<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For quarterly period ended January 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___ to ____
Commission File Number 0-13907
---------------------------------------------------
BIO-VASCULAR, INC.
(Exact name of Registrant as specified in its charter)
State of Incorporation: Minnesota
I.R.S. Employer Identification No.: 41-1526554
Principal Executive Offices: 2575 University Avenue
St. Paul, Minnesota 55114
Telephone Number: (612) 603-3700
---------------------------------------------------
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
----- -----
---------------------------------------------------
On March 6, 1997, there were 9,499,502 shares of the Registrant's common stock,
par value $.01 per share, outstanding.
<PAGE>
BIO-VASCULAR, INC.
BALANCE SHEETS
AS OF JANUARY 31, 1997 AND OCTOBER 31, 1996
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 3,967,041 $ 5,736,650
Marketable securities, short-term............................... 8,765,000 13,761,050
Accounts receivable, net of an allowance for doubtful
accounts of $22,900 at January 31, 1997 and $21,400
at October 31, 1996........................................... 1,619,207 1,465,809
Other receivables............................................... 856,091 632,386
Inventories..................................................... 1,698,361 1,972,728
Prepaid expenses................................................ 405,850 284,811
Deferred income taxes........................................... 778,000 914,300
----------- -----------
Total current assets.......................................... 18,089,550 24,767,734
----------- -----------
Equipment and leasehold improvements, net......................... 1,526,688 1,370,256
Intangible assets, net............................................ 1,183,128 1,213,600
Marketable securities, long-term.................................. 7,215,419 10,173,086
Deferred income taxes............................................. 185,600 182,200
Net assets of discontinued operations............................. 9,460,188 174,403
----------- -----------
TOTAL ASSETS.................................................. $37,660,573 $37,881,279
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
BIO-VASCULAR, INC.
BALANCE SHEETS
AS OF JANUARY 31, 1997 AND OCTOBER 31, 1996
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.............................. $ 559,694 $ 306,376
Accrued expenses.............................. 382,718 554,368
Accrued loss on disposal of discontinued
operations................................... 1,106,456 1,800,000
----------- -----------
Total current liabilities..................... 2,048,868 2,660,744
----------- -----------
COMMITMENTS AND CONTINGENCY (NOTE 4)
SHAREHOLDERS' EQUITY:
Common stock: authorized 20,000,000
shares of $.01 par value issued and
outstanding, 9,499,502 at January
31, 1997 and 9,484,898 at October 31, 1996... 94,995 94,849
Additional paid-in capital.................... 39,645,511 39,500,239
Accumulated deficit........................... (3,713,979) (3,838,537)
Unrealized marketable securities holding
loss......................................... (12,152) (51,107)
Unearned compensation......................... (402,670) (484,909)
----------- -----------
Total shareholders' equity.................... 35,611,705 35,220,535
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY......................................... $37,660,573 $37,881,279
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
BIO-VASCULAR, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
January 31
(unaudited)
1997 1996
----------- -----------
<S> <C> <C>
Net revenue ................................. $ 2,325,442 $ 2,836,725
Cost of revenue ............................. 1,004,040 802,290
----------- -----------
Gross margin .............................. 1,321,402 2,034,435
Operating Expenses:
Selling, general, and administrative ...... 1,176,180 1,228,816
Research and development .................. 213,684 213,833
----------- -----------
Income (loss) from operations ............... (68,462) 591,786
Other income, net ........................... 282,020 273,243
----------- -----------
Income from continuing operations before
income taxes ............................... 213,558 865,029
Provision for income taxes .................. 89,000 341,000
----------- -----------
Income from continuing operations ........... 124,558 524,029
Loss from discontinued operations, net of
income tax benefit ......................... -- (318,637)
----------- -----------
Net income .................................. $ 124,558 $ 205,392
=========== ===========
Per share amounts:
Continuing operations ..................... $ .01 $ .05
Discontinued operations ................... -- $ (.03)
----------- -----------
Net income ................................ $ .01 (.02)
=========== ===========
Weighted average shares outstanding ......... 9,829,000 9,928,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
BIO-VASCULAR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
January 31
(unaudited)
1997 1996
---------- -----------
<S> <C> <C>
NET CASH PROVIDED BY CONTINUING OPERATIONS... $ 228,317 $ 182,878
NET CASH USED IN DISCONTINUED OPERATIONS..... -- (736,133)
---------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES................................... 228,317 (553,255)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and improvements...... (238,478) (183,658)
Additions to intangibles..................... (29,235) (516,776)
Investments in marketable securities......... -- (7,356,301)
Maturities of marketable securities.......... -- 3,000,000
Cash investment in discontinued subsidiary... (1,877,569) --
Discontinued operations, net................. 31,781 (57,283)
---------- -----------
Net cash used in investing activities........ (2,113,501) (5,114,018)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Costs related to sale of stock............... -- (87,327)
Proceeds related to the exercise of stock
options, net of restricted stock
repurchased.................................. 115,575 61,367
---------- -----------
Net cash provided by (used in) financing
activities................................... 115,575 (25,960)
---------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS.... (7,769,609) (5,693,233)
---------- -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD....................................... 5,736,650 15,424,969
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD... $ 3,967,041 $ 9,731,736
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BIO-VASCULAR, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION:
The accompanying unaudited financial statements of Bio-Vascular, Inc. ("Bio-
Vascular" or "the Company"): have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary, including items of a normal
recurring nature, for a fair presentation have been included. Operating results
for the three months ended January 31, 1997 are not necessarily indicative of
the results that may be expected for the year ending October 31, 1997. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report to Shareholders and in the Form 10-K for
the year ended October 31, 1996.
(2) DISCONTINUED OPERATIONS:
On October 28, 1996, the Bio-Vascular Board of Directors approved the spin-off
of the Company's wholly-owned subsidiary, Vital Images, Inc. ("Vital Images") to
the Company's shareholders. The spin-off is expected to occur on or around April
30, 1997, following review of the appropriate filings by the Securities and
Exchange Commission, at which time Vital Images will trade as an independent
public Company. The Company has attempted to structure the transaction as tax-
free, but since no revenue ruling will be sought, no assurance can be made about
the final tax treatment of the transaction.
It is expected that one share of Vital Images common stock will be distributed
for every two Bio-Vascular shares in the spin-off. In anticipation of this
distribution, Bio-Vascular agreed to assign to Vital Images, $10,000,000 in
cash, cash equivalents and marketable securities, effective November 1, 1996 and
to contribute the approximately $3.1 million of intercompany debt existing on
that date to Vital Images. Subsequently, Bio-Vascular's Board of Directors
determined to make such additional capital contributions to Vital Images as
necessary to bring Vital Images' cash, cash equivalents and marketable
securities balances to a combined $10,000,000 and to contribute any additional
intercompany debt owed by Vital Images on the effective date of the
distribution. This additional contribution is estimated to be approximately
$1,600,000 and would result in Bio-Vascular retaining approximately $18,347,000
in cash, cash equivalents and marketable securities at the effective date of the
distribution. The actual amount of additional contribution and the resulting
cash, cash equivalents and marketable securities retained by Bio-Vascular may be
more or less than the estimate. On the effective date of the distribution, the
Company's Shareholders' Equity will be charged for the entire capital
contribution.
As a result of the plan to spin-off Vital Images, the Company's financial
statements and notes report Vital Images as discontinued operations. Prior
years' consolidated financial statements and notes have been restated
accordingly.
Net revenue of the discontinued business for the first quarter of fiscal 1996
was $142,867, with a loss from discontinued operations of $318,637. Loss from
discontinued operations for the three months ended January
6
<PAGE>
BIO-VASCULAR, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
- --------------------------------------------------------------------------------
31, 1997 is not reflected in the Company's statement of operations because the
expected loss from these operations through the original estimated effective
date of distribution was reflected in the loss on disposal of discontinued
operations recorded in the fourth quarter of fiscal 1996. To the extent that the
actual losses of Vital Images and expenses incurred in conjunction with the
spin-off exceed (which is likely, but not currently able to be estimated) or are
less than the amount of the accrued loss on disposal, the Company would report
additional loss or income (not likely) on disposal in the quarter in which the
distribution takes place.
<TABLE>
<CAPTION>
January 31, October 31,
NET ASSETS OF DISCONTINUED OPERATIONS 1997 1996
------------ -----------
<S> <C> <C>
Cash and cash equivalents....................... $6,045,839 $ --
Accounts receivable, net........................ 131,564 190,807
Other assets.................................... 213,476 100,752
Equipment and leasehold improvements, net....... 775,236 651,351
Marketable securities, long-term................ 2,986,875 --
Current liabilities............................. (227,008) (256,383)
Deferred revenues............................... (465,794) (512,124)
---------- ---------
Net assets of discontinued operations........... $9,460,188 $ 174,403
========== =========
</TABLE>
(3) SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- -----------
<S> <C> <C>
Inventories:
Raw materials and supplies..................... $ 495,376 $ 514,478
Work-in-process................................ 433,586 541,483
Finished goods................................. 769,399 916,767
----------- -----------
$ 1,698,361 $ 1,972,728
=========== ===========
</TABLE>
Condensed Statements of Cash Flows:
During the first quarter of 1997, the Company assigned approximately $8 million
of marketable securities to Vital Images along with cash and cash equivalents of
approximately $1.878 million and related accrued
7
<PAGE>
BIO-VASCULAR, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
- -------------------------------------------------------------------------------
interest receivable.
(4) CONTINGENCY:
Recently, the Company received notice of a suit brought against it in Japan by a
former Japanese distributor, claiming wrongful termination and economic damage
of $500,000. The Company believes the claim to be completely without merit and
intends to pursue this matter vigorously.
(5) MAJOR CUSTOMERS:
<TABLE>
<CAPTION>
Percentage
Significant Gross Percentage of of Accounts
Customer Sales Gross Sales Receivable
------- ----- ----------- ----------
<S> <C> <C> <C> <C>
Period ended January 31, 1997.. Futuretech $460,737 19% 16%
Life Systems 366,617 15% 13%
CardioMedical 280,089 12% 13%
Period ended January 31, 1996.. Futuretech $580,628 19% 13%
Life Systems 432,735 14% 21%
CardioMedical 336,711 11% 14%
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Spin-off of Vital Images
On October 28, 1996, the Bio-Vascular Board of Directors approved the spin-off
of its wholly-owned subsidiary, Vital Images, to the Company's shareholders. The
spin-off is expected to occur on or around April 30, 1997, following review of
the appropriate filings by the Securities and Exchange Commission, at which time
Vital Images will operate as an independent public Company. The Company has
attempted to structure the transaction as tax-free, but since no revenue ruling
will be sought, no assurance can be made about the final tax treatment of the
transaction.
It is expected that one share of Vital Images common stock will be distributed
for every two Bio-Vascular shares in the spin-off. In anticipation of the
Distribution, Bio-Vascular agreed to assign to Vital Images, $10,000,000 in
cash, cash equivalents, and marketable securities, effective November 1, 1996
and to contribute the approximately $3.1 million of intercompany debt existing
on that date to Vital Images. Subsequently, Bio-Vascular's Board of Directors
determined, effective as of the Distribution Date, to make such additional
capital contributions to Vital Images as necessary to bring Vital Images' cash,
cash equivalents, and marketable securities balances to a combined $10,000,000
and to contribute any additional intercompany debt owed by Vital Images on the
Distribution Date. This additional contribution is estimated to be approximately
$1,600,000 and would result in Bio-Vascular retaining approximately $18,347,000
in cash, cash equivalents and marketable securities at the Distribution Date.
The actual amount of additional contribution and the resulting cash, cash
equivalents and marketable securities retained by Bio-Vascular may be more or
less than the estimate.
The Company believes that strategically and financially, the timing and
circumstances are right to separate the Company's Surgical and Medical
Visualization Businesses for the long-term benefit of the shareholders. Both
organizations, it is believed, will benefit from a tighter focus on their
respective markets, will be able to invest in research and development at levels
appropriate to their respective stages of development and will be able to evolve
unique organizational and marketing structures to better serve their
substantially different markets. The Company acquired Vital Images on May 24,
1994 in a tax-free business combination. As a result of the plan to spin-off
Vital Images, the Company's financial statements and notes thereto report the
business of Vital Images as discontinued operations.
Net revenue of the discontinued business for the first quarter of fiscal 1996
was $142,867, with a loss from discontinued operations of $318,637. Loss from
discontinued operations for the three months ended January 31, 1997 is not
reflected in the Company's statement of operations because the expected loss
from these operations through the original estimated effective date of the
distribution was reflected in the loss on disposal of discontinued operations
recorded in the fourth quarter of fiscal 1996. At October 31, 1996, the Company
accrued an estimated loss on disposal, net of income tax benefit, of $1,348,000.
To the extent that the actual losses of Vital Images and accrued expenses
related to the spin-off exceed (which is likely, but not currently able to be
estimated), or are less than the amount of the accrual, the Company would report
additional loss or income (not likely) on disposal in the quarter in which the
distribution takes place. This
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
- -------------------------------------------------------------------------------
forward looking information regarding total losses of Vital Images will be
influenced by the actual date of the distribution and Vital Images' results of
operations.
The Company's continuing business develops, manufactures and markets proprietary
specialty medical products for use in thoracic, cardiac, neuro and vascular
surgery.
Medicare Non-Coverage Decision
The Health Care Financing Administration ("HCFA"), the Agency of the Federal
Government that administers Medicare, made a non-coverage decision for lung
volume reduction surgery ("LVRS"), a surgical treatment for late-stage
emphysema, that was effective January 1, 1996. This decision significantly
impacted the Company's revenue from sales of Peri-Strips. Peri-Strips, which
were cleared to market by the Food and Drug Administration in April of 1994, are
used to enable LVRS. At the time that this non-coverage decision was put into
effect, the Company estimates that approximately 70% of the patients undergoing
LVRS were Medicare patients. There has been no Medicare reimbursement for this
procedure since the January 1, 1996 effective date of the non-coverage decision.
While the Company understands that private insurance companies and managed care
organizations are currently reimbursing LVRS based on their own evaluation of
the procedure and its outcomes, it is unknown whether these private payers will
change their reimbursement practices in the future.
The National Institute of Health (NIH), in collaboration with HCFA, has outlined
and is in the process of organizing a seven year prospective, randomized study
of LVRS to determine whether it is safe and efficacious. The study, as it is
currently designed, is limited to 2,580 patients of which 1,380 would be
eligible to have the LVRS procedure. Members of Congress, responding to the
concerns of their constituents and supported by a significant number of
favorable peer-reviewed published medical articles bearing out the safety and
efficacy of LVRS, are questioning HCFA's study as it is currently planned.
Because HCFA and NIH appear intent on proceeding with the study, no assumption
can be made as to whether the efforts of Congress or the mounting evidence
regarding the benefits of this procedure will cause them to alter the study.
Results of Continuing Operations
Comparison of the Three Months Ended January 31, 1997 with
the Three Months Ended January 31, 1996
Net revenue (revenue) decreased 18% to $2,325,000 from $2,837,000, primarily due
to the decrease in Peri-Strips revenue resulting from the HCFA non- coverage
decision. Peri-Strips revenue decreased $745,000, or 49% to $762,000 from
$1,507,000. Revenue from sales of other Tissue-Guard products, Dura-Guard,
Vascu-Guard, Supple Peri-Guard and Peri-Guard, increased $227,000, or 40% to
$801,000 from $574,000. Increases in revenue from the sales of Dura-Guard and
Vascu-Guard provided the majority of the increase.
Revenue from sales of surgical productivity tools (Flo-Rester and the Bio-
Vascular Probe) increased
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
- -------------------------------------------------------------------------------
$78,000, or 16% to $557,000 from $479,000. The Company believes that Flo-
Resters are being used in minimally invasive coronary bypass surgery, a
procedure which is increasing.
The gross margin percentage was 57% in the 1997 quarter and 72% in the 1996
quarter. In fiscal 1996, the gross margin percentages declined through the
quarters, primarily due to decreases in the production volume in response to
decreases in expected demand for Peri-Strips as a result of the HCFA decision.
The gross margin percentage was 62% by the fourth quarter of 1996. It is
expected that the gross margin percentage will increase slightly during the year
from the first quarter level, due to anticipated increases in production volume.
This forward looking statement will be influenced primarily by the Company's
current estimates of production volume for 1997, and would be impacted by
significant increases or decreases in estimated production volume, by material
changes in the Company's product mix and by the accuracy of the Company's
estimates of standard costs.
Selling, general and administrative expense decreased 4% to $1,176,000 from
$1,229,000. General and administrative expense increased $29,000 or 5%,
primarily due to additional regulatory personnel and activities, while selling
expense decreased $81,000, or 13%. The majority of the decrease in selling
expense was due to a reduction in program expenses.
Research and development ("R&D") expense was level at $214,000 for both the 1997
and 1996 quarter. The Company has several projects under development and R&D
expense is expected to increase as these projects progress. This forward
looking statement is influenced primarily by the number of projects, the
development path of each, the expected costs, and the timing of these costs.
The decrease in revenue combined with lower margins, resulted in an operating
loss of $68,000 in the 1997 quarter compared to operating income of $592,000 in
the 1996 quarter.
Continuing operations had an operating loss in the 1997 quarter of $68,000
compared to operating income from continuing operations of $592,000 in the 1996
quarter. Other income, primarily interest income, was $282,000 and $273,000 in
the 1997 and 1996 quarters, respectively. As a result, continuing operations
had income before income taxes in the 1997 and 1996 quarters of $213,000 and
$865,000, respectively.
The Company recorded a provision for income taxes of $89,000 for the 1997
quarter, which is based on the Company's estimate of its annual rate for fiscal
1997. In the 1996 quarter, the Company allocated its provision for income taxes
to continuing and discontinued operations based on their respective pretax
income contribution and tax attributes. As a result, the amount of the
provision allocated to continuing operations in the 1996 quarter was $341,000.
Income from continuing operations was $124,000, or $0.01 per share for the 1997
quarter and $524,000, or $0.05 per share for the 1996 quarter. Additionally,
the loss from discontinued operations in the 1996 quarter was $319,000, or
$0.03 per share, resulting in net income for the 1996 quarter of $205,000, or
$0.02 per share.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
- -------------------------------------------------------------------------------
Liquidity and Capital Resources
In anticipation of the Distribution, Bio-Vascular agreed to assign to Vital
Images, $10,000,000 in cash, cash equivalents and marketable securities,
effective November 1, 1996 and to contribute the intercompany debt existing on
that date to Vital Images. Subsequently, Bio-Vascular's Board of Directors
determined to make such additional capital contributions to Vital Images as
necessary to bring Vital Images' cash, cash equivalents, marketable securities
balances to a combined $10,000,000 and to contribute any additional intercompany
debt owed by Vital Images on the Distribution Date. This additional
contribution is estimated to be approximately $1,600,000 and would result in
Bio-Vascular retaining approximately $18,347,000 in cash, cash equivalents and
marketable securities at the Distribution Date. The actual amount of additional
contribution and the resulting cash, cash equivalents and marketable securities
retained by Bio-Vascular may be more or less than the estimate.
Cash, cash equivalents and marketable securities totaled $19,947,000 at January
31, 1997, after the assignment of $10,000,000 to Vital Images, as compared to
cash, cash equivalents and marketable securities of $29,671,000 at October 31,
1996.
Operating activities provided $228,000. Additionally, $238,000 was invested in
equipment and leasehold improvements primarily related to new manufacturing
processes related to both an existing and a new product. Financing activities
provided $116,000 and represents stock option exercises, net of restricted stock
repurchased.
Historically, the cash needs of the Company have been met by cash generated from
operations and investments. The Company believes the $18,347,000 of cash, cash
equivalents and marketable securities estimated to be available at the
Distribution Date, along with cash provided by continuing operations, will be
sufficient to satisfy its cash requirements for the foreseeable future.
Certain Important Factors
This Form 10-Q contains certain forward-looking statements. For this purpose,
any statements contained in this Form 10-Q that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"estimate", or "continue" or comparable terminology are intended forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, and actual results may differ materially depending on a variety
of factors, including the availability of third party reimbursement, the extent
to which the Company's products gain market acceptance, litigation regarding
patent and other intellectual property rights, the introduction of competitive
products by others, the progress of product development and clinical studies,
and the receipt and timing of regulatory approvals, among others.
12
<PAGE>
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits to this quarterly report on Form 10-Q are listed in
the exhibit index beginning on page 15 of this report.
(b) Form 8-K. During the quarter ended January 31, 1997, the Company filed
one Current Report on Form 8-K, dated November 26, 1996, reporting Item 5 -
Other Information.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIO-VASCULAR, INC.
March 17, 1997 /s/ M. Karen Gilles
--------------------------------------------
M. Karen Gilles
Vice President of Finance/CFO
(Principal Financial Officer)
14
<PAGE>
BIO-VASCULAR, INC.
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
3.1 Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.2 to the Company's registration statement on Form 10
(File No. 0-13907)).
3.2 Amendment to Restated Articles of Incorporation of the Company dated June
21, 1995 (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (File No. 33-62199)).
3.3 Amended and Restated Bylaws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No.
33-74750)).
4.1 Form of common stock Certificate of the Company (incorporated by reference
to Exhibit 4.1 to the Company's registration statement on Form 10 (File No.
0-13907)).
4.2 Form of Rights Agreement, dated as of June 12, 1996, between Bio-Vascular,
Inc. and American Stock Transfer & Trust Company, which includes as Exhibit
A the form of Rights Certificate (incorporated by reference to Exhibit 4.1
to the Company's Current Report on Form 8-K dated June 12, 1996 (File No.
0-13907)).
4.3 Restated Articles of Incorporation of the Company (see Exhibit 3.1).
4.4 Amendment to Restated Articles of Incorporation of the Company dated June
21, 1995 (see Exhibit 3.2).
4.5 Amended and Restated Bylaws of the Company (see Exhibit 3.3).
11.1 Computation of income per share. Filed herewith electronically.
27.1 Financial Data Schedule for the three month period ended January 31, 1997.
Filed herewith electronically.
27.2 Restated Financial Data Schedule for the three month period ended January
31, 1996. Filed herewith electronically.
15
<PAGE>
EXHIBIT 11.1
BIO-VASCULAR, INC.
COMPUTATION OF INCOME (LOSS) PER SHARE
(In thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
----------------------
(unaudited)
1997 1996
---------- ----------
<S> <C> <C>
Net Income (loss) data:
Income from continuing operations.......................................... 125 524
Income from discontinued operations........................................ -- (319)
--------- ---------
Net income................................................................. $ 125 $ 205
========= =========
Net income (loss) per common and common
equivalent share, primary:
Continuing operations...................................................... .01 .05
Discontinued operations.................................................... -- (.03)
--------- ---------
Net income................................................................. $ .01 $ .02
========= =========
Net income (loss) per common and common
equivalent share, fully diluted:
Continuing operations...................................................... .01 .05
Discontinued operations.................................................... -- (.03)
--------- ---------
Net income................................................................... $ .01 $ .02
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES
Primary:
Weighted average number of common shares
outstanding................................................................ 9,532,868 9,383,526
Common equivalent shares:
Dilutive stock options and warrants, using Treasury
Stock Method............................................................. 296,256 544,752
--------- ---------
9,829,124 9,928,278
========= =========
Weighted average number of common shares
outstanding................................................................ 9,532,868 9,383,526
Common equivalent shares:
Dilutive stock options and warrants, using Treasury
Stock Method............................................................. 296,273 545,207
--------- ---------
9,829,141 9,928,733
========= =========
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the financial statements and related notes for the period ended January 31, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 3,967,041
<SECURITIES> 15,980,419
<RECEIVABLES> 1,642,107
<ALLOWANCES> 22,900
<INVENTORY> 1,698,361
<CURRENT-ASSETS> 18,089,550
<PP&E> 2,475,740
<DEPRECIATION> 949,052
<TOTAL-ASSETS> 37,660,573
<CURRENT-LIABILITIES> 2,048,868
<BONDS> 0
<COMMON> 94,995
0
0
<OTHER-SE> 35,516,710
<TOTAL-LIABILITY-AND-EQUITY> 37,660,573
<SALES> 2,325,442
<TOTAL-REVENUES> 2,325,442
<CGS> 1,004,040
<TOTAL-COSTS> 1,389,864
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 213,558
<INCOME-TAX> 89,000
<INCOME-CONTINUING> 124,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,558
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the financial statements and related notes for the period ended January 31, 1996
and the financial statements and related notes for the period ended January 31,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 9,731,736
<SECURITIES> 19,228,811
<RECEIVABLES> 2,054,727
<ALLOWANCES> 49,300
<INVENTORY> 2,293,168
<CURRENT-ASSETS> 17,624,810
<PP&E> 3,347,651
<DEPRECIATION> 3,347,651
<TOTAL-ASSETS> 36,889,620
<CURRENT-LIABILITIES> 1,302,986
<BONDS> 0
<COMMON> 93,940
0
0
<OTHER-SE> 35,492,694
<TOTAL-LIABILITY-AND-EQUITY> 36,889,620
<SALES> 2,836,725
<TOTAL-REVENUES> 2,836,725
<CGS> 802,290
<TOTAL-COSTS> 1,442,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 865,029
<INCOME-TAX> 341,000
<INCOME-CONTINUING> 524,029
<DISCONTINUED> (318,637)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 205,392
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
