<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Amendment No. 1
For the Fiscal Year Ended: JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number: 0-27120
KENSEY NASH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3316412
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
MARSH CREEK CORPORATE CENTER, 55 EAST UWCHLAN AVENUE, SUITE 204, EXTON,
PENNSYLVANIA 19341
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (610) 524-0188
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's voting stock (based upon
the per share closing price of $7.75 on September 18, 1998 and, in making such
calculation, registrant is not making a determination of the affiliate or
non-affiliate status of any holders of shares of Common Stock) was
approximately $57,809,358.
The number of shares outstanding of the registrant's Common Stock,
par value $.001, as of September 18, 1998 was 7,459,272.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document are incorporated by reference
into this report: Definitive Proxy Statement in connection with
the 1998 Annual Meeting of Stockholders
----------------------------------------------
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AHP also provided the Company with operating advances which were repaid
with the proceeds of the IPO in the year ended June 30, 1996.
THE RESEARCH AND DEVELOPMENT AGREEMENT - The Company and its Strategic
Alliance Partner have an agreement whereby such partner funds certain
ongoing research and development costs incurred by the Company. The
Company contributes one-third of such research and development costs while
the Strategic Alliance Partner contributes the remaining two-thirds. Prior
to the IPO, the Strategic Alliance Partner funded the Company's portion of
such costs. Such amounts were repaid with proceeds from the IPO and the
Company has taken no further advances from such partner.
THE COLLAGEN SUPPLY AGREEMENT - Pursuant to an agreement with the
Strategic Alliance Partner, the Company manufactures collagen to be used
in the Angio-Seal. The agreement contains a minimum purchase requirement
from the Company for five years beginning May 31, 1995.
3. RELATED PARTY TRANSACTIONS
The Company earned interest income of $9,322 for the fiscal year ended
June 30, 1996 on certain notes receivable from a former officer of the
Company which was repaid at the date of the IPO. Such amount had been
classified as a component of stockholders' equity as it was collateralized
primarily by common stock and common stock equivalents.
For the fiscal year ended June 30, 1996, the Company incurred $785,524
(of which $496,580 was offset against proceeds of the IPO) in legal fees
with a law firm which serves as the Company's general counsel for all
corporate legal affairs. Certain current and former partners of such firm
had interests in an investment partnership that owned 50,000 shares of
the outstanding Common Stock of the Company. The shares were sold during
the fiscal year ended June 30, 1997.
See Note 13 for a discussion of related party transactions with certain
former officers and transactions related to employee stock rights issued
to current and former officers and an outside director.
4. LEASES
At June 30, 1998, future minimum annual rental commitments under
non-cancelable lease obligations are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------------------------
<S> <C> <C>
YEAR ENDING JUNE 30:
1999 $ 45,262 $ 329,838
2000 25,078 356,244
2001 11,055 360,844
2002 1,950 367,285
2003 154,953
--------- ----------
Total minimum lease payments 83,345 $1,569,164
==========
Amount representing interest
(at rates ranging from 7.25%
to 10.25%) (10,722)
---------
Present value of net minimum
lease payments 72,623
Current portion (37,814)
---------
Long-term portion $ 34,809
=========
</TABLE>
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THE CREDIT AGREEMENT - The Company had a $5 million Credit Agreement with
its Strategic Alliance Partner. The outstanding balance of $6,517,348,
including interest of $1,517,348, was repaid in October 1996 following
receipt of FDA approval on September 30, 1996.
Amounts outstanding under the Company's Revolver and Patent Acquisition
Agreement are shown in the following table.
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1997
<S> <C> <C>
Patent Acquisition Agreement $ 879,228
Revolver 2,000,000 $500,000
---------- --------
Total 2,879,228 500,000
Current portion (540,077)
---------- --------
Long-term $2,339,151 $500,000
========== ========
</TABLE>
The annual debt maturities are approximately $540,077, $536,234, $353,750,
$400,000 and $400,000 for the years 1999 through 2003, respectively.
7. RETIREMENT PLAN
The Company has a 401(k) Salary Reduction Plan and Trust (the "401(k)
Plan") in which all employees that are at least 21 years of age are
eligible to participate. Contributions to the 401(k) Plan are made by
employees through an employee salary reduction election. Company
contributions are discretionary. The Company has not made any
contributions to the 401(k) Plan to date.
8. INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, which generally
provides that deferred tax assets and liabilities be recognized for
temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities and expected benefits of
utilizing net operating loss ("NOL") carryforwards. The impact on deferred
taxes of changes in tax rates and laws, if any, applied to the years
during which temporary differences are expected to be settled are
reflected in the financial statements in the period of enactment.
For 1998 the Company has not provided for current income taxes due to the
utilization of NOLs for tax purposes The difference between the Company's
income tax expense (benefit) and the income tax expense (benefit) computed
using the U.S. federal income tax rate were as follows:
<TABLE>
<CAPTION>
June 30,
--------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
Net income (loss) before income taxes $ 342,682 $ (262,476) $ (5,915,573)
============================================
Tax provision at U.S. statutory rate $ 123,121 $ (94,491) $ (2,129,606)
State income tax provision, net of federal benefit 17,066 (13,098) (295,187)
Reconciliation to actual tax rate:
Non-deductible meals and entertainment 13,328 9,158 4,587
Phantom stock plan (1,295,739)
Timing differences (80,880) 2,696 (165,950)
Utilization of net operating loss carryforwards (72,635)
Creation of net operating loss carryforwards 95,735 3,881,895
--------------------------------------------
$ $ $
============================================
</TABLE>
Significant component of the Company's deferred taxes are as follows:
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1998 1997
<S> <C> <C>
Accrual for:
Vacation $ 102,958 $ 120,403
Bonuses 75,000
Basis difference - patents 381,627 479,264
Basis difference - fixed assets (50,520) 99,741
Prepaid insurance (46,884) (97,009)
Inventory 170,870
Other 7,491 10,000
---------- ----------
565,542 687,399
Effective tax rate 40.59% 40.59%
---------- ----------
Deferred tax asset 229,553 279,015
NOL carryforwards (expiring
between 1998 and 2012) 6,322,911 6,315,906
---------- ----------
6,552,464 6,594,921
(6,552,464) (6,594,921)
---------- ----------
Less valuation allowance $ 0 $ 0
========== ==========
</TABLE>
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awards, consistent with the provisions of SFAS No. 123, the Company's net loss
and earnings per share would have been reduced to the proforma amounts below:
<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1996
---------------------------- --------------------------- ---------------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $342,682 ($664,398) ($262,476) ($818,363) ($5,915,573) ($5,972,087)
Income (loss) per share $0.05 ($0.09) ($0.04) ($0.11) ($1.00) ($1.01)
</TABLE>
Subsequent to year end, the Company granted 128,500 stock options under the
Employee Plan at an option price equal to the fair market value of the
Company's stock on the date of grant (August 28, 1998) of $7.63 per share.
16. EARNINGS PER SHARE
The following table shows the reconciliation between the numerators and
denominators for the basic and diluted EPS calculations, where income is the
numerator and the weighted average number of shares is the denominator. The
reconciliation is not shown for the years ended June 30, 1997 and 1996 as any
common share equivalents are antidilutive.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
------------------------------------------------
PER SHARE
INCOME SHARES AMOUNT
------------------------------------------------
<S> <C> <C> <C>
BASIC EPS
Income available to common shareholders $ 342,682 7,342,683 $ 0.05
EFFECT OF DILUTIVE SECURITIES ========
Options - 208,913
DILUTED EPS -------------- ---------
Income available to common shareholders
including assumed conversions $ 342,682 7,551,596 $ 0.05
============== ========= ========
</TABLE>
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
The summarized quarterly results of operations of the Company for the years
ended June 30, 1998 and June 30, 1997 are presented below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
-------------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Operating revenues $ 1,565,290 $ 2,762,081 $ 3,606,955 $ 3,384,406
Operating costs and expenses $ 2,365,692 $ 2,878,737 $ 2,902,788 $ 3,222,838
Net (loss) income $ (679,680) $ 492 $ 809,722 $ 212,148
(Loss) income per share $ (0.09) $ - $ 0.11 $ 0.03
YEAR ENDED JUNE 30, 1997
-------------------------------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
-------------- ----------- -------------- ------------
Operating revenues $ 2,328,109 $ 1,712,382 $ 2,027,082 $ 1,839,422
Operating costs and expenses $ 2,114,459 $ 2,339,353 $ 2,529,710 $ 2,597,457
Net income (loss) $ 220,713 $ 497,229 $ (374,444) $ (605,974)
Income (loss) per share $ 0.03 $ 0.07 $ (0.05) $ (0.08)
</TABLE>
Quarterly and total year earnings per share are calculated independently based
on the weighted average number of shares outstanding during each period.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 29th day of
September, 1998.
KENSEY NASH CORPORATION
By: /s/ JOSEPH W. KAUFMANN
-----------------------
Joseph W. Kaufmann
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 29th day of September, 1998.
SIGNATURE TITLES
/s/ JOSEPH W. KAUFMANN Chief Executive Officer (Principal Executive
- ------------------------------ Officer), President, Chief Financial Officer
Joseph W. Kaufmann (Principal Financial and Accounting Officer),
Secretary and Director
/s/ JOHN E. NASH, P.E. Vice Chairman of the Board and Executive
- ------------------------------ Vice President
John E. Nash, P.E.
/s/ KENNETH R. KENSEY, M.D. Chairman of the Board of Directors
- ------------------------------
Kenneth R. Kensey, M.D.
/s/ DOUGLAS G. EVANS, P.E. Chief Operating Officer, Assistant Secretary
- ------------------------------ and Director
Douglas G. Evans, P.E.
/s/ WENDY F. DICICCO, CPA Chief Financial Officer
- ------------------------------
Wendy F. DiCicco, CPA
/s/ ROBERT J. BOBB Director
- ------------------------------
Robert J. Bobb
/s/ HAROLD N. CHEFITZ Director
- ------------------------------
Harold N. Chefitz
/s/ WALTER R. MAUPAY, JR. Director
- ------------------------------
Walter R. Maupay, Jr.
43
