SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997 Commission File Number 0-21104
CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)
---------
Florida 59-2417093
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1655 Roberts Boulevard, NW
Kennesaw, Georgia 30144
(Address of principal executive offices)
(zip code)
(770) 419-3355
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
The number of shares of common stock, par value $0.01 per share, outstanding on
July 30, 1997 was 9,669,000.
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial statements
CRYOLIFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1997 1996 1997 1996
------------------------- ------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Cryopreservation and products $12,641,000 $9,619,000 $23,024,000 17,879,000
Research grants, licenses, leases,
interest income, and other 82,000 79,000 112,000 253,000
------------------------- --------------------------
12,723,000 9,698,000 23,136,000 18,132,000
Costs and expenses:
Cost of preservation and products 4,550,000 3,289,000 7,976,000 6,168,000
General, administrative and marketing 5,165,000 4,181,000 9,644,000 7,807,000
Research and development 857,000 701,000 1,706,000 1,391,000
Interest expense 296,000 -- 428,000 --
------------------------- --------------------------
10,868,000 8,171,000 19,754,000 15,366,000
-------------------------------------------------------
Income before income taxes 1,855,000 1,527,000 3,382,000 2,766,000
Income taxes 695,000 539,000 1,270,000 995,000
------------------------- --------------------------
Net income $ 1,160,000 $ 988,000 $ 2,112,000 $ 1,771,000
========================= ==========================
Earnings per share of common stock $ 0.12 $ 0.10 $ 0.21 $ 0.18
========================= ==========================
Weighted average common and common
equivalent shares outstanding 9,888,000 9,933,000 9,881,000 9,876,000
========================= ==========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
Item 1. Financial Statements
CRYOLIFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 208,000 $ 1,370,000
Marketable securities 41,000 43,000
Trade receivables (net) 7,936,000 6,572,000
Other receivables 384,000 1,625,000
Deferred preservation costs 10,040,000 7,178,000
Inventories 1,257,000 260,000
Prepaid expenses 1,640,000 846,000
Deferred income taxes 286,000 287,000
-----------------------------------
Total current assets 21,792,000 18,181,000
-----------------------------------
Property and equipment (net) 12,792,000 11,567,000
Goodwill (net) 8,554,000 1,846,000
Other intangibles (net) 4,799,000 3,379,000
-----------------------------------
TOTAL ASSETS $ 47,937,000 $ 34,973,000
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,012,000 $ 3,696,000
Accrued expenses 907,000 934,000
Accrued procurement fees 1,846,000 1,210,000
Accrued compensation 853,000 878,000
Current maturities of debt 478,000 527,000
Income taxes payable 69,000 --
-----------------------------------
Total current liabilities 5,165,000 7,245,000
-----------------------------------
Other long term liabilities 15,429,000 2,799,000
-----------------------------------
Total liabilities 20,594,000 10,044,000
-----------------------------------
Shareholders' equity:
Preferred stock -- --
Common stock (issued 10,195,000
shares in 1997 and
10,110,000 shares in 1996) 102,000 101,000
Additional paid-in capital 17,445,000 17,128,000
Retained earnings 10,014,000 7,902,000
Less: Unrealized gain on investments (1,000) (1,000)
Treasury stock (543,000 shares) (180,000) (180,000)
Notes receivable from shareholders (37,000) (21,000)
-----------------------------------
Total shareholders' equity 27,343,000 24,929,000
-----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 47,937,000 $ 34,973,000
===================================
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Item 1. Financial Statements
CRYOLIFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
-----------------------------------
(Unaudited)
<S> <C> <C>
Net cash flows provided by (used in) operating activities:
Net income $ 2,112,000 $ 1,771,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,593,000 638,000
Provision for doubtful accounts 15,000 28,000
Deferred income taxes (1,000) (97,000)
Receivables 822,000 (2,125,000)
Deferred preservation costs and inventories (3,222,000) (435,000)
Prepaid expenses and other assets (737,000) (343,000)
Accounts payable and accrued expenses (2,922,000) 716,000
-----------------------------------
Net cash flows provided by (used in) operating activities (2,338,000) 153,000
-----------------------------------
Net cash flows used in investing activities:
Capital expenditures (2,571,000) (1,811,000)
Other assets 280,000 (1,045,000)
Cash paid for acquisition, net of cash acquired (4,418,000) --
Proceeds from other long term liabilities -- 644,000
Net sales of marketable securities 2,000 1,698,000
-----------------------------------
Net cash flows used in investing activities (6,707,000) (514,000)
-----------------------------------
Net cash flows provided by financing activities:
Proceeds from borrowings on revolving term loan 7,581,000 --
Proceeds from issuance of common stock and
notes receivable from shareholders, net 302,000 252,000
-----------------------------------
Net cash provided by financing activities 7,883,000 252,000
-----------------------------------
Decrease in cash (1,162,000) (109,000)
Cash and cash equivalents at beginning of period 1,370,000 167,000
-----------------------------------
Cash and cash equivalents at end of period $ 208,000 $ 58,000
===================================
Supplemental cash flow information
Non-cash investing and financing activities:
Fair value of assets acquired $ 1,768,000 --
Cost in excess of assets acquired 8,541,000 --
Liabilities assumed (891,000) --
Debt issued for assets acquired (5,000,000) --
Net cash paid for acquisition $ 4,418,000 --
===================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CRYOLIFE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with (i) generally accepted accounting principles for
interim financial information and (ii) the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial presentations. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. Operating results for the three and six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the year ended December 31, 1996.
NOTE 2 - ACQUISITION OF IDEAS FOR MEDICINE
On March 5, 1997, the Company acquired the stock of Ideas for Medicine, Inc.
(IFM) of Clearwater, Florida, a medical device company specializing in the
manufacture and distribution of single use cardiovascular products, for
consideration of approximately $4.5 million in cash and approximately $5 million
in convertible debentures plus related expenses. The cash portion of the
purchase price was financed by borrowings under the Company's Revolving Term
Loan Agreement. The acquisition has been accounted for as a purchase. Based on
the preliminary allocation of the purchase price, the Company's unaudited pro
forma results of operations for the six months ended June 30, 1997 and June 30,
1996, assuming the consummation of the purchase and issuance of the convertible
debentures as of January 1, 1997 and 1996, respectively, are as follows:
Six Months Ended June 30
1997 1996
---- ----
Net sales $24,349,000 $21,477,000
Net income $2,143,000 $1,601,000
Net income per common share $0.22 $0.16
NOTE 3 - INVENTORY
Inventory consists of the following:
June 30, December 31,
1997 1996
---- ----
Raw materials $ 286,000 $ --
Work in process 102,000 --
Finished goods 869,000 260,000
----------- -------
$1,257,000 $260,000
========== ========
5
<PAGE>
NOTE 4 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share for the quarters ended June 30,
1997 and 1996 is not material.
6
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Revenues were $12.7 million and $23.1 million for the three and six months ended
June 30, 1997, respectively, compared to $9.7 million and $18.1 million for the
corresponding periods in 1996. Revenues increased 31% and 28% for the three and
six months ended June 30, 1997, respectively, compared to the corresponding
periods in 1996. Revenues for the three and six months ended June 30, 1997
included $1.6 million and $2.1 million attributable to the acquisition of IFM.
The remaining revenue increases are due to greater allograft shipments resulting
from increased demand, and a general cryopreservation fee increase in January
1997.
Revenues from human heart valve preservation increased 11% to $7.3 million for
the three months ended June 30, 1997 from $6.6 million for the three months
ended June 30, 1996, representing 57% and 68% of total revenues, respectively.
For the six months ended June 30, revenues from human heart valve preservation
increased 14% to $13.8 million for 1997 from $12.1 million for 1996,
representing 60% and 67% of total revenue, respectively. Shipments of human
heart valves increased 12% for the three months ended June 30, 1997 and
increased 14% for the six months ended June 30, 1997 as compared to the same
periods for 1996, due to an increase in demand.
Revenues from vein preservation increased 24% to $2.6 million for the three
months ended June 30, 1997 from $2.1 million for the three months ended June 30,
1996, representing 20% and 22% of total revenues, respectively. For the six
months ended June 30, revenues from vein preservation increased 31% to $5.1
million for 1997 from $3.9 million for 1996, representing 22% of total revenue
for each period. Shipments of veins increased 20% for the three months ended
June 30, 1997 and increased 30% for the six months ended June 30, 1997 as
compared to the same periods for 1996, due to an increase in demand.
Revenues from orthopedic tissue preservation increased 12% to $1.0 million for
the three months ended June 30, 1997 from $896,000 for the three months ended
June 30, 1996, representing 8% and 9% of total revenues, respectively. For the
six months ended June 30, revenues from orthopedic tissue preservation were $1.7
million for 1997 and 1996, representing 7% and 9% of total revenue,
respectively. Shipments of orthopedic tissue increased 8% for the three months
ended June 30, 1997 as compared to the same period for 1996 due to an increased
in demand. Shipments of orthopedic tissue decreased 1% for the six months ended
June 30, 1997 as compared to the same periods for 1996, due to limited
availability of tissue in the first quarter of 1997 as compared to the first
quarter of 1996.
Other revenues were $83,000 for the three months ended June 30, 1997 compared to
$77,000 for the three months ended June 30, 1996, representing 1% of total
revenues for both periods. For the six months ended June 30, other revenues were
$111,000 for 1997 compared to $253,000 for 1996, representing less than 1% of
total revenues. Other revenues consist primarily of research grant award
revenues and interest income. Research grant award revenues are primarily
related to the bioadhesive and synergraft projects.
Cost of preservation and products aggregated $4.6 million and $8.0 million,
respectively, for the three and six months ended June 30, 1997, representing 36%
and 35% of total revenues, respectively, compared to $3.3 million and $6.2
million, respectively, for the three and six months ended June 30, 1996,
representing 34% of total revenues for both periods. Cost of preservation and
products increased 39% for second quarter 1997 compared to second quarter 1996
and increased 29% for the first half of 1997 compared to the first half of 1996.
The increase relates to an increase in costs associated with the revenues
generated by IFM, partially offset by the general cryopreservation fee increase
and efficiencies resulting from an increase in units processed.
7
<PAGE>
General, administrative, and marketing expenses aggregated $5.2 million and $9.6
million, respectively, for the three and six months ended June 30, 1997,
representing 41% and 42% of total revenues, respectively, compared to $4.2
million and $7.8 million, respectively, for the three and six months ended June
30, 1996, representing 43% of total revenues for both periods.
Research and development expenses aggregated $857,000 and $1.7 million,
respectively, for the three and six months ended June 30, 1997, representing 7%
of total revenues for both periods, compared to $701,000 and $1.4 million,
respectively, for the three and six months ended June 30, 1996, representing 7%
and 8% of total revenues, respectively. Research and development spending
relates principally to the Company's focus on bioadhesives and synergraft
technologies.
Seasonality
The demand for the Company's human heart valve tissue preservation services is
seasonal, with peak demand generally occurring in the second and third quarters.
Management believes this demand trend for human heart valves is primarily due to
the high number of pediatric surgeries scheduled during the summer months.
Liquidity and Capital Resources
At June 30, 1997 net working capital was $16.6 million, compared to $10.9
million at December 31, 1996, with a current ratio of 4.2 to 1 at June 30, 1997.
Shareholders' equity at June 30, 1997 was $27.3 million. The Company's primary
capital requirements arise out of working capital needs, including receivables
and deferred preservation costs, capital expenditures for facilities and
equipment, and funding of research and development projects. The increase in
receivables results from the increase in revenue and from the acquisition of
IFM. The increase in deferred preservation costs results from an increase in the
amount of tissue procured. The increase in inventory results primarily from the
acquisition of IFM. The increase in prepaid expenses relates primarily to
prepaid insurance premiums. The increase in other assets results primarily from
intangible assets associated with the acquisition of IFM. The decrease in
accounts payable results from payment of amounts associated with the
construction of and equipping of the Company's new corporate headquarters. The
increase in debt results from borrowing on the Company's revolving term loan
facility and from the issuance of convertible debentures, which are associated
with the acquisition of IFM and with the construction of the new corporate
headquarters.
The Company is currently in negotiations with a bank to increase its borrowing
capacity; however, the Company believes that its current borrowing capacity
along with cash generated from operations will be sufficient to meet its
operating and development needs for the next 12 months, including the $1 million
committed for the construction of a new manufacturing/office facility for IFM,
the interest resulting from the convertible debentures issued in connection with
the IFM acquisition and any stock repurchases made under the Company's potential
repurchase of up to 500,000 shares of its Common Stock, authorized on April 2,
1997.
8
<PAGE>
Forward-Looking Statements
Statements made in this Form 10-Q for the three and six months ended June 30,
1997 that state the Company's or management's intentions, hopes, beliefs,
expectations or predictions of the future are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. It is
important to note that the Company's actual results could differ materially from
those contained in such forward-looking statements as a result of adverse
changes in any of a number of factors that affect the Company's business,
including without limitation, changes in (1) government regulation of the
Company's business, (2) the Company's competitive position, (3) the availability
of tissue for implant, (4) the status of the Company's products under
development, (5) the protection of the Company's proprietary technology, (6) the
reimbursement of health care costs by third-party payers and (7) the Company's
ability to successfully integrate the operations of IFM. See the "Business-Risk
Factors" section of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 for a more detailed discussion of these and other factors
which might affect the Company's future performance.
Item 3. Qualitative and Quantitative Discussion About Market Risk.
Not Applicable.
9
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders was held on May 15, 1997.
(b) Management's nominees for director were elected at the meeting by
the holders of common stock. The election was uncontested.
(c) The following table shows the results of voting in the election
of Directors:
Shares Voted For Authority Withheld
Steven G. Anderson 8,650,288 65,218
Ronald C. Elkins, M.D. 8,687,868 27,638
Benjamin H. Gray 8,687,868 27,638
Rodney G. Lacy 8,864,968 30,538
Ronald D. McCall, Esq. 8,687,068 28,438
Item 5. Other information.
On July 19th, 1997 Rodney G. Lacy, a member of the Company's Board of
Directors, passed away. The Company is currently searching for a
replacement to fulfill Mr. Lacy's term, which expires in May 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibit index can be found below.
Exhibit
Number Description
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.)
10
<PAGE>
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.)
10.1 First Amendment of Third Amended and Restated Loan Agreement between
CryoLife, Inc., as Borrower and NationsBank, N.A. (South), as Lender,
dated April 14, 1997.
11.1 Statement re: computation of earnings per share
27.1 Financial Data Schedule
(b) Current Reports on Form 8-K.
The Registrant filed a Current Report on Form 8-K with respect to the
acquisition of IFM with the Securities and Exchange Commission on March
19, 1997, which was subsequently amended by Registrant's Amendment to
Current Report on Form 8-K/A filed with the Securities and Exchange
Commission on May 15, 1997.
11
<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.
CRYOLIFE, INC.
(Registrant)
August 14, 1997 /s/ EDWIN B. CORDELL, JR..
- ------------------ ----------------------------------
DATE EDWIN B. CORDELL, JR.
Vice President and Chief Financial
Officer
(Principal Financial and
Accounting Officer)
12
FIRST MODIFICATION OF
THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS MODIFICATION is made and entered into as of the 14th day of April,
1997, by and between CRYOLIFE, INC., a Florida corporation ("Borrower"), and
NATIONSBANK, N.A. (SOUTH), a national banking association which is the successor
by merger to Bank South, formerly known as Bank South, N.A. ("Lender").
STATEMENT OF FACTS
Borrower and Lender are parties to a Third Amended and Restated Loan
Agreement, dated as of August 30, 1996 (the "Loan Agreement").
Borrower and Lender desire to amend the Loan Agreement as hereinafter
provided.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements, warranties and representations herein made, as well as $10.00 in
hand paid by each party hereto to the other, and other good and valuable
consideration, the receipt and sufficiency which are hereby acknowledged,
Borrower and Lender agree that all capitalized terms used herein (and not
otherwise defined herein) shall have the meanings given them in the Loan
Agreement as herein amended and Borrower and Lender further agree as follows:
STATEMENT OF TERMS
1. The Loan Agreement is hereby amended by adding the following new
definitions to Section 101 thereof:
"Subordinated Debt" means any and all Indebtedness of Borrower that is
expressly subordinated in right of payment to the Loans, including without
limitation the Subordinated Debenture.
"Subordinated Debenture" means the Subordinated Convertible Debenture of
Borrower, dated March 5, 1997, issued to J. Clayton Pruitt, Sr., M.D., in
the principal face amount of $4,999,999, and any extensions, renewals,
modifications or substitutions thereof or therefor.
2. The Loan Agreement is hereby further amended by adding a new Section 509
thereto, immediately following Section 508 thereof:
Section 509. Subordinated Debt. None of the Credit Parties shall make
any payment of any part or all of any Subordinated Debt
<PAGE>
in violation of the subordination agreement relating to such Subordinated
Debt or voluntarily prepay any Subordinated Debt (provided that, so long as
no Default or Event of Default shall then exist or would be caused thereby,
Borrower may prepay the Subordinated Debenture in accordance with its
terms); or enter into any agreement (oral or written) which could in any
way be construed to amend, modify, alter or terminate any one or more
instruments or agreements, evidencing or relating to any Subordinated Debt.
3. The Loan Agreement is hereby further amended by deleting Schedules 301
and 508 originally attached to the Loan Agreement and substituting in lieu
thereof the Schedules 301 and 508 attached hereto.
4. The effectiveness of this Modification is subject to:
(a) the prior or concurrent receipt by Lender of this Modification, duly
executed by Borrower;
(b) the prior or concurrent receipt by Lender of all documentation
required to be delivered under Section 202(c) of the Loan Agreement
in connection with the acquisition of Ideas for Medicine, Inc.;
(c) any and all guarantors of the Loans shall have consented to the
execution, delivery and performance of this Modification and all of
the transactions contemplated hereby by signing one or more
counterparts of this Modification in the appropriate space indicated
below and returning same to Lender; and
(d) the truth and accuracy in all material respects of Borrower's
representations and warranties in Section 6 below.
5. Except as expressly modified herein, the Loan Agreement shall remain in
full force and effect. Nothing contained herein shall be deemed to be or operate
as a novation or an accord and satisfaction of the Loan Agreement or of any
indebtedness arising thereunder.
6. Borrower hereby represents and warrants to Lender that (a) this
Modification and the supplemental Financing Documents executed in connection
herewith have been duly authorized, executed and delivered by Borrower, (b)
after giving effect to this Modification, no Default or Event of Default has
occurred and is continuing as of this date and (c) all of the representations
and warranties made by Borrower in the Loan Agreement are true and correct in
all material respects on and as of the date of this Modification (except to the
extent that any such representations or warranties expressly referred to a
specific prior date). Any breach by Borrower of its representations and
warranties contained in this Section shall be an Event of Default for all
purposes of the Loan Agreement.
<PAGE>
7. This Modification shall be governed and construed in accordance with the
laws of the State of Georgia and this Modification shall inure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
permitted assigns.
8. This Modification may be executed in multiple counterparts, each of
which shall be deemed to be an original and all of which when taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Lender has executed this Modification, and Borrower has
executed this Modification and placed its seal hereon, all as of the day and
year first above set forth.
LENDER:
NATIONSBANK, N.A. (SOUTH)
By:_________________________________
Assistant Vice President
BORROWER:
CRYOLIFE, INC.
By:_________________________________
Title:___________________________
(CORPORATE SEAL)
<PAGE>
SCHEDULE 301
------------
SUBSIDIARIES
CryoLife International, Inc.
Ideas for Medicine, Inc. (formerly known as CryoLife Acquisition Corporation)
<PAGE>
SCHEDULE 508
------------
PERMITTED FUNDED DEBT
1. Indebtedness incurred by Borrower in connection with its acquisition of all
or substantially all of the assets of United Cryopreservation Foundation,
Inc., not to exceed $1,250,000.
2. Indebtedness evidenced by the Subordinated Debenture.
3. Indebtedness arising in connection with the purchase of the bio-glue
technology, in the amount of $445,816 (the "Kowanko Note").
462873.1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 9,615,000 9,491,000 9,598,000 9,462,000
Neteffect of dilutive stock options
based on the treasury stock method
using the greater of quarter-end
market price or average market price 273,000 442,000 284,000 414,000
----------- ---------- ---------- --------
Totals 9,888,000 9,933,000 9,882,000 9,876,000
=========== =========== ========== =========
Net Income $1,160,000 $ 988,000 2,112,000 $1,771,000
=========== ========== ========== =========
Per share amount $.12 $.10 $.21 $.18
=========== ========== ========== =========
Fully diluted:
Average shares outstanding 9,615,000 9,491,000 9,598,000 9,462,000
Net effect of dilutive stock options
based on the treasury stock method
using the greater of quarter-end
market price or average market price 320,000 474,000 328,000 498,000
Totals 9,935,000 9,965,000 9,926,000 9,960,000
============ =========== ========== ==========
Net Income $1,160,000 $988,000 $2,112,000 $1,771,000
============ =========== ========== ==========
Per share amount $.12 $.10 $.21 $.18
============ ============== ========== ==========
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
CONSOLIDATED BALANCE SHEET OF CRYOLIFE, INC. AS OF JUNE 30, 1997 AND THE RELATED
UNAUDITED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000784199
<NAME> CRYOLIFE, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 208,000
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<BONDS> 5,000,000
0
0
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<CGS> 1,291,000
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<OTHER-EXPENSES> 11,350,000
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<EXTRAORDINARY> 0
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<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
