AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998

REGISTRATION NO. 333-As filed with the Securities and Exchange Commission on February 10, 2004
Registration No. 333-______________
- -------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------------------------------

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

-------------------------------------------

CRYOLIFE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)(Exact name of registrant as specified in its charter)

----------------------------

FLORIDA 58-2417093
(STATE OR OTHER JURISDICTION OF59-2417093
- ------------------------------------ ------------------------------------------
(State or other jurisdiction of (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)Employer Identification No.)
incorporation or organization)

CRYOLIFE, INC.
1655 ROBERTS BOULEVARD, N.W.NW
KENNESAW, GEORGIA 30144
(770) 419-3355
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
----------------------------------

COPIES TO:
STEVEN G. ANDERSON, PRESIDENT, T. CLARK FITZGERALD III, ESQ.
CHIEF EXECUTIVE OFFICER CRYOLIFE, INC.
1655 ROBERTS BOULEVARD, N.W.
KENNESAW, GEORGIA 30144
(770) 419-3355
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES OF COMMUNICATIONS TO:

B. JOSEPH ALLEY, JR., ESQ. WILLIAM T. WHELAN, ESQ.
ARNALL GOLDEN & GREGORY LLP
PALMER & DODGE LLPAND CHAIRMAN OF THE BOARD OF DIRECTORS 2800 ONE ATLANTIC CENTER
ONE BEACON STREETCRYOLIFE, INC. 1201 WEST PEACHTREE STREET
BOSTON, MASSACHUSETTS 021081655 ROBERTS BOULEVARD, NW ATLANTA, GEORGIA 30309 (617) 573-010030309-3450
KENNESAW, GEORGIA 30144 (404) 873-8500

---------------

APPROXIMATE873-8622
(770) 419-3355

(Name, address, including zip code, and
telephone number, including area code,
of agent for service)

----------------------------------

Approximate Date of Commencement of Proposed Sale to the Public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]THIS REGISTRATION STATEMENT.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_][ X ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.^[_] ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_][ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------[ ]

PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
- --------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------------------------------
Title of securities Amount to be Proposed Proposed maximum Amount of
to be registered Registered maximum offering aggregate registration
price per share offering price fee*
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.013,444,000 Shares $6.745 $23,229,780 $2,944
$0.01 par value................. 2,875,000 Shares $14.44 $41,507,812.50 $12,245value
- ---------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Calculated* The offering price for such shares is estimated pursuant to Rule 457(c) and
(h) under the Securities Act of 1933, as amended, solely for the purpose of
calculating the registration fee and is based onupon the average of the high
and low prices of the Company's CommonRegistrant's common Stock on February 18, 1998,6, 2004 as
reportedlisted on the New York Stock Exchange.

---------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREINTHE INFORMATION IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TOINCOMPLETE AND MAY BE CHANGED. THE SELLING
SHAREHOLDERS MAY NOT SELL THESE SECURITIES HAS BEENUNTIL THE REGISTRATION STATEMENT
FILED WITH THE +
+SECURITIESSECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMESCOMMISSION IS EFFECTIVE. THIS PROSPECTUS
SHALLIS NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OFTHESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIESSECURITIES IN ANY STATE IN WHICH SUCHWHERE THE OFFER SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIORIS NOT PERMITTED.

SUBJECT TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++COMPLETION, DATED FEBRUARY 10, 2004

PROSPECTUS

Subject to completion, dated February 19, 1998
- --------------------------------------------------------------------------------
2,500,000 Shares

[CRYOLIFE LOGO]3,444,000 SHARES

CRYOLIFE, INC.

Common Stock

- --------------------------------------------------------------------------------

OfCOMMON STOCK

This prospectus relates to the 2,500,000potential offer and sale from time to time
of up to 3,444,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), offered hereby (this "Offering"), 2,263,000 shares are being offeredour common stock by CryoLife, Inc. ("CryoLife"the shareholders identified on
pages 16 - 17 of this prospectus or the "Company"), and 237,000 shares are being
offered by certain shareholders of the Company (the "Selling Shareholders").
The Companyin any accompanying supplement to this
prospectus.

We will not receive any netof the proceeds from the sale of the shares of Common Stock offeredcommon
stock by the Selling Shareholders.selling shareholders.

Our common stock is traded on The Common Stock is quoted on the New York Stock Exchange ("NYSE") under the symbol
"CRY." On February 18, 1998, theThe last reported sale price of the Common
Stockcommon stock on the NYSEFebruary 9, 2004 was
$14$7.11 per share.

See "Price Range of Common Stock."

FOR A DISCUSSION OF CERTAIN RISKS OF AN-----------------------

THIS INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY,INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGES 7-12.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BYPAGE 5.

-----------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION ORNOR ANY STATE SECURITIES
COMMISSION NOR HAS THEAPPROVED OR DISAPPROVED OF THESE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Underwriting
Price to Discounts and Proceeds to Proceeds to
Public Commissions(/1/) Company(/2/) Selling Shareholders
- --------------------------------------------------------------------------------

Per Share $ $ $ $
- --------------------------------------------------------------------------------
Total(3) $ $ $ $

- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expensesdate of this Offering payable by the Company estimated
to be $700,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional sharesprospectus is February _____, 2004.

TABLE OF CONTENTS

PAGE

SUMMARY........................................................................1

SELECTED CONSOLIDATED FINANCIAL DATA...........................................4

RISK FACTORS...................................................................5

FORWARD LOOKING STATEMENTS....................................................15

USE OF PROCEEDS...............................................................16

SELLING SHAREHOLDERS..........................................................16

PLAN OF DISTRIBUTION..........................................................18

DESCRIPTION OF CAPITAL STOCK..................................................21

WHERE YOU CAN FIND MORE INFORMATION...........................................25

LEGAL MATTERS.................................................................26

EXPERTS.......................................................................26

SUMMARY

This summary highlights information that we believe is especially important
concerning our business and this offering of Common Stock on the same terms per share
solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public will be $ , total Underwriting Discounts
and Commissions will be $ and the total Proceeds to the Company will be
$ . See "Underwriting."

The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein.common stock. It is expected that the deliverydoes not contain
all of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York, on or about , 1998. The Underwriters include:

SBC WARBURG DILLON READ INC. PIPER JAFFRAY INC.

--------------------------------------------------------
CRYOLIFE CRYOPRESERVATION OF HUMAN TISSUE FOR TRANSPLANT
--------------------------------------------------------
HUMAN VASCULAR PRODUCTS
HUMAN HEART VALVES & CONDUITS -----------------------
- -----------------------

Coronary Artery bypass
[Image of Heart Valves] --------------- --------------------
[Image of
- ----------------------- Coronary Artery
.Normal blood flow Bypass]
hemodynamics --------------------
.High cardiac output .only commercially
.Immune to progressive available
calcification alternative to
.Anti-coagulation drug [Image of a patient's own
therapy not required human shadow tissue
.Inhibits growth of figure]
endocarditis Dialysis Access
Grafts
-------------------
[Image of
Dialysis Access
Grafts]
-------------------
HUMAN CONNECTIVE .alternative for
TISSUE FOR THE KNEE synthetic grafts
which have a greater
- ----------------------- risk of infection
----------------
[Image of Orthopaedic Peripheral Vascular
Tissue] Reconstruction
- ----------------------- -------------------
.Only provider of [Image of
meniscal tissue Peripheral Vascular
Reconstruction]
--------------------
.only commercially
available small
diameter conduit
product for below-
the-knee vascular
reconstruction

Venous Valve
Transplant
--------------------
[Image of
Venous Valve
Transplant]
--------------------
.only commercially
available surgical
alternative to
chronic drug therapy

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING TRANSACTIONS AND THE
IMPOSITION OF A PENALTY BID, DURING AND AFTER THIS OFFERING. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

The Company's logo, CryoLife(R), BioGlue(R), FibRx(R) and SynerGraft(R) are
registered trademarks of the Company, and CryoLife-O'Brien(TM), CryoLife-
O'Brien SG(TM), CryoLife-Ross(TM) and CryoLife-Ross SG(TM) are trademarks of
the Company. All other trademarks, service marks and trade names referred to
in this Prospectus are the property of their owners.

[art appears here]
---------------------------------------------
CRYOLIFE BIOPROSTHETIC CARDIOVASCULAR DEVICES
---------------------------------------------
Stentless Porcine Heart Valves
------------------------------
CryoLife-O'Brien(TM) Aortic Valve CryoLife-Ross(TM) Pulmonary Valve
------------------------- Absence of -------------------------
[Image of synthetic [Image of
CryoLife-O'Brien(TM) material reduces CryoLife-Ross(TM)
Aortic Valve] the risk of Pulmonary Valve]
------------------------- bacterial -------------------------
.Matched Composite leaflet infection. Attached conduit of
design approximates human porcine tissue mimics
blood flow characteristics Synergraft(R) structure of human
.Single suture line Technology heart valve simplifying
simplifies surgical implantation procedure
implantation techniques
Cryopreserved Depopulated
Stentless Porcine Valve
-------------------------
--------------------- .reduces the transplant recipient's
[Image of immune response and resulting
Cryopreserved calcification
Depopulated .provides platform for patient's own
Stentless cells to naturally populate the
Porcine Valve] implant
---------------------
Cryopreserved Repopulated
Stentless Porcine Valve
-------------------------

---------------------------
Reseeds animal tissues
with viable human cells [Image of reseeded
prior to implantation stentless porcine valve]
---------------------------
The products above, with the exception of the Ideas for Medicine products, are
under development and have not been approved by the FDA for commercial sale in
the U.S. The process of obtaining FDA clearance or approvalinformation that may be lengthy,
and there can be no assurance thatimportant to your investment decision. You
should read the products will be approved byentire prospectus, including the FDA.

[art appears here]
---------------------------------
CRYOLIFE IMPLANTABLE BIOMATERIALS
---------------------------------
BIOGLUE(R) SURGICAL ADHESIVE FIBRX(R) SURGICAL SEALANT
- ----------------- ------------------
Designed to be used Designed to be used
[Image of for vascular [Image of for hemostasis and
BioGlue] repair FibRx] adhesion applications
.double syringe .Light-activated
- ----------------- mixing ------------------ .Single syringe or
.CE Mark approval spray applicator
-----------------------------------
CRYOLIFE SINGLE USE MEDICAL DEVICES
-----------------------------------
-------------------------------
Dual Lumen
Pruitt-Inahara [Image of IFM Embolectomy
Shunt product line] Catheters

- -------------------------- --------------------------
-------------------------------
[Image of Pruitt- [Image of Dual Lumen
Inahara shunt] Embolectomy Catheters]
- -------------------------- --------------------------
.Barrier feature reduces .Water irrigation
migration of plaque mechanism enhances
physician's ability to
remove whole blood clots
The products above, with the exception of the Ideas for Medicine products, are
under development and have not been approved by the FDA for commercial sale in
the U.S. The process of obtaining FDA approval may be lengthy, and there can
be no assurance that the products will be cleared or approved by the FDA.

PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus ordocuments incorporated herein
by reference, including the information under "Risk Factors." Unless otherwise indicated, all
information in this Prospectus assumes that the Underwriters' over-allotment
option is not exercisedFactors" and that the Selling Shareholders sell 237,000 shares.
See Glossary on page 58 for definitions of certain terms used herein.

THE COMPANY

CryoLife is the leaderour financial statements and related notes,
before deciding to invest in the cryopreservation of viablecommon stock.

CryoLife, Inc., incorporated January 19, 1984 in Florida, preserves and
distributes human tissues for cardiovascular, vascular and orthopaedicorthopedic transplant
applications and develops and commercializes additional implantable productsmedical devices,
including its BioGlue(R) Surgical Adhesive, glutaraldehyde-fixed stentless
porcine heart valves, and single-use medicalSynerGraft(R) processed bovine vascular grafts for use
as arteriovenous access devices. The Company estimates that it provided approximately 80% of the
cryopreserved human tissue implanted in the U.S. in 1997. The Company usesThrough its continuing research and development
activities, CryoLife endeavors to use its expertise in biochemistry, and cell
biology, immunology, and protein chemistry and its understanding of the
needs
of the cardiovascular, vascular, and orthopaedicorthopedic surgery medical specialties, to continue expansion of its core cryopreservation business and to develop
or
acquire complementaryuseful implantable products and technologies for these fields.technologies.

The Company develops bioprostheticdistributes preserved human cardiovascular, devices including a novel
design stentless porcine heart valve currently marketed invascular and
orthopedic tissue throughout the European
CommunityUnited States, Canada and a proprietary process for non-viable animal tissue designed to
improve human biocompatibility. The Company also develops proprietary
implantable surgical bioadhesives, including BioGlue surgical adhesive, which
it has begun commercializing for vascular applications withinEurope. Management
believes the European
Community. In addition, the Company manufactures and distributes, through its
Ideas For Medicine, Inc. ("IFM") subsidiary, single-use medical devices for use
in vascular surgical procedures. The Company has generated compound annual
growth rates in revenues and earnings per share, including contributions from
acquisitions, of 24% and 68%, respectively, since 1993.

The U.S.
marketCryoLife's proprietary BioGlue Surgical Adhesive, designed for
implantable products targeting indications addressed bycardiovascular, vascular, pulmonary, and general surgical applications, is a
polymer based on bovine serum albumin and a cross-linking agent. CryoLife can
distribute BioGlue throughout the Company's cryopreserved tissues was approximately $950 million in 1997. Since
1993, cryopreserved human tissues have captured an increasing share of this
market. For example, since 1993, the total U.S. replacement heart valve market
grew at a compound annual growth rate of approximately 7%, while CryoLife's
revenues from cryopreservation of human heart valvesUnited States and conduits grew at a
compound annual growth rate of approximately 21%. The Company seeks to expand
the availability of human tissue through its established relationships with
over 250 tissue banks and organ procurement agencies nationwide.

CryoLife develops and markets outsidemore than 40 other
countries for designated applications. In the U.S. bioprosthetic cardiovascular
devicesBioGlue is FDA approved as an
adjunct to sutures and staples for transplantation, currently consistinguse in adult patients in open surgical repair
of fixedlarge vessels. In Europe, CryoLife distributes BioGlue under CE Mark product
certification for vascular applications, pulmonary indications, such as the
repair of air leaks in lungs, and soft tissue repair procedures. CryoLife has
also received approval and distributes BioGlue for vascular, pulmonary and soft
tissue repairs in Canada. Additional marketing approvals have been granted for
specified applications in Australia, and in several countries in South America
and Asia.

CryoLife is using the protein hydrogel technology underlying its BioGlue
surgical adhesive as the base for several potential products in development.
Other potential applications for BioGlue surgical adhesive in the U.S. include
hernia repair and dura mater sealing. BioGlue also has the potential to be used
as a replacement for spinal disc nuclei. A Company subsidiary is developing a
reversible linker technology that has potential uses in the areas of cancer
therapy, fibrinolysis (blood clot dissolving), and other drug delivery
applications.

CryoLife also distributes its SynerGraft processed bovine vascular graft
and a glutaraldehyed-fixed stentless porcine heart valves. Fixedvalve, the
CryoLife-O'Brien(R)aortic heart valve. The SynerGraft process involves the
depopulation of cells leaving a collagen matrix that has the potential to be
repopulated with the recipient's cells. CryoLife believes that this process
increases graft longevity, and improves the biocompatibility and functionality
of the tissue. CryoLife markets the SynerGraft vascular graft in Europe and the
Middle East. CryoLife's glutaraldehyde fixed porcine valves contain minimal
amounts of synthetic materials, compared to many other fixed porcine heart
valves are often preferred by surgeons for
procedures involving elderly patients because they eliminate the risk of
patient non-compliance with long-term anti-coagulation drug therapy associated
with mechanical valves, are less expensive than human heart valves and their
shorter longevity is more appropriately matched with these patients' life
expectancies. Fixed porcine heart valves address a worldwide target market
estimated to have been $175 million in 1997. Unlike most other available
porcine heart valves, the Company's stentless porcine heart valves do not
contain synthetic materials which increasevalves. This decreases the risk of endocarditis, a debilitating and potentially
deadly bacterialfatal infection. The

Company's CryoLife-O'Brien aortic heartCryoLife currently markets this valve currently marketed in the
European CommunityEurope and certain
other territories outside the U.S., is

RECENT DEVELOPMENTS

PIPE Offering

On January 27, 2004, CryoLife closed on a stentless porcine heart valve which contains a matched composite leaflet design
that approximates human heart valve blood flow characteristics and requires
only a single suture line which simplifies surgical implantation.$21.5 million private placement
of 3,444,000 shares of common stock. Net proceeds from the offering were
approximately $20.0 million. The Company
intends to submit a CE Mark applicationproceeds from the sale of the common stock will
be used for general corporate purposes.

Financial Results

On January 7, 2004, CryoLife announced that:

o Aggregate revenues for 2003 were approximately $59.6 million.

o Aggregate revenues for the CryoLife-Ross pulmonary heart
valve, anotherfourth quarter of 2003 were approximately
$12.8 million.

o BioGlue revenues were approximately $27.8 million for the full year
2003 and approximately $7.8 million in the fourth quarter of 2003.
BioGlue revenues increased 33% over full year 2002.

o Tissue processing revenues were approximately $30.8 million for the
full year 2003 and approximately $4.9 million in the fourth quarter of
2003.

o Cardiac tissue processing revenues were approximately $17.1 million
for the full year 2003 and approximately $2.8 million in the fourth
quarter of 2003.

o Vascular tissue processing revenues were approximately $12.6 million
for the full year 2003 and approximately $2.0 million in the fourth
quarter of 2003.

o Orthopedic tissue processing revenues were approximately $1.1 million
for the full year 2003 and approximately $166,000 in the fourth
quarter of 2003.

CryoLife has an ongoing, comprehensive program to increase the number of
tissues available for distribution to patients who require reconstructive
cardiac, vascular, and orthopedic surgeries. This program includes recently
implemented initiatives with tissue procurement organizations, operating a newly
created, in-house pathology department, and several tissue processing
improvements. While CryoLife expects to realize the positive impact of these
initiatives beginning in the second quarter of 2004, the Company believes there
will be an increase in tissue processing costs through the first quarter of
2004.

As of December 31, 2003, CryoLife had approximately $11 million in cash,
cash equivalents, and marketable securities. These funds have now been
supplemented by the net proceeds of the Company's fixed stentless porcine valves, for marketingPIPE offering. CryoLife also expects to
receive tax refunds of approximately $2.4 million during 2004.

CryoLife has not completed the preparation of its 2003 financial statements
and additional definitive information with respect to 2003 is not yet available.
This "Recent Developments" section should not be read to confirm the accuracy of
the company's prior guidance with respect to 2003.

Food and Drug Administration.

The FDA inspected CryoLife in October of 2003 in response to a reported
orthopedic infection and issued a Form 483 Notice of Observations. The
observation in the European Community.October 2003 483, which was a reissuance of a previous
observation, required CryoLife to complete the validation of its processing
operations and procedures for decontaminating tissues, written procedures for
the prevention of infectious disease contamination during processing, and its
anti-microbial solution. CryoLife submitted its response to the October 2003 483
on October 28, 2003. The Company planssubmissions include the completed validation report for
its anti-microbial solution.

Products Liability Litigation and Insurance Coverage.

During 2003, the insurance carriers with the second and third layers of
coverage totaling $15 million for the 2002/2003 policy year tendered their
remaining limits of approximately $13.2 million to apply its proprietary
SynerGraft technologyCryoLife and made the funds
available to be applied to settle all claims outstanding in the relevant policy
period. CryoLife continues to attempt to reach settlements of the remaining
outstanding litigation.

During 2003 and through January, 2004, CryoLife resolved, or reached
agreements in principle to resolve, 22 product liability cases and claims
related to the 2002-2003 insurance policy year. CryoLife believes it has
sufficient insurance coverage to defend against the four suits related to
periods prior to its stentless porcine heart valves. SynerGraft
involves2002/2003 insurance policy year. CryoLife currently has two
lawsuits pending related to the depopulation2002-2003 insurance policy year and three
lawsuits pending related to subsequent periods. There are other claims that have
not resulted in lawsuits.

As of living cells fromSeptember 30, 2003, CryoLife had accrued $16.7 million in the
structureaggregate for the uninsured portion of non-viable
animal heart tissueestimated potential legal fees and
settlement costs related to the repopulation of such tissue with human cells. This
process is designed to reduce calcification of porcine heart valves, thereby
increasing longevity,Company's product liability lawsuits and
more generally to improve the biocompatibility and
functionality of such tissue. The Company believespotential claims that its porcine heart
valves, when treated with SynerGraft technology, will expand its opportunity to
address the broader international and U.S. heart valve markets, estimated to be
$348 million and $395 million, respectively, in 1997.have been incurred, but not reported. CryoLife is
developing implantable biomaterials for use as surgical adhesivesevaluating this accrual to determine if it should be increased or decreased.

----------------------

All references to "CryoLife," the "Company," "we," "us" or "our" in this
prospectus mean CryoLife, Inc., a Florida corporation, and sealants. The Company's patent protected BioGlue surgical adhesive,
designed for cardiovascular and peripheral vascular applications,all entities owned or
controlled by CryoLife, Inc., except where it is a polymer
based on a derivative of a blood protein and a cross-linking agent. The
Company's patent protected FibRx surgical sealant, designed for tissue
hemostasis and suture line sealing, is a light-activated, biodegradable
surgical sealant under development which is based on a derivative of the human
blood factors fibrinogen and thrombin. Both of these products may be used with
or without sutures or staples, and may offer advantages over sutures and
staples, including more effective sealing and easier application. The Company
estimatesmade clear that the annual worldwide market for surgical sutures and staples in
1997 was in excess of $2 billion. The Company recently received CE Mark
Certification for its BioGlue surgical adhesive which permitsterm means
only the Company to
begin marketing this product in the European Community for vascular
applications.

CryoLife manufactures and distributes, through its IFM subsidiary, single-use
medical devices including endarterectomy surgical instruments, intravascular
shunts, infusion ports, accessories utilized in laparoscopic procedures and a
wide range of single and dual lumen balloon catheters. The Company believes
that many of its existing single-use medical devices have novel proprietary
features that offer clinical advantages over competing products. For example,
the Company's Pruitt-Inahara Shunt was the first endarterectomy shunt available
to surgeons which contains a barrier feature designed to reduce migration of
plaque particles to the brain during surgery. Another example is the Company's
dual lumen embolectomy catheter incorporating a novel water irrigation
mechanism which enables physicians to remove whole blood clots more effectively
than with single lumen embolectomy catheters. The Company is benefiting from,
and intends to utilize, its design and manufacturing expertise to develop
single-use medical devices for use in conjunction with its cryopreserved human
tissue and biomaterial products. Examples of such devices under development
include a family of balloon catheters designed to assist in applying the
BioGlue surgical adhesive and a human heart valve holder designed to provide
physicians greater control in implantation procedures.

In the U.S., the Company markets its cryopreservation services for human heart
valves and conduits and human vascular tissue through its in-house technical
service representatives and relies on independent orthopaedic sales
representatives to market its cryopreservation services for human connective
tissue for the knee. Also in the U.S., the Company markets its single-use
medical devices through its in-house technical service representatives.
Internationally, cryopreserved human tissues, bioprosthetic cardiovascular
devices and single-use medical devices are distributed through independent
representatives located in several countries in Europe, South America and Asia.
The Company plans to market and distribute its BioGlue surgical adhesive
internationally through its existing independent representatives and, if
approved for sale in the U.S., through its in-house technical service
representatives.

as an alternative to mechanical and synthetic implantable products, developing
new markets for existing products and technologies and developing new products
and technologies for new and existing markets. The Company also selectively
considers strategic acquisitions of complementary technologies to supplement
its internal growth.

The Company was incorporated in Florida in 1984. The Company'sparent company.

Our principal executive offices are located at 1655 Roberts Boulevard, N.W.,NW,
Kennesaw, Georgia 30144. ItsOur telephone number is (770) 419-3355 and its fax numberour Web site
is (770) 590-3754.

THE OFFERING

Common Stock offered by the
Company.......................... 2,263,000 shares(1)
Common Stock offered by the
Selling Shareholders............. 237,000 shares(1)
Total Offering.................... 2,500,000 shares(1)
Common Stock to be outstanding
after this Offering.............. 12,021,791 shares(1)(2)
Use of Proceeds................... For repayment of indebtedness, expansion of
facilities, general corporate purposes and
potential acquisitions.
New York Stock Exchange Symbol.... CRY

- --------
(1) The Selling Shareholders may electlocated at www.cryolife.com. Information contained in our Web site is not
to sell any or allpart of the shares to
be sold by them in this Offering. In such event, the Company has agreed to
increase the number of shares it is selling in this Offering by the number
of shares not sold by Selling Shareholders. See "Principal and Selling
Shareholders."
(2) Based on the number of outstanding shares at February 1, 1998. Excludes an
aggregate of 745,000 shares of Common Stock issuable upon exercise of stock
options outstanding on that date. See "Description of Capital Stock" and
the Notes to the Consolidated Financial Statements. Includes 50,000 shares
of Common Stock issuable upon conversion by a Selling Shareholder of
$607,000 of a convertible debenture and 2,000 shares to be issued to a
Selling Shareholder pursuant to the exercise of outstanding options.

5prospectus.

SUMMARYSELECTED CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE DATA)The following Selected Consolidated Financial Data should be read in
conjunction with our Consolidated Financial Statements and Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information incorporated herein by reference.
The selected data presented below for and as of the end of the year ended
December 31, 2002 are derived from our Consolidated Financial Statements that
were audited by Deloitte and Touche LLP, independent auditors, and which are
incorporated herein by reference. The selected data presented below as of and
for each of the years in the three-year period ended December 31, 2001, are
derived from our Consolidated Financial Statements that were audited by Arthur
Andersen LLP, independent auditors. The data set forth below with respect to our
Consolidated Balance Sheet and Statement of Operations as of and for the year
ended December 31, 1998 are derived from our Consolidated Financial Statements
that were audited by Ernst & Young LLP, independent auditors. The historical
results are not necessarily indicative of future results of operations. The
selected consolidated statement of income data for the nine months ended
September 30, 2003 and 2002 and the selected consolidated balance sheet data as
of September 30, 2003 are derived from our unaudited consolidated financial
statements, which, in our opinion, include all adjustments (consisting of only
normal, recurring adjustments) necessary for a fair presentation.

SELECTED FINANCIAL INFORMATION
(in thousands, except percentages and per share data)

YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995 1996(1) 1997(1)
------- ------- ------- ------- -------
INCOME STATEMENT DATA:
Revenues............................. $21,341 $23,810 $29,226 $37,228 $50,869
Cost
NINE MONTHS ENDED: YEAR ENDED
SEPTEMBER 30 DECEMBER 31,
-------------------------- ------------------------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
OPERATIONS -------------------------- ------------------------------------------------------------------------
Revenues $ 46,730 $ 65,624 $ 77,795 $ 87,671 $ 77,096 $ 66,722 $ 60,691
Net (loss)/income (25,050) (22,064) (27,761) 9,166 7,817 4,451 6,486
Research and
expenses.................... 20,448 22,046 25,930 31,145 43,236
------- ------- ------- ------- -------
Income before income taxes........... 893 1,764 3,296 6,083 7,633
Income tax expense................... 339 498 1,094 2,156 2,908
------- ------- ------- ------- -------
Net income...........................development as a
percentage of
revenues 6.1% 5.6% 5.9% 5.4% 6.8% 6.6% 7.8%

(LOSS)/EARNINGS PER SHARE 1
- ---------------------------------------------------------------------------------------------------------------------------------
Basic $ 554(1.27) $ 1,266(1.14) $ 2,202(1.43) $ 3,9270.49 $ 4,725
======= ======= ======= ======= =======
Earnings per share of common stock:
Basic..............................0.42 $ .060.24 $ .140.36
Diluted $ .23(1.27) $ .41(1.14) $ .49
======= ======= ======= ======= =======
Diluted............................(1.43) $ .060.47 $ .140.41 $ .230.24 $ .40 $ .48
======= ======= ======= ======= =======
Weighted average number of shares of
common stock outstanding:
Basic.............................. 9,018 9,312 9,379 9,505 9,642
Diluted............................ 9,114 9,373 9,568 9,906 9,9420.35

DECEMBER 31, 1997
----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents..............................
DECEMBER 31,
SEPT. 30, -------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
----------- -------------------------------------------------------------------
Total assets $ 111 $17,415
Total assets........................................... 53,749 71,053
Long-term debt, including current maturities........... 18,362 5,978
Retained earnings...................................... 12,627 12,627
Total shareholders' equity............................. 30,227 59,91586,523 $ 106,414 $ 129,310 $ 112,009 $ 94,025 $ 98,390
Working capital 20,251 37,816 66,668 69,063 59,597 62,313
Long Term Liabilities 5,030 2,752 10,071 12,192 6,177 8,577
Shareholder's equity 55,319 79,800 101,439 89,395 80,226 80,421
Current ratio 2 2:1 3:1 5:1 8:1 9:1 8:1

- --------
(1) Includes United Cryopreservation Foundation Inc. ("UCFI") and IFM from
their dates of acquisition, September 11, 1996 and March 5, 1997,
respectively.
(2) Adjusted to give effect to (i) the receipt of the net proceeds from the
sale of 2,263,000 shares of Common Stock offered---------------
1 Reflects adjustment for 3-for-2 stock split effected December 27, 2000.
2 Current assets divided by the Company hereby (at
an assumed offering price of $14 per share) after deduction of underwriting
discounts and commissions and estimated expenses payable by the Company in
connection with this Offering, (ii) the repayment of the $11,777,000
outstanding principal balance under the Company's credit facility, (iii)
the conversion of $607,000 of a convertible debenture into 50,000 shares of
Common Stock and (iv) the issuance of 2,000 shares to be sold by a Selling
Shareholder pursuant to the exercise of outstanding options. See "Use of
Proceeds," "Principal and Selling Shareholders" and "Description of Capital
Stock--Convertible Debenture."

6current liabilities.

RISK FACTORS

- -------------------------------------------------------------------------------

Prospective investors in the shares of Common Stock offered herebyYou should carefully consider the following risk factors as well as theand all other
information contained in this Prospectus, or incorporated by reference herein,prospectus before purchasingyou make any investment
decisions with respect to our securities.

If any of the Common Stock offered hereby.

DEPENDENCEadverse events described in the following factors actually
occur, or if we do not accomplish those events or objectives described in the
risk factors as necessary to meet our expectations, our business, financial
condition and operating results could be materially and adversely affected, the
trading price of our common stock could decline and you could lose all or part
of your investment.

SINCE 2002 CRYOLIFE HAS FACED SEVERAL EXTRAORDINARY CHALLENGES, INCLUDING THE
2002 FDA RECALL ORDER, DECREASED REVENUES, AND INCREASED EXPENSES, AND MAY NOT
BE SUCCESSFUL IN ADDRESSING THEM

CryoLife has faced extraordinary challenges since 2002. It received, on
August 13, 2002, an FDA order calling for the retention, recall, and/or
destruction of all non-valved cardiac, vascular, and orthopedic tissue processed
by CryoLife since October 3, 2001 (the "FDA Order"). The recall resulted in the
destruction of much of CryoLife's tissue, required that it adjust revenue for
tissue recall returns, curtailed its processing activities, subjected it to
intense FDA scrutiny and additional regulatory requirements that increased cost
while CryoLife suffered decreased revenues due to lack of processing ability and
decreased market demand for its services. During the same year, CryoLife was the
subject of intense adverse media attention in connection with allegations that
tissue processed by CryoLife had infected a man in Minnesota and caused his
death. CryoLife also became the subject of a shareholders' class action suit and
a derivative shareholder suit, both of which remain pending. Products liability
cases and claims increased to unprecedented numbers for CryoLife, using all of
its related 2002/2003 insurance policy year insurance coverage and taxing its
other resources. While many cases and claims have been settled, several remain
unresolved. Since 2002, a U.S. Senate committee has inquired into safety in the
tissue processing industry, making inquiries of CryoLife. The SEC has initiated
and continues to pursue a formal investigation of CryoLife. The combined effect
of these challenges has been to reduce Company revenues, increase its costs to
process tissues and operating expense and strain management resources. Although
CryoLife has now resumed processing and distribution of the tissues subject to
the FDA recall and resolved many of the products liability suits pending against
it, the foregoing factors will continue to challenge CryoLife in its efforts to
return to the sales and profitability it enjoyed prior to 2002. No assurances
can be made that CryoLife will succeed in those efforts in the near future.

THE AUGUST 2002 FDA ORDER ON CRYOPRESERVATION OF HUMAN TISSUE AND SUBSEQUENT FDA ACTIVITY CONTINUE
TO ADVERSELY IMPACT CRYOLIFE'S BUSINESS, INCLUDING DEMAND FOR ITS SERVICES AND
PROCESSING COSTS

On August 13, 2002 CryoLife received an order from the FDA calling for the
retention, recall, and/or destruction of all non-valved cardiac, vascular, and
orthopedic tissue processed by CryoLife at its headquarters since October 3,
2001 based upon allegations that CryoLife violated FDA regulations in its
handling of such tissue and alleged contamination through CryoLife's processing
of such tissue that resulted in 14 post-transplant infections including one
death. A significant portion of the Company'sCryoLife's current revenues is derived from the
cryopreservationpreservation of human tissues. Revenues from human tissue particularly heart valvespreservation services
for the six months ended June 30, 2002, the last period ending prior to the
issuance of the FDA Order, were 78% of CryoLife's revenues, or approximately
$20.0 million. During the fourth quarter of 2003, these revenues were
approximately $4.9 million or 52% of fourth quarter revenues.

The FDA Order, subsequent FDA activity and conduits.resulting adverse publicity have
had a material adverse effect on CryoLife's business, financial condition,
results of operations and cash flows. CryoLife has experienced decreases in
revenues and profits and there is a possibility that CryoLife may not generate
sufficient cash from operations to fund its operations over the long-term.

CryoLife has continued to experience a reduced demand for the types of
tissues subject to the FDA Order due to the adverse publicity generated from the
recall and from decisions by implanting physicians' or risk managers at
implanting institutions to use human tissue services provided by CryoLife's
competitors. In addition, as a result of the FDA Order, subsequent FDA activity,
and changes in CryoLife's processing, the costs of such processing have
increased and are likely to remain high as compared to cost levels prior to the
FDA Order. Although CryoLife expects them to decrease somewhat beginning in the

second quarter of 2004, these high costs could have a material adverse effect on
CryoLife's business, results of operations and financial position.

The success of this businessCryoLife depends upon, among other factors, the availability
of sufficient quantities of tissue from human donors. Any material reduction in
the supply of donated human heart tissue could restrict the Company'sCryoLife's growth. The CompanyCryoLife
relies primarily upon the efforts of third-third party procurement agencies (alland tissue
banks (most of which are not-for-profit) and others to educate the public and
foster a willingness to donate tissue. Because of the adverse publicity
associated with the FDA Order and subsequent FDA activity and uncertainty
regarding future tissue processing, some procurement agencies stopped sending
tissue to CryoLife for processing. If CryoLife's relationships with procurement
agencies continue to be adversely affected or CryoLife is unable to obtain
tissues from procurement agencies that have ceased sending tissue to CryoLife
for processing, CryoLife may be unable to obtain adequate supplies of donated
tissues to operate profitably.

THE FDA ORDER AND SUBSEQUENT ACTIVITY HAVE HAD AND CONTINUE TO HAVE AN ADVERSE
IMPACT ON LIQUIDITY AND CAPITAL RESOURCES

Based upon the lower levels of revenues and profits since the FDA Order,
FDA activity, and associated adverse publicity, CryoLife expects that its cash
and cash equivalents will continue to decrease over the near term and working
capital could decrease from levels now on hand. Although CryoLife has reduced
its level of operations and the Company's
experience withnumber of personnel, there is a possibility that
CryoLife may not have sufficient funds to fund its primary capital requirements
or to meet its operating and development needs in the long-term.

REVENUE FROM ORTHOPEDIC TISSUE PRESERVATION SERVICES IS MINIMAL AND MAY NOT
RETURN

The Company has received only nominal revenue from the preservation of
orthopedic tissue since August 14, 2002. For the year ended December 31, 2001,
human tissue preservation services revenues for orthopedic tissue were $22.5
million, which represented 26% of CryoLife's revenues. For the six months ended
June 30, 2002, (the last period ending prior to the FDA Order) revenues for
preservation services for orthopedic tissue were $11.9 million (prior to the
reduction for estimated tissue recall returns), which represented 23% of
CryoLife's revenues. For the year ended December 31, 2003, revenues for
preservation services for orthopedic tissue were $1.1 million, which represented
2% of CryoLife's revenues. The demand for orthopedic tissue from CryoLife may
remain minimal and may never return to the levels in existence before the FDA
Order, even though CryoLife has resumed processing. As a result, this portion of
CryoLife's business may have to be permanently discontinued or may only continue
at substantially reduced levels. Any of these occurrences would result in a
continued significant decrease in CryoLife's preservation services revenues and
profitability in the future as compared to prior to the FDA Order.

PHYSICIANS MAY BE RELUCTANT TO IMPLANT CRYOLIFE'S PRESERVED TISSUES

There is a risk that physicians or implanting institutions will be
reluctant to choose CryoLife's preserved tissues for use in implantation, due to
a perception that they may not be safe or to a belief that the implanting
physician or hospital may be subject to a heightened liability risk if
CryoLife's tissues are used. In addition, for similar reasons, hospital risk
managers may forbid implanting surgeons to utilize CryoLife's tissues where
alternatives are available. If a significant number of implanting hospitals or
physicians refused to use tissues preserved by the Company, CryoLife's
preservation services revenues and profits would be materially adversely
affected.

PRODUCTS AND SERVICES NOT INCLUDED IN THE FDA RECALL MAY COME UNDER INCREASED
SCRUTINY

Although CryoLife's heart valve processing services, BioGlue Surgical
Adhesive and bioprosthetic devices were not included in the FDA recall, the
processing and manufacturing facilities for these products may come under
increased scrutiny from the FDA. A negative review from the FDA of these
manufacturing facilities could have a material adverse effect on CryoLife's
business, results of operations and financial position.

DEMAND FOR HEART VALVES PROCESSED BY CRYOLIFE HAS DECREASED AND MAY CONTINUE TO
DECREASE

Some physicians and implanting institutions have remained reluctant to
choose CryoLife's allograft heart valves management believesfor use in implantation, perhaps due to
a perception that oncethey may not be safe or to a belief that the implanting
institutions or hospitals may be subject to a heightened liability risk if
CryoLife's preserved tissues are used, especially if alternatives are available.
Demand for CryoLife's allograft heart valves could decrease. In such an event,
CryoLife's preservation services revenues and profits would be materially
adversely affected.

ADVERSE PUBLICITY MAY REDUCE DEMAND FOR PRODUCTS AND SERVICES NOT AFFECTED BY
THE FDA RECALL

Even though CryoLife's BioGlue, porcine heart valves and bovine vascular
grafts (of which the porcine and bovine products are not sold in the U.S.) were
not included in the FDA Order, there is a possibility that surgeons or risk
managers at institutions that use by
physicianssuch products may be reluctant to use such
products because of a particular transplantable tissue gains acceptance,the adverse publicity associated with the FDA Order.
Decreased demand for that tissue will exceedsuch products, particularly BioGlue, could have a material
adverse effect on CryoLife's business, results of operations and financial
position.

WE MAY BE UNABLE TO ADDRESS THE CONCERNS RAISED BY THE FDA IN ITS FEBRUARY 2003
FORM 483 NOTICE OF OBSERVATIONS OR ITS OCTOBER 2003 FORM 483 NOTICE OF
OBSERVATIONS

The FDA issued new Form 483 Notice of Observations in February 2003 and
October 2003. If CryoLife's responses to the amount of tissue available from human donors.
While availability is not currently a limiting factor for most vascular tissue
and connective tissue for the knee, growthFDA's observations contained in
these areasnotices are deemed unsatisfactory, the FDA could ultimately be
limited by tissue availability, in addition to other factors. Failure of the
Company to maintain its supply of tissue for cryopreservationtake further action,
which could have a material adverse effect on the Company's business, financial condition and
results of
operations. Furthermore,operations, financial position or cashflows.

THE FDA HAS NOTIFIED CRYOLIFE OF ITS BELIEF THAT MARKETING OF CRYOVALVE SG AND
CRYOVEIN SG REQUIRE ADDITIONAL REGULATORY SUBMISSIONS AND/OR APPROVALS

On February 20, 2003 CryoLife received a reductionletter from the FDA stating that a
510(k) premarket notification for the CryoValve SG was required before the
product can be marketed. The letter also contended that a premarket approval
application was required in order to market the CryoVein SG when used for A-V
(arteriovenous) access. The agency's position is that femoral veins used for A-V
access are medical devices that require premarket approval. CryoLife submitted a
510(k) premarket notification for the CryoValve SG, and received a response
requesting additional information. There can be no assurance as to when
clearance will be obtained, if at all.

REGULATORY ACTION OUTSIDE OF THE U.S. MAY ALSO AFFECT CRYOLIFE'S BUSINESS

After the issuance of the FDA Order, Health Canada also issued a recall on
the same types of tissue. In addition, other countries have inquired as to the
tissues exported by the Company, although these inquiries are now, to CryoLife's
knowledge, complete. In the event additional regulatory concerns are raised by
other countries, CryoLife may be unable to export tissues to those countries.

CRYOLIFE IS THE SUBJECT OF AN ONGOING SEC INVESTIGATION

CryoLife is the subject of an ongoing SEC investigation. An adverse finding
by the SEC could have a material adverse effect on CryoLife's business financial
position, results of operations, and cash flows. At the present time, CryoLife
is unable to predict the outcome of this matter.

CRYOLIFE'S INSURANCE COVERAGE MAY BE INSUFFICIENT

Product Liability Claims

In the normal course of business as a medical device and services company,
CryoLife has product liability complaints filed against it. Following the FDA
Order, products liability lawsuits increased to unprecedented numbers for
CryoLife. CryoLife maintains claims-made insurance policies to mitigate its
financial exposure to product liability claims. Claims-made insurance policies
generally cover only those asserted claims and incidents that are reported to
the insurance carrier while the policy is in effect. Thus, a claims-made policy
does not generally represent a transfer of risk for claims and incidents that

have been incurred but not reported to the insurance carrier during the policy
period.

For the 2000/2001 and 2001/2002 insurance policy years, CryoLife maintained
claims-made insurance policies, which CryoLife believes to be adequate to defend
against the suits filed during this period. For the 2002/2003 insurance policy
year, CryoLife maintained claims-made insurance policies with three carriers.
CryoLife used all of its insurance coverage, aggregating $25.0 million, for the
2002/2003 insurance policy year, as well as funds of its own, to resolve claims
outstanding in the demandrelevant policy period. CryoLife continues to attempt to
reach settlements of the remaining litigation. CryoLife recorded a liability on
its September 30, 2003, consolidated balance sheet and a corresponding expense
for the Company's cryopreserved human tissueestimated cost of resolving these claims and reflecting the uninsured
portion of the estimated liability. The amounts recorded were estimates, and did
not reflect actual settlement arrangements or final judgments, the latter of
which could alsoinclude punitive damages. CryoLife's product liability insurance
policies do not include coverage for any punitive damages. If CryoLife is
unsuccessful in arranging acceptable settlements of product liability claims,
there may not be sufficient insurance coverage and liquid assets to meet these
obligations. Additionally, if one or more of the product liability claims in
which CryoLife is a defendant should be tried with a substantial verdict
rendered in favor of the plaintiff(s), such verdict(s) could exceed CryoLife's
available insurance coverage and liquid assets. If CryoLife is unable to meet
required future cash payments to resolve the outstanding product liability
claims, it will have a material adverse effect on the Company's business, financial condition andposition,
results of operations. Such
reductionoperations, and cash flows of CryoLife.

Class Action Lawsuit

Several putative class action lawsuits were filed in July through September
2002 against CryoLife and certain officers of CryoLife, alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on a
series of purportedly materially false and misleading statements to the market.
The suits were consolidated, and a consolidated amended complaint filed, which
principally alleges that CryoLife failed to disclose its alleged lack of
compliance with certain FDA regulations regarding the handling and processing of
certain tissues and other product safety matters. The consolidated complaint
seeks certification of a class of purchasers between April 2, 2001 and August
14, 2002, compensatory damages, and other expenses of litigation. CryoLife and
the other defendants filed a motion to dismiss the consolidated complaint on
February 28, 2003, which motion the United States District Court for the
Northern District of Georgia denied in part and granted in part on May 27, 2003.
The discovery phase of the case commenced on July 16, 2003. CryoLife carries
directors' and officers' liability insurance policies, which CryoLife presently
believes to be adequate to defend against this action. Nonetheless, an adverse
judgment in excess of CryoLife's insurance coverage could occurhave a material
adverse effect on CryoLife's financial position, results of operations, and cash
flows.

Shareholder Derivative Action

On August 30, 2002 a purported shareholder derivative action was filed by
Rosemary Lichtenberger against Steven G. Anderson, Albert E. Heacox, John W.
Cook, Ronald C. Elkins, Virginia C. Lacy, Ronald D. McCall, Alexander C.
Schwartz, and Bruce J. Van Dyne in the Superior Court of Gwinnett County,
Georgia. The suit, which names CryoLife as a nominal defendant, alleges that the
individual defendants breached their fiduciary duties to CryoLife by causing or
allowing CryoLife to engage in certain inappropriate practices that caused
CryoLife to suffer damages. The complaint was preceded by one day by a letter
written on behalf of Ms. Lichtenberger demanding that CryoLife's Board of
Directors take certain actions in response to her allegations. On January 16,
2003 another purported derivative suit alleging claims similar to those of the
Lichtenberger suit was filed in the Superior Court of Fulton County by
complainant Robert F. Frailey. As in the Lichtenberger suit, the filing of the
complaint in the Frailey action was preceded by a demand letter sent on
Frailey's behalf to CryoLife's Board of Directors. Both complaints seek
undisclosed damages, costs and attorney's fees, punitive damages, and
prejudgment interest against the individual defendants derivatively on behalf of
CryoLife. As previously disclosed, CryoLife's Board of Directors established an
independent committee to investigate the allegations of Ms. Lichtenberger and
Mr. Frailey. The independent committee engaged independent legal counsel to
assist in the investigation, which culminated in a report by the committee
concluding that no officer or director breached any fiduciary duty. In October
2003 the two derivative suits were consolidated into one action in the Superior
Court of Fulton County, and a consolidated amended complaint was filed. The
independent committee, along with its independent legal counsel, evaluated the
consolidated amended complaint, and concluded that its prior report and
determination addressed the material allegations contained in the consolidated

amended complaint. The committee reiterated its previous conclusions and
determinations, including that maintaining the derivative litigation is not in
the best interests of the Company. An adverse decision in the case could have a
material adverse effect on CryoLife.

INSURANCE COVERAGE MAY BE DIFFICULT OR IMPOSSIBLE TO OBTAIN IN THE FUTURE AND IF
OBTAINED, THE COST OF INSURANCE COVERAGE IS LIKELY TO BE MUCH MORE EXPENSIVE
THAN IN THE PAST

Because of the current litigation, the FDA Order and subsequent FDA
activity, CryoLife may be unable to obtain satisfactory insurance coverage in
the future, causing CryoLife to be subject to additional future exposure from
product liability claims. Additionally, if competitors' products were perceived as either
functionally superior or more cost effective (see "--Intense Competition"insurance coverage is obtained, the
insurance rates may be significantly higher than in the past, and "--Uncertainties Regarding Future Health Care Reimbursement"), if the number
of procedures inmay provide
less coverage, which cryopreserved tissues are used declines or if hospitals
acquire sufficient inventories of cryopreserved tissue to allow a reduction in
new orders.may adversely impact CryoLife's profitability.

INTENSE COMPETITION The CompanyMAY AFFECT CRYOLIFE'S ABILITY TO RECOVER FROM THE FDA ORDER
AND DEVELOP ITS SURGICAL ADHESIVE BUSINESS

CryoLife faces competition from other companies that cryopreserve human
tissue, as well as companies that market mechanical valves and synthetic and
animal tissue for implantation.implantation and companies that market wound closure products.
Management believes that at least threefour tissue banks offer cryopreservationpreservation services
for humanallograft heart valves and many companies offer processed porcine heart
valves and mechanical heart valves. A few companies dominate portions of the
mechanical, porcine and porcinebovine heart valve markets, including St. Jude Medical,
Inc., Medtronic, Inc. and Baxter
International Inc. The Company also faces competition from a number of
competitors in the area of single-use medical devices andEdwards Life Sciences. CryoLife is aware that severala few
companies have surgical adhesive products under development. Competitive
products may also be under development by other large medical device,
pharmaceutical and biopharmaceutical companies. Many of the Company'sCryoLife's competitors
have greater financial, technical, manufacturing and marketing resources than
the CompanyCryoLife and are well established in their markets.

There can be no assurance that the Company'sCryoLife's products and services will be
able to compete successfully with the products of these or other companies. Any
products developed by the CompanyCryoLife that gain regulatory clearance or approval willwould
have to compete for market acceptance and market share. Failure of the
CompanyCryoLife to
compete effectively could have a material adverse effect on the
Company'sCryoLife's business,
financial condition, results of operations and cash flows. The FDA Order and
related adverse publicity had an adverse effect on CryoLife's competitive
position, which had a material adverse effect on CryoLife's results of
operations. See
"Business--Competition."The FDA Order and subsequent FDA activity may continue to have an
adverse effect on CryoLife's competitive position, which may continue to have a
material adverse effect on CryoLife's results of operations. As a result,
CryoLife's competitors may gain competitive advantages that may be difficult to
overcome.

RAPID TECHNOLOGICAL CHANGE COULD CAUSE CRYOLIFE'S SERVICES AND PRODUCTS TO
BECOME OBSOLETE

The technologies underlying the Company'sCryoLife's products and services are subject to
rapid and profound technological change. The CompanyCryoLife expects competition to
intensify as technical advances in each field are made and become more widely
known. There can be no assurance that others will not develop products or
processes with significant advantages over the products and processes that
the
CompanyCryoLife offers or is seeking to develop. Any such occurrence could have a
material adverse effect on the Company'sCryoLife's business, financial condition, and
results of
operations.

UNCERTAINTIES REGARDINGoperations, and cash flows.

CRYOLIFE MAY NOT BE SUCCESSFUL IN OBTAINING NECESSARY CLINICAL RESULTS AND
REGULATORY APPROVALS FOR PRODUCTS AND SERVICES IN DEVELOPMENT, The Company'sAND SUCH PRODUCTS
AND SERVICES MAY NOT ACHIEVE MARKET ACCEPTANCE

CryoLife's growth and profitability will depend, in part, upon its ability
to complete development of and successfully introduce new products. The
Company may beproducts, including
new applications of its BioGlue and applications applying its SynerGraft
technology. Developing new products and services to a commercially acceptable
form is uncertain, and obtaining required to undertakeregulatory approval is time consuming
and costly development
activities and seek regulatory clearance or approval for new products. See "--
Extensive Government Regulation."costly.

Although the CompanyCryoLife has conducted pre-
clinicalpre-clinical studies on many of its
products under development which indicate that such products may be effective in
a particular application, there can be no assurance that the results obtained

9
from expanded clinical studies will be consistent with earlier trial results or
be sufficient for the CompanyCryoLife to obtain any required regulatory approvals or
clearances. There can be no assurance that the CompanyCryoLife will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products, that regulatory clearance or
approval of these or any new products will be granted on a timely basis, if
ever, or that the new products will adequately meet the requirements of the
applicable market or achieve market acceptance.

The completion of the development of any of the Company'sCryoLife's products remains
subject to all of the risks associated with the commercialization of new
products based on innovative technologies, including unanticipated technical or
other problems, manufacturing difficulties and the possible insufficiency of the
funds allocated for the completion of such development. Consequently, there can be no assurance that any of the Company'sCryoLife's
products under development willmay not be successfully developed or manufactured or,
if developed and manufactured, that such products willmay not meet price or performance
objectives, be developed on a timely basis or prove to be as effective as
competing products.

The inability to successfully complete successfully the development of a product or
application, or a determination by the Company,CryoLife, for financial, technical or other
reasons, not to complete development of any product or application, particularly
in instances in which the CompanyCryoLife has made significant capital expenditures, could
have a material adverse effect on the
Company'sCryoLife's business, financial condition,
and results of operations.

The Company's porcine heart valve products are currently only offered for sale
outside of the U.S.,operations, and beginning in the second quarter of 1998, the Company
expects to begin shipping its BioGlue surgical adhesive for distribution in
the European Community. The Company's porcine heart valves and BioGlue
surgical adhesive are subject to the risk that the Company may be unable to
obtain regulatory approval necessary to permit commercial distribution of
these products in the U.S.

The Company'scash flows. CryoLife's research and development
efforts are time consuming and expensive and there can be no assurance that
these efforts will lead to commercially successful products or services. Even
the successful commercialization of a new service or product in the medical
industry can be characterized by slow growth and high costs associated with
marketing, under-
utilizedunder-utilized production capacity and continuing research and
development and education costs. Generally, theThe introduction of new human tissue services
or products requiresmay require significant physician training and years of clinical
evidence derived from follow-up studies on human implant recipients in order to
gain acceptance in the medical community.

INVESTMENTS IN NEW TECHNOLOGIES OR DISTRIBUTION RIGHTS MAY NOT BE SUCCESSFUL

CryoLife may invest in new technology licenses or distribution rights that
may not succeed in the marketplace. In such cases, CryoLife may be unable to
recover its initial investment in the license, distribution right or purchase of
initial inventory, which may adversely impact CryoLife's profitability.

FUNDING FOR THE ACT TECHNOLOGY MAY NOT BE AVAILABLE

The ACT (Activation Control Technology) is a reversible linker technology
that has potential uses in the areas of cancer therapy, fibrinolysis (blood clot
dissolving) and other drug delivery applications. In February 2001 CryoLife
formed AuraZyme, a wholly-owned subsidiary, in order to seek a corporate
collaboration or to complete a potential private placement of equity or
equity-oriented securities to fund the commercial development of the ACT.
CryoLife has been seeking such funding since 1998. This strategy is designed to
allow CryoLife to continue development of this technology without incurring
additional research and development expenditures, other than through AuraZyme.
There can be no guarantee that such funding can be obtained on acceptable terms,
if at all, especially in light of the recent FDA Order. If such funding is not
obtained, CryoLife may be unable to effectively test and develop the ACT, and
may therefore be unable to determine its effectiveness. Even if such financing
is obtained, there is no guarantee that the ACT will in fact prove to be
effective in the above applications.

UNCERTAINTIES REGARDING THE SYNERGRAFT TECHNOLOGY

CryoLife processes bovine tissues with the SynerGraft technology and
processed human tissues with the SynerGraft technology until February 22, 2003,
following the receipt of the informal February FDA letter. In animal studies,
explanted SynerGraft treated allograft heart valves have been shown to
repopulate with the hosts' cells. However, should SynerGraft-treated tissues
implanted in humans not consistently and adequately repopulate with the human
host cells, the SynerGraft-treated tissues may not have the improved longevity
over the CryoLife standard processing technology that CryoLife currently
expects. This could have a material adverse effect on future expansion plans and
could limit future growth.

10
EXTENSIVE GOVERNMENT REGULATION MAY ADVERSELY AFFECT CRYOLIFE'S ABILITY TO
DEVELOP AND SELL PRODUCTS AND SERVICES

Government regulation in the U.S., the European CommunityEEA and other jurisdictions represents a potentially determinative factor incan
determine the success of the Company'sCryoLife's efforts to market and develop its products.
See "Business--
Government Regulation." The humanallograft heart valves to which the CompanyCryoLife applies its cryopreservationpreservation services
are currently regulated as Class II medical devices by the U.S. Food and Drug Administration ("FDA")FDA and are subject
to significant regulatory requirements, including Quality System Regulations and
recordkeepingrecord keeping requirements. There can be no assurance that changesChanges in regulatory treatment or the adoption of
new statutory or regulatory requirements will notare likely to occur, which could
adversely impact the marketing or development of these products or could
adversely affect market demand for these products. Other allograft tissues
processed and distributed by the CompanyCryoLife are currently regulated as "human tissue"
under a rulerules promulgated by the FDA pursuant to the Public Health Services Act.
This rule establishesThese rules establish requirements for donor testing and screening of human
tissue and recordkeepingrecord keeping relating to these activities. Although the Company's otheractivities and impose certain
registration and product listing requirements on establishments that process or
distribute human tissue allografts are not
currently regulated as medical devices, suchor cellular-based products. The FDA has proposed and is
refining a regulation that will implement good tissue 8

may in the future become subjectpractices, akin to more extensivegood
manufacturing practices, followed by tissue banks and processors of human
tissue. It is anticipated that these good tissue practices regulations when
promulgated will enhance regulatory oversight of CryoLife and other processors
of human tissue. See "Risk Factor - The FDA regulation, which could
include premarket approval ("PMA") Has Notified CryoLife of Its Belief
that Marketing of CryoValve SG and CryoVein SG Require Additional Regulatory
Submissions and/or product licensing requirements.

Although the regulatory status of the Company'sApprovals."

BioGlue surgical adhesive and
FibRx surgical sealantSurgical Adhesive is not certain, the Company believes that FibRx
surgical sealant will be regulated as a biologic and anticipates that BioGlue
surgical adhesive will be regulated as a Class III medical device and
CryoLife believes that its ACT may be regulated as a biologic or in some other capacitydrug by the
FDA. These products haveThe ACT has not been approved for commercial distribution within the U.S. To date, the FDA has never approved
for sale in the U.S. a surgical adhesive or
sealant which, like FibRx surgical
sealant, is composed of human blood components. Management believes that
concerns over viral transmission may have hindered FDA approval of such
products. There can be no assurance that CryoLife's quality control protocols
will sufficiently address FDA concerns or that CryoLife will be able to
develop viral inactivation processes acceptable to the FDA or license such
processes at an acceptable cost.elsewhere. Fixed porcine heart valve products are classified as Class III
medical devices. There can be no assurance that the
Company will be able toCryoLife may not obtain the FDA approval required to distribute
its
surgical adhesives, surgical sealants or porcine heart valve products in the U.S. Distribution of these products
within the European CommunityEC is dependent upon the CompanyCryoLife maintaining its CE Mark ISO 9001, and
ISO 900113485 certifications, of which there can be no assurance.

Most of the Company'sCryoLife's products and services in development, if successfully
developed, will require regulatory approvals from the FDA and perhaps other
regulatory authorities before they may be commercially distributed. The process
of obtaining required regulatory approvals from the FDA normally involves
clinical trials and the preparation of an extensive PMApremarket approval ("PMA")
application and often takes many years. The process is expensive and can vary
significantly based on the type, complexity and novelty of the product. There
can be no assurance that any products developed by the Company,CryoLife, independently or in
collaboration with others, will receive the required approvals for manufacturing
and marketing.

Delays in obtaining U.S. or foreign approvals could result in substantial
additional cost to the CompanyCryoLife and adversely affect the Company'sCryoLife's competitive
position. The FDA may also place conditions on product approvals that could
restrict commercial applications of such products. Product marketing approvals
or clearances may be withdrawn if compliance with regulatory standards is not
maintained or if problems occur following initial marketing. Delays imposed by
the governmental clearance process may materially reduce the period during which
the CompanyCryoLife has the exclusive right to commercialize patented products.

Also, delays or rejections may be encountered during any stage of the
regulatory approval process based upon the failure of the clinical or other data
to demonstrate compliance with, or upon the failure of the product to meet, the
regulatory agency's requirements for safety, efficacy and quality, and those
requirements may become more stringent due to changes in applicable law,
regulatory agency policy or the adoption of new regulations. Clinical trials may
also be delayed due to unanticipated side effects, inability to locate, recruit
and qualify sufficient numbers of patients, lack of funding, the inability to
locate or recruit scientists,clinical investigators, the redesign of clinical trial
programs, the inability to manufacture or acquire sufficient quantities of the
particular product candidate or any other components required for clinical trials, changes
in the Company'sCryoLife's or its collaborative partners' development focus and a disclosure of
trial results by competitors. To date, the Company has never had to submit clinical trials for
any of its products. In the event that it should be required to perform
clinical trials, there can be no guarantee that it will be able to do so
effectively and efficiently.

Even if regulatory approval is obtained for any of the Company'sCryoLife's products or
services, the scope of the approval may significantly limit the indicated usage
for which such products or services may be marketed. Products or services
marketed by the CompanyCryoLife pursuant to FDA or foreign oversight or approvalapprovals are
subject to pervasive and continuing regulation. In the U.S., devices and biologics must be
manufactured in registered andestablishments (and, in the case of biologics,
licensed establishmentsestablishments) and must be produced in accordance with Quality System
Regulations. Manufacturing facilities and processes are subject to periodic FDA
inspection. Labeling and promotional activities are also subject to scrutiny by
the FDA and, in certain instances, by the Federal Trade Commission. The export
of devices and biologics is also subject to regulation and may require FDA
approval. From time to time, the FDA may modify such regulations, imposing

11
additional or different requirements. Failure to comply with any applicable FDA
requirements, which may be ambiguous, could result in civil and criminal
enforcement actions, warnings, citations, product recalls or detentions and
other penalties and could have a material adverse effect on the

Company'sCryoLife's business,
financial condition, and results of operations.operations, and cash flows. As noted above, the
FDA Order and subsequent FDA activity had, and may continue to have such an
effect.

In addition, theThe National Organ Transplant Act ("NOTA") prohibits the
acquisition or transfer of human organs for "valuable consideration" for use in
human transplantation. NOTA permits the payment of reasonable expenses
associated with the removal, transportation, processing, preservation, quality
control and storage of human organs. There can be no assurance that restrictive
interpretations of NOTA will not be adopted in the future that will challenge
one or more aspects of the Company'sCryoLife's methods of charging for its cryopreservationpreservation
services. The Company'sCryoLife's laboratory operations are subject to the U.S. Department of
Labor, Occupational Safety and Health Administration and Environmental
Protection Agency requirements for prevention of occupational exposure to
infectious agents and hazardous chemicals and protection of the environment.
Some states have enacted statutes and regulations governing the processing,
transportation and storage of human organs and tissue.

While management believes that the Company is presently in
compliance in all material respects with all such applicable statutes and
regulations, there can be no assurance that moreMore restrictive state laws or regulations will notmay be adopted in the future thatand
they could have a material adverse effect on the Company'sCryoLife's business, financial
condition, and results of operations. See "Business--Government Regulation."operations and cash flows.

UNCERTAINTIES RELATED TO PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY The CompanyMAY
AFFECT THE VALUE OF CRYOLIFE'S INTELLECTUAL PROPERTY

CryoLife owns several patents, patent applications and licenses relating to
its technologies, which it believes provide important competitive advantages.
There can be no assurance that the Company'sCryoLife's pending patent applications will issue
as patents or that challenges will not be instituted concerning the validity or
enforceability of any patent owned by the Company,CryoLife, or, if instituted, that such
challenges will not be successful. The cost of litigation to uphold the validity
and prevent infringement of a patent could be substantial. Furthermore, there
can be no assurance that competitors will not independently develop similar
technologies or duplicate the Company'sCryoLife's technologies or design around the patented
aspects of the Company'sCryoLife's technologies. There can be no assurance that the Company'sCryoLife's
proposed technologies will not infringe patents or other rights owned by others.

In addition, under certain of the Company'sCryoLife's license agreements, if the CompanyCryoLife
fails to meet certain contractual obligations, including the payment of minimum
royalty amounts, such licenses may become nonexclusive or terminable by the
licensor, which could have a material adverse effect on the Company'sCryoLife's business,
financial condition, and results of operations.operations, and cash flows. Additionally,
the
CompanyCryoLife protects its proprietary technologies and processes in part by
confidentiality agreements with its collaborative partners, employees and
consultants. There can be no assurance that these agreements will not be
breached, that the CompanyCryoLife will have adequate remedies for any breach or that
the Company'sCryoLife's trade secrets will not otherwise become known or independently
discovered by competitors, any of which could have a material adverse effect on
the Company'sCryoLife's business, financial condition, and results of operations.operations, and cash flows.

UNCERTAINTIES REGARDING FUTURE HEALTH CARE REIMBURSEMENT MAY AFFECT THE AMOUNT
AND TIMING OF CRYOLIFE'S REVENUES

Even though the CompanyCryoLife does not receive payments directly from third-party
health care payors, their reimbursement methods and policies impact demand for
the Company'sCryoLife's cryopreserved tissue and other services and products. The
Company's cryopreservationCryoLife's
preservation services with respect to its cardiac, vascular, and orthopedic
tissues may be particularly susceptible to third-
partythird-party cost containment
measures. In particular,For example, the initial cost of a cryopreserved humanallograft heart valve
generally exceeds the cost of a mechanical, synthetic or animal-derived valve.
The CompanyCryoLife is unable to predict what changes will be made in the reimbursement
methods and policies utilized by third-party health care payors or their effect
on the Company.CryoLife.

Changes in the reimbursement methods and policies utilized by third-party
health care payors, including Medicare, with respect to cryopreserved tissues
provided for implant by the CompanyCryoLife and other Company services and products, could
have a material adverse effect on the Company.CryoLife. Significant uncertainty exists as to
the reimbursement status of newly approved health care products and services and
there can be no assurance that adequate third-party coverage will be available

12
for the CompanyCryoLife to maintain price levels sufficient for realization of an
appropriate return on its investment in developing new products.

Government, hospitals, and other third-party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new products approved for marketing by the FDA and by
refusing in some cases to provide any coverage for uses of approved products for
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and other
third-party 10
payors for uses of the Company'sCryoLife's new products and services, market
acceptance of these products would be adversely affected, which could have a
material adverse effect on the Company'sCryoLife's business, financial condition, and results of
operations.

DEPENDENCEoperations and cash flows.

CRYOLIFE IS DEPENDENT ON ITS KEY PERSONNEL

The Company'sCryoLife's business and future operating results depend in significant part
upon the continued contributions of its key technical personnel and senior
management, many of whomwho would be difficult to replace. The Company'sCryoLife's business and
future operating results also depend in significant part upon its ability to
attract and retain qualified management, processing, technical, marketing, sales
and support personnel for its operation. Competition for such personnel is
intense and there can be no assurance that the CompanyCryoLife will be successful in
attracting and retaining such personnel. The loss of key employees, the failure
of any key employee to perform adequately or the Company'sCryoLife's inability to attract and
retain skilled employees as needed could have a material adverse effect on
the Company'sCryoLife's business, financial condition, and results of operations.

PRODUCT LIABILITYoperations and cash flows.

OUR CONSOLIDATED FINANCIAL STATEMENTS AS OF AND INSURANCE

The useFOR THE TWO YEARS ENDED DECEMBER
31, 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2000 INCLUDED IN CRYOLIFE'S 10-K
WERE AUDITED BY ARTHUR ANDERSEN LLP, WHICH HAS BEEN FOUND GUILTY OF OBSTRUCTION
OF JUSTICE AND THE SUBJECT OF ADDITIONAL LITIGATION

Arthur Andersen LLP has been found guilty of the Company's products involves the possibilityobstruction of adverse effects
that could expose the Company to product liability claims. A recent U.S.
Supreme Court decision held that product liability may exist despite FDA
approval, and future court decisions may also increase the Company's risk of
product liability. From time to time, the Company is involved in legal
proceedings based on product liability claims of a nature considered normaljustice with
respect to its business. The Company is currently involved in one such proceeding. The
Company's products are used by health care providersactivities in connection with Enron Corp. and may be the treatmentsubject
of patients, who will, on occasion, sustain injuryadditional litigation. Arthur Andersen LLP has also ceased practicing before
the SEC. Arthur Andersen LLP or dieany successor in interest may have insufficient
assets to satisfy any claims that may be made by investors with respect to the
financial statements as of and for the year ending December 31, 2001 and for the
year ended December 31, 2000 included in CryoLife's Form 10-K for the year
ending December 31, 2002 and incorporated into this prospectus.

In addition, Arthur Andersen LLP has not consented to the inclusion of
their report dated March 27, 2002 in CryoLife's Form 10-K for the year ending
December 31, 2002, and as a result, only a copy of such report has been
included. Because Arthur Andersen LLP has not consented to the inclusion of
their conditionreport in our Form 10-K for the year ending December 31, 2002 which is
incorporated into this prospectus, claimants may not be able to recover against
Arthur Andersen LLP for any untrue statements of a material fact contained in
the financial statements audited by Arthur Andersen LLP or medical treatment. Ifany omissions to
state a lawsuit is filed because
of such an occurrence, the Company, along with physicians and nurses,
hospitals and other medical suppliers, may be named as a defendant, and
whether or not the Company is ultimately determinedmaterial fact required to be liable, the Company
may incur significant legal expenses. In addition, such litigation could
damage the Company's reputation and therefore impair its ability to market its
products or obtain product liability insurance and could cause the premiums
for such insurance to increase. Although the Company has incurred minimal
losses due to product liability claims to date, there can be no assurance that
it will not incur significant losses in the future. The Company currently
maintains product liability insurance in the aggregate amount of $14 million
per year. There can be no assurance that such coverage will continue to be
available on terms acceptable to the Company or will be adequate to cover any
losses due to product claims if actually incurred. Furthermore, if any such
claim is successful, it could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Legal
Proceedings."

MANAGEMENT DISCRETION IN USE OF PROCEEDS

The Company will have broad discretion as to the use of the net proceeds to
the Company of this Offering, including approximately 60% of such net proceeds
not designated for the repayment of indebtedness (assuming an offering price
of $14). As a result of such discretion, the Company's management could
allocate the net proceeds to the Company of this Offering for uses that the
shareholders may not deem desirable. In addition, there can be no assurance
that the net proceeds can or will be invested to yield an acceptable return.
See "Use of Proceeds."

USEstated therein.

SECURITIES PRICES FOR CRYOLIFE SHARES HAVE BEEN, AND DISPOSAL OF HAZARDOUS MATERIAL

The Company's research, development and processing activities involve the
controlled use of small quantities of radioactive compounds, chemical solvents
and other hazardous materials. The Company's activities also include the
preservation and growth of human cells and the processing of human tissue.
Although the Company believes that its safety procedures for handling,
processing and disposing of hazardous materials and human tissue comply with
the standards prescribed by federal, state and local regulations, the risk of
accidental contamination, injury or disease transmission from these materials
cannot be completely eliminated. In the event of such an accident or
transmission, the Company could be held liable for resulting damages and any
liability could have a material adverse effect on the Company's business,
financial condition and results of operations. Also, any failure to comply
with applicable regulations could result in the imposition of penalties, fines
and sanctions, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

VOLATILITY OF SECURITIES PRICESMAY CONTINUE TO BE,
VOLATILE

The trading price of the Company's Common StockCryoLife's common stock has been subject to wide
fluctuations from time to timerecently and may continue to be subject to such volatility in the
future. Trading price fluctuations can be caused by a variety of factors,
including quarter to quarterregulatory actions such as the FDA Order, recent product liability
claims, variations in operating results, announcement of technological
innovations or new products by the
CompanyCryoLife or its competitors, governmental
regulatory acts, developments with respect to patents or proprietary rights,
general conditions in the medical device or service industries, actions taken by
government regulators, changes in earnings estimates by securities analysts or
other events or factors, many of which are beyond the Company'sCryoLife's control. If
the Company'sCryoLife's revenues or operating results in future quarters fall below the
expectations of securities analysts and investors, the price of the Company's Common StockCryoLife's
common stock would likely decline further, perhaps substantially. Changes in the
trading price of the Company's
Common StockCryoLife's common stock may bear no relation to the Company'sCryoLife's
actual operational or financial results. If CryoLife's share prices do not meet
the requirements of the New York Stock Exchange, CryoLife's shares may be
delisted. CryoLife's closing stock price in the period January 1, 2002 to
January 22, 2004 has ranged from a high of $31.31 to a low of $1.89.

13
ANTI-TAKEOVER PROVISIONS The Company'sMAY DISCOURAGE OR MAKE MORE DIFFICULT AN ATTEMPT TO
OBTAIN CONTROL OF CRYOLIFE

CryoLife's Articles of Incorporation and Bylaws contain provisions that may
discourage or make more difficult any attempt by a person or group to obtain
control of the Company,CryoLife, including provisions authorizing the issuance of preferred
stock ("Preferred Stock") without shareholder approval, restricting the persons who may call a
special meeting of the shareholders and prohibiting shareholders from taking
action by written consent. In addition, the CompanyCryoLife is subject to certain
provisions of Florida law that may discourage or make more difficult takeover
attempts or acquisitions of substantial amounts of the
Company's Common Stock.CryoLife's common stock.
Further, pursuant to the terms of a shareholder rights plan adopted in 1995,
each outstanding share of Common Stockcommon stock has one attached right. The rights will
cause substantial dilution of the ownership of a person or group that attempts
to acquire the CompanyCryoLife on terms not approved by the Board of Directors and may have
the effect of deterring hostile takeover attempts.

See
"Description of Capital Stock."

SHARES ELIGIBLE FORDIVIDENDS ARE NOT LIKELY TO BE PAID IN THE FORESEEABLE FUTURE

SALE

Substantially all of the Company's outstanding Common Stock is available for
sale in the public marketplace. As of January 31, 1998, there were also
outstanding stock options to purchase an aggregate of 747,000 shares of Common
Stock at various exercise prices per share. The majority of the shares to be
received upon exercise of these options will be available for immediate resale
in the public markets. No prediction can be made as to the effect, if any,
that sales of shares of Common Stock or the availability of such shares for
sale will have on the market prices prevailing from time to time. The
possibility exists that substantial amounts of Common Stock may be sold in the
public market, which may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities. See "Shares Eligible for Future Sale."

ABSENCE OF DIVIDENDS

The CompanyCryoLife has not paid, and does not presently intend to pay, cash
dividends. The Company's major credit agreement contains, and futureFuture credit agreements may contain financial covenants, including
covenants to maintain certain levels of net worth and certain leverage ratios,
which could have the effect of restricting the amount of dividends that the CompanyCryoLife
may pay. It is not likely that any cash dividends will be paid in the
foreseeable future.

See
"Dividend Policy.14

FORWARD LOOKING STATEMENTS

This prospectus, and the information incorporated herein by reference,
contains forward-looking statements and information made or provided by us that
are based on the beliefs of our management as well as estimates and assumptions
made by and information currently available to our management. The words
"could," 12

FORWARD-LOOKING STATEMENTS
- -------------------------------------------------------------------------------

This Prospectus includes "forward-looking statements" within"may," "might," "will," "would," "shall," "should," "pro forma,"
"potential," "pending," "intend," "believe," "expect," "anticipate," "estimate,"
"plan," "future" and other similar expressions generally identify
forward-looking statements, including, in particular, statements regarding
future services, market expansion and pending litigation. These forward-looking
statements are made pursuant to the meaningsafe harbor provisions of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Private
Securities Litigation Reform Act of 1995. Investors are cautioned not to place
undue reliance on these forward-looking statements, which are as of their
respective dates. Such forward-looking statements reflect the views of our
management at the time such statements are made and are subject to a number of
risks, uncertainties, estimates and assumptions, including, without limitation,
in addition to those identified in the text surrounding such statements, those
identified under "Risk Factors" and elsewhere in this prospectus.

All statements, other than statements of historical facts, included or
incorporated by reference in this Prospectus whichherein
that address activities, events or developments whichthat the Company expects or
anticipates will or may occur in the future, are forward-looking statements,
including statements regardingregarding:

o the impact of recent accounting pronouncements;

o adequacy of product liability insurance to defend against lawsuits;

o the outcome of lawsuits filed against the Company;

o the impact of the FDA Order and subsequent FDA activity on future
revenues, profits and business operations;

o the effect of the FDA Order and subsequent FDA activity on sales of
BioGlue;

o future tissue procurement levels;

o expected future impact of BioGlue on revenues;

o the impact of the February 2003 FDA 483 and October 2003 FDA 483;

o the estimates of the amounts accrued for the retention levels under
the Company's product liability and directors' and officers' insurance
policies, as well as the estimates of the amounts accrued for product
loss claims incurred but not reported at December 31, 2002 or
September 30, 2003;

o future costs of human tissue preservation services;

o changes in liquidity and capital resources;

o the outcome of any evaluation of allograft heart valves by the FDA;

o the Company's competitive position,
the timing of the application to the FDA for approval of the stentless
CryoLife-O'Brien porcine heart valves, BioGlue surgical adhesive and FibRx
surgical sealant, otherposition;

o estimated dates relating to the Company's proposed regulatory
submissions, estimates regarding 1998 research and development
expenditures,submissions;

o the Company's expectations regarding the adequacy of current financing
arrangements,arrangements;

o product demand and market growth,growth;

o the potential of the ACT for use in cancer therapies, fibrinolysis
(blood clot dissolving), and other drug delivery applications;

o the impact on the Company of adverse results of surgery utilizing
tissue processed by it;

o the expected receipt of tax refunds; and

o other statements regarding future plans and strategies, anticipated
events or trends and
similar expressions concerning matters that are not historical facts are
forward-looking statements.trends.

These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions, and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
and developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties which could cause actual results
to differ materially from the Company's expectations, including the risk factors
discussed in this Prospectusprospectus and other factors, many of which are beyond the
control of the
Company.CryoLife. Consequently, all of the forward-looking statements made in
this Prospectusprospectus are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.

13
USE OF PROCEEDS

- -------------------------------------------------------------------------------

The net proceedsThis prospectus relates to the Company from theoffer and sale of shares of Common Stock
offeredour common stock by the
Company hereby are estimated to be approximately $29,081,000
($34,016,000 if the Underwriters' over-allotment option is exercised in full
and $37,135,000 if the Underwriters' over-allotment option is exercised in
full and the Selling Shareholders sell no shares), based on an assumed public
offering price of $14 per share, and after deduction of the underwriting
discounts and commissions and estimated offering expenses payable by the
Company. The Companyshareholders named herein. We will not receive any proceeds from the sale of shares of
Common Stock offered hereunder by the
Selling Shareholders. The Company has,
however, agreedcommon stock. We will pay all expenses related to offer for sale all or any portionthe registration of the 237,000 shares not
sold hereunder by the Selling Shareholders.

The Company anticipates that a portion of the net proceeds will be used to
repay all outstanding indebtedness under its credit facility (the "Credit
Facility") with NationsBank N.A. This indebtedness was incurred pursuant to a
term note and revolving note, and was used, in part, to finance the Company's
new headquarters facility and its new IFM manufacturing facility. At January
31, 1998, approximately $11.9 million in principal and accrued and unpaid
interest was outstanding under the Credit Facility at interest rates ranging
from approximately 7.4% to 8.5% per annum. See Note 4 to the Consolidated
Financial Statements as contained elsewhere in this Prospectus. Such
borrowings under the Credit Facility are repayable in varying amounts with the
final payment due December 31, 2004. The balance of the net proceeds will be
used for manufacturing facilities expansion and general corporate purposes,
including working capital, and may be used for potential acquisitions. The
Company selectively considers strategic acquisitions of complementary
technologies, but it currently has no specific plans for any such acquisition.
See "Business--Manufacturing and Operations." Pending such use, the Company
expects to invest the net proceeds in short-term, interest-bearing, investment
grade securities.

The Company anticipates that its current resources, together with the net
proceeds of this Offering and continued revenue from sales of its products and
services at present levels will be sufficient to meet the Company's operating
and capital requirements for the next 12 months. However, there can be no
assurance that the Company will not need to obtain additional financing prior
to such time, or that such financing will be available on terms acceptable to
the Company, or at all. The Company's actual cash requirements may vary
materially from those now planned, and will depend upon numerous factors,
including the Company's results of operations, the results of the Company's
development and commercialization programs, the timing and results of pre-
clinical and clinical trials, the timing and costs of obtaining regulatory
approvals, the level of resources that the Company commits to the development
of manufacturing, marketing and sales capabilities, the technological advances
and activities of competitors and other factors. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Risk Factors--Management Discretion in Use of
Proceeds."

PRICE RANGE OF COMMON STOCK
- -------------------------------------------------------------------------------

The Company's Common Stock is traded on the NYSE under the symbol "CRY." Prior
to July 15, 1997, the Company's Common Stock was traded on the Nasdaq National
Market under the symbol "CRYL." The following table sets forth, for the
periods indicated, the intra-day high and low sale prices per share of Common
Stock on the NYSE or the Nasdaq National Market, as applicable:

HIGH LOW
--------- --------

1998
First Quarter (through February 18, 1998)................. $17 15/16 $13 3/4
1997
Fourth Quarter............................................ 19 13
Third Quarter............................................. 16 1/8 11 1/4
Second Quarter............................................ 13 1/4 7 5/8
First Quarter............................................. 14 1/4 8
1996
Fourth Quarter............................................ 15 3/4 12 3/16
Third Quarter............................................. 20 1/2 11 1/4
Second Quarter............................................ 20 3/4 10 4/5
First Quarter............................................. 12 5/8 7
1995
Fourth Quarter............................................ 9 1/16 6 1/8
Third Quarter............................................. 9 1/8 5 3/8
Second Quarter............................................ 5 5/8 3 3/8
First Quarter............................................. 4 1/4 3 1/8

The last reported sales price per share for the Common Stock on the NYSE on
February 18, 1998 was $14. As of February 1, 1998, there were approximately
410 holders of record, and approximately 7,000 beneficial holders, of the
Company's Common Stock.

DIVIDEND POLICY
- -------------------------------------------------------------------------------

The Company has never declared or paid any cash dividends on its Common Stock.
The Company currently intends to retain any future earnings for funding growth
and therefore, does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The holders of any shares of Preferred Stock
issued by the Company will have a preference as to the payment of dividends
over the holders of shares of Common Stock. No shares of Preferred Stock are
currently issued and outstanding. See "Description of Capital Stock." The
Credit Facility contains, and future credit agreements may contain, financial
covenants, including covenants to maintain certain levels of net worth and
certain leverage ratios, which could have the effect of restricting the amount
of dividends that the Company may pay.

CAPITALIZATION
- -------------------------------------------------------------------------------

The following table sets forth as of December 31, 1997 (i) the actual
capitalization of the Company and (ii) the capitalization as adjusted to give
effect to (a) the receipt of the net proceeds from the sale of 2,263,000
shares of Common Stock offered by the Company hereby (at an assumed offering
price of $14 per share) after deduction ofcommon
stock except underwriting discounts and commissions and estimatedfees and expenses payable byof
counsel for the Company in connection withselling shareholders.

SELLING SHAREHOLDERS

The shareholders named below have contractual rights requiring us to
register the resale of their shares. The following table states the name of each
shareholder who may sell under this Offering, (b)prospectus and, for each shareholder, the
repaymentnumber of $11,777,000 in principal under the Credit
Facility, (c) the conversion of $607,000 of the convertible debenture into
50,000 shares of Common Stockour common stock beneficially owned as of January 31, 2004,
and (d) the issuancepercentage of 2,000our stock that number represents; the number of shares
towhich may be sold by a Selling Shareholder pursuant tousing this prospectus; and the exercisenumber of outstanding options. This
table shouldshares of common
stock that will be read in conjunction withbeneficially owned after the Consolidated Financial Statementscompletion of this offering
(assuming the Companysale of all shares offered), and Notes thereto included elsewhere in this Prospectus:

DECEMBER 31, 1997
------------------------
ACTUAL AS ADJUSTED
----------- -----------

Current maturities of long-term debt................. $ 1,496,000 $ 496,000
Long-term debt:
Bank loans......................................... 10,777,000 --
Convertible debenture.............................. 5,000,000 4,393,000
Other long-term debt............................... 1,089,000 1,089,000
Shareholders' equity:
Preferred stock, $.01 par value per share;
authorized 5,000,000 shares including 2,000,000
shares of Series A junior participating preferred
stock; no shares issued........................... -- --
Common stock, $.01 par value per share; authorized
50,000,000 shares; 10,242,961 shares issued;
12,564,791 shares issued as adjusted(1)........... 102,000 125,000
Additional paid-in capital......................... 17,694,000 47,359,000
Treasury stock, 543,000 shares, at cost............ (180,000) (180,000)
Retained earnings.................................. 12,627,000 12,627,000
Notes receivable from shareholder.................. (16,000) (16,000)
----------- -----------
Total shareholders' equity....................... 30,227,000 59,915,000
----------- -----------
Total capitalization........................... $48,589,000 $65,893,000
=========== ===========

- --------
(1) Excludes an aggregatethe percentage of 754,000 Shares of Common Stock issuable upon
exercise of options outstanding as of December 31, 1997 at a weighted
average exercise price of $8.95 per share, of which options to purchase
308,000 shares were exercisable. See "Shares Eligible for Future Sale."our common
stock that number represents.

SELECTED CONSOLIDATED FINANCIAL DATA
- -------------------------------------------------------------------------------

The following Selected Consolidated Financial Data should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other financial information included elsewhere in
this Prospectus or incorporated herein by reference. The data set forth below
with respect to the Company's Consolidated Income Statements and Balance
Sheets for, and as of the end of, the years ended December 31, 1996 and 1997
are derived from the Company's Consolidated Financial Statements which have
been audited by Ernst & Young LLP, independent auditors, and which are
included elsewhere in this Prospectus and are qualified by reference to such
Consolidated Financial Statements and Notes thereto.The selected data
presented below for, and as of the end of, each of the years in the three-year
period ended December 31, 1995, are derived from the Consolidated Financial
Statements of the Company, which Consolidated Financial Statements have been
audited by KPMG Peat Marwick LLP, independent auditors. The Consolidated
Income Statement for the year ended December 31, 1995, and the report thereon,
are included elsewhere in this Prospectus. The historical results are not
necessarily indicative of future results of operations.

YEAR ENDED DECEMBER 31,
---------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME STATEMENT DATA:
Revenues:
Cryopreservation....... $18,938 $22,818 $27,994 $36,293 $44,242
Bioprosthetic
cardiovascular
devices............... 933 414 263 385 576
Single-use medical
devices............... -- -- -- -- 5,591
Other income........... 1,470 578 969 550 460
------- ------- ------- ------- -------
Total Revenues....... 21,341 23,810 29,226 37,228 50,869
Expenses:
CostBENEFICIAL OWNERSHIP PRIOR BENEFICIAL OWNERSHIP AFTER
TO THE OFFERING THE OFFERING (1)
----------------------------- -------------------------------
NUMBER OF
SHARES
NAMES OF SHAREHOLDERS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
------------- ------------- -------------- ------------- -------------
Atlas Equity I, Ltd. (2)..................... 250,000 * 250,000 0 *
BlackRock Funds, Small Cap Growth Equity 600,000 2.6% 600,000 0 *
Portfolio (3) (12).........................
Capital Ventures International (4)........... 500,000 2.2% 500,000 0 *
Deephaven Small Cap Growth Fund LLC (5) (12). 400,000 1.7% 400,000 0 *
MFS Series I Trust on behalf of cryopreservation and
products.............. 8,759 8,965 10,485 12,593 17,764
Research and
development........... 1,384 1,975 2,634 2,807 3,946
General, administrative
and marketing......... 10,282 11,085 12,807 15,673 20,548
Interest expense....... 23 21 4 72 978
------- ------- ------- ------- -------
Total Expenses....... 20,448 22,046 25,930 31,145 43,226
Income before income
taxes................... 893 1,764 3,296 6,083 7,633
Income tax expense....... 339 498 1,094 2,156 2,908
------- ------- ------- ------- -------
Net income............. $ 554 $ 1,266 $ 2,202 $ 3,927 $ 4,725
======= ======= ======= ======= =======
Earnings per shareMFS New
Discovery Fund (6) (12).................... 598,300 2.6% 119,500 478,800 2.1%
MFS/Sun Life Series Trust on behalf of common stock:
Basic.................. $ .06 $ .14 $ .23 $ .41 $ .49
======= ======= ======= ======= =======
Diluted................ $ .06 $ .14 $ .23 $ .40 $ .48
======= ======= ======= ======= =======
Weighted average numberNew
Discovery Series (7) (12).................. 111,000 * 22,000 89,000 *
MFS Variable Insurance Trust on behalf of
sharesMFS New Discovery Series (8) (12)......... 218,100 * 48,500 169,600 *
The Riverview Group LLC (9) (12)............. 160,000 * 160,000 0 *
Smithfield Fiduciary LLC (10) (12)........... 944,000 4.1% 944,000 0 *
UBS O'Connor LLC f/b/o O'Connor PIPES
Corporate Strategies Ltd. (11)............. 400,000 1.7% 400,000 0 *

- ------------------
*Less than 1% of common
stock outstanding:
Basic.................. 9,018 9,312 9,379 9,505 9,642
Diluted................ 9,114 9,373 9,568 9,906 9,942

DECEMBER 31, AS ADJUSTED
--------------------------------------- DECEMBER 31,
1993 1994 1995 1996 1997 1997(1)
------- ------- ------- ------- ------- ------------

BALANCE SHEET DATA:
Cash, cash equivalents
and marketable
securities.............. $ 5,079 $ 6,366 $ 6,182 $ 1,370 $ 111 $17,415
Total assets............. 20,075 21,417 24,132 34,973 53,749 71,053
Long-term debt, including
current maturities...... -- -- -- 3,326 18,362 5,978
Retained earnings........ 506 1,773 3,975 7,902 12,627 12,627
Total shareholders'
equity.................. 16,615 17,933 20,465 24,929 30,227 59,915the outstanding shares

- --------
(1) Adjusted to give effect to (a)Assumes that all common stock offered will be sold, that we will not issue
additional shares before the receiptoffering is completed, and that the shareholder
will not acquire more shares before completion of the net proceeds fromoffering.

(2) Balyasny Asset Management, LLC ("Balyasny") is the salemanager of 2,263,000 sharesAtlas Equity
I, Ltd. ("Atlas"). By virtue of Common Stock offered by the Company hereby (at
an assumed offering priceits ownership of $14 per share) after deduction of
underwriting discounts and commissions and estimated expenses payable by
the Company in connection with this Offering, (b) the repayment of
$11,777,000 in principal under the Credit Facility, (c) the conversion of
$607,000100% of the convertible debenture into 50,000equity interest in
Atlas, Balyasny may be deemed to beneficially own the shares held by Atlas. By
virtue of Common Stock
and (d) the issuance of 2,000 shares to be sold by a Selling Shareholder
pursuant to the exercise of outstanding options.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------

The following discussion of the financial condition and results of operations
of CryoLife should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in the
Prospectus. See Glossary on page 58 for definitions of certain terms used
herein.

OVERVIEW

The Company was organized in 1984 to address market opportunities in the area
of biological implantable products and materials, and today is the leader in
the cryopreservation of viable human tissue for cardiovascular, vascular and
orthopaedic applications. Ahis majority of the Company's current revenues are
derived from the cryopreservation of human heart valves and conduits,
reflecting CryoLife's initial exclusive focus on this area. The Company began
cryopreserving aortic heart valves in 1984, pulmonary heart valves in 1986 and
mitral heart valves in 1995. CryoLife has also expanded into the
cryopreservation of other human tissue, including vascular tissue and
connective tissue for the knee.

The Company pays a fee to an organ procurement agency or tissue bank at the
time such organization consigns human tissue to the Company. The Company
generates revenues from cryopreservation services by charging hospitals a fee,
which covers the Company's services, the associated procurement fee and
applicable shipping expenses. The Company records revenue upon shipping tissue.
Costs associated with the procurement, processing and storage of tissue are
accounted for as deferred preservation costs on the Company's balance sheet and
are expensed when the tissue is shipped. The Company continually monitors
cryopreserved tissue in its possession to determine its viability. Tissue
determined not to be suitable for implantation is disposed of properly, and the
associated deferred preservation costs are expensed. As part of an effort to
reduce its working capital needs, while simultaneously facilitating the use of
cryopreserved tissue, the Company provides liquid nitrogen freezers to a number
of hospitals. The Company retains ownership of the liquid nitrogen freezers
and, consequently, incurs associated depreciation charges. The hospitals are
responsible for operating expenses related to the useequity interest in Balyasny, which owns
100% of the liquid nitrogen
freezers.

The Company has expanded, and intends to continue to expand, its portfolio of
products and services. Much of this expansion has been accomplished through
acquisitions of intellectual property and companies. In 1992, the Company
purchased for $730,000 the exclusive distribution rights for a line of
stentless porcine heart valves which the Company currently marketsequity interest in the
European Community. In 1996, the Company purchased for $275,000 a patent for an
advanced design stentless pulmonary porcine heart valve. Also in 1996, the
Company acquired the assets of UCFI, a tissue processor, for $750,000 in cash
and a $1.3 million note. In 1997, the Company acquired IFM and its line of
single-use medical devices for $4.5 million in cash, a $5.0 million convertible
debenture and a commitment to pay additional cash consideration (not to exceed
$1.8 million) if certain target net revenues of IFM are exceeded.

The composition of the Company's revenues is expected to change in future
years, reflecting, among other things, the anticipated growth in shipments of
human vascular tissue and human connective tissue for the knee, the acquisition
of IFM and the introduction into the European Community of BioGlue surgical
adhesive as well as other expected new products.

The following table outlines product shipment and revenue data for the
Company's major product lines from 1995 to 1997:

YEAR ENDED DECEMBER 31,
-----------------------
UNITS SHIPPED AND REVENUES BY MAJOR PRODUCT LINE 1995 1996 1997
------------------------------------------------ ------- ------- -------
(DOLLARS IN THOUSANDS)

Human Heart Valves and Conduits:
Units shipped.................................. 3,499 4,528 5,244
Revenues....................................... $19,767 $24,763 $29,046
Human Vascular Tissue:
Units shipped.................................. 1,765 2,147 2,621
Revenues....................................... $ 6,771 $ 8,172 $10,469
Human Connective Tissue for the Knee:
Units shipped.................................. 573 1,562 1,859
Revenues....................................... $ 1,456 $ 3,358 $ 4,727
Bioprosthetic Cardiovascular Devices:
Units shipped.................................. 198 256 532
Revenues....................................... $ 263 $ 385 $ 576

RESULTS OF OPERATIONS

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Revenues increased 37% to $50.9 million in 1997 from $37.2 million in 1996. The
increase in revenues was primarily due to the growing acceptance in the medical
community of cryopreserved tissues, the Company's ability to procure greater
amounts of tissue, price increases for certain cryopreservation services and
revenues attributable to the Company's line of single-use medical devices
following the IFM acquisition in March 1997. Revenues attributable to IFM were
$5.6 million in 1997.

Revenues from human heart valve and conduit cryopreservation services increased
17% to $29.0 million in 1997 from $24.8 million in 1996, representing 57% and
67%, respectively, of total revenues during such years. This increase in
revenues was primarily due to a 16% increase in the number of heart allograft
shipments.

Revenues from human vascular tissue cryopreservation services increased 28% to
$10.5 million in 1997 from $8.2 million in 1996, representing 21% and 22%,
respectively, of total revenues during such years. This increase in revenues
was primarily due to a 22% increase in the number of vascular allograft
shipments resulting from the introduction of cryopreserved tissues for new
procedures and an increased demand for the Company's existing cryopreservation
services.

Revenues from human connective tissue for the knee cryopreservation services
increased 38% to $4.7 million in 1997 from $3.4 million in 1996, representing
9% of total revenues during each year. This increase in revenues was primarily
due to a 19% increase in the number of allograft shipments resulting from a
greater proportion of the 1997 revenues being derived from the implantation of
cryopreserved menisci, which have a significantly higher per unit revenue than
the Company's cryopreserved tendons.

Revenues from the sale of bioprosthetic cardiovascular devices in 1997 were
$576,000 compared to $385,000 in 1996, representing 1% of revenues during each
year. Other revenues decreased to $460,000 in 1997 from $550,000 in 1996. Other
revenues in 1997 consisted primarily of research grant award revenues related
to the Company's SynerGraft technology.

Cost of cryopreservation services and products increased to $17.8 million in
1997 from $12.6 million in 1996. Cost of cryopreservation services and products
as a percentage of revenues increased to 35% in 1997 from 34% in 1996. This
increase was primarily due to the increased overhead costs associated with the
new corporate headquarters and the addition of the IFM product line, partially
offset by efficiencies gained with the increase in the number of allografts
processed.

General, administrative and marketing expenses increased 31% to $20.5 million
in 1997 from $15.7 million in 1996, representing 40% and 42%, respectively, of
total revenues during such years. The increased expenses of approximately $4.8
million were primarily attributable to increased costs associated with the
Company's new corporate headquarters, increased fees paid to technical
representatives and other related marketing expenses relating to the growth in
revenues and increases in general overhead expenses to support the growth in
revenues.

The Company has continued its commitment to research and development activity,
spending approximately $3.9 million in 1997 and $2.8 million in 1996,
representing 8% of total revenues during each year. The Company's research and
development expenditures during 1997 were primarily for the development of
bioadhesives for surgical applications and its SynerGraft technology.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenues increased 27% to $37.2 million in 1996 from $29.2 million in 1995. The
increase in revenues was primarily due to growing acceptance in the medical
community of cryopreserved tissues, the Company's ability to procure greater
amounts of tissue and price increases for certain services.

Revenues from human heart valve and conduit cryopreservation services increased
25% to $24.8 million in 1996 from $19.8 million in 1995, representing 67% and
68%, respectively, of total revenues during such years. This increase in
revenues was primarily due to a 29% increase in the number of heart allograft
shipments.

Revenues from human vascular tissue cryopreservation services increased 21% to
$8.2 million in 1996 from $6.8 million in 1995, representing 22% and 23%,
respectively, of total revenues during such years. This increase in revenues
was primarily due to a 22% increase in the number of vascular allograft
shipments.

Revenues from human connective tissue for the knee cryopreservation services
increased 127% to $3.4 million in 1996 from $1.5 million in 1995, representing
9% and 5%, respectively, of total revenues during each year. This increase in
revenues was primarily due to a 173% increase in the number of allograft
shipments partially offset by a decrease in the unit revenue of cryopreserved
tendons.

Revenues from the sale of bioprosthetic cardiovascular devices in 1996 were
$385,000 compared to $263,000 in 1995, representing 1% of revenues during each
year. This increase in revenues was primarily due to a 29% increase in the
number of units shipped.

Other revenues decreased to $550,000 in 1996 from $969,000 in 1995. Other
revenues in 1996 consisted primarily of research grant award revenues and a fee
from a terminated agreement with Bayer Corporation. Research grant award
revenues in 1996 were primarily related to the development of bioadhesives for
surgical application and the Company's SynerGraft technology. The decrease
compared to 1995 was primarily attributable to the sale of the Company's
patented Viral Inactivation Process ("VIP") technology to Osteotech, Inc. for
approximately $450,000 in 1995. The Company had developed its VIP technology to
eliminate potential viruses from human bone processed by the Company. The
Company sold its bone processing business in 1993.

Costs of cryopreservation services and products increased to $12.6 million in
1996 from $10.5 million in 1995. Cost of cryopreservation services and products
as a percentage of cryopreservation revenues decreased to 34% in 1996 from 36%
in 1995. This decrease was primarily due to an increase in the volume of
processed tissue and more efficient processing methods.

General, administrative and marketing expenses increased 23% to $15.7 million
in 1996 from $12.8 million in 1995, representing 42% and 44%, respectively, of
total revenues during such years. The increased expenses of approximately $2.9
million were primarily attributable to additional regulatory and quality
assurance costs related to the Company's CE Mark and ISO 9001 certifications,
increased fees paid to technical representatives and other related marketing
expenses resulting from the growth in revenues and increases in general
overhead expenses to support the growth in revenues.

The Company continued its commitment to research and development activity,
spending approximately $2.8 million and $2.6 million in 1996 and 1995,
representing 8% and 9%, respectively, of total revenues during such years. The
Company's research and development expenditures during 1996 were primarily for
the development of bioadhesives for surgical applications and the SynerGraft
technology.

Seasonality

The demand for the Company's human heart valve and conduit cryopreservation
services is seasonal, with peak demand generally occurring in the second and
third quarters. Management believes that this demand trend for human heart
valve and conduit cryopreservation services is primarily due to the high number
of surgeries scheduled during the summer months. Management believes that the
trends experienced by the Company to date for its human connective tissue for
the knee cryopreservation services indicate that this business may also be
seasonal because it is an elective procedure thatAtlas, Dmitry Balyasny may be performed less
frequently duringdeemed to
beneficially own the fourth quarter holiday months. However, the demand for
the Company's vascular tissue cryopreservation services, bioprosthetic
cardiovascular devices and single-use medical devices does not appear to
experience this seasonal trend.

Quarterly Results

The Company achieved record revenues and earnings in both the year and three
months ended December 31, 1997, as compared to comparable prior periods, with
the fourth quarter of 1997 being the Company's tenth consecutive quarter of
record revenues and earnings as compared to the same quarter for prior years.
In the opinion of management, the information set forth in the table below has
been prepared on a basis consistent with the Company's audited Consolidated
Financial Statements appearing elsewhere in the Prospectus, and all necessary
adjustments (consisting only of normal recurring adjustments) have been
included to present fairly the unaudited quarterly results in accordance with
generally accepted accounting principles ("GAAP"). The results for any quarter
are not necessarily indicative of results to be expected in any future period.

The following table presents selected unaudited quarterly income statement
data for each of the eight quarters in the period ended December 31, 1997:

QUARTER ENDED
-------------------------------------------------------------------
1996 1997
--------------------------------- ---------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- ------- -------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)

REVENUES:
Cryopreservation
services.............. $8,103 $9,544 $10,067 $8,579 $9,725 $10,910 $12,689 $10,918
Bioprosthetic
cardiovascular
devices............... 157 75 71 82 104 135 177 160
Single-use medical
devices............... -- -- -- -- 554 1,596 1,703 1,738
Interest and other
income................ 174 79 273 24 30 82 72 276
------ ------ ------- ------ ------ ------- ------- -------
Total Revenues......... 8,434 9,698 10,411 8,685 10,413 12,723 14,641 13,092
EXPENSES:
Cost of
cryopreservation
services and
products.............. 2,879 3,289 3,563 2,862 3,426 4,550 5,112 4,676
Research and
development........... 690 701 616 800 849 857 1,243 997
General, administrative
and marketing......... 3,626 4,181 4,239 3,627 4,479 5,165 5,620 5,284
Interest expense....... -- -- 39 33 132 296 317 233
------ ------ ------- ------ ------ ------- ------- -------
Total Expenses......... 7,195 8,171 8,457 7,322 8,886 10,868 12,292 11,190
------ ------ ------- ------ ------ ------- ------- -------
INCOME BEFORE INCOME
TAXES.................. 1,239 1,527 1,954 1,363 1,527 1,855 2,349 1,902
Income tax expense..... 457 539 693 467 575 695 891 747
------ ------ ------- ------ ------ ------- ------- -------
NET INCOME.............. $ 782 $ 988 $ 1,261 $ 896 $ 952 $ 1,160 $ 1,458 $ 1,155
====== ====== ======= ====== ====== ======= ======= =======
EARNINGS PER SHARE OF
COMMON STOCK:
Basic.................. $ .08 $ .11 $ .13 $ .09 $ .10 $ .12 $ .15 $ .12
====== ====== ======= ====== ====== ======= ======= =======
Diluted................ $ .08 $ .10 $ .13 $ .09 $ .10 $ .12 $ .15 $ .12
====== ====== ======= ====== ====== ======= ======= =======
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING:
Basic.................. 9,433 9,491 9,529 9,575 9,581 9,615 9,670 9,694
Diluted................ 9,756 9,933 9,925 9,943 9,877 9,889 9,978 10,023

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, net working capital was $18.8 million, compared to $10.8
million at December 31, 1996, with a current ratio of 4 to 1 at December 31,
1997. The Company's primary capital requirements arise out of general working
capital needs, capital expenditures for facilities and equipment and funding
of research and development projects. The Company historically has funded
these requirements through bank credit facilities, cash generated by
operations and equity offerings.

Net cash used in operating activities was $2.2 million for the year ended
December 31, 1997, as compared to net cash provided by operating activities of
$3.2 million for the year ended December 31, 1996. This decrease resulted from
an increase in deferred cryopreservation costs to support the growing
acceptance of the Company's existing cryopreserved tissues as well as new
cryopreserved tissue offerings in 1997.

Net cash used in investing activities was $9.6 million for the year ended
December 31, 1997, as compared to $4.2 million for the year ended December 31,
1996. This increase primarily resulted from the Company's acquisition of IFM.

Net cash provided by financing activities was $10.6 million for the year ended
December 31, 1997, as compared to $1.8 million for the year ended December 31,
1996. This increase was primarily attributable to borrowings under the
Company's credit facility in connection with the acquisition of IFM and the
construction of the new Company and IFM facilities and increased deferred
cryopreservation costs.

The Company anticipates that the net proceeds from this Offering, together with
borrowings under its existing credit agreements and cash generated from
operations will be sufficient to meet its operating and development needs for
the next 12 months. However, the Company's future liquidity and capital
requirements beyond that period will depend upon numerous factors, including
the timing of the Company's receipt of FDA approvals to begin clinical trials
for its products currently in development, the resources required to further
develop its marketing and sales capabilities if, and when, those products gain
approval, the resources required to expand manufacturing capacity and the
extent to which the Company's products generate market acceptance and demand.
There can be no assurance that the Company will not require additional
financing or will not seek to raise additional funds through bank facilities,
debt or equity offerings or other sources of capital to meet future
requirements. These additional funds may not be available when needed or on
terms acceptable to the Company, which could have a material adverse effect on
the Company's business, financial condition and results of operations.

INFLATION

Although the Company cannot determine the precise effects of inflation,
management does not believe it has had a significant effect on revenues or
results of operations and does not expect it to have a significant effect in
the near future.

YEAR 2000

The Company is aware of the issues that many computer systems will face as the
millennium (year 2000) approaches. The Company, however, believes that its own
internal software and hardware is year 2000 compliant. The Company believes
that any year 2000 problems encountered by procurement agencies, hospitals and
other customers and vendors are not likely to have a material adverse effect on
the Company's operations. The Company anticipates no other year 2000 problems
which are reasonably likely to have a material adverse effect on the Company's
operations. There can be no assurance, however, that such problems will not
arise.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, Reporting Comprehensive Income ("Statement 130"). Statement
130 establishes new standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. These new standards require that all items recognized as components
of comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. Statement 130 is
effective for fiscal years beginning after December 15, 1997. The adoption of
Statement 130 will not have a significant impact on the Company's Consolidated
Financial Statements.

In June 1997, the FASB issued Statement 131, Disclosures About Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131 changes the
way public companies report segment information in annual financial statements
and also requires those companies to report selected segment information in
interim financial reports. Statement 131 is effective for years beginning after
December 15, 1997. The adoption of Statement 131 will not have a significant
impact on the Company's consolidated financial position and results of
operations, but will require additional disclosure in the notes to the
Company's Consolidated Financial Statements.

BUSINESS
- -------------------------------------------------------------------------------

See Glossary on page 58 for definitions of certain terms used herein.

OVERVIEW

CryoLife is the leader in the cryopreservation of viable human tissues for
cardiovascular, vascular and orthopaedic transplant applications, and develops
and commercializes additional implantable products and single-use medical
devices. The Company estimates that it provided approximately 80% of the
cryopreserved human tissue implanted in the U.S. in 1997. The Company uses its
expertise in biochemistry and cell biology, and its understanding of the needs
of the cardiovascular, vascular and orthopaedic surgery medical specialties,
to continue expansion of its core cryopreservation business and to develop or
acquire complementary implantable products and technologies for these fields.
The Company develops bioprosthetic cardiovascular devices including a novel
design stentless porcine heart valve currently marketed in the European
Community and a proprietary process for non-viable animal tissue designed to
improve human biocompatibility. The Company also develops proprietary
implantable surgical bioadhesives, including BioGlue surgical adhesive, which
it has begun commercializing for vascular applications within the European
Community. In addition, the Company manufactures and distributes, through its
Ideas For Medicine, Inc. ("IFM") subsidiary, single-use medical devices for
use in vascular surgical procedures. The Company has generated compound annual
growth rates in revenues and earnings per share, including contributions from
acquisitions, of 24% and 68%, respectively, since 1993.

CryoLife processes and distributes for transplantation cryopreserved human
heart valves and conduits, human vascular tissue and human connective tissue
for the knee. Revenues from these services, which were $44.2 million or 87% of
the total revenues in 1997, have grown at a compound annual growth rate of 24%
since 1993. Based on detailed follow-up data available from approximately
1,700 documented implant procedures performed with the Company's cryopreserved
human heart valves and conduits, management believes that cryopreserved human
heart valves and conduits offer certain advantages over mechanical, synthetic
and animal-derived alternatives. Depending on the alternative, these
advantages include more natural functionality, elimination of a chronic need
for anti-coagulation drug therapy, reduced incidence of reoperation and
reduced risk of catastrophic failure, thromboembolism (stroke) or
calcification. The U.S. market for implantable products targeting indications
addressed by the Company's cryopreserved tissues was approximately $950
million in 1997. Since 1993, cryopreserved human tissues have captured an
increasing share of this market. For example, since 1993, the total U.S.
replacement heart valve market grew at a compound annual growth rate of
approximately 7%, while CryoLife's revenues from cryopreserved human heart
valves and conduits grew at a compound annual growth rate of approximately
21%. The Company seeks to expand the availability of human tissue through its
established relationships with over 250 tissue banks and organ procurement
agencies nationwide.

CryoLife develops and markets outside the U.S. bioprosthetic cardiovascular
devices for transplantation, currently consisting of fixed stentless porcine
heart valves. Fixed porcine heart valves are often preferred by surgeons for
procedures involving elderly patients because they eliminate the risk of
patient non-compliance with long-term anti-coagulation drug therapy associated
with mechanical valves, are less expensive than human heart valves and their
shorter longevity is more appropriately matched with these patients' life
expectancies. Fixed porcine heart valves address a worldwide target market
estimated to have been $175 million in 1997. Unlike most other available
porcine heart valves, the Company's stentless porcine heart valves do not
contain synthetic materials which increase the risk of endocarditis, a
debilitating and potentially deadly bacterial infection. The Company's
CryoLife-O'Brien aortic heart valve, currently marketed in the European
Community and certain other territories outside the U.S., is a stentless
porcine heart valve which contains a matched composite leaflet design that
approximates human heart valve blood flow characteristics and requires only a
single suture line which simplifies surgical implantation. The Company intends
to submit a CE Mark application for the CryoLife-Ross pulmonary heart valve,
another of the Company's fixed stentless porcine valves, for marketing in the
European Community. The Company plans to apply its proprietary SynerGraft
technology to its

stentless porcine heart valves. SynerGraft involves the depopulation of living
cells from the structure of non-viable animal heart tissue and the
repopulation of such tissue with human cells. This process is designed to
reduce calcification of porcine heart valves, thereby increasing longevity,
and more generally to improve the biocompatibility and functionality of such
tissue. The Company believes that its porcine heart valves, when treated with
SynerGraft technology, will expand its opportunity to address the broader
international and U.S. heart valve markets, estimated to be $348 million and
$395 million, respectively, in 1997.

CryoLife is developing implantable biomaterials for use as surgical adhesives
and sealants. The Company's patent protected BioGlue surgical adhesive,
designed for cardiovascular and peripheral vascular applications, is a polymer
based on a derivative of a blood protein and a cross-linking agent. The
Company's patent protected FibRx surgical sealant, designed for tissue
hemostasis and suture line sealing, is a light activated, biodegradable
surgical sealant under development which is based on a derivative of the human
blood factors fibrinogen and thrombin. Both of these products may be used with
or without sutures or staples, and may offer advantages over sutures and
staples, including more effective sealing and easier application. The Company
estimates that the annual worldwide market for surgical sutures and staples in
1997 was in excess of $2 billion. The Company recently received CE Mark
Certification for its BioGlue surgical adhesive which permits the Company to
begin marketing this product in the European Community for vascular
applications.

CryoLife manufactures and distributes, through its IFM subsidiary, single-use
medical devices including endarterectomy surgical instruments, intravascular
shunts, infusion ports, accessories utilized in laparoscopic procedures and a
wide range of single and dual lumen balloon catheters. The Company believes
that many of its existing single-use medical devices have novel proprietary
features that offer clinical advantages over competing products. For example,
the Company's Pruitt-Inahara Shunt was the first endarterectomy shunt
available to surgeons which contains a barrier feature designed to reduce
migration of plaque particles to the brain during surgery. Another example is
the Company's dual lumen embolectomy catheter incorporating a novel water
irrigation mechanism which enables physicians to remove whole blood clots more
effectively than with single lumen embolectomy catheters. The Company is
benefiting from, and intends to utilize, its design and manufacturing
expertise to develop single-use medical devices for use in conjunction with
its cryopreserved human tissue and biomaterial products. Examples of such
devices under development include a family of balloon catheters designed to
assist in applying the BioGlue surgical adhesive and a human heart valve
holder designed to provide physicians greater control in implantation
procedures.

In the U.S., the Company markets its cryopreservation services for human heart
valves and conduits and human vascular tissue through its in-house technical
service representatives and relies on independent orthopaedic sales
representatives to market its cryopreservation services for human connective
tissue for the knee. Also in the U.S., the Company markets its single-use
medical devices through its in-house technical service representatives.
Internationally, cryopreserved human tissues, bioprosthetic cardiovascular
devices and single-use medical devices are distributed through independent
representatives located in several countries in Europe, South America and
Asia. The Company plans to market and distribute its BioGlue surgical adhesive
internationally through its existing independent representatives and, if
approved for sale in the U.S., through its in-house technical service
representatives.

GROWTH STRATEGY

The Company's primary objective is to continue its consistent growth in
revenues and profitability. The Company has generated compound annual growth
rates in revenues and net income of approximately 21% and 71%, respectively,
since 1993, excluding revenues and net income from IFM, which the Company
acquired in March 1997. The Company's strategy to generate continued growth is
based on increasing the use of cryopreserved tissues as an alternative to
mechanical and synthetic implantable products, developing new markets for
existing products and technologies and developing new products and
technologies for new and existing markets. The Company also selectively
considers strategic acquisitions of complementary technologies to supplement
its internal growth. The key elements of the Company's business and growth
strategy are to:

. Continue Leadership in Cryopreservation of Human Heart Valves and
Conduits. The Company intends to increase the market penetration of its
cryopreserved human heart valves and conduits by

(i) expanding awareness of clinical advantages of cryopreserved human
tissues through continuing educational efforts directed to physicians,
prospective heart valve and conduit recipients and tissue procurement
agencies, (ii) expanding its relationships with the more than 250 tissue
banks and procurement agencies across the U.S. which direct tissue to
the Company for cryopreservation and (iii) expanding its physician
training activities.

. Expand Distribution of Cryopreserved Human Vascular Tissue and
Connective Tissue for the Knee. Using the same strategy it has
successfully employed to expand its distribution of cryopreserved human
heart valves and conduits, the Company intends to increase its
cryopreservation revenues from human vascular tissue and connective
tissue for the knee through continuing educational efforts directed to
vascular and orthopaedic surgeons about the clinical advantages of
cryopreserved vascular and orthopaedic tissue, expanding its
relationships with tissue banks and procurement agencies and expanding
its programs for training physicians in the use of tissue cryopreserved
by the Company.

. Broaden Application of Cryopreservation Services. The Company will
continue to collect, monitor and evaluate implant data to (i) develop
expanded uses for the human tissues currently cryopreserved by the
Company and (ii) identify new human tissues as candidates for
cryopreservation. The Company has recently begun providing cryopreserved
human vascular tissue to be used as dialysis access replacement grafts
for patients undergoing long-term dialysis, and separately, as venous
valve replacements for patients suffering from diseases of the venous
system. The Company has ongoing projects for cryopreserving the
posterior tibialis and anterior tibialis tendons for use in knee
repairs. The Company is also investigating the use of cryopreserved
human osteochondral grafts to repair articular defects, and the use of
cryopreserved human endothelial cells, peripheral nerves and spinal
disks in various surgical applications.

. Develop and Commercialize Bioprosthetic Cardiovascular Devices. The
Company intends to leverage its expertise with stentless human heart
valves to expand commercialization of its stentless porcine heart valves
and to use its stentless porcine heart valves as a platform for the
development and commercialization of the Company's SynerGraft
technology. The Company is expanding its production capacity for its
bioprosthetic cardiovascular devices to address the increased demand it
is currently experiencing. Separately, the Company's patent protected
SynerGraft technology is being developed to expand the target market for
the CryoLife-O'Brien aortic heart valve and the CryoLife-Ross pulmonary
heart valve by minimizing calcification often associated with porcine
tissues and thereby increasing their longevity.

. Develop and Commercialize Biomaterials for Surgical Adhesive and Sealant
Applications. In the second quarter of 1998, the Company plans to ship
its patent protected BioGlue surgical adhesive for distribution in the
European Community through its existing independent representatives and
to file an application to conduct clinical trials for BioGlue surgical
adhesive in the U.S. The Company also plans to continue development of
its patent protected FibRx surgical sealant. In addition to the adhesive
and sealant applications of these biomaterials, the Company intends to
pursue, either directly or through strategic alliances, certain drug
delivery applications of BioGlue surgical adhesive and FibRx surgical
sealant, such as administering antibiotics, attaching chemotherapy drugs
to tumors, delivering growth agents or delivering bone chips for
orthopaedic bone repair.

. Leverage Existing Capability across Product Lines. The Company plans to
expand sales of its single-use medical devices by leveraging its
established cryopreservation services marketing and sales staff and by
introducing new complementary products. The Company intends to apply its
expertise with stentless human heart valves to expand commercialization
of its stentless porcine heart valves and to use its stentless porcine
heart valves as a platform for the development and commercialization of
the Company's SynerGraft technology. New complementary products under
development include a stentless human heart valve holder being designed
to provide greater physician control in implantation procedures and
modified single and dual lumen balloon catheters for use in delivering
the Company's implantable bioadhesives.

SERVICES AND PRODUCTS

Cryopreservation of Human Tissue for Transplant/Living Biologic Devices

The Company's proprietary and patent protected cryopreservation process
involves the procurement of tissue from deceased human donors, the timely and
controlled delivery of such tissue to the Company, the screening,
disinfection, dissection and cryopreservation of the tissue by the Company,
the storage and shipment of the cryopreserved tissue and the controlled
thawing of the tissue. Thereafter, the tissue is surgically implanted into a
human recipient.

The transplant of human tissue that has not been preserved must be
accomplished within extremely short time limits (not to exceed eight hours for
transplants of the human heart). Prior to the advent of human tissue
cryopreservation, these time constraints resulted in the inability to use much
of the tissue donated for transplantation. The application by the Company of
its cryopreservation technologies to donated tissue expands the amount of
human tissue available to physicians for transplantation. Cryopreservation
also expands the treatment options available to physicians and their patients
by offering alternatives to implantable mechanical, synthetic and animal-
derived devices. The tissues presently cryopreserved by the Company include
human heart valves and conduits, vascular tissue and connective tissue for the
knee. The following table sets forth, for the types of tissues cryopreserved
by the Company, the cumulative number of units shipped, the number of units
shipped in 1997 and the total number of target market procedures performed
annually in the United States:

NUMBER OF TARGET
NUMBER OF CRYOLIFE UNITS SHIPPED MARKET PROCEDURES
------------------------------------- PERFORMED IN THE
SINCE INCEPTION DURING 1997 U.S. IN 1997
------------------ --------------- -----------------

Human Heart Valves and
Conduits............... 29,500 5,244 95,000
Human Vascular Tissue... 9,300 2,621 34,000
Human Connective Tissue
for the Knee........... 4,800 1,859 270,000

CryoLife maintains and collects extensive clinical data on the use and
effectiveness of implanted human tissues that it has cryopreserved, and shares
this data with implanting physicians. The Company also uses this data to help
direct its continuing efforts to improve its cryopreservation services through
ongoing research and development. Its research staff and technical
representatives assist physicians by providing educational materials, seminars
and clinics on methods for handling and implanting the tissue cryopreserved by
the Company and the clinical advantages, indications and applications for
those tissues. The Company has ongoing efforts to train and educate physicians
on the indications for and uses of its cryopreserved tissues, as well as its
programs whereby surgeons train other surgeons in necessary techniques. The
Company also assists organ procurement agencies through training and
development of protocols and provides necessary materials to improve their
internal tissue processing techniques and to increase efficiency and the yield
of usable tissue.

Human Heart Valves and Conduits. The Company's revenues have been primarily
derived from the cryopreservation of human heart valves and conduits for use
in reconstructive heart valve replacement surgery. CryoLife shipped
approximately 29,500 cryopreserved human heart valves and conduits from 1984
to 1997. Based on CryoLife's records of documented implants, management
believes that the Company's success in the allograft heart valve market is due
in part to physicians' recognition of the longevity and natural functionality
of the Company's cryopreserved human tissues as compared to mechanical and
porcine heart valve alternatives in certain applications. The Company
currently applies its cryopreservation services to human aortic, pulmonary
and, more recently, mitral heart valves for implantation by cardiac surgeons.
In addition, the Company provides cryopreserved conduit tissue, which is the
only source of tissue available to surgeons who wish to perform certain
specialized cardiac repair procedures. Each of these human heart valves and
conduits maintains a viable tissue structure which more closely resembles and
performs like the patient's own tissue than non-human tissue alternatives.

Based on available market data, the Company estimates that of all heart valve
replacement surgeries performed in the U.S. in 1997, 69%, 30% and 1% involved
the replacement of diseased or damaged aortic valves, mitral valves and
pulmonary valves, respectively. Due to the success of a procedure known as the
Ross Switch

Procedure, 53% of the valves which CryoLife shipped in 1997 were pulmonary
valves. In the Ross Switch Procedure, the surgeon replaces the patient's
damaged aortic valve with the patient's own pulmonary valve. The patient's
pulmonary valve is then replaced with a cryopreserved pulmonary valve. The
advantage of this procedure is the use of the patient's own valve in the more
stressful aortic position. The resulting benefit to CryoLife and the surgical
community is a more even demand and distribution of the processed human aortic
and pulmonary valves.

The Company estimates that the total heart valve and conduit replacement
market in the U.S. in 1997 was approximately $395 million. Management believes
that approximately 95,000 heart valve and conduit surgeries were conducted in
the U. S. in 1997. Of the total number of heart valve and conduit surgeries,
approximately 64,000, or 67%, involved mechanical heart valves, and
approximately 31,500, or 33%, involved tissue heart valves or conduits,
including porcine and cryopreserved human tissues. Of these tissue heart valve
or conduit replacements, management believes that approximately 6,500, or 21%,
involved cryopreserved human heart valve or conduit replacements. Over 5,200
human heart valves and conduits cryopreserved by the Company were shipped for
implantation in 1997. Since 1993, the total U.S. replacement heart valve
market grew at a compound annual growth rate of approximately 7%, while
CryoLife's revenues from cryopreservation of human heart valves and conduits
grew at a compound annual growth rate of approximately 21%.

Based on detailed follow-up data available from approximately 1,700 documented
implant procedures performed with the Company's cryopreserved human heart
valves and conduits, management believes cryopreserved human heart valves and
conduits have characteristics that make them the preferred replacement for
most patients. Specifically, human heart valves, such as those cryopreserved
by the Company, allow for more normal blood flow hemodynamics and provide
higher cardiac output than porcine and mechanical heart valves. Human heart
valves are not subject to progressive calcification, or hardening, as are
porcine heart valves, and do not require anti-coagulation drug therapy, as do
mechanical valves. The synthetic sewing rings contained in mechanical and
stented porcine valves are difficult to treat with antibiotics after they have
become infected, a condition which usually necessitates the surgical removal
of these valves at considerable cost, morbidity and risk of mortality.
Consequently, human heart valves are the preferred alternative to mechanical
and stented porcine valves for patients who have, or are at risk to contract,
endocarditis.

The following table sets forth the characteristics of alternative heart valve
implants that management believes make cryopreserved human heart valves the
preferred replacement for most patients:

PORCINE
CRYOPRESERVED -------------------------------- BOVINE
HUMAN STENTED STENTLESS(1) MECHANICAL PERICARDIUM(2)
------------- --------------- --------------- ------------- ---------------

Materials: human tissue glutaraldehyde- glutaraldehyde- pyrolitic glutaraldehyde-
fixed pig fixed pig carbon bi- fixed cow
tissue and tissue leaflet and tissue and
synthetic synthetic synthetic
sewing ring sewing ring sewing ring

Blood Flow Dynamics: normal moderate nearly normal high high elevation
elevation elevation

(Required Pressure) (3) (0-5) (10-20) (5-15) (10-25) (10-30)

Mode of Failure: gradual gradual expected to be catastrophic gradual
gradual

Longevity: 20 years 7-10 years expected to 20 years 10-15 years
exceed stented
porcine valves
Increased Risk of
Thromboembolic Events
(strokes or other
clotting): no occasional expected to be yes occasional
rare
Anti-Coagulation Drug
Therapy Required: none short-term short-term chronic short-term

Responsiveness to
Antibiotic Treatment of
Endocarditis: high low low low low

Average Valve Cost in
U.S.: $6,850 $4,228 $5,500 $4,100(4) $4,500

- --------
(1) Limited long-term clinical data is available since stentless porcine heart
valves only recently became commercially available.
(2) Management believes that bovine pericardium heart valves have experienced
mixed clinical results and are generally not considered a preferred
alternative for most patients.
(3) Pressure measured in mm/Hg.
(4) Mechanical valves also require chronic anti-coagulation drug therapy at a
cost of approximately $450 per year.

While the clinical benefits of cryopreserved human heart valves discussed
above are relevant to all patients, they are particularly important for (i)
pediatric patients (newborn to 14 years) who are prone to calcification of
porcine tissue, (ii) young or otherwise active patients who face an increased
risk of severe blood loss or even death due to side effects associated with
the anti-coagulation drug therapy required with mechanical valves and (iii)
women in their childbearing years for whom anti-coagulation drug therapy would
interfere with normal pregnancy.

Human Vascular Tissues. The Company cryopreserves human saphenous and
superficial femoral veins for use in vascular surgeries that require small
diameter conduits (3mm to 6mm), such as coronary bypass surgery and peripheral
vascular reconstructions. Failure to bypass or revascularize an obstruction in
such cases may result in death or the loss of a limb. The Company believes it
offers the only available small diameter conduit product for below-the-knee
vascular reconstruction and shipped approximately 9,300 human vascular tissues
from 1986 to 1997.

A surgeon's first choice for replacing diseased or damaged vascular tissue is
generally the patient's own tissue. However, in cases of advanced vascular
disease, the patient's own tissue is often unusable and the surgeon may
consider using synthetic grafts or transplanted human vascular tissue.
Synthetic small diameter vascular grafts are not available for below-the-knee
surgeries and, in other procedures, have a tendency to shut down due to
occlusion because the synthetic materials in these products attract cellular
material from the blood stream which in turn closes off the vessel to normal
blood flow. Cryopreserved vascular tissues tend not to occlude as quickly
because of the presence of an endothelial cell lining in the donor vein which
remains intact following the cryopreservation process. The Company's
cryopreserved human vascular tissues are used for coronary artery bypass
surgeries, peripheral vascular reconstruction, dialysis access graft
replacement and venous valve transplantation.

In 1986, the Company began a program to cryopreserve saphenous veins for use
in coronary artery bypass surgeries. Although the Company's cryopreserved
human tissue was used in only a small percentage of the nearly 310,000
coronary artery bypass procedures performed in 1997, it is the only
commercially available alternative to the patient's own tissue. Approximately
950 cryopreserved human saphenous veins for use in coronary artery bypass
surgeries were shipped for this application in 1997, representing
approximately 36% of all the human vascular tissue shipped by the Company
during such period. The Company estimates that, in 1997, approximately 20,000
coronary artery bypass surgeries were performed in which human vascular
tissues cryopreserved by the Company could have been used.

In 1989, the Company began a program to cryopreserve long segment saphenous
veins for use in peripheral vascular reconstruction. In cases of peripheral
arteriosclerosis, a cryopreserved saphenous vein can be implanted as a bypass
graft for the diseased artery in order to improve blood flow and maintain a
functional limb. Analysis of clinical data has shown that 80% of patients
receiving CryoLife's preserved vascular tissues in this type of surgical
procedure still have the use of the affected leg three years after surgery.
The alternative for many of these patients was amputation. Approximately 1,570
cryopreserved human saphenous veins were shipped for this application in 1997.
The Company estimates that, in 1997, approximately 22,000 peripheral vascular
reconstruction surgeries were performed in which its cryopreserved human
vascular tissues could have been used.

In 1996, the Company began a program for the cryopreservation of human
superficial femoral veins for use in dialysis access graft replacement as an
alternative for synthetic grafts which have a higher risk of infection than
human tissue. The Company shipped less than 100 cryopreserved human
superficial femoral veins for this application in 1997. The Company estimates
that, in 1997, approximately 30,000 dialysis access graft replacements were
performed in which its cryopreserved human vascular tissues could have been
used.

In 1997, the Company began a program for the cryopreservation of human
superficial femoral veins for venous valve transplant. The cryopreservation of
these human tissues is designed for patients suffering from chronic venous
insufficiency, a condition in which the blood flow returning to the heart from
the legs is compromised due to absent, improperly functioning or destroyed
venous valves. Prior to the introduction of CryoLife's cryopreserved venous
valves, treatment for patients suffering from this ailment generally was
limited to drug

therapy or compression stockings. The Company shipped less than 100
cryopreserved human superficial femoral veins for this application in 1997.
The Company estimates that, in 1997, approximately 20,000 patients with
chronic venous insufficiency could have benefitted from venous valve
transplant procedures using its cryopreserved human vascular tissues.

Human Connective Tissue for the Knee. The Company provides cryopreserved
surgical replacements for the meniscus and the anterior and posterior cruciate
ligaments, which are connective tissues critical to the proper operation of
the human knee. CryoLife has shipped approximately 4,800 human connective
tissues for the knee through 1997.

Human menisci cryopreserved by the Company provide orthopaedic surgeons with
an alternative treatment in cases where a patient's meniscus has been
completely removed. When a patient has a damaged meniscus, the current
surgical alternatives are to repair, partially remove or completely remove the
patient's meniscus, with partial removal being the most common procedure.
Meniscal removal increases the risk of premature knee degeneration and
arthritis and typically results in the need for knee replacement surgery at
some point during the patient's life. Management believes that the Company is
the only provider of cryopreserved meniscal tissue and that there are no
synthetic menisci on the market. The Company estimates that in 1997
approximately 683,000 partial and total meniscectomies were performed in the
U.S. The Company believes up to 30% of these patients could become candidates
for meniscal replacement within five years.

Tendons cryopreserved by the Company are used for the reconstruction of
anterior cruciate ligaments in cases where the patient's ligaments are
irreparably damaged. Surgeons have traditionally removed a portion of the
patient's patellar tendon from the patient's undamaged knee for use in
repairing a damaged anterior cruciate ligament. Tendons cryopreserved by the
Company provide an alternative to this procedure. Because surgeries using
cryopreserved tissue do not involve the removal of any of the patient's own
patellar tendon, the patient recovery period is typically shorter. The Company
estimates that in 1997 approximately 175,000 cruciate ligament reconstruction
surgeries were performed.

Based on its experience with human heart valves and conduits, management
believes that as the body of clinical data builds regarding the use of
cryopreserved human connective tissues for the knee, the use of such tissues
will increase, although there can be no assurance that this will be the case.

Other Allograft Tissues Under Development. The Company currently has ongoing
projects for cryopreserving the posterior and anterior tibialis tendons for
use in the repair of anterior cruciate ligaments. The Company has other
projects for using preserved osteochondral grafts to repair articular defects
and for the use of cryopreserved human endothelial cells, peripheral nerves
and spinal discs, in various surgical applications.

Bioprosthetic Cardiovascular Devices

The Company is developing bioprosthetic cardiovascular devices based on its
experience with cryopreserved human tissue implants. Like human heart valves,
the Company's porcine heart valves are stentless with the valve opening, or
annulus, retaining a more natural flexibility. Stented porcine and mechanical
heart valves are typically fitted with synthetic sewing rings which are rigid
and can impede normal blood flow and hemodynamics. Unlike most other available
porcine heart valves, the Company's stentless porcine heart valves do not
contain synthetic materials which increase the risk of endocarditis, a
debilitating and potentially deadly bacterial infection.

Fixed porcine heart valves are often preferred by surgeons for procedures
involving elderly patients because they eliminate the risk of patient non-
compliance with anti-coagulation drug therapy associated with mechanical
valves, are less expensive than allograft valves and their shorter longevity
is more appropriately matched with these patients' life expectancies. Fixed
porcine heart valves address a worldwide target market estimated to have been
$175 million in 1997.

The Company's SynerGraft technology involves the removal of living cells from
the structure of non-viable animal tissue and the repopulation of such tissue
with human cells. This process is designed to reduce

calcification of porcine heart valves, thereby increasing their longevity, and
more generally to improve the biocompatibility and functionality of such
tissue. The Company believes that its porcine heart valves, when treated with
SynerGraft technology, will expand its opportunity to address the broader
international and U.S. heart valve markets, estimated to be $348 million and
$395 million, respectively, in 1997.

The following table sets forth the bioprosthetic cardiovascular devices
currently marketed or under development by the Company, along with the product
features and regulatory or market status for each:

FEATURES REGULATORY/MARKET STATUS
--------------------- ----------------------------

FIXED STENTLESS PORCINE VALVES:
CryoLife-O'Brien aortic valve of currently marketed in Europe
matched composite with regulatory approval
leaflet design; under CE Mark
single suture line
CryoLife-Ross pulmonary valve with submission of application
attached conduit for CE Mark for European
marketing approval
anticipated in mid-1998
DEPOPULATED STENTLESS PORCINE VALVES:
CryoLife-O'Brien S.G. aortic valve, as submission of application
above, with antigen for CE Mark for European
reduction properties marketing approval
anticipated in fourth
quarter 1998
CryoLife-Ross S.G. pulmonary valve, as submission of application
above, with antigen for CE Mark for European
reduction properties marketing approval
anticipated in fourth
quarter 1998
REPOPULATED STENTLESS PORCINE VALVES:
CryoLife-O'Brien SynerGraft aortic valve, as pre-clinical
above, repopulated
with human cells
CryoLife-Ross SynerGraft pulmonary valve, as pre-clinical
above, repopulated
with human cells

The CryoLife-O'Brien aortic valve, is a stentless porcine valve with design
features which management believes provide significant advantages over other
stentless porcine heart valves. CryoLife began exclusive worldwide
distribution of this value in 1992 and acquired all rights to the underlying
technology in 1995. The Company's CryoLife-O'Brien aortic heart valve,
currently marketed in the European Community and certain other territories
outside the U.S., contains a matched composite leaflet design that
approximates human heart valve blood flow characteristics and requires only a
single suture line thereby simplifying surgical implantation. Other stentless
porcine valves require a more complicated implant procedure.

The CryoLife-Ross pulmonary valve, the patent for which the Company acquired
in October 1996, is an advanced design stentless porcine heart valve within an
attached conduit of porcine tissue, which mimics the structure of a human
heart valve which simplifies the surgical implantation procedure. The Company
intends to submit a CE Mark application for marketing the Cryolife-Ross
pulmonary heart valve, another of the Company's fixed stentless porcine
valves, in the European Community.

The Company plans to apply its proprietary SynerGraft technology to its
stentless porcine heart valves. The first of the SynerGraft technology
applications involves developing depopulated stentless porcine heart valves
with antigen reduction properties. This technology removes viable cells from
animal tissues thereby reducing the transplant recipient's auto-immune
response to the remaining depopulated tissues. The immune response typically
deposits calcium which attaches to and hardens implanted porcine heart valve
tissue, a process known as calcification, which reduces the useful life of the
implant. By removing viable animal cells from the tissue while maintaining the
underlying structural strength of the porcine heart valve, this SynerGraft
application is designed to provide a platform for a patient's own cells to
naturally populate the implant. This SynerGraft depopulation technology is
being applied to both the CryoLife-O'Brien aortic heart valve and the
CryoLife-Ross pulmonary heart valve for products under development anticipated
to be known as the CryoLife-O'Brien S.G. and the CryoLife-Ross S.G.

The second of the SynerGraft technology applications involves developing
stentless porcine heart valves repopulated with viable human cells prior to
implantation. This technology uses porcine tissues that have been depopulated
of viable animal cells as in the CryoLife-O'Brien S.G. and the CryoLife-Ross
S.G. This SynerGraft repopulation technology is being applied to both the
CryoLife-O'Brien aortic heart valve and the CryoLife-Ross pulmonary heart
valve for products anticipated to be known as the CryoLife-O'Brien SynerGraft
and the CryoLife-Ross SynerGraft.

Implantable Biomaterials for Use as Surgical Adhesives and Sealants

The effective closure of internal wounds following surgical procedures is
critical to the restoration of the function of tissue and to the ultimate
success of the surgical procedure. Failure to effectively seal surgical wounds
can result in leakage of air in lung surgeries, cerebral spinal fluids in
neurosurgeries, blood in cardiovascular surgeries and gastrointestinal
contents in abdominal surgeries. Air and fluid leaks resulting from surgical
procedures can lead to significant post-surgical morbidity resulting in
prolonged hospitalization, higher levels of post-operative pain and a higher
mortality rate.

Sutures and staples facilitate healing by joining wound edges and allowing the
body to heal naturally. However, because sutures and staples do not have
inherent sealing capabilities, they cannot consistently eliminate air and
fluid leakage at the wound site. This is particularly the case when sutures
and staples are used to close tissues containing air or fluids under pressure,
such as the lobes of the lung, the dural membrane surrounding the brain and
spinal cord, blood vessels and the gastrointestinal tract. In addition, in
minimally invasive surgical procedures, where the surgeon must operate through
small access devices, it can be difficult and time consuming for the surgeon
to apply sutures and staples. The Company believes that the use of surgical
adhesives and sealants with or without sutures and staples could enhance the
efficacy of these procedures through more effective and rapid wound closure.

In order to address the inherent limitations of sutures and staples, the
Company is developing and commercializing its BioGlue surgical adhesive and is
developing its FibRx surgical sealant. The BioGlue surgical adhesive is a
polymeric surgical bioadhesive based on a derivative of a blood protein and a
cross-linking agent. BioGlue surgical adhesive is nonbiodegradable and has a
tensile strength that is four to five times that of FibRx surgical sealant.
Target clinical applications for BioGlue surgical adhesive include
cardiovascular and vascular peripheral repair. FibRx surgical sealant is a
light-activated surgical sealant based on a derivative of the human blood
factors fibrinogen and thrombin. The Company believes that FibRx is the only
surgical sealant under development offering ease of use to the surgeon through
either single-syringe or spray applicators.

The following table summarizes certain important features, targeted
applications and regulatory and market status of BioGlue surgical adhesive and
FibRx surgical sealant:

BIOGLUE SURGICAL ADHESIVE FIBRX SURGICAL SEALANT
------------------------------ ------------------------------

COMPOSITION: animal albumin and thrombin, fibrinogen and a
glutaraldehyde thrombin inhibitor
METHOD OF APPLICATION: double syringe; mixing device light activated single
provided syringe; or light activated
spray applicator
TARGETED CLINICAL vascular repair; anastomotic hemostasis in cardiovascular
APPLICATIONS: sealing; aortic dissection procedures, skin grafts and
repair; carotid endarterectomy breast reconstruction;
patching; tissue bonding adhesion for skin grafts and
breast reconstruction
PERFORMANCE high tensile strength; non- strength of normal human blood
CHARACTERISTICS: biodegradable clot; biodegradable; flexible,
easily manipulated
REGULATORY/MARKET STATUS
Europe: CE Mark received for vascular regulatory pathway not
repair applications; expect to determined; expected to be
commence marketing in Europe evaluated in 1998
in second quarter 1998
United States: submission of application with submission of IND application
the FDA for approval to with the FDA for approval to
conduct clinical trials conduct U.S. clinical trials
anticipated in second quarter anticipated in third quarter
1998 1998

The Company estimates that the worldwide market for surgical sutures and
staples in 1997 was in excess of $2 billion. The Company intends to begin
shipping BioGlue surgical adhesive for distribution in the European Community
in the second quarter of 1998. FibRx surgical sealant is progressing through
pre-clinical trials and is presently undergoing toxicology validation
procedures mandated by the FDA prior to the commencement of clinical trials.

Single-Use Medical Devices

CryoLife manufactures and distributes, through its IFM subsidiary, single-use
medical devices including endarterectomy surgical instruments, intravascular
shunts, infusion ports, accessories utilized in laparoscopic procedures and a
wide range of single and dual lumen balloon catheters. The Company believes
that many of its existing single-use medical devices have novel proprietary
features that offer clinical advantages over competing products. For example,
the Company's Pruitt-Inahara Shunt was the first endarterectomy shunt
available to surgeons which contains a barrier feature designed to reduce
migration of plaque particles to the brain during surgery. Another example is
the Company's dual lumen embolectomy catheter incorporating a novel water
irrigation mechanism which enables physicians to remove whole blood clots more
effectively than with single lumen embolectomy catheters. The Company is
benefiting from, and intends to utilize, its design and manufacturing
expertise in developing single-use medical devices for use in conjunction with
its human tissue and biomaterial products. Examples of such single-use medical
devices under development include a family of balloon catheters designed to
assist in applying the BioGlue surgical adhesive and a stentless human heart
valve holder designed to provide physicians greater control in implantation
procedures.

The Company plans to expand sales of its single-use medical devices by
leveraging its established cryopreservation services marketing and sales staff
to market existing products and by introducing new products. New complementary
products under development include a modified single and dual lumen balloon
catheters to be used to deliver the Company's implantable bioadhesives. The
Company is working to develop single-use medical devices for use with its
BioGlue surgical adhesive. The Company believes that the introduction of
BioGlue surgical adhesive in the European Community for vascular repair will
create additional marketing opportunities for its single-use medical devices.

SALES, DISTRIBUTION AND MARKETING

Cryopreservation Services

CryoLife markets its cryopreservation services to tissue procurement agencies,
implanting physicians and prospective tissue recipients. The Company works
with tissue banks and organ procurement agencies to ensure consistent and
continued availability of donated human tissue for transplant and educates
physicians and prospective tissue recipients with respect to the benefits of
cryopreserved human tissues.

Procurement of Tissue. Donated human tissue is procured from deceased human
donors by organ procurement agencies and tissue banks. After procurement, the
tissue is packed and shipped, together with certain information about the
tissue and its donor, to the Company in accordance with the Company's
protocols. The tissue is transported to the Company's laboratory facilities
via commercial airlines pursuant to arrangements with qualified courier
services. Timely receipt of procured tissue is important, as tissue that is
not received promptly cannot be cryopreserved successfully. The procurement
agency receives a fee for its services, which is paid by the Company. The
procurement fee and related shipping costs are ultimately reimbursed to the
Company by the hospital with which the implanting physician is associated. The
Company has developed relationships with over 250 tissue banks and organ
procurement agencies throughout the U.S. Management believes the establishment
of these relationships is critical for a growing business in the
cryopreservation services industry and that the breadth of these existing
relationships provides the Company a significant advantage over potential new
entrants to this market. As a result of its maintaining and developing these
relationships, the Company has consistently increased its annual human heart
valve procurement since its inception. The Company employs approximately 14
individuals in the area of tissue procurement, seven of whom are employed as
procurement relations managers and are stationed throughout the country. The
Company's central procurement office is staffed 24 hours per day, 365 days per
year.

Preservation of Tissue. Upon receiving tissue, a Company technician completes
the documentation control for the tissue prepared by the procurement agency and
gives it a control/inventory number. The documentation identifies, among other
things, donor age and cause of death. A trained technician then removes the
portion or portions of the delivered tissue that will be cryopreserved. These
procedures are conducted under aseptic conditions in clean rooms. At the same
time, additional samples are taken from the donated tissue and subjected to the
Company's comprehensive quality assurance program. This program may identify
characteristics which would disqualify the tissue for cryopreservation.

Human heart valves and conduits, vascular tissue and connective tissue for the
knee are cryopreserved in a proprietary freezing process conducted according to
strict Company protocols. After the cryopreservation process, the specimens are
transferred to liquid nitrogen freezers for long-term storage at temperatures
below -135(degrees)C. The entire cryopreservation process is rigidly controlled
by guidelines established by the Company.

Distribution of Tissue to Implanting Physicians. After cryopreservation, tissue
is stored by the Company or is delivered directly to hospitals at the
implanting physician's request. Cryopreserved tissue must be transported under
stringent handling conditions and maintained within specific temperature
tolerances at all times. Cryopreserved tissue is packaged for shipment using
the Company's proprietary processes. At the hospital, the tissue is held in a
liquid nitrogen freezer according to Company protocols pending implantation.
The Company provides a detailed protocol for thawing the cryopreserved tissue.
The Company also makes its technical personnel available by phone or in person
to answer questions. After the Company transports the tissue to the hospital,
the Company invoices the institution for its services, the procurement fee and
transportation costs.

The Company encourages hospitals to accept the cryopreserved tissue quickly by
providing Company-owned liquid nitrogen freezers to client hospitals without
charge. The Company has currently installed more than 300 of these freezers.
Participating hospitals pay the cost of liquid nitrogen and regular
maintenance. The availability of on-site freezers makes it easier for a
hospital's physicians to utilize the Company's cryopreservation services by
making the cryopreserved tissue more readily available. Because fees for the
Company's cryopreservation services become due upon the delivery of tissue to
the hospital, the use of such on-site freezers also reduces the Company's
working capital needs.

Marketing, Educational and Technical Support. The Company maintains active
relationships with approximately 1,600 cardiovascular, vascular and orthopaedic
surgeons who have active practices implanting cryopreserved human tissues and
markets to a broader group of physicians within these medical specialties.
Because the Company markets its cryopreservation services directly to
physicians, an important aspect of increasing the distribution of the Company's
cryopreservation services is educating physicians on the use of cryopreserved
human tissue and on proper implantation techniques. Trained field support
personnel provide back-up and support to implanting institutions and surgeons.
The Company currently has approximately 98 independent technical service
representatives and sub-representatives (who deal primarily with orthopaedic
surgeons and who are paid on a commission basis) as well as 37 persons employed
as technical service representatives (who deal primarily with cardiovascular
and vascular surgeons and receive a base salary with a performance bonus) all
of whom provide field support.

The Company sponsors physician training seminars where physicians teach other
physicians the proper technique for handling and implanting cryopreserved human
tissue. The Company conducted seven of these seminars in 1997. Physicians pay
their own expenses to attend these seminars in addition to paying the Company a
fee for attendance. The Company also produces educational videotapes for
physicians. The Company coordinates live surgery demonstrations at various
medical schools. The Company also coordinates laboratory sessions that utilize
animal tissue to demonstrate the respective surgical techniques. Members of the
Company's Medical Advisory Board often lead the surgery demonstrations and
laboratory sessions. Management believes that these activities improve the
medical community's acceptance of the cryopreserved human tissue processed by
the Company.

In order to increase the Company's supply of human tissue for cryopreservation,
the Company educates and trains procurement agency personnel in procurement,
dissection, packaging and shipping techniques. The

Company also produces educational videotapes and coordinates laboratory
sessions on procurement techniques for procurement agency personnel. To
supplement its educational activities, the Company employs in-house technical
specialists that provide technical information and assistance and maintains a
staff 24 hours per day, 365 days per year for customer support.

Bioprosthetic Cardiovascular Devices

The Company markets the CryoLife-O'Brien stentless porcine heart valves in the
European Community. The Company's European sales, distribution and marketing
force consists of eight independent representatives, representing each of the
Benelux countries, France, Germany, Greece, Scandinavia, Turkey and the United
Kingdom. Each of these representatives is paid on a commission basis.
Marketing efforts are directed almost exclusively toward cardiovascular and
vascular surgeons, and the Company conducts educational seminars and
conferences to train these surgeons and educate them with respect to the uses
and benefits of its porcine stentless heart valves. In 1997, the Company
conducted one workshop and participated in three European conferences. The
Company intends to market its CryoLife-Ross stentless porcine heart valves, if
CE Mark approval is obtained, through this same European sales force.

BioGlue Surgical Adhesive

The Company plans to market and distribute its BioGlue surgical adhesive
internationally through its existing independent representatives, and if
approved for sale in the U.S., through its in-house technical service
representatives. The initial shipments of BioGlue surgical adhesive to
CryoLife's European distributors, which are currently distributing the
CryoLife-O'Brien stentless porcine heart valve and single-use medical devices
product lines, are scheduled for the second quarter of 1998. The Company
conducts training sessions for European doctors with respect to the
application and administration of BioGlue surgical adhesive.

Single-Use Medical Devices

Following its acquisition of IFM in March 1997, the Company terminated the
majority of IFM's sales representatives and began transitioning the sales and
distribution of single-use medical devices to its in-house technical service
representatives. The Company plans to expand sales of its single-use medical
devices by continuing new product development and leveraging its established
cryopreservation services marketing and sales staff to market the products.
The Company conducted two training seminars for these representatives during
1997.

RESEARCH AND DEVELOPMENT

The Company uses its expertise in biochemistry and cell biology, and its
understanding of the needs of the cardiovascular, vascular and orthopaedic
surgery medical specialties, to continue to expand its core cryopreservation
business in the U.S. and to develop or acquire implantable products and
technologies for these fields. The Company seeks to identify market areas that
can benefit from preserved living tissues and other related technologies, to
develop innovative techniques and products within these areas, to secure their
commercial protection, to establish their efficacy, and then to market these
techniques and products. The Company employs approximately 26 people in its
research and development department. There are seven PhDs with specialties as
diverse as immunology, molecular biology, protein chemistry, organic chemistry
and vascular biology.

In order to expand the Company's service and product offerings, the Company is
currently in the process of developing or investigating several technologies
and products, including FibRx surgical sealant, SynerGraft and additional
applications of BioGlue surgical adhesive. The Company is currently
investigating certain drug delivery applications for BioGlue surgical adhesive
and FibRx surgical sealant, such as administering antibiotics, attaching
chemotherapy drugs to tumors, delivering growth agents or delivering bone
chips for orthopaedic bone repair. To the extent the Company identifies
additional applications for these products, the Company may attempt

to license these products to corporate partners for further development of such
applications. The Company's research and development strategy is to allocate
available resources among the Company's four core market areas of
cryopreservation services, bioprosthetic cardiovascular devices, implantable
biomaterials and single-use medical devices, based on the size of the potential
market for any specific product candidate and the estimated development time
and cost required to bring the product to market.

Research on these and other projects is conducted in the Company's research and
development laboratory or at universities or clinics where the Company sponsors
research projects. In 1995, 1996 and 1997, the Company spent approximately $2.6
million, $2.8 million and $3.9 million, respectively, on research and
development activities on new and existing products. These amounts represented
approximately 9%, 8% and 8% of the Company's revenues for those respective
years. The Company's research and development program is overseen by its
medical and scientific advisory boards. The Company's pre-clinical studies are
conducted at universities and other locations outside the Company's facilities
by third parties under contract with the Company. In addition to these efforts,
the Company may, as situations develop, pursue other research and development
activities.

MANUFACTURING AND OPERATIONS

The Company's facilities (other than its single-use medical device
manufacturing plant) are located in suburban Atlanta, Georgia, and consist of
three separate locations totaling approximately 130,000 square feet of leased
office, laboratory and warehouse space. Approximately 17,500 square feet are
dedicated to laboratory work areas. The primary facility, which does not
include the bioadhesive laboratory and the bioprosthetic manufacturing
operation, has three main laboratory facilities: human tissue processing,
research and development and microbiology. Each of these areas consists of a
general technician work area and adjoining "clean rooms" for work with human
tissue and for aseptic processing. The clean rooms are supplied with highly
filtered air which provides a near-sterile environment.

Human Tissue Processing

The human tissue processing laboratory is responsible for the processing and
cryopreservation of human tissue for transplant. This includes all processing
of heart valves and conduits, vascular tissue and connective tissue for the
knee supplied by CryoLife. This laboratory contains approximately 7,700 square
feet with a suite of seven clean rooms. Currently there are 37 technicians
employed in this area, and the laboratory is staffed for two shifts, 365 days
per year. In 1997, the laboratory processed approximately 14,000 human tissues
for distribution and transplant. The current staffing level is estimated to be
at about half of total capacity. Increasing this capacity could be accomplished
by increasing employees and expanding to three shifts.

Bioprosthetic Cardiovascular Devices

The bioprosthesis laboratory is responsible for the manufacturing of the
CryoLife-O'Brien stentless porcine aortic heart valve. This laboratory is
located in Marietta, Georgia and contains approximately 13,000 square feet,
with about 3,500 square feet of laboratory space and a suite of four clean
rooms for tissue processing. The Company plans renovation to this facility in
1998 which would double the size of the processing area and plans to add the
production of the CryoLife-Ross stentless porcine pulmonary heart valve to its
product line this summer. Currently, this laboratory employs nine technicians
and is scheduled to manufacture approximately 1,500 CryoLife-O'Brien valves in
1998. The planned renovation, with additional staffing, is expected to expand
capacity at this facility to over 6,000 valves.

Implantable Biomedical Devices

The Company produces limited quantities of FibRx surgical sealant in the
biomedical products laboratory, which is located in Marietta, Georgia and
employs 11 technicians. This laboratory contains approximately 11,000 square
feet, including 4,000 square feet of laboratory space and a suite of eight
clean rooms. The Company is also planning an addition of about 8,000 to 15,000
square feet of laboratory and clean room space to support the

manufacture of BioGlue surgical adhesive. BioGlue surgical adhesive is
presently manufactured at the Company's headquarters facility, which has an
annual capacity of approximately 30,000 units. The facility expansion is
expected to allow the manufacture of over 300,000 units of BioGlue surgical
adhesive each year, with modest staff additions.

Single-Use Medical Devices

The manufacturing of single-use medical devices is conducted at the Company's
IFM subsidiary located in St. Petersburg, Florida. IFM was purchased by
CryoLife in 1997 and has recently moved to a renovated 30,000 square foot
facility. The Company has 91 employees at this facility. At nearly full
capacity in 1997, production was about 180,000 units. In the new facility, a
single shift can produce approximately 300,000 units annually with full
capacity expected to be nearly 800,000 units annually.

QUALITY ASSURANCE

The Company's operations encompass the provision of cryopreservation services
and the manufacturing of bioprosthetics, bioadhesives and single-use medical
devices. In all of its facilities, the Company is subject to regulatory
standards for good manufacturing practices, including current Quality System
Regulations, which are FDA regulatory requirements for medical device
manufacturers. The FDA periodically inspects Company facilities to ensure
Company compliance with these regulations. The Company also operates according
to ISO 9001 Quality System Requirements, an internationally recognized
voluntary system of quality management for companies that design, develop,
manufacture, distribute and service products. The Company maintains a
Certification of Approval to the ISO 9001, as well as EN46001 and
ANSI/ISO/ASQC/Q9001, the European and U.S. versions of the international
standard, respectively. This approval is issued by Lloyd's Register Quality
Assurance Limited ("LRQA"). LRQA is a Notified Body officially recognized by
the European Community to perform assessments of compliance with ISO 9001 and
its derivative standards. LRQA performs semi-annual on-site inspections of the
Company's quality systems.

The Company's quality assurance staff is comprised primarily of experienced
professionals from the medical device and pharmaceutical manufacturing
industries. The quality assurance department, in conjunction with the
Company's research and development and select university research staffs,
routinely evaluates the Company's processes and procedures.

Cryopreservation Services

The Company employs a comprehensive quality assurance program in all of its
tissue processing activities. The Company is subject to Quality System
Regulations, additional FDA regulations and ISO 9001. The Company's quality
assurance program begins with the development and implementation of training
courses for the employees of procurement agencies. To assure uniformity of
procurement practices among the tissue recovery teams, the Company provides
procurement protocols, transport packages and tissue transport liquids to the
donor sites.

Upon receipt by the Company, each tissue is assigned a unique control number
that provides traceability of tissue from procurement through the processing
and preservation processes, and ultimately to the tissue recipient. Blood
samples from each tissue donor are subjected to a variety of tests to screen
for infectious diseases. Samples of certain tissues are also sent to
independent laboratories for pathology testing. Following removal of the
tissue to be cryopreserved, a separate disinfection procedure is begun during
which the removed tissue is treated with proprietary antibiotic solutions. A
trained technician then removes samples from the disinfected tissue upon which
serial cultures are performed to identify bacterial or fungal growth.

The materials and solutions used by the Company in processing tissue are pre-
screened to determine if they are of desired quality as defined by Company
protocols. Only materials and solutions that meet the Company's requirements
are approved by quality assurance personnel for use in processing. Throughout
tissue processing, detailed records are maintained and reviewed by quality
assurance personnel.

The Company's tissue processing facilities are annually licensed by the States
of Georgia, New York, Florida and California as facilities that process, store
and distribute human tissue for implantation. The regulatory bodies of these
states perform appropriate inspections of the facilities to ensure compliance
with state law and regulations. In addition, the Company's human heart valve
operations are additionally regulated by the FDA and periodically inspected
for compliance with Quality System Regulations. Other human tissue processed
by the Company is periodically inspected for compliance with the Code of
Federal Regulation ("CFR") Part 1270. CFR 1270 is a FDA regulation which sets
forth the requirements with which the Company must comply in determining the
suitability of human tissue for implantation.

Bioprosthetic, Bioadhesive and Single-Use Medical Device Manufacturing

The Company employs a comprehensive quality assurance program in all of its
manufacturing activities. The Company is subject to Quality System
Regulations, additional FDA regulations and ISO 9001.

All materials and components utilized in the production of the Company's
products are received and thoroughly inspected by trained quality control
personnel, according to written specifications and standard operating
procedures. Only materials and components found to comply with Company
procedures are accepted by quality control and utilized in production.

All materials, components and resulting sub-assemblies are traced throughout
the manufacturing process to assure that appropriate corrective actions can be
implemented if necessary. Each process is documented along with all inspection
results, including final finished product inspection and acceptance. Records
are maintained as to the consignee of product to facilitate product removals
or corrections, if necessary. All processes in manufacturing are validated by
quality engineers to assure that they are capable of consistently producing
product meeting specifications. The Company maintains a rigorous quality
assurance program of measuring devices used for manufacturing and inspection
to ensure appropriate accuracy and precision.

Each manufacturing facility is subject to periodic inspection by the FDA and
an LRQA Notified Body to independently assure the Company's compliance with
its systems and regulatory requirements.

PATENTS, LICENSES AND OTHER PROPRIETARY RIGHTS

The Company relies on a combination of patents, trade secrets, trademarks and
confidentiality agreements to protect its proprietary products, processing
technology, rights and know-how. The Company believes that its patents, trade
secrets, trademarks and technology licensing rights provide it with important
competitive advantages. The Company owns or has licensed rights to 14 U.S.
patents and three foreign patents, including but not limited to, patents
relating to its technology for human heart valve and conduit, vascular tissue
and connective tissue for the knee preservation; tissue revitalization prior
to freezing; tissue transport; fibrin adhesive; organ storage solution; and
packaging. Certain of the above patents relate to the Company's BioGlue
surgical adhesive and FibRx surgical sealant. The Company has eight pending
U.S. patent applications and in excess of 20 pending foreign applications that
relate to areas including heart valve and tissue processing technology for
transplantation and to delivery of bioadhesives for anastomosis and other
uses. The Company holds six patents and has seven patents pending with respect
to its single-use medical devices. There can be no assurance that any patents
pending will result in issued patents. The Company also has exclusive
licensing rights for technology relating to light-sensitive enzyme inhibitors.
The remaining duration of the Company's issued patents ranges from 5 to 17
years. The Company has licensed from third parties certain technologies used
in the development of its FibRx surgical sealant and SynerGraft technology.
These licenses call for the payment of both development milestones and
royalties based on product sales, when and if such products are approved for
marketing. The loss of these licenses could adversely affect the Company's
ability to successfully develop its FibRx surgical sealant and SynerGraft
technology.

There can be no assurance that the claims allowed in any of the Company's
existing or future patents will provide competitive advantages for the
Company's products, processes and technologies or will not be successfully

challenged or circumvented by competitors. To the extent that any of the
Company's products are not patent protected, the Company's business, financial
condition and results of operations could be materially adversely affected.
Under current law, patent applications in the U.S. are maintained in secrecy
until patents are issued and patent applications in foreign countries are
maintained in secrecy for a period after filing. The right to a patent in the
U.S. is attributable to the first to invent, not the first to file a patent
application. The Company cannot be sure that its products or technologies do
not infringe patents that may be granted in the future pursuant to pending
patent applications or that its products do not infringe any patents or
proprietary rights of third parties. The Company may incur substantial legal
fees in defending against a patent infringement claim or in asserting claims
against third parties. In the event that any relevant claims of third-party
patents are upheld as valid and enforceable, the Company could be prevented
from selling certain of its products or could be required to obtain licenses
from the owners of such patents or be required to redesign its products to
avoid infringement. There can be no assurance that such licenses would be
available or, if available, would be on terms acceptable to the Company or
that the Company would be successful in any attempt to redesign its products
or processes to avoid infringement. The Company's failure to obtain these
licenses or to redesign its products could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company has entered into confidentiality agreements with all of its
employees and several of its consultants and third-party vendors to maintain
the confidentiality of trade secrets and proprietary information. There can be
no assurance that the obligations of employees of the Company and third
parties with whom the Company has entered into confidentiality agreements will
effectively prevent disclosure of the Company's confidential information or
provide meaningful protection for the Company's confidential information if
there is unauthorized use or disclosure, or that the Company's trade secrets
or proprietary information will not be independently developed by the
Company's competitors. Litigation may be necessary to defend against claims of
infringement, to enforce patents and trademarks of the Company, or to protect
trade secrets and could result in substantial cost to, and diversion of effort
by, the Company. There can be no assurance that the Company would prevail in
any such litigation. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the U.S.

COMPETITION

Cryopreserved Human Tissues and Bioprosthetic Cardiovascular Devices

The Company faces competition from non-profit tissue banks that cryopreserve
and distribute human tissue, as well as from companies that market mechanical,
porcine and bovine heart valves for implantation. Many established companies,
some with resources greater than those of the Company, are engaged in
manufacturing, marketing and selling alternatives to cryopreserved human
tissue. Management believes that it competes favorably with other entities
that cryopreserve human tissue on the basis of technology, customer service
and quality assurance. As compared to mechanical, porcine and bovine heart
valves, management believes that the human heart valves cryopreserved by the
Company compete on the factors set forth above, as well as by providing a
tissue that is the preferred replacement alternative with respect to certain
medical conditions, such as pediatric cardiac reconstruction, valve
replacements for women in their child-bearing years and valve replacements for
patients with endocarditis. Although human tissue cryopreserved by the Company
is initially higher priced than are mechanical alternatives, these
alternatives typically require that the patient take anti-coagulation drug
therapy for the lifetime of the implant. As a result of the costs associated
with anti-coagulants, mechanical valves are generally, over the life of the
implant, more expensive than tissue cryopreserved by the Company.
Notwithstanding the foregoing, management believes that, to date, price has
not been a significant competitive factor.

Generally, for each procedure that may utilize other human tissue that the
Company cryopreserves, there are alternative treatments. Often, as in the case
of veins and ligaments, these alternatives include the repair, partial removal
or complete removal of the damaged tissue and may utilize other tissues from
the patients themselves or synthetic products. The selection of treatment
choices is made by the attending physician in consultation with the patient.
Any newly developed treatments will also compete with the use of tissue
cryopreserved by the Company.

Human and Stentless Porcine Heart Valves. Alternatives to human heart valves
cryopreserved by the Company include mechanical valves, porcine valves and
valves constructed from bovine pericardium. St. Jude Medical, Inc. is the
leading supplier of mechanical heart valves, and has a marketing and
distribution arrangement with a tissue bank for supplies of cryopreserved
human heart valves and Baxter International Inc. is the leading supplier of
porcine heart valves. In addition, management believes that at least three
tissue banks offer cryopreservation services for human heart valves in
competition with the Company. The Company presently distributes its stentless
porcine heart valves only outside the U.S. These stentless porcine heart
valves compete with mechanical valves, human heart valves and processed bovine
pericardium. The Company is aware of at least two other companies that offer
stentless porcine heart valves.

Human Vascular Tissue. Synthetic alternatives to veins cryopreserved by the
Company are available primarily in medium and large diameters. Currently,
management believes that there are no other providers of cryopreserved human
vascular tissue in competition with the Company. Companies offering either
synthetic or allograft products may enter this market in the future.

Human Connective Tissue for the Knee. The Company's competition in the area of
connective tissue for the knee varies according to the tissue involved. When
transplant is indicated, the principal competition for human tissues
cryopreserved by the Company are freeze-dried and fresh frozen human
connective tissues. These alternative allografts are distributed by
distributors of Osteotech, Inc. and various tissue banks, among others.
Ligaments and tendons cryopreserved by the Company constitute the principal
treatment options for injuries which require anterior cruciate ligament
repair. To management's knowledge, there are presently no processed or
synthetic alternatives to menisci cryopreserved by the Company.

Implantable Biomedical Devices

The Company competes with many domestic and foreign medical device,
pharmaceutical and biopharmaceutical companies. In the surgical adhesive and
surgical sealant area, the Company will compete with existing methodologies,
including traditional wound closure products such as sutures and staples,
marketed by companies such as Johnson & Johnson, United States Surgical
Corporation, Sherwood, Davis & Geck and others. Other products currently being
marketed include fibrin glue, sold in Europe, and the Pacific Rim countries by
Immuno AG, a subsidiary of Baxter Healthcare Corporation, Chemo-Sero
Therapeutic Research Institute, Hoechst GmbH and others, and management
believes other products are under development by Baxter Healthcare
Corporation, Bristol-Myers Squibb Company, V.I. Technologies, Inc. and others.
Other competitors in the surgical sealant market include Closure Medical
Corporation, B. Braun GmbH and Focal, Inc. Competitive products may also be
under development by other large medical device, pharmaceutical and
biopharmaceutical companies. Many of the Company's current and potential
competitors have substantially greater financial, technological, research and
development, regulatory and clinical, marketing and sales, and personnel
resources than the Company.

These competitors may also have greater experience in developing products,
conducting clinical trials, obtaining regulatory approvals, and manufacturing
and marketing such products. Certain of these competitors may obtain patent
protection, approval or clearance by the FDA or foreign countries or product
commercialization earlier than the Company, any of which could materially
adversely affect the Company. Furthermore, if the Company commences
significant commercial sales of its products, it will also be competing with
respect to manufacturing efficiency and marketing capabilities, areas in which
it currently has limited experience.

Other recently developed technologies or procedures are, or may in the future
be, the basis of competitive products. There can be no assurance that the
Company's current competitors or other parties will not succeed in developing
alternative technologies and products that are more effective, easier to use
or more economical than those which have or are being developed by the Company
or that would render the Company's technology and products obsolete and non-
competitive in these fields. In such event, the Company's business, financial
condition and results of operations could be materially adversely affected.
See "Risk Factors--Rapid Technological Change."

Single-Use Medical Devices

The Company competes in this market with many larger companies such as Boston
Scientific's SciMed Life Systems, Guidant Corporation's Advanced
Cardiovascular Systems, C.R. Bard, Inc. and Baxter Healthcare Corporation.
Many of these companies are larger and carry broader product lines than
CryoLife which allows them to bundle products to hospitals. Bundling device
products has become a cost-effective way of marketing several products in a
line and of providing incentives for the customer to use several products in a
product line. At present, CryoLife does not bundle its single-use medical
devices but instead offers novel product enhancement.

GOVERNMENT REGULATION

U.S. Federal Regulation

Because human heart valves are, and other Company products may be regulated in
the future as, medical devices, the Company and these products are subject to
the provisions of the Federal Food, Drug and Cosmetic Act ("FDCA") and
implementing regulations. Pursuant to the FDCA, the FDA regulates the
manufacture, distribution, labeling and promotion of medical devices in the
U.S. In addition, various foreign countries in which the Company's products
are or may be distributed impose additional regulatory requirements.

The FDCA provides that, unless exempted by regulation, medical devices may not
be distributed in the U.S. unless they have been approved or cleared for
marketing by the FDA. There are two review procedures by which medical devices
can receive such approval or clearance. Some products may qualify for
clearance to be marketed under a Section 510(k) ("510(k)") procedure, in which
the manufacturer provides a premarket notification that it intends to begin
marketing the product, and shows that the product is substantially equivalent
to another legally marketed product (i.e., that it has the same intended use
and that it is as safe and effective as a legally marketed device and does not
raise different questions of safety and effectiveness than does a legally
marketed device). In some cases, the submission must include data from
clinical studies. Marketing may commence when the FDA issues a clearance
letter finding such substantial equivalence.

If the product does not qualify for the 510(k) procedure (either because it is
not substantially equivalent to a legally marketed device or because it is a
Class III device required by the FDCA and implementing regulations to have an
approved application for PMA), the FDA must approve a PMA application before
marketing can begin. PMA applications must demonstrate, among other matters,
that the medical device is safe and effective. A PMA application is typically
a complex submission, usually including the results of human clinical studies,
and preparing an application is a detailed and time-consuming process. Once a
PMA application has been submitted, the FDA's review may be lengthy and may
include requests for additional data. By statute and regulation, the FDA may
take 180 days to review a PMA application although such time may be extended.
Furthermore, there can be no assurance that a PMA application will be reviewed
within 180 days or that a PMA application will be approved by the FDA.

The FDCA also provides for an IDE which authorizes distribution for clinical
evaluation of devices that lack a PMA or 510(k). Devices subject to an IDE are
subject to various restrictions imposed by the FDA. The number of patients
that may be treated with the device is limited, as are the number of
institutions at which the device may be used. Patients must give informed
consent to be treated with an investigational device. The device must be
labeled that it is for investigational use and may not be advertised, or
otherwise promoted, and the price charged for the device may be limited.
Unexpected adverse experiences must be reported to the FDA.

The FDCA requires all medical device manufacturers and distributors to
register with the FDA annually and to provide the FDA with a list of those
medical devices which they distribute commercially. The FDCA also requires
manufacturers of medical devices to comply with labeling requirements and to
manufacture devices in accordance with Quality System Regulations, which
require that companies manufacture their products and maintain their documents
in a prescribed manner with respect to good manufacturing practices, design,
document production, process, labeling and packaging controls, process
validaiton and other quality control activities. The

FDA's medical device reporting regulation requires that a device manufacturer
provide information to the FDA on death or serious injuries alleged to have
been associated with the use of its products, as well as product malfunctions
that would likely cause or contribute to death or serious injury if the
malfunction were to recur. The FDA's medical device tracking regulation
requires the adoption of a method of device tracking by manufacturers of life-
sustaining or implantable products, the failure of which would be reasonably
likely to have serious adverse health consequences. The manufacturer must adopt
methods to ensure that such devices can be traced from the manufacturing
facility to the ultimate user, the patient. The FDA further requires that
certain medical devices not cleared for marketing in the U.S. follow certain
procedures before they are exported.

The FDA inspects medical device manufacturers and distributors and has
authority to seize noncomplying medical devices, to enjoin and/or to impose
civil penalties on manufacturers and distributors marketing non-complying
medical devices, to criminally prosecute violators and to order recalls in
certain instances.

Human Heart Valves. The Company's human heart valves became subject to
regulation by the FDA in June 1991, when the FDA published a notice stating
that human heart valves are Class III medical devices under the FDCA. The June
1991 notice provided that distribution of human heart valves for
transplantation would violate the FDCA unless they were the subject of an
approved PMA or IDE on or before August 26, 1991.

On October 14, 1994, the FDA announced in the Federal Register that neither an
approved application for PMA nor an IDE is required for processors and
distributors who had marketed heart valve allografts before June 26, 1991. This
action by the FDA has resulted in the allograft heart valves being classified
as Class II Medical Devices and has removed them from clinical trial status. It
also allows the Company to distribute such valves to cardiovascular surgeons
throughout the U.S.

Other Tissue. Other than human and porcine heart valves, none of the Company's
other tissue services or products are currently subject to regulation as
medical devices under the FDCA or FDA regulation. Heart valves are one of a
small number of processed human tissues over which the FDA has asserted medical
device jurisdiction. In July 1997, the FDA published a final rule, which became
effective in January 1998, regulating "human tissue." The rule clarifies and
modifies an earlier interim rule and defines human tissue as any tissue derived
from a human body which is (i) intended for administration to another human for
the diagnosis, cure, mitigation, treatment or prevention of any condition or
disease and (ii) recovered, processed, stored or distributed by methods not
intended to change tissue function or characteristics. The FDA definition
excludes, among other things, tissue that currently is regulated as a human
drug, biological product or medical device and excludes kidney, liver, heart,
lung, pancreas or any other vascularized human organ. Human tissue is regulated
by the FDA in a manner the agency has deemed necessary to protect the public
health from the transmission of HIV infection and hepatitis infection through
transplantation of tissue from donors with or at risk for these diseases.
Unlike certain drugs, biologicals and medical devices, human tissue is not
subject to premarket notification or approval by the FDA. It is likely,
moreover, that the FDA will expand its regulation of processed human tissue in
the future. For example, the FDA may determine that the veins and connective
tissue that are currently processed by the Company are medical devices, or the
FDA may determine to regulate human heart valves as "human tissue" rather than
medical devices, but the FDA has not done so at this time. Complying with FDA
regulatory requirements or obtaining required FDA approvals or clearances may
entail significant time delays and expenses or may not be possible, any of
which may have a material adverse effect on the Company. In addition, the U.S.
Congress is expected to consider legislation that would regulate human tissue
for transplant or the FDA could impose a separate regulatory scheme for human
tissue. Such legislation or regulation could have a material adverse effect on
the Company.

Porcine Heart Valves. Porcine heart valves are Class III medical devices, and
FDA approval of a PMA is required prior to commercial distribution of such
valves in the U.S. The porcine heart valves currently marketed by the Company
have not been approved by the FDA for commercial distribution in the U.S. but
may be manufactured in the U.S. and exported to foreign countries if the valves
meet the specifications of the foreign purchaser, do not conflict with the laws
of and are approved by the country to which they will be exported, and the FDA
determines that their exportation is not contrary to public health and safety.

Single-Use Medical Devices. The products offered by the Company through IFM
are regulated as Class I and Class II medical devices by the FDA. These
products require clearance under a 510(k) procedure. All products currently
marketed by IFM have received a 510(k) clearance from the FDA. In addition,
the IFM facilities are subject to periodic review by the FDA, as are the
Company's records on returned products and reported problems.

BioGlue Surgical Adhesive. It is anticipated that BioGlue surgical adhesive
will be regulated as a Class III medical device, as a biologic or in some
other capacity by the FDA. The Company is currently preparing to submit an
application with the FDA for approval to conduct clinical trials for BioGlue
surgical adhesive. There can be no assurance that approval of this application
will be obtained.

Possible Other FDA Regulation. Other products and processes under development
by the Company are likely to be subject to regulation by the FDA (e.g.,
SynerGraft and FibRx surgical sealant). Some may be classified as medical
devices; others may be classified as drugs or biological products or subject
to a regulatory scheme for human tissue that the FDA may adopt in the future.
Regulation of drugs and biological products is substantially similar to
regulation of medical devices. Obtaining FDA approval to market these products
is likely to be a time consuming and expensive process, and there can be no
assurance that any of these products will ever receive FDA approval, if
required, to be marketed.

NOTA Regulation. The Company's activities in processing and transporting human
hearts and certain other organs are also subject to federal regulation under
the NOTA, which makes it unlawful for any person to knowingly acquire, receive
or otherwise transfer any human organ for valuable consideration for use in
human transplantation if the transfer affects interstate commerce. NOTA
excludes from the definition of "valuable consideration" reasonable payments
associated with the removal, transportation, implantation, processing,
preservation, quality control and storage of a human organ. The purpose of
this statutory provision is to allow for compensation for legitimate services.
The Company believes that to the extent its activities are subject to NOTA, it
meets this statutory provision relating to the reasonableness of its charges.
There can be no assurance, however, that restrictive interpretations of NOTA
will not be adopted in the future that would call into question one or more
aspects of the Company's methods of charging for its preservation services.

State Licensing Requirements

Some states have enacted statutes and regulations governing the processing,
transportation and storage of human organs and tissue. The activities engaged
in by the Company require it to be licensed as a clinical laboratory and
tissue bank under Georgia, New York, California and Florida law. The Company
has such licenses, and the Company believes it is in compliance with
applicable state laws and regulations relating to clinical laboratories and
tissue banks which store, process and distribute human tissue designed to be
used for medical purposes in human beings. There can be no assurance, however,
that more restrictive state laws or regulations will not be adopted in the
future that could adversely affect the Company's operations. Certain employees
of the Company have obtained other required licenses.

Foreign Approval Requirements

Sales of medical devices and biological products outside the U.S. are subject
to foreign regulatory requirements that vary widely from country to country.
Approval of a product by comparable regulatory authorities of foreign
countries must be obtained prior to commercialization of the product in those
countries. The time required to obtain foreign approvals may be longer or
shorter than that required for FDA approval. The European Community recognizes
a single approval, called a CE Mark, which allows for distribution of an
approved product throughout the European Community (15 countries) without
additional applications to each country. The CE Mark is awarded by third
parties called Notified Bodies. These Notified Bodies are approved and subject
to review by the Competent Authorities of their respective countries. A number
of countries outside of the European Community accept the CE Mark in lieu of
clinical data submission as an addendum to that country's application process.
The Company has been issued CE Marks for its CyroLife-O'Brien porcine heart
valves, BioGlue

surgical adhesive and IFM single-use medical devices by LRQA. The Company's
porcine heart valves may be exported to specified developed nations, including
countries in the European Community, Australia, Canada, Israel, Japan, New
Zealand, South Africa and Switzerland if they comply with the laws of that
country and have valid marketing authorization by the appropriate authority in
that country. Beginning in July 1998, CE Mark Certification will be required to
market porcine heart valves and other bioprosthetics in the European Community.

ENVIRONMENTAL MATTERS

The Company's tissue processing activities generate some biomedical wastes
consisting primarily of human pathological and biological wastes, including
human tissue and body fluids removed during laboratory procedures. The
biomedical wastes generated by the Company are placed in appropriately
constructed and labeled containers and are segregated from other wastes
generated by the Company. The Company contracts with third parties for
transport, treatment and disposal of biomedical waste. Although the Company
believes it is in compliance with applicable laws and regulations promulgated
by the U.S. Environmental Protection Agency and the Georgia Department of
Natural Resources, Environmental Protection Division, the failure by the
Company to comply fully with any such regulations could result in an imposition
of penalties, fines or sanctions, which could have a material adverse effect on
the Company's business.

EMPLOYEES

The Company presently has approximately 330 employees. These employees include
nine persons with PhD degrees. None of the Company's employees is represented
by a labor organization or covered by a collective bargaining agreement, and
the Company has never experienced a work stoppage or interruption due to labor
disputes. Management believes its relations with its employees are good.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. Management
believes that no currently ongoing litigation, if determined adversely to the
Company, will have a material adverse effect on the Company's business,
financial condition or results of operations.

MANAGEMENT
- -------------------------------------------------------------------------------

The following sets forth the name, age and position of executive officers and
directors of the Company as of January 31, 1998.

NAME AGE POSITION
- ---- --- --------

Steven G. Anderson...... 59 President, Chief Executive Officer and Chairman
Kirby S. Black, PhD..... 43 Vice President, Research and Development
Edwin B. Cordell, Jr.,
CPA.................... 39 Vice President and Chief Financial Officer
Albert E. Heacox, PhD... 47 Vice President, Laboratory Operations
Gerald B. Seery......... 41 Vice President, Marketing
James C. Vander Wyk,
PhD.................... 53 Vice President, Regulatory Affairs and Quality Assurance
Ronald C. Elkins, MD.... 61 Director
Benjamin H. Gray........ 47 Director
Virginia C. Lacy........ 56 Director
Ronald D. McCall, Esq... 61 Director, Secretary and Treasurer

STEVEN G. ANDERSON, a founder of the Company, has served as the Company's
President, Chief Executive Officer and Chairman since its inception. Mr.
Anderson has more than 30 years of experience in the implantable medical
device industry. Prior to joining the Company, Mr. Anderson was Senior
Executive Vice President and Vice President, Marketing, from 1976 until 1982
of Intermedics, Inc., a manufacturer and distributor of pacemakers and other
medical devices. Mr. Anderson received his BA from the University of
Minnesota.

KIRBY S. BLACK, PHD, has served as Vice President of Research and Development
since July 1995. Dr. Black is responsible for the continued development of the
Company's current products as well as the evaluation of new technologies. Dr.
Black is listed on three patents and has authored 118 publications. Prior to
joining the Company, Dr. Black was Director, Medical Information and Project
Leader from July 1993 until July 1994 at Advanced Tissue Sciences, LaJolla,
California. Dr. Black has also held a number of positions at the University of
California at Irvine, including Director, Transplantation and Immunology
Laboratories, Department of Surgery. Dr. Black received his BS degree from the
University of California, Los Angeles, and his PhD degree from the University
of California at Irvine.

EDWIN B. CORDELL, JR., CPA, has served as Vice President and Chief Financial
Officer of the Company since November 1994. From August 1987 to November 1994,
Mr. Cordell served as Controller and Chief Financial Officer of Video Display
Corporation, a cathode ray tube remanufacturing and distribution company. Mr.
Cordell received his BS in Accounting from the University of Tennessee.

ALBERT E. HEACOX, PHD, has served as Vice President, Laboratory Operations
since June 1988 and has been with the Company since June of 1985. Dr. Heacox
has been responsible for developing protocols and procedures for both
cardiovascular and connective tissues, implementing upgrades in procedures in
conjunction with the Company's quality assurance programs, and overseeing all
production activities of the Company's laboratories. Prior to joining the
Company, Dr. Heacox worked as a researcher with the U.S. Department of
Agriculture and North Dakota State University, developing methods for the
cryopreservation of cells and animal germ plasm storage. Dr. Heacox received a
BA and an MS in Biology from Adelphi University, received his PhD in Biology
from Washington State University and completed his post-doctorate training in
cell biology at the University of Cologne, West Germany.

GERALD B. SEERY has served as Vice President of Marketing since August 1995
and has been with the Company since July 1993. Mr. Seery is responsible for
developing and implementing the Company's sales and marketing plans and
supervising all tissue procurement activities. Prior to joining the Company,
Mr. Seery held senior marketing management positions with Meadox Medicals from
1982 until 1985, Electro Catheter Corporation from 1985 until 1989 and Daig
Corporation from 1992 until 1993, accumulating fifteen years of specialized

marketing experience in cardiovascular medical devices. Mr. Seery received his
BA in International Economics at The Catholic University of America in
Washington, D.C. in 1978 and completed his MBA at Columbia University in New
York in 1980.

JAMES C. VANDER WYK, PHD, has served as Vice President, Regulatory Affairs and
Quality Assurance of the Company since February 1996. Prior to joining the
Company, Dr. Vander Wyk held senior management positions at Schneider (USA),
Inc. from 1993 until 1996, Pharmacia Deltec, Inc. from 1985 until 1993,
Delmed, Inc. from 1980 until 1985 and Pharmaco, Inc. from 1975 to 1979,
gaining 20 years of experience in Regulatory Affairs and Quality Assurance.
Dr. Vander Wyk received his BS in Pharmacy from the Massachusetts College of
Pharmacy and his PhD in Microbiology from the University of Massachusetts. Dr.
Vander Wyk performed his NIH Postdoctoral Fellowship at the University of
Illinois.

RONALD C. ELKINS, MD, has served as a Director of the Company since January
1994. Dr. Elkins is Professor and Vice Head of the Department of Surgery and
Chief of Thoracic and Cardiovascular Surgery, University of Oklahoma Health
Science Center. Dr. Elkins has been a physician at the Health Science Center
since 1971, and has held his present position since 1975.

BENJAMIN H. GRAY has served as a Director of the Company since January 1991.
Mr. Gray is Chief Financial Officer of Columbia Corporation, an operator of
long-term care facilities. Prior to joining Columbia Corporation in 1997, Mr.
Gray was a principal of Massey Burch Capital Corp. and Vice President of
Massey Burch Investment Group, Inc., a Nashville-based venture capital firm
specializing in the health care industry. Mr. Gray joined Massey Burch in 1987
and was responsible for evaluating and managing various investments in the
portfolio. Mr. Gray was previously with Chemical Bank of New York from 1973 to
1987.

VIRGINIA C. LACY has served as a Director of the Company since August 1997.
Mrs. Lacy is President and a Director of American Industries, a company she
co-founded with her husband in 1986. American Industries, located in West
Chicago, Illinois, is a manufacturer and distributor of personal
identification cards used by a variety of industries, both domestically and
internationally. Mrs. Lacy has served as Chairman of the Board of Directors of
Precision Devices Corporation, a distributor of pacemakers and other
implantable medical devices, since its founding in 1974. Mrs. Lacy received
her BA degree from Northwestern University in 1963.

RONALD D. MCCALL, ESQ, has served as a Director of the Company and as the
Secretary and Treasurer of the Company since January 1984. From 1985 to the
present, Mr. McCall has been the proprietor of the law firm of Ronald McCall,
Attorney At Law, based in Tampa, Florida. Mr. McCall was admitted to the
practice of law in Florida in 1961. Mr. McCall received his BA and JD degrees
from the University of Florida.

PRINCIPAL AND SELLING SHAREHOLDERS
- -------------------------------------------------------------------------------

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock asbeneficially owned by
Atlas Fund, LLC. The address for this shareholder is 181 W. Madison, Suite 3600,
Chicago, IL 60602, Attn: Dmitry Balyasny.

(3) BlackRock Funds is a registered investment company. Its investment manger is
BlackRock Advisors, a registered investment adviser. The address for this
shareholder is c/o BlackRock Advisors, Inc., 100 Bellevue Parkway, Wilmington,
DE 19809, Attn: Thomas Downey.

(4) Heights Capital Management, Inc., the authorized agent of February 13, 1998,Capital Ventures
International ("CVI"), has discretionary authority to vote and as
adjusted to reflect the sale by the Selling Shareholdersdispose of the
shares held by CVI and may be deemed to be the beneficial owner of Common Stock offered hereby,these shares.
Martin Kobinger, in his capacity as Investment Manager of Heights Capital
Management, Inc., may also be deemed to have investment discretion and voting
power over the shares held by (a) each person who is known by the Company to
own beneficially more than five percentCVI. Mr. Kobinger disclaims any such beneficial
ownership of the outstandingshares. The business address for this shareholder is 425
California Street, San Francisco, CA 94104.

(5) Deephaven Small Cap Growth Fund LLC is a private investment fund that is
owned by all of its investors and managed by Deephaven Capital Management LLC.
Deephaven Capital Management LLC, of which Mr. Colin Smith is the Chief
Executive Officer, has voting and investment control over the shares of Common
Stock, (b) each Director of thethat are
owned by Deephaven Small Cap Growth Fund LLC. The address for this shareholder
is 130 Chesire Lane, Suite 102, Mennetonka, MN 55305, Attn: Jared R. Lewis.

(6) The shareholder is a registered investment company. Massachusetts Financial
Services Company (c) each executive officer of the
Company, (d) all executive officers and Directors of the Company as("MFSC"), a group
and (e) each Selling Shareholder. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, haveregistered investment advisor, has sole investment
and voting power over these shares. Through this and other investment funds, and
private client accounts, MFSC may be deemed to have voting and investment power
over an aggregate of 1,498,010 shares of CryoLife common stock. Clump & Co. acts
as a nominee and is the record holder of these shares. The address for this
shareholder is c/o Massachusetts Financial Services Company, 500 Boylston
Street, Boston, Massachusetts 02116.

(7) The shareholder is a registered investment company. MFSC has sole investment
and voting power over these shares. Through this and other investment funds, and
private client accounts, MFSC may be deemed to have voting and investment power

over an aggregate of 1,498,010 shares of CryoLife common stock. Inletbluff & Co.
acts as a nominee and is the record holder of these shares. The address for this
shareholder is c/o Massachusetts Financial Services Company, 500 Boylston
Street, Boston, Massachusetts 02116.

(8) The shareholder is a registered investment company. MFSC has sole investment
and voting power over these shares. Through this and other investment funds, and
private client accounts, MFSC may be deemed to have voting and investment power
over an aggregate of 1,498,010 shares of CryoLife common stock. Newwind & Co.
acts as a nominee and is the record holder of these shares. The address for this
shareholder is c/o Massachusetts Financial Services Company, 500 Boylston
Street, Boston, Massachusetts 02116.

(9) The sole member of Riverview is Millennium Holding Group, L.P., a Delaware
limited partnership ("Holding"). Millennium Management, LLC, a Delaware limited
liability company ("Millennium Management"), is the general partner of Holding.
Israel A. Englander ("Mr. Englander") is the sole managing member of Millennium
Management. The foregoing should not be construed in and of itself as an
admission by any of Holding, Millennium Management or Mr. Englander as to
beneficial ownership of the shares owned by Riverview. The address for this
shareholder is 666 Fifth Avenue, 8th Floor, New York, NY 10103, Attn: Terry
Feeney.

(10) Highbridge Capital Management, LLC is the trading manager of Smithfield
Fiduciary LLC and consequently has voting control and investment discretion over
securities held by Smithfield. Glenn Dubin and Henry Swieca control Highbridge.
Each of Highbridge, Glenn Dubin and Henry Swieca disclaims beneficial ownership
of the securities held by Smithfield.The address for this shareholder is c/o
Highridge Capital Management LLC, 9 West 57th Street, 27th Floor, New York, NY
10019, Attn: Ari J. Storch/Adam J. Chill.

(11) UBS O'Connor LLC ("UBS") is the investment manager for PIPES Corporate
Strategies Master Ltd (the selling security holder), which is a wholly owned
subsidiary of UBS AG which is traded on NYSE. UBS AG is the managing member of
UBS, and in that capacity directs its operations. The address for this
shareholder is 1 North Wacker Drive, 32nd Floor, Chicago, Illinois 60606, Attn:
Jeff Richmond.

(12) This selling shareholder has represented to CryoLife that, although it is
affiliated with a broker or dealer, the selling shareholder purchased the
securities shown in the ordinary course of business, and at the time of the
purchase of the securities, the selling shareholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.

PLAN OF DISTRIBUTION

The shareholders named herein may offer and sell shares of common stock
offered by this prospectus during the two year period ending on the second
anniversary of the closing of the PIPE offering in one or more of the following
transactions:

o on The New York Stock Exchange or any other securities exchange or
quotation service that lists the common stock for trading;

o in the over-the-counter market;

o in transactions other than on such exchanges or in the
over-the-counter market;

o in negotiated transactions;

o through the writing of options, whether such options are listed on an
options exchange or otherwise;

o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o an exchange distribution in accordance with the rules of the
applicable exchange;

o privately negotiated transactions;

o short sales, swaps, or other derivative shares at a stipulated price
per share;

o pursuant to Rule 144; and

o a combination of any such methods of sale.

The selling shareholders may offer and sell the shares using any other
method permitted pursuant to applicable law. The named shareholders may sell
their shares at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices or at fixed prices. The
transactions listed above may include block transactions. These shareholders
have advised us that they have no arrangements with any underwriters or
broker-dealers relating to the distribution of the shares covered by this
prospectus.

The shareholders may sell their shares directly to purchasers, use
broker-dealers to sell their shares or may sell their shares to broker-dealers
acting as principals. If this happens, broker-dealers may either receive
discounts or commissions from the shareholders, or they may receive commissions
from purchasers of shares for whom they acted as agents, or both. If a
broker-dealer purchases shares as a principal, it may resell the shares for its
own account under this prospectus. We will pay all registration fees and
expenses for the common stock offered by this prospectus.

The shareholders and any underwriter, agent, broker or dealer that
participates in sales of common stock offered by this prospectus may be deemed
"underwriters" within the meaning of Section 2(11) under the Securities Act of
1933 and any discounts, concessions, commissions or fees received by them and
any profit on the resale of the securities sold by them may be considered
underwriting discounts or commissions under the Securities Act. We have agreed
to indemnify the shareholders named herein against certain liabilities arising
under the Securities Act from sales of common stock. Selling shareholders may
agree to indemnify any agent, broker or dealer that participates in sales of
common stock against liabilities arising under the Securities Act from sales of
common stock.

The selling shareholders and any underwriter, agent, broker or dealer that
participates in sales of common stock offered by this prospectus will be subject
to the prospectus delivery requirements of the Securities Act, which may include
delivery through the facilities of The New York Stock Exchange pursuant to Rule
153 under the Securities Act.

The selling shareholders and other persons participating in the sale or
distribution of the securities may be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated under the Exchange Act, including Regulation M. Under Regulation M,
in connection with a distribution of securities effected by or on behalf of the
selling security holder, it is unlawful for such person, or any affiliated
purchaser of such person, directly or indirectly, to bid for, purchase, or
attempt to induce any person to bid for or purchase, a covered security during
the applicable restricted period. These restrictions may affect the
marketability of the securities and the ability of any person or entity to
engage in market-making activities with respect to such shares.

SHARES BENEFICIALLY
OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING (1) NUMBER OF AFTER OFFERING (1)
------------------------- SHARES ------------------------------
BENEFICIAL OWNERS NUMBER PERCENT OFFERED NUMBER PERCENT(2)
- ----------------- ------------- ----------- --------- --------------- --------------

Steven G.
Anderson(3)(4)........ 1,194,703 12.2% 50,000 1,144,703 9.5%
Kirby S. Black,
PhD(5)................ 12,507 * 0 12,507 *
Edwin B. Cordell,
Jr(6)................. 20,300 * 5,000 15,300 *
Albert E. Heacox,
PhD(7)................ 78,000 * 5,000 73,000 *
Gerald G. Seery(8)..... 16,200 * 3,000 13,200 *
James C. Vander Wyk,
PhD(9)................ 12,000 * 0 12,000 *
Ronald C. Elkins,
MD(3)(10)............. 47,200 * 0 47,200 *
Benjamin H.
Gray(3)(11)........... 61,312 * 0 61,312 *
Virginia C.
Lacy(3)(12)........... 395,086 4.1 30,000 365,086 3.0
Ronald D. McCall,
Esq(3)(13)............ 119,792 1.2 20,000 99,792 *
All executive officers
and Directors as a
group
(10 people)(14)....... 1,957,100 19.7 113,000 1,844,100 15.1
Dr. J. Crayton
Pruitt(15)............ 413,907 4.1 50,000 363,907 2.9
Robert T. McNally,
PhD(16)............... 180,000 1.9 74,000 106,000 *
-------
Total shares offered
by Selling
Shareholders........ 237,000
=======

- --------
*Less than 1%.
(1) Sharesthe securities. Generally,
Regulation M provides an exemption from these restrictions if the CryoLife
common stock has a public float of Common Stock which wereat least $150 million and an average daily
trading volume of at least $1 million for a 60 consecutive calendar day period
ending within 10 days preceding the determination of the offering price in any
distribution of the shares under this registration statement. However, this
exemption does not outstanding but which could be
acquired by a person upon exercise of an option within 60 days of February
17, 1998, are deemed outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by such person. Such
shares, however, are notapply to any selling shareholder who is deemed to be outstanding foran
affiliate of CryoLife at the purpose of
computing the percentage of outstanding shares beneficially owned by any
other person.
(2) Assumes no exercisetime of the Underwriters' over-allotment option. The number
ofdistribution.

In addition, the selling shareholders may from time to time sell short our
common stock and, in such instances, this prospectus may be delivered in
connection with such short sales and the shares of Common Stock deemed outstanding aftercommon stock offered under
this Offering assumes
2,263,000prospectus may be used to cover such short sales. Any short sales and
purchases to cover short positions may be subject to the Regulation M
restrictions mentioned above.

Instead of selling common stock under this prospectus, shareholders may
sell common stock in compliance with the provisions of Rule 144 under the
Securities Act, if available.

With respect to a particular offering of the common stock, to the extent
required, an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part will be prepared and will set forth the following information:

o the specific shares of Common Stock are soldcommon stock to be offered and sold;

o the names of the selling shareholders;

o the respective purchase prices and public offering prices and other
material terms of the offering;

o the names of any participating agents, broker-dealers or underwriters;
and

o any applicable commissions, discounts, concessions and other items
constituting compensation from the selling shareholders.

In addition, upon CryoLife being notified by a selling shareholder that a
permitted transferee to which the Companyright to utilize this prospectus, as
determined in this Offering.
The Selling Shareholders may elect notaccordance with the stock purchase agreements which granted
registration rights to the selling shareholders, has been transferred intends to
sell allmore than 500 shares, a post effective amendment or anysupplement to this
prospectus will be filed, as appropriate.

Shareholders who sell shares using this prospectus may also include persons
who obtain common stock from one of the shares
proposed to be sold in this Offering. In such event, the Company has
agreed to increase the number of shares it is selling in this Offering by
the number of shares not sold by such Selling Shareholders.
(3) The shareholders' address is 1655 Roberts Boulevard, N.W., Kennesaw, GA
30144.
(4) Includes 105,133 shares held of record by Ms. Ann B. Anderson, Mr.
Anderson's spouse. Also includes 46,000 shares subject to options which
are presently exercisable or will become exercisable within 60 days after
the date of this Prospectus.
(5) Includes 270 shares held by minor children and 12,000 shares subject to
options which are either presently exercisable or will become exercisable
within 60 days after the date of this Prospectus.
(6) Includes 2,300 shares innamed shareholders as a trading account as to which Mr. Cordell has
signature authority and 6,000 shares subject to options which are either
presently exercisable or will become exercisable within 60 days after the
date of this Prospectus.

(7) Includes 12,000 shares subject to options which are either presently
exercisable or will become exercisable within 60 days after the date of
this Prospectus.
(8) Includes 15,000 shares subject to options which are either presently
exercisable or will become exercisable within 60 days after the date of
this Prospectus.
(9) Includes 12,000 shares subject to options which are presently exercisable
or will become exercisable within 60 days after the date of this
Prospectus.
(10) Includes 28,170 shares subject to options which are presently exercisable
or will become exercisable within 60 days after the date of this
Prospectus.
(11) Includes 55,000 shares subject to options which are presently exercisable
or will become exercisable within 60 days after the date of this
Prospectus.
(12) Includes 215,500 shares held as beneficiarygift, for no
consideration upon dissolution of a trust, and 110,586
shares held as beneficiary of an IRA, of Ms. Lacy's deceased spouse.
Includes 30,000 shares held as administratorcorporation, partnership or limited
liability company, on foreclosure of a pension plan. Includes
15,000 shares subjectpledge or in another private transaction;
provided, however, that if a permitted transferee intends to options which are presently exercisable or will
become exercisable within 60 days after the date of this Prospectus.
(13) Includes 10,000sell more than 500
shares of Common Stock owned of record by Ms. Marilyn B.
McCall, Mr. McCall's spouse. Includes 35,000 shares of subject to options
which are presently exercisable or will become exercisable within 60 days
aftersuch CryoLife common stock, the date of this Prospectus.
(14) Includes 236,170 shares subject to options which are presently exercisable
or will become exercisable within 60 days after the date of this
Prospectus. Includes 2,300 shares held by the parents of an executive
officer for which such executive officer has shared voting control.
Includes 270 shares held as trustee by an executive officer. Includes
215,500 shares held as beneficiaryfiling of a trust, and 110,586 shares held as
beneficiary of an IRA, of Ms. Lacy's deceased spouse. Includes 30,000
shares held as administrator of a pension plan. Includes 115,133 shares
held of record by the spouses of executive officers and Directors.
(15) Represents shares issuable upon conversion of $607,000 of the convertible
debenture. Dr. Pruitt was the sole stockholder of IFM, which was acquired
by the Company in March 1997. In connection with the acquisition, the
Company issued a convertible debenturesupplement to Dr. Pruitt. See "Description of
Capital Stock--Convertible Debenture." Dr. Pruitt serves a consultant to
the Company pursuant to a consulting agreement.
(16) Includes 25,000 shares held of record by Ms. Gertrude McNally, Dr.
McNally's spouse. Includes 24,000 shares subject to options which are
presently exercisable. Mr. McNally retired as an executive officer of the
Company, and entered into a consulting agreement with the Company,
effective as of January 2, 1998.

48this
prospectus will be required.

DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------

The Company is authorized to issue up to 50,000,00075,000,000 shares of Common Stock,
$.01 par value, and 5,000,000 shares of Preferred Stock, $.01 par value. As of
February 11, 1998,January 31, 2004, there were 9,706,79123,225,566 shares of Common Stock outstanding held
by approximately 410431 shareholders of record and no shares of Preferred Stock
outstanding.

The following summary is qualified in its entirety by reference to the
Company's Amended and Restated Articles of Incorporation, the Company's Bylaws,
as amended, and the Florida Business Corporation Act (the "FBCA").

COMMON STOCK

Holders of Common Stock are entitled to one vote per share of Common Stock
held of record on all matters to be voted upon by the Company's shareholders
generally. Holders of Common Stock are not entitled to cumulative voting rights.
As a result, the holders of a majority of the shares of Common Stock voting for
the election of directors may elect all of the Company's directors if they
choose to do so, and, in such event, the holders of the remaining shares of
Common Stock will not be able to elect any person or persons to the Board of
Directors. See "Principal and Selling"Selling Shareholders."

Holders of Common Stock are entitled to receive, on a pro rata basis, such
dividends and distributions, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend right of any issued and outstanding shares of Preferred
Stock. In the event of liquidation, dissolution or winding up of the Company,
after payment of creditors, holders of Common Stock are entitled to share
ratably in all assets, subject to the payment of any liquidation preference of
any issued and outstanding shares of Preferred Stock. The shares of Common Stock
currently outstanding are and the shares of Common Stock to be issued
upon the completion of this Offering will be, validly issued, fully paid and non-assessable.

PREFERRED STOCK

The Board of Directors of the Company is empowered, without approval of the
Company's shareholders, to cause shares of Preferred Stock (the "Preferred
Stock") to be issued in one or more series and to fix and determine the relative
rights and preferences of the shares of any such series, subject to the limits
of Florida law. Because the Board of Directors has the power to establish the
preferences and rights of each series, it may afford the holders of any series
of Preferred Stock preferences, powers and rights, voting or otherwise, senior
to the rights of holders of Common Stock. The issuance of Preferred Stock could
have the effect of delaying or preventing a change in control of the Company.CryoLife. The
Board of Directors has no present plans to issue any shares of Preferred Stock.

CONVERTIBLE DEBENTURE

In connection with the acquisition of IFM, the Company issued a 7%, Five-Year
Subordinated Convertible Debenture dated March 5, 1997 (the "Debenture") in the
original principal amount of $4,999,999 in favor of J. Clayton Pruitt, the
former sole stockholder of IFM. The Debenture is convertible, at any time
between March 5, 1998 and March 5, 2002, into 413,907 shares of Common Stock
("Conversion Shares"). The conversion feature is subject to customary anti-
dilution provisions for stock splits or dividends. Dr. Pruitt has registration
rights with respect to the Conversion Shares. See "Shares Eligible For Future
Sale--Registration Rights."

STOCK OPTIONS

As of February 1, 1998,December 31, 2003, the Company has issued and outstanding options to
purchase an aggregate of 747,0002,523,000 shares of Common Stock (net of forfeitures,
expirations and cancellations) pursuant to its Stock Option Plans, at exercise
prices between $3.00$2.20 and $18.43.$31.99. Of such options, 301,000approximately 1,293,000 were
exercisable as of February 1, 1998.

49
December 31, 2003.

ARTICLES OF INCORPORATION AND BYLAWS

Certain provisions of the Articles of Incorporation and Bylaws of the
Company, which are summarized below, could have the effect of making it more
difficult to change the composition of the Company's Board of Directors or for
any person or entity to acquire control of the Company.

Special Meetings21

SPECIAL MEETINGS

Pursuant to the Company's Articles of Incorporation and Bylaws, special
meetings of the shareholders may be called only by the President or Secretary at
the request in writing of a majority of the Board of Directors then in office or
at the request in writing of shareholders owning not less than 50% of all votes
entitled to be cast at the special meeting.

Prohibition of Shareholder Action without MeetingPROHIBITION OF SHAREHOLDER ACTION WITHOUT MEETING

Under the Company's Articles of Incorporation, the shareholders may not
take action by written consent. Any and all action by the shareholders is
required to be taken at the annual shareholders' meeting or at a special
shareholders' meeting. See "Risk Factors--Anti-Takeover Provisions."

ANTI-TAKEOVER STATUTES

The Company is subject to several anti-takeover provisions of the FBCA that
apply to a public corporation organized under Florida law unless the corporation
has elected to opt out of such provision in its Articles of Incorporation or
(depending on the provision in question) its Bylaws. The Company has not elected
to opt out of these provisions. The Common Stock of the Company is subject to
the "affiliated transaction" and "control-share acquisition" provisions of the
FBCA, which are Sections 607.0901 and 607.0902, respectively. These provisions
provide that, subject to certain exceptions, an "affiliated transaction" must be
approved by the holders of two-thirds of the voting shares other than those
beneficially owned by an "interested shareholder" and that "control shares"
acquired in specified shareholders, excluding holders of shares defined as
"interested shares." These provisions of the FBCA may have the effect of making
it more difficult for any person or group to acquire the Company or substantial
amounts of the Company's Common Stock. See "Risk Factors--Anti-Takeover
Provisions."

ABILITY TO CONSIDER OTHER CONSTITUENCIES

The Directors of the Company are subject to the "general standards for
Directors" provisions set forth in Section 607.0830 of the FBCA. These
provisions provide that, among other things, in discharging his or her duties
and determining what is in the best interests of the Company, a Director may
consider such factors as the Director deems relevant, including the long-term
prospects and interests of the Company and its shareholders, and the social,
economic, legal or other effects of any proposed action on the employees,
suppliers or customers of the Company, the communities in which the Company
operates and the economy in general. Consequently, in connection with any
proposed corporate action, the Board of Directors is empowered to consider
interests of other constituencies in addition to the interests of the Company's
shareholders. Shareholders should be aware that Directors who take into account
these other factors may make decisions which are less beneficial to the
shareholders than if the law did not permit consideration of such other factors.

SHAREHOLDER RIGHTS PLAN

In November 1995, the Board of Directors of the Company established a
rights plan, pursuant to which one preferred share purchase right (a "Right") is
attached to each outstanding share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-tenth of a share of
Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock"), of the Company at a price of $100.00 per one-tenth of a
share of Preferred Stock (the "Purchase Price"), subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement dated as of November 27, 1995,
as

amended as of May 30, 1997 (the "Rights Agreement") between the Company and Chemical Mellon Shareholder Services, the original
"Rights Agent." The agreement was amended effective June 1, 1997, when the
Company's Board appointed American Stock Transfer &and Trust Company successor
Rights Agent.

Each Right currently entitles the registered holder, upon a "Distribution
Date" (defined below), to purchase from the Company .0333 of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock") for $100.00, subject to adjustment as described below. In addition, if
any person or group of affiliated or associated persons becomes an Acquiring
Person (defined below), each Right, other than Rights Agent (the "Rights Agent"beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter entitle its
holder to receive upon exercise (in lieu of Preferred Stock) a number of shares
of Company Common Stock having a market value of two times the exercise price of
the Right. After accounting for the Company's 1996 and 2000 stock splits, the
exercise price would be $33.33, subject to further adjustment upon certain
events.

Currently, each Right is non-exercisable and is evidenced only by the
certificate of Common Stock to which it is attached. The Rights will not be
exercisable and will not be evidenced by separate certificates ("Right
Certificates").

Until until the Distribution Date. Certificates will be issued upon the
"Distribution Date," which will occur on the earlier to occur of (i)of:

o 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") havehas acquired
beneficial ownership of 15% or more of the outstanding Common StockStock;
or

(ii)o 10 business days (or such later date as may be determined by
action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation
of which would result incause the beneficial ownership byofferor to become an Acquiring Person (except
that the Board of Directors may extend the 10-business-day period
before a person or group of 15% or more of the outstanding Common Stock (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced by
Common Stock certificates.

The Rights Agreement provides that, untilbecomes an Acquiring Person).

Until the Distribution Date (or earlier redemption or expiration of the Rights),
the Rights will be transferred with
andare transferable only with the Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), newDuring this period,
newly issued Common Stock certificates issued
after the Record Date upon transfer or new issuance of Common Stock will
contain a notation incorporatinglegend that evidences the
Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender forRight, and transfer of any certificatescertificate for Common Stock even without such
notation or a copy of a summary of Rights being attached thereto, will also constituteconstitutes the
transfer of the Rights associated with the Common Stock represented by such
certificate.

As soon as practicable followingUpon the Distribution Date, separate certificates evidencing the Rights ("Right Certificates")Certificates will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date and such separateDate.
From that date, all Rights will be evidenced by Right Certificates alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date.and generally
exercisable. The Rights will expire on November 27, 2005 (the "Expiration
Date"), unless the Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case, as described below.Company.

The Purchase Price payable and the number of shares of Preferred Stock or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to(to prevent dilution (i) indilution) upon any of the event offollowing
events:

o a stock dividend on, or a subdivision, combination or reclassification
of, the Preferred Stock, (ii) uponStock;

o the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price
less than the then-current market price of the Preferred StockStock; or

(iii)o upon the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than
those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.

The number of outstanding Rights and the number of shares of Preferred
Stock issuable upon exercise of each Right (presently one-tenth.0333 of a share) are also
subject to adjustment in the event ofof:

o a stock split of the Common Stock orStock;

o a stock dividend on the Common Stock payable in Common StockStock; or

subdivisions,
consolidationso subdivision, consolidation or combinationscombination of the Common Stock occurring, in any such
case, prior toStock.

Such adjustments are made only if the triggering event occurs before the
Distribution Date. Such an adjustment was made following the Company's 1996 and
2000 stock splits. Currently, there is one Right attached to each share of
Common Stock, and each Right entitles its holder, after the Rights become
exercisable, to purchase .0333 of a share of Preferred Stock. The exercise price

payable to acquire Common Stock is also subject to adjustment. Currently, each
Right entitles its holder to purchase, after the Rights become exercisable,
$66.66 worth of Common Stock for $33.33.

Shares of Preferred Stock purchasable upon exercise of the Rights will not be redeemable. The Preferred Stock will
be entitled to a minimum preferential quarterly dividend paymentequal to the greater of $.01$.10
per share but will be entitled to an
aggregate dividend of 10and (after adjustment for the stock splits) approximately 3.33 times
the dividend declared per share of Common Stock. In the event of liquidation,
theany holders of the Preferred Stock will be entitled to a minimum preferential
liquidation payment equal to the greater of $10.00 per share but
will be entitled to an aggregate payment of 10and approximately
3.33 times the payment made per share of Common Stock. TheEach share of Preferred
Stock will havebe entitled to one vote, voting together with the Common Stock. Finally, inIn
the event of any merger, consolidation or other transaction in which Common
Stock is exchanged, the Preferred Stock will be entitled to receive 10approximately
3.33 times the amount received per share of Common Stock.

These Rights are protected by customary antidilution provisions.

Because ofBased on the natureterms of the Preferred Stock, including its dividend,
liquidation and voting rights, the value of the one-tenth interest in the.0333 of a share of Preferred Stock
(before stock splits or other adjustments) purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.

In the event thatIf the Company is acquired in a merger or other business combination
transaction, or if 50% or more of its consolidated assets or earning power areis
sold after a person or group has become an Acquiring"Acquiring Person," proper provision
will be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.

In the event that
any person or group of affiliated or associated persons becomes an Acquiring
Person, proper provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter
be void), will thereafter have the right to receive upon exercise the number
of shares of Common Stock having a market value of two times the exercise
price of the Right.

At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Stock of the Company, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock or
one-tenth of a share of Preferred Stock (or of a share of a class or series of
the Company's Preferred Stock having equivalent rights, preferences and
privileges), per Right (subjectRight.

The Company is not obligated to adjustment).

With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.

Noissue fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-tenth of a
sharePreferred Share). If the Company issues fractional shares of Preferred Stock, whichit
may at the election of theissue depositary receipts to represent such fractional shares. The Company
be evidenced by depository receipts) andmay also provide in lieu thereof,of fractional shares an adjustment inamount of cash will be made based on the
market price of the Preferred Stock on the last trading day prior to the date of
exercise.

At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Stock, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001part. The "Redemption Price," after adjustment for the
Company's stock splits, is approximately $.00033 per Right, (the "Redemption
Price").subject to further
adjustment for future stock splits, stock dividends and similar transactions.
The redemption of the Rights may be made effective at such time, on such basis,
and with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights, with
respect to the Rights, will be to receive the Redemption Price.

The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain beneficial ownership thresholds described above to not less
than the sum of .001% and the largest percentage of the outstanding Common
Shares then known to the Company to be beneficially owned by any person or group
of affiliated or associated persons, except that from and after such time as any
person or group of affiliated or associated persons becomes an Acquiring Person
no such amendment may adversely affect the interests of the holders of the
Rights. Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

The description of the Rights contained herein is qualified in its entirety
by reference to the Rights Agreement, which is incorporated by reference into
the registration statement of which this Prospectus forms a part.

5224

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company. It is located at 40 Wall Street, 46th Floor, New York,
NY 10005, and its telephone number is (718) 921-8200.

SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------

Upon the completion of this Offering, the Company will have 12,021,791 shares
of Common Stock outstanding. Substantially all of these shares will be
transferable without restriction or registration under the Securities Act or
pursuant to the volumeWHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy and information
statements and other limitations of Rule 144 promulgated under the
Securities Act as described below.

SALE OF RESTRICTED SHARES

Holders of approximately shares 1,785,125 ("Restricted Shares") are entitled to
sell their shares in the public securities markets without registration under
the Securities Act to the extent permitted by Rule 144 as promulgated
thereunder. In general, under Rule 144, a person (together with persons whose
shares are aggregated with that person pursuant to Rule 144) who has held
Restricted Shares for at least one year, but less than two years, or who may be
deemed an affiliate may sell within any three-month period a number of shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume during the
four calendar weeks preceding the date on which notice of the sale is filedinformation with the Securities and Exchange Commission. The one-year holding period with
respect to 83,700 of the currently outstanding shares of Common Stock will
expire within 180 days of the date of this Prospectus. Rule 144 also permits
the sale of Restricted Shares, without the quantity limitation or other
restrictions, by a person who (i) is not an affiliate of the Company, (ii) has
not been an affiliate for at least three months and (iii) has satisfied a two-
year holding period. Pursuant to these provisions, approximately 187,123 of the
Restricted Shares may be sold immediately.

Approximately 1,962,000 shares are subject to lock-up agreements between the
holders thereof and the Representatives of the Underwriters, pursuant to which
the holders of these shares (the "Lock-up Shares")We
have agreed not to offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
Common Stock until 90 days after the date of this Prospectus (the "Lock-up
Period") without the prior written consent of SBC Warburg Dillon Read Inc.,
subject to limited exceptions. See "Underwriting." Following the expiration of
the Lock-up Period, substantially all of the Lock-up Shares will become
available for immediate resale in the public market subject to the volume and
other limitations of Rule 144.

OPTIONS

At February 1, 1998, options to purchase a total of 747,000 shares of Common
Stock pursuant to the Company's stock option plans were outstanding, of which
301,000 were exercisable. Of the shares subject to options, 616,000 are subject
to lock-up agreements. The Company has filed registration statements with the
Commission with respect to substantially all of these shares.

STOCK PURCHASE PLAN

In July 1996, the Company adopted the Stock Purchase Plan. The aggregate number
of shares of Common Stock that may be purchased by all participants under the
Stock Purchase Plan may not exceed 600,000, subject to certain adjustments. The
Company has filed a registration statement on Form S-3 with the Commission with respectSEC to the shares subject to the Stock Purchase Plan. Under the terms of the Stock
Purchase Plan, participants may sell shares of Common Stock without
restriction.

REGISTRATION RIGHTS

The Massey Burch Investment Group, Inc. and certain other investors
(collectively, the "Massey Burch Investors") and the Company are parties to a
securities purchase agreement dated December 17, 1985, pursuant to which the
Company is required to give the Massey Burch Investors notice of any proposed
registration by the Company of shares of its Common Stock pursuant to a
registration statement to be filedregister under
the Securities Act and to permit the Massey Burch Investors, subject to certain restrictions, to sell sharescommon stock offered hereby. This prospectus constitutes
a part of Common Stock pursuant to any suchthat registration statement. The Massey Burch
Investors hold approximately 118,000 shares of Common Stock. All of the
expenses of such registration under the securities purchase agreement, other
than the fees and expenses of counsel for the Massey Burch Investors,
underwriting discounts and selling commissions, will be paidAs allowed by the Company.

In connection with the acquisition of IFM, the Company issued a subordinated
convertible debenture convertible into 413,907 shares of the Company's Common
Stock to Dr. Pruitt. Dr. Pruitt has registration rights with respect to the
Conversion Shares. Dr. Pruitt is selling 50,000 of the Conversion Shares inSEC's rules, this
Offering. See "Principal and Selling Shareholders." The Company is
required upon request by the holder of the Debenture to use its best efforts to
file a registration statement to register up to one-third of the Conversion
Shares. The holder of the Conversion Shares may request up to three such
registrations. Generally, the Company is required to bear the expenses of all
such registrations, except that the holder will be required to bear his pro
rata share of the underwriters' discounts and filing fees related to the
inclusion of such Registrable Securities in such registration statement. See
"Description of Capital Stock--Convertible Debentures."

In connection with the retirement of Robert McNally, former Senior Vice
President Clinical Research, the Company entered into a Consulting Agreement
dated January 1, 1998 with Dr. McNally. The Consulting Agreement provides that
the Company will use its best efforts to enable Dr. McNally to sell up to
24,000 shares of Common Stock through May 15, 1998 either on the open market or
through participation in an underwritten public offering. Dr. McNally is
selling 74,000 shares in this Offering. Assuming at least 24,000 of these
shares are sold, the Company will have fullfilled these obligations under the
Consulting Agreement. See "Principal and Selling Shareholders."

UNDERWRITING
- --------------------------------------------------------------------------------

The names of the Underwriters of the shares of Common Stock offered hereby and
the aggregate number of shares of Common Stock which each has severally agreed
to purchase from the Company, subject to the terms and conditions specified in
the Underwriting Agreement, are as follows:

UNDERWRITERS NUMBER OF SHARES
------------ ----------------

SBC Warburg Dillon Read Inc...............................
Piper Jaffray Inc.........................................
---------
Total................................................... 2,500,000
=========

The Managing Underwriters are SBC Warburg Dillon Read Inc. and Piper Jaffray
Inc.

If any shares of Common Stock offered hereby are purchased by the Underwriters,
all such shares will be so purchased. The Underwriting Agreement contains
certain provisions whereby if any Underwriter defaults in its obligation to
purchase such shares and if the aggregate obligations of the Underwriters so
defaulting do not exceed ten percent of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.

The Underwriters propose to offer the shares of Common Stock to the public
initially at the offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not to exceed $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not to exceed $ per share on sales to certain other dealers. The offering of
the shares of Common Stock is made for delivery when, as and if accepted by the
Underwriters and subject to prior sale and withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right to
reject any order for the purchase of the shares. After the shares are released
for sale to the public, the public offering price, the concession and the
reallowance may be changed by the Managing Underwriters.

The Company has granted to the Underwriters an option to purchase up to an
additional 375,000 shares of Common Stock at the offering price less the
underwriting discount set forth on the cover page of this Prospectus. Such
option is exercisable during the 30 days beginning on the date of the
Underwriting Agreement. The Underwriters may exercise such option only to cover
over-allotments made of the shares in connection with the Offering. To the
extent the Underwriters exercise this option, each of the Underwriters will be
obligated, subject to certain conditions, to purchase the number of additional
shares proportionate to such Underwriter's initial commitment.

The Company, each of its Directors and officers and certain of its shareholders
have agreed that they will not sell, contract to sell, grant any option to sell
or otherwise dispose of, directly or indirectly, any shares of the Common Stock
or any securities convertible into or exchangeable for Common Stock or warrants
or other rights to purchase Common Stock, for a period of at least 90 days
after the date of this Prospectus, without the prior written consent of SBC
Warburg Dillon Read Inc., except for (i) the issuance of shares of Common Stock
by the Company upon the purchase of outstanding warrants or the exercise of
outstanding options, provided that the Company shall have obtained an agreement
substantially to the effect set forth in this paragraph from each such person
to whom such shares of Common Stock are issued and (ii) the grant of options
and other rights by the Company to purchase up to an aggregate of 161,900
shares of Common Stock to the Company's employees, officers and Directors
pursuant to the Stock Plans.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including any liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.

In connection with this Offering, the Managing Underwriters, on behalf of the
Underwriters, may engage in transactions that stabilize, maintain or otherwise
affect the price of the Common Stock. Specifically, the Managing Underwriters
may over-allot this Offering, creating a syndicate short position. In addition,
the Managing Underwriters may bid for and purchase shares of Common Stock in
the open market to cover syndicate short positions or to stabilize the price of
the Common Stock. Finally, the Managing Underwriters may reclaim selling
concessions from syndicate members in this Offering if the syndicate
repurchases previously distributed Common Stock in syndicate covering
transactions, in stabilizing transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Managing Underwriters are not required to engage
in these activities, and may end any of these activities at any time.

LEGAL MATTERS
- --------------------------------------------------------------------------------

The validity of the Common Stock offered hereby is being passed upon for the
Company by Arnall Golden & Gregory, LLP, Atlanta, Georgia. Certain legal
matters in connection with this Offering are being passed upon for the
Underwriters by Palmer & Dodge LLP, Boston, Massachusetts.

EXPERTS
- --------------------------------------------------------------------------------

The consolidated financial statements of CryoLife, Inc. as of December 31, 1997
and 1996, and for the years then ended, and the financial statements of IFM as
of and for the year ended December 31, 1996, have been included herein and in
the Registration Statement in reliance upon the reports of Ernst & Young LLP,
independent auditors, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.

The consolidated financial statements of CryoLife, Inc. for the year ended
December 31, 1995 have been included herein and in the Registration Statement
in reliance upon the report of KPMG Peat Marwick LLP, independent auditors,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

The Company has filed with the Commission, through the Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"), a Registration Statement on
Form S-3 under the Securities Act with respect to the Common Stock offered
hereby (the "Registration Statement"). This Prospectus, filed as part of the
Registration Statement,prospectus does not contain all of the information includedset forth in the Registration Statement and the exhibits and schedules thereto,registration
statement, certain portionsparts of which have been omitted in accordance with the rules
and regulations of the Commission. ForSEC. Please refer to the registration statement and
related exhibits and schedules filed therewith for further information with
respect to the Companyus and the Common
Stockcommon stock offered hereby, reference is hereby made tohereby. Although the Registration Statementprospectus
describes the material provisions of documents referenced herein and filed as
exhibits, statements contained herein concerning the exhibits and schedules filed therewith or incorporated by reference
thereto. Statements contained in this Prospectus as to the contentsprovisions of any contract, agreement, or othersuch
document are not necessarily complete and incomplete. In each
such instance, reference is made to
the copy of such contract, agreement or
other document filed as an exhibit to the Registration Statement, including
documents incorporatedregistration statement or
otherwise filed by reference, for a more complete description ofus with the matters involvedSEC and each such statement shall be deemedis qualified in its
entirety by such reference.

The Registration Statement, includingfollowing documents, which we have filed with the exhibitsSEC (file number
001-13165), are incorporated by reference in and schedules thereto, may be inspected without charge and copied at the
officesmade a part of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional

offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may be obtained at the prescribed rates from
the Commission's Public Reference Section at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. Electronic registration statements
filed through EDGAR may also be accessed electronically through the
Commission's home page on the World Wide Web at http://www.sec.gov.this prospectus:

o The Company is subject to the periodic reporting requirements of the Exchange
Act, and in accordance therewith, it files reports, proxy statements, and
other information required thereby to the Commission via EDGAR. Copies of such
material may be inspected and copied at the offices of the Commission and
accessed electronically through the Commission's home page on the World Wide
Web. Reports, proxy statements, other required information statements, and
other information concerning the Company may also be inspected at the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- -------------------------------------------------------------------------------

The Company'sRegistrant's Annual Report on Form 10-K forfiled with respect to the
Registrant's fiscal year ended December 31, 1997,
and the description of the Company's Common Stock contained in its
registration statement2002.

o The Registrant's Quarterly Report on Form 8-A, File No. 001-13165, including any
amendment or report filed10-Q for the purpose of updating such description,quarter ended
March 31, 2003.

o The Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003, as amended.

o The Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2003.

o The Registrant's Current Reports on Forms 8-K filed on April 3, May 1,
July 15, August 5, August 11, August 21 and November 4, 2003, as well
as January 7, January 26 and February 9, 2004.

We are hereby incorporatedalso incorporating by reference in this Prospectus.

All documents filed byany future filings we make with the
Company pursuant to SectionsSEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequentprior to the
termination of the offering. We also are incorporating any filings under these
sections filed after the date of the initial filing of this Prospectusregistration
statement and prior to termination of this Offering shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the respective dateseffectiveness of the filing of such documents. Any statement contained herein or in a document
incorporated orregistration statement. These
documents will be deemed to be incorporated by reference herein shall be deemedin this prospectus and
to be modified or supersededa part of it from the date they are filed with the SEC. You may read and
copy any document we file at the SEC's public reference room located at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for purposes of this Prospectusfurther information on the public reference room. Our SEC
filings are also available to the extent
that a statement contained herein or in any subsequently filedpublic from commercial document whichretrieval
services and at the Web site maintained by the SEC at http://www.sec.gov. This
information is also is, or is deemed to be, incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute part of this
Prospectus.

The Company will provide,available without charge upon written or oral request without charge to each
person to whom a copy of this Prospectus has been delivered, including any
beneficial owner, a copy of any or all of the documents which have been or may
be incorporated in this Prospectus by reference other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests for such copies should be directed to:
Assistant Secretary,

CryoLife, Inc.,
Attn: Chief Financial Officer
1655 Roberts Boulevard, N.W.,NW
Kennesaw, Georgia 30144
(770) 419-3355.

GLOSSARY
- -------------------------------------------------------------------------------

Allograft--A graft of tissue taken from a donor419-3355

You should rely only on the information provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We may not
make an offer of the same species ascommon stock in any state where the recipient.

Albumin--Protein existingoffer is not permitted.
The delivery of this prospectus does not, under any circumstances, mean that
there has not been a change in blood plasma involvedour affairs since the date of this prospectus. It
also does not mean that the information in this prospectus is correct after this
date.

LEGAL MATTERS

The validity of the coagulation process.

Anastomosis--Surgical formationshares of a passage between two normally unconnected
vessels.

Anti-Coagulant--Drug treatment to prevent blood from clotting.

Antigen Reduction--Reduction of protein or carbohydrate substances capable of
stimulating an immune response.

Aortic Valve--The heart valve between the left ventriclecommon stock offered by this prospectus has
been passed upon for CryoLife by Arnall Golden Gregory LLP, Atlanta, Georgia.

EXPERTS

The consolidated financial statements and the ascending
aorta.

Arteriosclerosis--A chronic disease characterized by abnormal thickening and
hardening of the arterial walls with resulting loss of elasticity.

Bioadhesives--Glue or sealant composed of human or animal blood factors.

Bioprosthesis--A replacement, made of biological materials, for a limb, organ
or other part of the body.

Calcification--Deposits of calcium which attach to body tissues and degenerate
such tissues.

Catheter--A tubular surgical instrument for withdrawing from or introducing
fluid to vessels.

Coronary Artery--A vessel which delivers oxygenated blood to the heart muscle.

Cruciate Ligament--A ligament that helps to stabilize the knee.

Cryopreservation--Preservation of tissue by use of special freezing
techniques.

Embolectomy--Surgical removal of a clot which impedes blood flow.

Endarterectomy--Surgical removal of the inner layer of an artery.

Endocarditis--Inflammation, caused by bacteria, of the lining of heart valve
and surrounding tissue.

Endothelial Cells--A single layer of thin flattened cells that line the
internal walls of veins, arteries and other internal body cavities.

Femoral Vein--The vein which accompanies the main artery in the thigh.

Fibrinogen--A component of plasma which is essential to the clotting process.

Fixed Porcine Valve--A porcine valve treated with glutaraldehyde in order to
eliminate viable cells capable of producing an auto-immune response.

Glutaraldehyde--Chemical agent of the aldehyde group used in cross-linking
proteins and fixing porcine valve tissues.

Heart Conduit--Portions of the aorta or other vessels which includes a heart
valve within its walls.

Hemostasis--The stoppage of blood flow.

Infusion Port--A device with a catheter implanted under the skin through which
therapeutic doses of medicine are administered and delivered to a diseased
area.

Laparoscopy--Minimally invasive surgical technique designed to minimize the
trauma of the operative site.

Lumen--The inner open space of a tubular organ.

Meniscus--A crescent-shaped, fibrous cartilage pad positioned within the knee
between the surface of the femur and tibia.

Mitral Valve--The heart valve positioned between the left atrium and left
ventricle.

Osteochondral Graft--Surgical implant relating to or composed of bone and
cartilage.

Patellar Tendon--A tendon extending from the patella (kneecap) to the tibia
(shin bone).

Peripheral Vascular--Refers to the blood vessels, or circulatory system, of
the limbs.

Porcine--Of or related to pigs.

Pulmonary Valve--The heart valve separating the non-oxygenated, or pulmonary,
trunk from the right ventricle.

Saphenous Vein--A vein that runs the full length of the leg.

Shunt--Surgical device to facilitate an anastomosis.

Stentless Heart Valve--Heart valve that does not contain a sewing ring to
support the valve opening.

SynerGraft--Proprietary technology for depopulating animal tissue of its
viable cells and repopulating it with viable human cells resulting in a
reduced auto-immune response.

Thrombin--An enzyme that facilitates the clotting of blood.

Thrombin Inhibitor--An agent that slows or interferes with a chemical reaction
associated with the clotting of blood.

Thromboembolism--Catastrophic blockage of blood flow caused when a particle is
trapped in a vein or artery.

Tibialis Tendon--Tendon connecting the bones and muscles of the lower leg and
foot.

Viable Tissue--Cells capable of living, growing or developing.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

PAGE
NUMBER
------

CryoLife, Inc.
Report of Independent Auditors........................................ F-2
Independent Auditors' Report.......................................... F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996.......... F-4
Consolidated Income Statements for the Years Ended December 31, 1997,
1996 and 1995........................................................ F-6
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1996
and 1995............................................................. F-7
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1997, 1996 and 1995..................................... F-8
Notes to Consolidated Financial Statements............................ F-9
Ideas for Medicine, Inc.
Report of Independent Auditors........................................ F-18
Balance Sheet as of December 31, 1996................................. F-19
Statement of Income and Retained Earnings for the Year Ended December
31, 1996............................................................. F-20
Statement of Cash Flows for the Year Ended December 31, 1996.......... F-21
Notes to the Financial Statements..................................... F-22
Pro Forma Condensed Consolidated Income Statement for the Year Ended
December 31, 1997 (Unaudited).......................................... F-25

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
CryoLife, Inc.

We have audited the accompanying consolidated balance sheets of CryoLife, Inc.financial statement
schedules as of December 31, 19972002 and 1996, and the related consolidated statements of
income, shareholders' equity and cash flows for the yearsyear then ended. These
financial statements areended incorporated in
this prospectus by reference from the responsibility of the Company's management. Our
responsibility is to express an opinionAnnual Report on these consolidated financial
statements based on our audits. The consolidated financial statementsForm 10-K of CryoLife,
Inc. for the year ended December 31, 1995 were2002 have been audited by otherDeloitte & Touche
LLP, independent auditors, whose report dated February 14, 1996 expressedas stated in their reports (which reports express an
unqualified opinion and with respect to the report on those statements.

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 1997 and 1996 consolidated financial
statements referred
to above present fairly, in all material respects,for the consolidated financial
position of CryoLife, Inc. atyear ended December 31, 19972002 includes an explanatory
paragraph relating to the Company's change in its method of accounting for
goodwill and 1996,other intangible assets to conform with Statement of Financial
Accounting Standards No. 142), which are incorporated herein by reference and
have been so incorporated in reliance upon the consolidated
resultsreports of its operationssuch firm given upon
their authority as experts in accounting and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.

Ernst & Young LLP

Atlanta, Georgia
February 9, 1998

F-2

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
CryoLife, Inc.

We have audited the accompanyingauditing.

The consolidated statements of income, changes in shareholders' equity, and
cash flows of CryoLife, Inc. and subsidiaries for the year ended December 31, 1995. These consolidated2001 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report dated March 27, 2002.

We could not obtain, after reasonable efforts, the written consent of
Arthur Andersen LLP to its being named in this Form S-3 as having audited our
financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of CryoLife, Inc. and subsidiaries for the year ended December 31, 1995,
in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Atlanta, Georgia
February 14, 1996

F-3

CRYOLIFE, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
-----------------------
1997 1996
----------- -----------

ASSETS
Current assets:
Cash and cash equivalents............................ $ 111,000 $ 1,370,000
Receivables:
Trade accounts, less allowance for doubtful accounts
of $103,000 in 1997 and $94,000 in 1996............ 9,224,000 6,572,000
Income taxes........................................ 230,000 404,000
Other............................................... 311,000 1,518,000
----------- -----------
Total receivables.................................. 9,765,000 8,494,000
----------- -----------
Deferred preservation costs, less allowances of
$152,000 in 1997 and $278,000 in 1996............... 12,257,000 7,178,000
Inventories.......................................... 1,761,000 260,000
Prepaid expenses..................................... 1,260,000 697,000
Deferred income taxes................................ -- 33,000
----------- -----------
Total current assets............................... 25,154,000 18,032,000
----------- -----------
Property and equipment:
Equipment............................................ 10,533,000 8,515,000
Furniture and fixtures............................... 1,828,000 1,493,000
Leasehold improvements............................... 8,247,000 7,495,000
Construction in progress............................. 2,509,000 --
----------- -----------
23,117,000 17,503,000
Less accumulated depreciation and amortization....... 7,630,000 5,788,000
----------- -----------
Net property and equipment......................... 15,487,000 11,715,000
----------- -----------
Other assets:
Goodwill, less accumulated amortization of $468,000
in 1997 and $27,000 in 1996......................... 9,809,000 1,846,000
Patents, less accumulated amortization of $531,000 in
1997 and $352,000 in 1996........................... 2,196,000 2,081,000
Other, less accumulated amortization of $483,000 in
1997 and
$289,000 in 1996.................................... 1,103,000 1,299,000
----------- -----------
Total assets....................................... $53,749,000 $34,973,000
=========== ===========

See accompanying notes to consolidated financial statements.

F-4

CRYOLIFE, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
------------------------
1997 1996
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 1,612,000 $ 3,696,000
Accrued expenses................................... 222,000 720,000
Accrued compensation............................... 1,122,000 878,000
Accrued fees to technical service representatives.. 312,000 214,000
Accrued procurement fees........................... 1,565,000 1,210,000
Current maturities of long-term debt............... 1,496,000 527,000
----------- -----------
Total current liabilities........................ 6,329,000 7,245,000
----------- -----------
Deferred income taxes................................ 327,000 --
Bank loans........................................... 10,777,000 1,250,000
Convertible debenture................................ 5,000,000 --
Other long-term debt................................. 1,089,000 1,549,000
----------- -----------
Total liabilities................................ 23,522,000 10,044,000
----------- -----------
Commitments and Contingencies
Shareholders' equity:
Preferred stock, $.01 par value per share;
authorized 5,000,000 shares including 2,000,000
shares of series A junior participating preferred
stock; no shares issued........................... -- --
Common stock, $.01 par value per share; authorized
50,000,000 shares; issued 10,242,961 shares in
1997 and 10,110,326 shares in 1996................ 102,000 101,000
Additional paid-in capital......................... 17,694,000 17,128,000
Retained earnings.................................. 12,627,000 7,902,000
Unrealized gain (loss) on marketable securities.... -- (1,000)
Treasury stock, 543,000 shares, at cost............ (180,000) (180,000)
Notes receivable from shareholders................. (16,000) (21,000)
----------- -----------
Total shareholders' equity....................... 30,227,000 24,929,000
----------- -----------
Total liabilities and shareholders' equity..... $53,749,000 $34,973,000
=========== ===========

See accompanying notes to consolidated financial statements.

F-5

CRYOLIFE, INC.

CONSOLIDATED INCOME STATEMENTS

DECEMBER 31,
-----------------------------------
1997 1996 1995
----------- ----------- -----------

Revenues:
Cryopreservation and products............ $50,409,000 $36,678,000 $28,257,000
Research grants, licenses and other
revenues................................ 460,000 361,000 713,000
Interest income.......................... -- 189,000 256,000
----------- ----------- -----------
50,869,000 37,228,000 29,226,000
----------- ----------- -----------
Costs and Expenses:
Cryopreservation and products............ 17,764,000 12,593,000 10,485,000
General, administrative and marketing.... 20,548,000 15,673,000 12,807,000
Research and development................. 3,946,000 2,807,000 2,634,000
Interest expense......................... 978,000 72,000 4,000
----------- ----------- -----------
43,236,000 31,145,000 25,930,000
----------- ----------- -----------
Income before income taxes................. 7,633,000 6,083,000 3,296,000
Income tax expense......................... 2,908,000 2,156,000 1,094,000
----------- ----------- -----------
Net income................................. $ 4,725,000 $ 3,927,000 $ 2,202,000
=========== =========== ===========
Earnings per share:
Basic.................................... $ 0.49 $ 0.41 $ 0.23
=========== =========== ===========
Diluted.................................. $ 0.48 $ 0.40 $ 0.23
=========== =========== ===========
Weighted average shares outstanding:
Basic.................................... 9,642,000 9,505,000 9,379,000
Diluted.................................. 9,942,000 9,906,000 9,568,000

See accompanying notes to consolidated financial statements.

F-6

CRYOLIFE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

DECEMBER 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------

Net cash flows from operating activities:
Net income................................ $4,725,000 $3,927,000 $2,202,000
Adjustments to reconcile net income to net
cash flows (used in) provided by
operating activities:
Depreciation and amortization of property
and equipment........................... 1,842,000 973,000 769,000
Amortization............................. 814,000 383,000 211,000
Provision for doubtful accounts.......... 46,000 167,000 266,000
Deferred income taxes.................... 360,000 242,000 (107,000)
Changes in operating assets and
liabilities:
Trade and other receivables............. (530,000) (2,561,000) (1,780,000)
Income taxes............................ 174,000 (614,000) 106,000
Deferred preservation costs............. (5,079,000) (1,053,000) 379,000
Inventories............................. (864,000) 163,000 432,000
Prepaid expenses........................ (506,000) (326,000) (146,000)
Accounts payable........................ (2,756,000) 1,197,000 38,000
Accrued expenses........................ (468,000) 740,000 39,000
---------- ---------- ----------
Net cash flows (used in) provided by
operating activities..................... (2,242,000) 3,238,000 2,409,000
---------- ---------- ----------
Net cash flows from investing activities:
Capital expenditures...................... (5,059,000) (8,481,000) (1,573,000)
Cash paid for acquisitions, net of cash
acquired................................. (4,418,000) (722,000) --
Other assets.............................. (148,000) (939,000) (1,002,000)
Net sales (purchases) of marketable
securities............................... -- 5,942,000 (2,175,000)
---------- ---------- ----------
Net cash flows used in investing
activities............................... (9,625,000) (4,200,000) (4,750,000)
---------- ---------- ----------
Net cash flows from financing activities:
Principal payments of debt................ (6,607,000) (750,000) --
Proceeds from debt issuance............... 16,643,000 2,000,000 --
Proceeds from exercise of options and
issuance of stock........................ 567,000 561,000 265,000
Net payments on notes receivable from
shareholders............................. 5,000 5,000 --
---------- ---------- ----------
Net cash flows provided by financing
activities............................... 10,608,000 1,816,000 265,000
---------- ---------- ----------
(Decrease) increase in cash................ (1,259,000) 854,000 (2,076,000)
Cash and cash equivalents, beginning of
year...................................... 1,370,000 516,000 2,592,000
---------- ---------- ----------
Cash and cash equivalents, end of year..... $ 111,000 $1,370,000 $ 516,000
========== ========== ==========
Supplemental disclosures of cash flow
information--cash paid during the year
for:
Interest................................. $ 920,000 $ 34,000 $ 4,000
========== ========== ==========
Income taxes............................. $2,380,000 $2,529,000 $1,089,000
========== ========== ==========
Noncash investing and financing activities:
Purchases of property and equipment in
accounts payable......................... $ 440,000 $ 888,000
========== ==========
Note issued for patent.................... $ 826,000
==========
Fair value of assets acquired............. $1,768,000 $ 534,000
Cost in excess of assets acquired......... 8,541,000 1,873,000
Liabilities assumed....................... (891,000) (435,000)
Notes issued for assets acquired.......... (5,000,000) (1,250,000)
---------- ----------
Net cash paid for acquisition............. $4,418,000 $ 722,000
========== ==========

F-7

CRYOLIFE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------

Common Stock:
Balance, beginning of year, (9,567,000,
9,431,000 and 9,326,000 shares
outstanding, at January 1, 1997, 1996
and 1995, respectively)............... $ 101,000 $ 100,000 $ 99,000
Issuances of common stock:
Employee stock purchase plan (30,000
and 2,000 shares in 1997 and 1996,
respectively)........................ -- -- --
Purchase of other assets (10,000
shares in 1996)...................... -- -- --
Exercise of options (105,000, 124,000,
and 105,000 shares in 1997, 1996 and
1995, respectively).................. 1,000 1,000 1,000
----------- ----------- -----------
Balance, end of year................... 102,000 101,000 100,000
----------- ----------- -----------
Additional Paid-in Capital:
Balance, beginning of year............. 17,128,000 16,568,000 16,304,000
Issuances of common stock:
Employee stock purchase plan.......... 268,000 21,000 --
Purchase of other assets.............. -- 130,000 --
Exercise of options................... 298,000 409,000 264,000
----------- ----------- -----------
Balance, end of year................... 17,694,000 17,128,000 16,568,000
----------- ----------- -----------
Retained Earnings:
Balance, beginning of year............. 7,902,000 3,975,000 1,773,000
Net income............................. 4,725,000 3,927,000 2,202,000
----------- ----------- -----------
Balance, end of year................... 12,627,000 7,902,000 3,975,000
----------- ----------- -----------
Unrealized Gain (Loss) on Marketable Se-
curities:
Balance, beginning of year............. (1,000) 28,000 (38,000)
Unrealized gain (loss)................. 1,000 (29,000) 66,000
----------- ----------- -----------
Balance, end of year................... -- (1,000) 28,000
----------- ----------- -----------
Treasury Stock:
----------- ----------- -----------
Balance, beginning and end of year..... (180,000) (180,000) (180,000)
----------- ----------- -----------
Notes Receivable From Shareholders:
Balance, beginning of year............. (21,000) (26,000) (26,000)
Additions to shareholder notes......... (21,000) -- --
Payments on shareholder notes.......... 26,000 5,000 --
----------- ----------- -----------
Balance, end of year................... (16,000) (21,000) (26,000)
----------- ----------- -----------
Total shareholders' equity, end of
year................................... $30,227,000 $24,929,000 $20,465,000
=========== =========== ===========

See accompanying notes to consolidated financial statements.

F-8

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Founded in 1984, CryoLife, Inc. (the "Company") is the leader in the
cryopreservation of viable human tissues for transplant, and is developing and
commercializing additional implantable and single-use non-implantable devices
for use in vascular, cardiovascular and orthopaedic applications. The Company
markets its viable human tissues in North and South America, Europe and Asia.
The Company's bioprosthetic cardiovascular devices include fixed stentless
porcine heart valves recently introduced into the European Community2001, as well
as a proprietary project to transplant human cells onto the structure of
animal tissue. The Company also manufactures and distributes, principally
through its recently acquired Ideas for Medicine, Inc. ("IFM") of Clearwater,
Florida subsidiary, single-use medical devices for use in vascular surgical
procedures. In addition, the Company is developing and commercializing within
the European Community a proprietary surgical adhesive designed for vascular
sealing.

Principles of Consolidation

The consolidated financial statements include the accountsrequired by
Section 7 of the Company and
its subsidiaries. All significant intercompany balances are eliminated.

Reclassifications

Certain prior year balancesSecurities Act. Accordingly, Arthur Andersen LLP may not have
been reclassified to conform to the 1997
presentation.

Use of Estimates

The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts based
on informed estimates and judgments of management with consideration given to
materiality. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents consist primarily of highly liquid investments with
insignificant interest rate risk and maturity dates of 90 days or less at the
time of acquisition.

Deferred Preservation Costs and Revenue Recognition

Tissue is procured from deceased human donors by organ procurement
organizations and tissue banks which consign the tissue to the Company for
processing and preservation. Preservation costs related to tissue held by the
Company are deferred until shipment to the implanting hospital. Deferred
preservation costs consist primarily of laboratory expenses, tissue
procurement fees, and freight-in charges and are stated at average cost,
determined annually, on a first-in, first-out basis. When the tissue is
shipped to the implanting hospital, revenue is recognized and the related
deferred preservation costs are charged to operations. The Company does not
require collateral or other security for its receivables.

Inventories

Inventories are comprised of single-use medical devices and bioprosthetic
cardiovascular devices and are valued at the lower of cost (first-in, first-
out) or market.

F-9

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided over the
estimated useful livesany liability under Section 11 of the assets, generally 5 to 10 years, on a straight-
line basis. Leasehold improvements are amortized on a straight-line basis over
the lease termSecurities Act for false or the estimated useful lives of the assets, whichever is
shorter.

Intangible Assets

Goodwill resulting from business acquisitions is amortized on a straight-line
basis over 20 years. Patent costs are amortized over the expected useful lives
of the patents (primarily 17 years) using the straight-line method. Other
intangibles, which consist primarily of manufacturing rights and agreements,
are being amortized over the expected useful lives of the related assets
(primarily five years).

The Company periodically evaluates the recoverability of intangible assets and
measures the amount of impairment, if any, by assessing current and future
levels of income and cash flows as well as other factors, such as business
trends and prospects and market and economic conditions.

Income Taxes

Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted income tax rates expected to apply to taxable incomemisleading
statements or omissions contained in the years in
which those temporary differences are expected to be recovered or settled.

Research Grant and License Revenues

Revenues from research grants are recognized in the period the associated
costs are incurred. License revenues are recognized in the period the cash is
received and all licenser obligations have been fulfilled.

Earnings Per Share and Stock Split

In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("Statement 128").
Statement 128 replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary earnings
per share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirements.

On May 16, 1996, the Board of Directors declared a two-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 consolidated financial statements have been adjusted to
reflect such split.

2. ACQUISITION OF IDEAS FOR MEDICINE

On March 5, 1997, the Company acquired the stock of IFM, a medical device
company specializing in the manufacture and distribution of single-use medical
devices, for approximately $9.5 million in cash ($4.5 million) and convertible
debentures ($5.0 million) plus related expenses. The cash portion of the
purchase price was financed by borrowings under the Company's loan agreement
described in Note 4. Additional consideration equal to 10 percent of IFM's net
revenues in excess of $7.5 million shall be payable each year for a 10 year
period,

F-10

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

limited to $1.75 million in the aggregate. The acquisition has been accounted
for as a purchase; accordingly, the results of operations are included in the
accompanying 1997 consolidated income statement from the date of acquisition.
Based on the allocation of the purchase price, the Company's unaudited
condensed pro forma results of operations for the years ended December 31,
1997 and 1996, assuming consummation of the purchase as of January 1, 1997 and
1996, respectively, are as follows:

1997 1996
----------- -----------

Revenues............................................. $52,082,000 $43,574,000
Net income........................................... 4,756,000 3,511,000
Earnings per share:
Basic.............................................. $ 0.49 $ 0.37
Diluted............................................ 0.48 0.35

In connection with this acquisition, the Company also entered into a
consulting agreement with the former majority shareholder requiring monthly
payments of approximately $17,000 until March 2002.

3. INVENTORIES

Inventories at December 31 are comprised of the following:

1997 1996
---------- --------

Raw material............................................. $ 262,000 $ --
Work-in-process.......................................... 358,000 --
Finished goods........................................... 1,141,000 260,000
---------- --------
$1,761,000 $260,000
========== ========

4. LONG-TERM DEBT

Long-term debt at December 31 consists of the following:

1997 1996
----------- ----------

Bank loans:
Revolving loan..................................... $ 6,777,000 $1,250,000
Term loan due in equal monthly installments of
$83,000 plus interest at prime through December
31, 2002.......................................... 5,000,000 --
7% convertible debenture, due in March 2002.......... 5,000,000 --
8.25% note payable due in equal annual installments
of $250,000......................................... 1,000,000 1,250,000
Note payable due in 2000 with an effective interest
rate of 8%, net of unamortized discount of $35,000
in 1997 and $84,000 in 1996......................... 585,000 826,000
----------- ----------
18,362,000 3,326,000
Less current maturities.............................. 1,496,000 527,000
----------- ----------
Total long-term debt................................. $16,866,000 $2,799,000
=========== ==========

On August 30, 1996, the Company executed a loan agreement (the "Agreement")
with a bank which, as amended on December 16, 1997, permits the Company to
borrow up to $10,000,000 under a revolving loan and includes $5,000,000 under
a term loan. Borrowings under the Agreement provide for interest at either the
bank's prime rate (8.5% at December 31, 1997) or at Adjusted LIBOR, as
defined, plus an applicable LIBOR margin. The Agreement expires on December
31, 1999; all borrowings outstanding on that date under the revolving loan

F-11

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

convert to a term loan to be paid in 60 equal monthly installments of
principal plus interest computed as described above. The Agreement contains
certain restrictive covenantsprospectus, including but not limited to, maintenance of
certain financial ratios and a minimum tangible net worth requirement. The
Agreement is secured by substantially all of the Company's assets, including
IFM's stock but excluding intellectual property. Commitment fees are paid
based on the unused portion of the revolving loan. At December 31, 1997 an
additional $3,223,000 was available to be borrowed under the revolving loan.

In March 1997, the Company issued a $5,000,000 convertible debenture in
connection with the IFM acquisition. The debenture is convertible into common
stock of the Company at any time prior to the due date at $12.08 per common
share.

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 veins for transplant. The
Company issued a $1,250,000 note in connection with the acquisition. The note
bears interest at prime, as adjusted annually on the anniversary date of the
acquisition.

In April 1996 the Company issued a $910,000 non-interest bearing note in
connection with the technology underlying its BioGlue surgical adhesive. The
note is payable in four annual installments of $290,000, plus a final payment
of $40,000 at maturity.

Scheduled maturities of long-term debt for the next five years and thereafter
are as follows:

1998............................................................. $ 1,496,000
1999............................................................. 1,516,000
2000............................................................. 2,678,000
2001............................................................. 2,605,000
2002............................................................. 7,355,000
Thereafter....................................................... 2,712,000
-----------
$18,362,000
===========

5. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments ("Statement 107"), requires the Company to
disclose estimated fair values for its financial instruments. The carrying
amounts of cash and cash equivalents, receivables and accounts payable
approximate their fair values due to the short term maturity of these
instruments.

The Company enters into short-term interest rate swap agreements with the
lender under the Agreement which effectively fix the interest rate on
$5,000,000 of borrowings. The estimated fair values of the Company's interest
rate swap agreements (which expired in January 1998) and outstanding debt
approximate their carrying amounts at December 31, 1997.

F-12

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. LEASES

The Company leases equipment and office space under various operating leases
with terms of up to 15 years. Certain leases contain escalation clauses and
renewal options for additional periods. Future minimum lease payments under
noncancelable operating leases as of December 31, 1997 are as follows:

1998............................................................. $ 1,443,000
1999............................................................. 1,361,000
2000............................................................. 1,220,000
2001............................................................. 1,237,000
2002............................................................. 1,205,000
Thereafter....................................................... 10,390,000
-----------
$16,856,000
===========

Total rental expense for operating leases amounted to $1,282,000, $714,000 and
$740,000 for 1997, 1996 and 1995, respectively.

Commencing January 5, 1998, IFM leases office and manufacturing facilities
under a capital lease for $28,500 per month through January 2008 from the
former majority shareholder of IFM.

7. STOCK OPTION PLANS

The Company has stock option plans which provide for grants of options to
employees and directors to purchase shares of the Company's Common Stock at
exercise prices generally equal to the fair values of such stock at the dates
of grant, which generally become exercisable over a five-year vesting period
and expire within ten years of the grant dates. Under the 1993 Employee
Incentive Stock Option Plan and the Non-employee Director's Plan, the Company
has authorized the grant of options of up to 700,000 and 360,000 shares of
Common Stock, respectively. A summary of stock option transactions under the
plans follows:

WEIGHTED
EXERCISE AVERAGE
SHARES PRICE EXERCISE PRICE
-------- ----------- --------------

Outstanding at December 31, 1994....... 414,000 $ 2.25-4.13
Granted................................ 321,000 3.63-7.74 $ 4.90
Exercised.............................. (105,000) 2.25-4.13 2.53
Canceled............................... (40,000) 2.25-4.13 3.10
--------
Outstanding at December 31, 1995....... 590,000 2.25-7.74 4.21
Granted................................ 247,000 8.5-18.43 15.70
Exercised.............................. (124,000) 2.26-7.26 3.31
Canceled............................... (5,000) 2.25-3.75 3.68
--------
Outstanding at December 31, 1996....... 708,000 2.25-18.43 7.36
Granted................................ 201,000 10.25-15.88 11.97
Exercised.............................. (105,000) 2.25-7.50 2.85
Canceled............................... (50,000) 2.25-16.75 10.06
--------
Outstanding at December 31, 1997....... 754,000 3.00-18.43 8.95
========

F-13

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table summarizes information concerning currently outstanding
and exercisable options:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ------------ -------- ----------- --------

$ 3.00- 8.50......... 429,000 2.5 $ 4.93 248,000 $ 4.35
10.25-13.50......... 181,000 5.0 11.88 23,000 10.75
15.88-18.43......... 144,000 3.3 17.14 37,000 17.21

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and related Interpretations ("APB
25") in accounting for its employee stock options because, as discussed below,
the alternative fair value accounting provided for under Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement 123") requires use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market prices of the underlying stock on the date of the grant, no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required
by Statement 123, which also requires that the information be determined as if
the Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair
values for these options were estimated at the dates of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions:

1997 1996 1995
----- ----- -----

Expected dividend yield.................................... 0% 0% 0%
Expected stock price volatility............................ .591 .552 .515
Risk-free interest rate.................................... 6.13% 6.48% 5.91%
Expected life of options (years)........................... 4.3 4.8 4.0

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.

For purposes of pro forma disclosures, the estimated fair values of the option
are amortized to expense over the options' vesting periods. The Company's pro
forma information follows:

1997 1996 1995
---------- ---------- ----------

Net income--as reported................... $4,725,000 $3,927,000 $2,202,000
Net income--pro forma..................... 4,308,000 3,632,000 2,123,000
Earnings per share--as reported:
Basic................................... $ 0.49 $ 0.41 $ 0.23
Dilutive................................ 0.48 0.40 0.23
Earnings per share--pro forma:
Basic................................... 0.45 0.38 0.23
Dilutive................................ 0.43 0.37 0.22

F-14

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Other information concerning stock options follows:

1997 1996 1995
------- ------- ------

Weighted average fair value of options granted
during the year.................................. $6.34 $7.97 $2.36
Number of shares as to which options are
exercisable at end of year....................... 308,000 157,000 74,000

Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1999.

8. SHAREHOLDER RIGHTS PLAN

On November 27, 1995, the Board of Directors adopted a shareholder rights plan
to protect long-term share value for the Company's shareholders. Under the
plan, the Board declared a distribution of one Right for each outstanding
share of the Company's Common Stock to shareholders of record on December 11,
1995. Each Right entitles the registered holder to purchase from the Company
one-tenth of a share of a newly created Series A Junior Participating
Preferred Stock, at an exercise price of $100. The rights, which expire on
November 27, 2005, may be exercised only if certain conditions are met, such
as the acquisition of 15 percent or more of the Company's Common Stock by a
person or affiliated group ("Acquiring Person").

In the event the Rights become exercisable, each Right will enable the owner,
other than the Acquiring Person, to purchase, at the Right's then current
exercise price, that number of shares of Common Stock with a market value
equal to twice the exercise price. In addition, unless the Acquiring Person
owns more than 50% of the outstanding shares of Common Stock, the Board of
Directors may elect to exchange all outstanding Rights (other than those owned
by such Acquiring Person) at an exchange ratio of one share of Common Stock,
or one-tenth of a Preferred Share per Right.

9. EMPLOYEE BENEFIT PLANS

The Company has a 401(k) savings plan (the "Plan") providing retirement
benefits to all employees who have completed at least six months of service.
The Company makes matching contributions of 50% of each participant's
contribution up to 5% of each participant's salary. Total Company
contributions approximated $139,000, $123,000 and $131,000 for 1997, 1996, and
1995, respectively. Additionally, the Company may make discretionary
contributions to the Plan that are allocated to each participant's account. No
such discretionary contributions were made in 1997, 1996 or 1995.

On May 16, 1996, the Company's shareholders approved the CryoLife, Inc.
Employee Stock Purchase Plan (the "ESPP"). The ESPP allows eligible employees
the right to purchase Common Stock on a quarterly basis at the lower of 85% of
the market price at the beginning or end of each three-month offering period.
As of December 31, 1997 and 1996 there were 568,000 and 598,000 shares of
Common Stock reserved for the ESPP and there had been 32,000 and 2,000 shares
issued under the plan, respectively.

F-15

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share:

1997 1996 1995
---------- ---------- ----------

Numerator for basic and diluted earnings
per share--income available to common
shareholders.............................. $4,725,000 $3,927,000 $2,202,000
========== ========== ==========
Denominator for basic earnings per share--
weighted-average basis.................... 9,642,000 9,505,000 9,379,000
Effect of dilutive stock options........... 300,000 401,000 189,000
---------- ---------- ----------
Denominator for diluted earnings per
share--adjusted weighted-average shares... 9,942,000 9,906,000 9,568,000
========== ========== ==========
Basic earnings per share................... $ 0.49 $ 0.41 $ 0.23
========== ========== ==========
Diluted earnings per share................. $ 0.48 $ 0.40 $ 0.23
========== ========== ==========

11. INCOME TAXES

Income tax expense consists of the following:

1997 1996 1995
---------- ---------- ----------

Current:
Federal.................................. $2,145,000 $1,573,000 $1,012,000
State.................................... 403,000 341,000 189,000
---------- ---------- ----------
2,548,000 1,914,000 1,201,000
Deferred................................... 360,000 242,000 (107,000)
---------- ---------- ----------
$2,908,000 $2,156,000 $1,094,000
========== ========== ==========

Such amounts differ from the amounts computed by applying the U.S. Federal
income tax rate of 34% to pretax income as a result of the following:

1997 1996 1995
---------- ---------- ----------

Tax expense at statutory rate......... $2,593,000 $2,068,000 $1,121,000
Increase (reduction) in income taxes
resulting from:
Change in valuation allowance for
deferred tax assets................. (30,000) (129,000) (52,000)
Entertainment expenses............... 42,000 30,000 33,000
State income taxes, net of federal
benefit............................. 266,000 241,000 126,000
Non-taxable interest income.......... -- (50,000) (74,000)
Other................................ 37,000 (4,000) (60,000)
---------- ---------- ----------
$2,908,000 $2,156,000 $1,094,000
========== ========== ==========

F-16

CRYOLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The tax effects of temporary differences which give rise to deferred tax
liabilities and assets at December 31 are as follows:

1997 1996
-------- --------

Deferred tax liabilities:
Depreciation........................................... $399,000 $ 99,000
Other.................................................. 80,000 44,000
-------- --------
479,000 143,000
Deferred tax assets:
Deferred preservation costs and inventory reserves..... 58,000 87,000
Intangible assets...................................... 38,000 62,000
Other.................................................. 56,000 57,000
-------- --------
152,000 206,000
Less valuation allowance............................... -- 30,000
-------- --------
Net deferred tax assets................................ 152,000 176,000
-------- --------
Net deferred tax liabilities (assets).................... $327,000 $(33,000)
======== ========

12. FDA REGULATION

Human heart valves historically have not been subject to regulation by the
U.S. Food and Drug Administration (the "FDA"). However, in June 1991 the FDA
published a notice stating that human heart valves for transplantation are
medical devices subject to Premarket Approval (PMA) or an Investigational
Device Exemption (IDE). In October 1994 the FDA announced in the Federal
Register that neither an approved application for PMA nor an IDE is required
for processors and distributors who had marketed heart valve allografts before
June 1991. This action by the FDA has removed allograft heart valves from
clinical trial status thus allowing the Company to distribute such valves to
cardiovascular surgeons throughout the U.S.

13. EXECUTIVE INSURANCE PLAN

Pursuant to a supplemental life insurance program for certain executive
officers of the Company, the Company and the executives share in the premium
payments and ownership of insurance policies on the lives of such executives.
The Company's aggregate premium contributions under this program were $38,000,
$37,000 and $31,000 for 1997, 1996 and 1995, respectively.

14. EQUIPMENT ON LOAN TO IMPLANTING HOSPITALS

The Company consigns liquid nitrogen freezers with certain implanting
hospitals for tissue storage. The freezers are the property of the Company. At
December 31, 1997 freezers with a total cost of approximately $1,339,000 and
related accumulated depreciation of approximately $781,000 were located at the
implanting hospitals' premises. Depreciation is provided over the estimated
useful lives of the freezers on a straight-line basis.

15. TRANSACTIONS WITH RELATED PARTIES

The Company expensed $65,000, $39,000 and $67,000 during 1997, 1996 and 1995,
respectively, relating to services performed by a law firm whose sole
proprietor is a member of the Company's Board of Directors and a shareholder
of the Company.

F-17

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Ideas for Medicine, Inc.

We have audited the accompanying balance sheet of Ideas for Medicine, Inc.
as of December 31, 1996, and the related statements of income and retained
earnings and cash flows for the year then ended. 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 audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ideas for Medicine, Inc.
at December 31, 1996, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Atlanta, Georgia
February 5, 1997

F-18

IDEAS FOR MEDICINE, INC.

BALANCE SHEET
DECEMBER 31, 1996

ASSETS
Current assets:
Cash.............................................................. $ 180,408
Accounts receivable, net of allowance for doubtful accounts of
$10,590.......................................................... 741,352
Inventories....................................................... 651,882
Prepaid expenses.................................................. 47,311
----------
Total current assets................................................ 1,620,953
Property and equipment, net......................................... 200,065
Other assets, net................................................... 6,586
----------
$1,827,604
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 220,240
Accrued liabilities............................................... 64,020
----------
Total current liabilities........................................... 284,260
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value; 150,000 shares authorized; 105,590
shares issued and outstanding.................................... 1,056
Additional paid-in capital........................................ 642,768
Retained earnings................................................. 899,520
----------
Total shareholders' equity.......................................... 1,543,344
----------
$1,827,604
==========

See accompanying notes.

F-19

IDEAS FOR MEDICINE, INC.

STATEMENT OF INCOME AND RETAINED EARNINGS

YEAR ENDED DECEMBER 31, 1996

Net sales........................................................... $6,344,114
Cost of sales....................................................... 3,331,669
----------
Gross profit........................................................ 3,012,445
Selling, general and administrative expenses........................ 2,660,051
----------
Operating income.................................................... 352,394
Other income, net................................................... 1,805
----------
Net income.......................................................... 354,199
Retained earnings at beginning of year.............................. 1,095,321
----------
1,449,520
Less distributions paid............................................. 550,000
----------
Retained earnings at end of year.................................... $ 899,520
==========

See accompanying notes.

F-20

IDEAS FOR MEDICINE, INC.

STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1996

Operating activities:
Net income......................................................... $ 354,199
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 153,952
Provision for doubtful accounts.................................. 11,272
Loss on disposal of assets....................................... 5,181
Changes in operating assets and liabilities:
Accounts receivable............................................ 61,023
Inventories.................................................... (35,856)
Other assets................................................... 16,046
Accounts payable and accrued liabilities....................... 93,029
---------
Net cash provided by operating activities.......................... 658,846
Investing activities:
Purchases of property and equipment................................ (107,579)
---------
Net cash used in investing activities.............................. (107,579)
Financing activities:
Payments of note................................................... (12,398)
Distributions paid................................................. (550,000)
---------
Net cash used in financing activities.............................. (562,398)
---------
Net decrease in cash............................................... (11,131)
Cash at beginning of year.......................................... 191,539
---------
Cash at end of year................................................ $ 180,408
=========
Supplemental disclosure of cash flow information:
Interest paid...................................................... $ 157
=========

See accompanying notes.

F-21

IDEAS FOR MEDICINE, INC.

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 1996

1. NATURE OF BUSINESS

Ideas for Medicine, Inc. ("IFM") is a closely-held Florida corporation. IFM
designs and manufactures a variety of surgical devices. The devices are
marketed primarily to hospitals in the U.S. and throughout the world through
stocking and non-stocking distributors. IFM's corporate offices and
manufacturing facilities are located in Clearwater, Florida.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Sales are recorded when the related goods are shipped.

Inventories

Inventories are stated at the lower of average cost or market.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed primarily
using accelerated methods over the following useful lives:

Manufacturing Equipment...................................... 5-7 years
Office furniture and equipment............................... 5-7 years
Leasehold improvements....................................... Life of lease

Patents

Patent costs are expensed in the period in which they are incurred.

Income Taxes

IFM operates as an "S" Corporation under the Internal Revenue Code and,
consequently, is not subject to federal income tax. IFM's shareholders include
their proportionate shares of IFM's income in their individual income tax
returns.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements, and accompanying notes. Actual results could differ from those estimates.

3. INVENTORIES

Inventories consist of the following at December 31, 1996:

Finished Goods.................................................... $317,757
Work-in-process................................................... 53,663
Raw Materials..................................................... 280,462
--------
$651,882
========

F-22

IDEAS FOR MEDICINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEAR ENDED DECEMBER 31, 1996

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1996:

Manufacturing equipment.......................................... $450,390
Office furniture and equipment................................... 215,334
Leasehold improvements........................................... 101,750
--------
767,474
Less accumulated depreciation and amortization................... 567,409
--------
$200,065
========

5. RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses, aggregating $260,000 in 1996 are expensed
as incurred.

6. CREDIT ARRANGEMENTS

Under a revolving line of credit arrangement dated September 27, 1996 with a
bank, IFM may borrow upany claims against Arthur Andersen LLP related to $250,000 with borrowings due and payable on demand.
No amounts were borrowed under such line during 1996.

7. COMMITMENTS AND CONTINGENCIES

During 1996, IFM leased its facilities under a non-cancelable operating lease
which expired December 31, 1996. Rent expense for 1996 totaled $172,000.
Effective January 1, 1997, IFM leases its manufacturing facilities on a month-
to-month basis (see Note 8) and its office facility is leased under a non-
cancelable operating lease expiring on December 31, 1997. Minimum rent
payments under this one-year lease total $20,000.

8. RELATED PARTY TRANSACTIONS

IFM leases its manufacturing facilities from shareholders of IFM under month-
to-month leases for $7,000 per month.

9. CONCENTRATION OF CREDIT RISK

IFM maintains the majority of its cash balances at one financial institution.
These balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. The uninsured balance on deposit at the financial institution
totaled $220,000 at December 31, 1996.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet for cash, accounts
receivable, and accounts payable approximate their fair values.

11. LEGAL COSTS

During 1996, IFM incurred legal expenses aggregating $117,000 relating to the
settlement of three separate lawsuits.

F-23

IDEAS FOR MEDICINE, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

YEAR ENDED DECEMBER 31, 1996

12. GEOGRAPHIC AREA

IFM produces surgical devices for hospitals in the U.S. and throughout the
World. All sales are to unaffiliated customers. Sales to international
distributors aggregated $1,304,000 in 1996.

13. PROPOSED MERGER

IFM is involved in negotiations with a third-party corporation for a proposed
merger of IFM with and into a wholly-owned subsidiary of CryoLife, Inc. The
accompanying financialfalse or
misleading statements do not include any adjustments whichor omissions may be required upon the successful completion of such a merger.

14. EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)

On March 5, 1997, CryoLife, Inc. acquired the stock of IFM for consideration
of approximately $4.5 million in cash and approximately $5 million in
convertible debentures plus related expenses. The acquisition was accounted
for as a purchase. Following the acquisition, IFM became a wholly-owned
subsidiary of CryoLife, Inc. and will be taxed as a C corporation.

F-24limited.

CRYOLIFE, INC.

PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)

IDEAS FOR PRO FORMA
CRYOLIFE MEDICINE TWO CONSOLIDATED
YEAR ENDED MONTHS ENDED PRO FORMA YEAR ENDED
12/31/97 2/28/97 ADJUSTMENTS 12/31/97
---------- ------------ ----------- ------------

REVENUES:
Cryopreservation and
product................... $50,409 $1,213 $51,622
Other...................... 460 460
------- ------ -------
Total revenues............... 50,869 1,213 52,082
COST AND EXPENSES:
Preservation costs and cost
of goods sold............. 17,764 510 18,274
General and
administrative............ 20,548 423 $ 35 (A) 21,029
81 (B)
(58)(C)
Research and development... 3,946 50 3,996
Interest expense........... 978 122 (D) 1,100
------- ------ ----- -------
Total costs and expenses..... 43,236 983 180 44,399
------- ------ ----- -------
Income before income taxes... 7,633 230 (180) 7,683
Income tax expense........... 2,908 19 (E) 2,927
------- ------ ----- -------
Net income................... $ 4,725 $ 230 $(199) $ 4,756
======= ====== ===== =======
Earnings per share:
Basic...................... $ 0.49 $ 0.49
======= =======
Diluted.................... $ 0.48 $ 0.48
======= =======
Weighted average shares
outstanding:
Basic...................... 9,642 9,642
Diluted.................... 9,942 9,942

- --------
(A) Represents costs associated with new consulting agreement with former
principal owner of IFM.
(B) Represents amortization of intangible assets acquired in connection with
the acquisition of IFM.
(C) Elimination of salary and related costs for IFM personnel who are no
longer with CryoLife as a result of the acquisition of IFM.
(D) Adjustments to interest expense to reflect borrowings and indebtedness
related to the acquisition of IFM.
(E) Income tax effects related to (A) through (D) above and IFM's change in
status from an S corporation to a C corporation.

F-25

[art appears here]
---------------------------------
CRYOLIFE CRYOPRESERVATION PROCESS
---------------------------------
Shipping
---------------- Implantation
-------------------
----------------- [Image of ----------------
| shipping] [Image of valve
| --------------- implantation]
| ------------
| Thawing -------------------
| process & |
| implantation |
| ------------ |
Storage |
- ------------ |
|
[Image of |
Freezers] |
|
- ------------ Recovery
| -------------------
|
| [Image of
Cryopreservation Biker]
- ------------
------------ -------------------
[Image of Screening &
cryopreserva- Disinfection
tion process] ------------
- ------------
|
| -----------
| Dissection Delivery to Procurement
| --------------- Company ---------------
| -----------
---------- [Image of ------------------------ [Image of
dissection] Procurement]

--------------- ---------------

No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company, any Selling shareholder or any Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, shares of Common Stock in any jurisdiction to any person to whom it is
not lawful to make such offer or solicitation in such jurisdiction or in which
the person making such offer or solicitation is not qualified to do so. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to the date of this Prospectus.

TABLE OF CONTENTS3,444,000 SHARES COMMON STOCK

- --------------------------------------------------------------------------------

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Forward-Looking Statements................................................ 13
Use of Proceeds........................................................... 14
Price Range of Common Stock............................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Selected Financial Data................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 24
Management................................................................ 45
Principal and Selling Shareholders........................................ 47
Description of Capital Stock.............................................. 49
Shares Eligible for Future Sale........................................... 53
Underwriting.............................................................. 55
Legal Matters............................................................. 56
Experts................................................................... 56
Additional Information.................................................... 56
Incorporation of Certain Documents by Reference........................... 57
Glossary.................................................................. 58
Index to Financial Statements............................................. F-1
PROSPECTUS
, 1998

[CRYOLIFE LOGO]

2,500,000 Shares

CRYOLIFE, INC.

Common Stock

SBC WARBURG DILLON READ INC.
PIPER JAFFRAY INC.- --------------------------------------------------------------------------------

FEBRUARY __, 2004

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

A reasonable estimateAll expenses, other than fees and expenses of legal or other advisors to
the costs toselling shareholders, will be incurred in connection with this
Registration Statement and Prospectus, to be borne entirelypaid by the Registrant,
isCryoLife. Such expenses are as
follows:
Securities and Exchange Commission Registration Fee................. $12,245
NASD Filing Fee..................................................... 4,875
Accounting Fees and Expenses........................................ *
Legal Fees and Expenses............................................. *
Printing and Publication Expenses................................... 75,000
Transfer Agent's Fee................................................ 10,000
Miscellaneous Expenses.............................................. *
-------
TOTAL............................................................. $ *
=======
*

SEC registration fee.......................... $ 2,944
NYSE listing fee.............................. 40,186
Printing expenses............................. 10,000
Accounting fees and expenses.................. 25,000
Legal fees and expenses....................... 50,000
Miscellaneous................................. 11,870
------------------
Total................................ $ 140,000
==================

- --------
* to be filed by amendment---------------------

*The amounts set forth, except for the filing fees for the SEC and NYSE, are
estimated.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

AND DIRECTORS

The CompanyRegistrant is a Florida corporation. The following summary is qualified
in its entirety by reference to the complete text of the Florida Business
Corporation Act (the "FBCA"), the Company'sRegistrant's Restated Articles of
Incorporation, and the Company'sRegistrant's Bylaws.

Under Section 607.0850(1) of the FBCA, a corporation may indemnify any of
its directors and officers against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including any
appeal thereof) (i) if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and (ii) with respect to any criminal action or proceeding, he or
she had no reasonable cause to believe his or her conduct was unlawful. In
actions brought by or in the right of the corporation, however, Section
607.0850(2) provides that no indemnification shall be made in respect of any
claim, issue or matter as to which the director or officer shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Article X of the Company'sRegistrant's Restated Articles of Incorporation and Article VI
of the Company'sRegistrant's Bylaws require that, if in the judgment of the majority of
the Board of Directors (excluding from such majority any director under
consideration for indemnification) the criteria set forth under Section 607.0850
have been met, then the CompanyRegistrant shall indemnify its directors and officers
for certain liabilities incurred in the performance of their duties on behalf of
the CompanyRegistrant to the maximum extent allowed by Section 607.0850 of the FBCA
(formerly Section 607.014 of the Florida General Corporation Act).

The Securities Purchase Agreement and Plan of Merger dated December 17, 1985March 5, 1997, between the CompanyRegistrant
and Ideas for Medicine, Inc. ("IFM") and certain shareholdersstockholders of the CompanyIFM provides
that any investors exercising registration rights pursuant to such agreement
must indemnify the officers and directors signing the registration statement
against any liability arising from statements or omissions made in reliance upon
information furnished by such investors to the CompanyRegistrant for use in such
registration statement.

The registration rights agreement dated August 22, 1991, among the Company,
Galen Partners, L.P. ("Galen"), and Galen Partners International, L.P. ("Galen
International") provides that if Galen or Galen International exercises its
registration rights, then such prospective seller and any underwriter acting
on its behalf shall have agreed to indemnify the Company and each officer and
director signing such registration statement for any liability arising from
any untrue statement or omission made in such registration statement in
reliance upon

II-1

written information provided to the Company for use in such registration
statement. The registration rights agreement further specifies that the
indemnification rights granted therein shall be inoperative if, in connection
with an underwritten public offering, an underwriting agreement is executed
containing provisions covering indemnification among the partners thereto.

The CompanyRegistrant has purchased insurance to insure (i) the Company'sRegistrant's
directors and officers against damages from actions and claims incurred in the
course of their duties, and (ii) the CompanyRegistrant against expenses incurred in
defending lawsuits arising from certain alleged acts of its directors and
officers.

PursuantII-1

ITEM 16. EXHIBITS

Exhibit No. Exhibit
- ----------- -------

3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 to the UnderwritingRegistrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
2003).

3.2 ByLaws of the Company, as amended. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter year ended March 31, 2003).

3.3 Articles of Amendment to the Articles of Incorporation of
CryoLife. (Incorporated by reference to Exhibit 3.3 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000).

4.1 Form of Certificate for the Company's Common Stock (Incorporated
by reference to Exhibit 4.1 to the Registrant's Registrant's
Registration Statement on Form S-1 (Commission File No.
33-56388).

4.2 Form of Certificate for the Company's Common Stock (Incorporated
by reference to Exhibit 4.2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997).

4.3 Rights Agreement entered intobetween the Company and Chemical Mellon
Shareholder Services, L.L.C., as Rights Agent, dated as of
November 27, 1995. (Incorporated by reference to Exhibit 10.36 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000).

4.4* First Amendment to Rights Agreement, effective June 1, 1997,
executed by the Company in
connection with its initial public offeringand American Stock Transfer & Trust
Company, as successor Rights Agent.

5* Opinion of Common Stock, the Underwriters
thereunder have agreed to indemnify the directors and officersArnall Golden & Gregory, LLP regarding legality

23.1* Consent of the Company
and certain other persons against certain civil liabilities.

ITEM 16. EXHIBITS

The following exhibits have been filed (except where otherwise indicated)Arnall Golden & Gregory, LLP (included as part of
Exhibit 5 hereto).

23.2* Consent of Deloitte & Touche LLP

23.3* Notice regarding consent of Arthur Andersen LLP

- ----------
* Filed with this Registration Statement:

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

1.1 Form of Underwriting Agreement.
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 reference 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
Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.)
4.1 Form of Certificate for the Company's Common Stock. (Incorporated by
reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-
K for the fiscal year ended December 31, 1997.)
4.2 Rights Agreement, dated as of November 27, 1995 among Registrant and
Rights Agent. (Incorporated by reference to Exhibit (1) to the
Registrant's Current Report on Form 8-K dated November 27, 1995).
5.1 Form of Opinion of Arnall Golden & Gregory, LLP.
23.1 Consents of Ernst & Young LLP.
23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Arnall Golden & Gregory, LLP.

- --------
* to be filed by AmendmentForm S-3.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrantregistrant hereby undertakesundertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the

II-2

"Calculation of Registration Fee" table in the effective
registration statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.

(2) That, for purposesthe purpose of determining any liability under the Securities
Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statementsuch post-effective amendment shall be deemed to be a new
Registration Statementregistration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

II-2

(b)(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) That, for purposes of determining liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant,registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission has
informed the Registrant that such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrantregistrant of expenses
incurred or paid by a director, officer or controlling person of the Registrantregistrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrantregistrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(1) For purposesII-3

SIGNATURES

Pursuant to the requirements of determining any liability under the Securities Act of 1933, the information omitted fromRegistrant
certifies that it has reasonable grounds to believe that it meets all of the
form of prospectus filed as part ofrequirements for filing on Form S-3 and has duly caused this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filedRegistration
Statement to be signed on its behalf by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) underundersigned, thereunto duly
authorized, in the Securities Act shall be deemed to be partCity of this
registration statement asKennesaw, State of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF KENNESAW, STATE OF GEORGIA ON FEBRUARY 18, 1998.

Cryolife, Inc.Georgia on February 10, 2004.

CRYOLIFE, INC.

By: /s/ Steven G. Anderson
By: _________________________________
STEVEN G. ANDERSON
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND
CHAIRMAN OF THE BOARD OF DIRECTORS

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS AND DIRECTORS:

NAME TITLE DATE

/s/------------------------------------------
Steven G. Anderson
President, Chief February 18,
- ------------------------------------- Executive Officer 1998
STEVEN G. ANDERSON and
Chairman of the Board of Directors

(Principal
Executive Officer)

/s/ Edwin B. Cordell, Jr. Vice PresidentKNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and February 18,
- ------------------------------------- Chief Financial 1998
EDWIN B. CORDELL, JR. Officer (Principal
Financialappoints Steven G. Anderson and D. Ashley Lee and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS AND DIRECTORS:
- ------------------------------------------------------------------

Name Title Date
---- ------ ----
/s/ Steven G. Anderson
- ---------------------------- President, Chief Executive Officer and February 10, 2004
Steven G. Anderson Chairman of the Board of Directors
(Principal Executive Officer)

/s/ D. Ashley Lee
- ---------------------------- Vice President of Finance, Treasurer February 10, 2004
D. Ashley Lee and Chief Financial Officer (Principal
Financial and Accounting Officer)

/s/ Thomas F. Ackerman
- ---------------------------- Director February 10, 2004
Thomas F. Ackerman

- ---------------------------- Director February ___, 2004
Dan Bevevino

/s/ John M. Cook
- ---------------------------- Director February 10, 2004
John M. Cook

- ---------------------------- Director February ___, 2004
Ronald Charles Elkins, M.D.

/s/ Virginia C. Lacy
- ---------------------------- Director February 10, 2004
Virginia C. Lacy

/s/ Ronald D. McCall
- ---------------------------- Director February 10, 2004
Ronald D. McCall

/s/ Bruce J. Van Dyne, M.D.
- ---------------------------- Director February 10, 2004
Bruce J. Van Dyne, M.D.

II-4

NAME TITLE DATE

/s/ Ronald D. McCall Director February 18,
- ------------------------------------- 1998
RONALD D. MCCALL

/s/ Benjamin H. Gray Director February 16,
- ------------------------------------- 1998
BENJAMIN H. GRAY

/s/ Virginia C. Lacy Director February 18,
- ------------------------------------- 1998
VIRGINIA C. LACY

/s/ Ronald Charles Elkins, M.D. Director February 16,
- ------------------------------------- 1998
RONALD CHARLES ELKINS, M.D.

II-5

EXHIBIT INDEX

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

3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
2003).

3.2 ByLaws of the Company, as amended. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter year ended March 31, 2003).

3.3 Articles of Amendment to the Articles of Incorporation of
CryoLife. (Incorporated by reference to Exhibit 3.3 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000).

4.1 Form of Certificate for the Company's Common Stock (Incorporated
by reference to Exhibit 4.1 to the Registrant's Registrant's
Registration Statement on Form S-1 (Commission File No.
33-56388).

4.2 Form of Certificate for the Company's Common Stock (Incorporated
by reference to Exhibit 4.2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997).

4.3 Rights Agreement between the Company and Chemical Mellon
Shareholder Services, L.L.C., as Rights Agent, dated as of
November 27, 1995. (Incorporated by reference to Exhibit 10.36 to
the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000).

4.4* First Amendment to Rights Agreement, effective June 1, 1997,
executed by the Company and American Stock Transfer & Trust
Company, as successor Rights Agent.

5* Opinion of Arnall Golden & Gregory, LLP regarding legality

23.1* Consent of Arnall Golden & Gregory, LLP (included as part of
Exhibit 5 hereto).

23.2* Consent of Deloitte & Touche LLP

23.3* Notice regarding consent of Arthur Andersen LLP

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* To be filed by AmendmentFiled with this Form S-3.