<PAGE> 1
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 March 31, 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 No. 0-22958
INTERPORE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3043318
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
181 TECHNOLOGY DRIVE, IRVINE, CALIFORNIA 92618-2402
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 453-3200
Interpore International
- --------------------------------------------------------------------------------
(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 proceeding 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 |_|
As of May 6, 1998, there were 7,114,898 shares of the registrant's
common stock issued and outstanding.
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Interpore International, Inc.
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page(s)
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<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1998 (unaudited) and December 31, 1997 .............. 3
Condensed Consolidated Statements of Income (unaudited)
for the three month periods ended March 31, 1998 and
March 31, 1997 ................................................ 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the three month periods ended March 31, 1998 and
March 31, 1997 ................................................ 5
Notes to Condensed Consolidated Financial Statements .......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................. 10
</TABLE>
2
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Interpore International, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,680 $ 10,221
Short-term investments 1,970 3,326
Accounts receivable, less allowance for doubtful
accounts of $209 and $204 in 1998 and 1997,
respectively 2,369 2,286
Inventories 1,811 1,915
Prepaid expenses 650 438
Deferred income taxes 571 571
Other current assets 46 756
-------- --------
Total current assets 20,097 19,513
Property, plant and equipment, net 581 580
Deferred income taxes 2,639 2,639
Other assets 44 44
======== ========
Total assets $ 23,361 $ 22,776
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 193 $ 102
Accrued compensation and related expenses 410 758
Accrued sales taxes 112 114
Deferred rent payable 5 10
Other accrued liabilities 159 156
Current portion of long-term debt -- --
-------- --------
Total current liabilities 879 1,140
-------- --------
Contingencies
Shareholders' equity:
Series E convertible preferred stock, voting, no
par value: Authorized, issued and outstanding shares -
32,906 at March 31, 1998 and December 31, 1997;
aggregate liquidation value of $247 at March 31, 1998
and December 31, 1997 208 208
Preferred stock: Authorized shares - 296,358; issued and
outstanding shares - none -- --
Common stock, no par value: Authorized shares -
20,000,000; issued and outstanding shares - 7,110,898 at
March 31, 1998 and 7,104,538 at December 31, 1997 36,049 36,043
Accumulated deficit (13,775) (14,615)
-------- --------
Total shareholders' equity 22,482 21,636
======== ========
Total liabilities and shareholders' equity $ 23,361 $ 22,776
======== ========
</TABLE>
See accompanying notes.
3
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Interpore International, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
Net sales $ 3,707 $ 4,725
Cost of goods sold 548 1,303
---------------- ---------------
Gross profit 3,159 3,422
---------------- ---------------
Operating expenses:
Research and development 492 529
Selling and marketing 1,487 2,247
General and administrative 537 619
Merger related expenses 68 -
---------------- ---------------
Total operating expenses 2,584 3,395
---------------- ---------------
Income from operations 575 27
---------------- ---------------
Interest income 200 139
Interest expense - (4)
Other income 65 97
---------------- ---------------
Total interest and other income, net 265 232
---------------- ---------------
Income before taxes 840 259
Income tax provision - -
================ ===============
Net income $ 840 $ 259
================ ===============
Net income per share:
Basic $ .12 $ .04
================ ===============
Diluted $ .11 $ .04
================ ===============
Shares used in computing net income per share:
Basic 7,107 6,963
Diluted 7,496 7,316
</TABLE>
See accompanying notes.
4
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Interpore International, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 840 $ 259
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 80 96
Changes in operating assets and liabilities:
Accounts receivable (83) 623
Inventories 104 101
Prepaid expenses (212) (274)
Other assets 710 (18)
Accounts payable 91 150
Accrued liabilities (352) (15)
-------- --------
Net cash provided by operating activities 1,178 922
-------- --------
INVESTING ACTIVITIES
Sales of short-term investments, net 1,356 1,166
Capital expenditures (81) (14)
-------- --------
Net cash provided by investing activities 1,275 1,152
-------- --------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 6 27
Repayment of lease financing -- (2)
-------- --------
Net cash provided by financing activities 6 25
-------- --------
Net increase in cash and cash equivalents 2,459 2,099
Cash and cash equivalents at beginning of period 10,221 6,112
======== ========
Cash and cash equivalents at end of period $ 12,680 $ 8,211
======== ========
</TABLE>
See accompanying notes.
5
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Interpore International, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by Interpore International, Inc. (the "Company") without audit,
pursuant to Securities and Exchange Commission regulations. In the opinion of
management, the accompanying condensed consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position at March 31, 1998 and the
results of operations and cash flows for the three month periods ended March 31,
1998 and 1997.
The accompanying condensed consolidated financial statements include the
accounts of the Company and its subsidiaries, Interpore Orthopaedics, Inc. and
Interpore Acquisition Corporation, Inc., after elimination of all significant
intercompany transactions.
The results of operations and cash flows for the three months ended March 31,
1998 are not necessarily indicative of results to be expected for the full year.
These consolidated financial statements should be read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, as filed with the Securities and Exchange
Commission.
2. INVENTORIES
Inventories are stated at the lower of average cost or market. Inventories are
comprised of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------ ------
<S> <C> <C>
Raw materials $ 521 $ 540
Work-in-process 189 227
Finished goods 1,101 1,148
------ ------
$1,811 $1,915
====== ======
</TABLE>
3. CONTINGENCIES
In the ordinary course of its business, the Company is subject to legal
proceedings, claims and liabilities, including product liability matters. In the
opinion of management, the amount of ultimate liability with respect to any
known proceedings or claims will not materially affect the financial position or
results of operations of the Company.
6
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4. SALE OF ASSETS
In April 1997, the Company entered into a definitive agreement for the sale of
its dental implant business to Steri-Oss Inc. of Yorba Linda, California. In May
1997, the sale was completed, and the Company received an initial cash payment
of $1.5 million. A deferred cash payment of $749,000 was received in March 1998.
The transaction, including associated costs, resulted in a net charge of
$617,000 in the second quarter of 1997.
5. BUSINESS COMBINATION
In February 1998, the Company entered into an agreement to merge with Cross
Medical Products, Inc., ("Cross") an Ohio-based worldwide supplier of spinal
implant systems used to treat degenerative conditions and deformities of the
spine. The merger was approved by the shareholders of both companies on May 6,
1998 and became effective on May 7, 1998. Approximately 6.7 million shares of
the Company's common stock will be issued in exchange for all of the common
stock of Cross. The merger will be accounted for as a pooling of interests.
The following table presents pro-forma information for the quarters ended March
31, 1998 and 1997 as if the combination had taken place as of the beginning of
the periods presented (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
------ ------
<S> <C> <C>
Net sales $7,370 $7,498
Net income from continuing operations $ 943 $ 82
Net income per share from continuing operations - basic $ .07 $ .01
Net income per share from continuing operations - diluted $ .07 $ .01
</TABLE>
In February 1998, the Board of Directors of the Company approved a proposal for
the Company to reincorporate from California to Delaware. The proposed
reincorporation was approved by the Company's shareholders and was completed on
May 6, 1998. In connection with the reincorporation, the Company's name was
changed from Interpore International to Interpore International, Inc.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIGNIFICANT EVENTS
In February 1998, the Company entered into an agreement to merge with Cross
Medical Products, Inc., ("Cross") an Ohio-based worldwide supplier of spinal
implant systems used to treat degenerative conditions and deformities of the
spine. The merger was approved by the shareholders of both companies on May 6,
1998 and became effective on May 7, 1998. Approximately 6.7 million shares of
the Company's common stock were exchanged for all of the common stock of Cross.
The merger will be accounted for as a pooling of interests.
In February 1998, the Board of Directors of the Company approved a proposal for
the Company to reincorporate from California to Delaware. The proposed
reincorporation was approved by the Company's shareholders and was completed on
May 6, 1998. In connection with the reincorporation, the Company's name was
changed from Interpore International to Interpore International, Inc.
In April 1997, the Company entered into a definitive agreement for the sale of
its dental business to Steri-Oss Inc. of Yorba Linda, California. In May 1997,
the sale was completed, and the Company received an initial cash payment of $1.5
million. A deferred cash payment of $749,000 was received in March 1998. As part
of the transaction, the Company and Steri-Oss negotiated a distribution
agreement whereby the Company manufactures and provides Interpore 200(R) Porous
Hydroxyapatite Bone Void Filler ("Interpore 200") for distribution by Steri-Oss
in the dental market. The transaction, including associated costs, resulted in a
net charge of $617,000 which was recorded in the quarter ended June 30, 1997.
RESULTS OF OPERATIONS
The following table presents the Company's results of operations as percentages:
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------
1998 1997 1998 vs. 1997
----- ----- -------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% (21.5%)
Cost of goods sold 14.8% 27.6% (57.9%)
----- ----- -----
Gross profit 85.2% 72.4% (7.7%)
----- ----- -----
Operating expense:
Research and development 13.3% 11.2% (7.0%)
Selling and marketing 40.1% 47.5% (33.8%)
General and administrative 14.5% 13.1% (2.3%)
Merger related expenses 1.8% -- n/a
----- ----- -----
Total operating expenses 69.7% 71.8% (23.9%)
----- ----- -----
Income from operations 15.5% .6% n/a
===== ===== =====
</TABLE>
8
<PAGE> 9
For the quarter ended March 31, 1998, net sales of $3.7 million were $1.0
million or 21.5% lower than sales of $4.7 million for the same period of 1997.
<TABLE>
<CAPTION>
Change
-----------------------
Quarter Ended March 31, 1998 1997 Amount %
--------- --------- --------- ------
<S> <C> <C> <C> <C>
Orthopaedic product sales... $ 3,599 $ 3,058 $ 541 17.7%
OEM product sales........... 108 223 (115) (51.6)%
--------- --------- --------- ------
Sub-total................... 3,707 3,281 426 13.0%
Dental product sales........ - 1,444 (1,444) (100.0%)
--------- --------- --------- ------
Total sales................. $ 3,707 $ 4,725 $ (1,018) (21.5%)
========= ========= ========= ======
</TABLE>
Sales of orthopaedic products, primarily Pro Osteon(R) bone graft substitute
material for orthopaedic applications, increased in the quarter ended March 31,
1998 by $541,000 or 17.7% to $3.6 million compared to $3.1 million for the first
quarter of 1997. Domestic sales of orthopaedic products increased 12.5% over the
first quarter of 1997. Domestic sales through direct sales representatives in
the first quarter of 1998 increased 27.1% while domestic sales through
independent distributors and agents decreased 11.1% compared to the first
quarter of 1997. In late 1997, the Company began an initiative to convert its
domestic distributors into agency relationships. Instead of purchasing products
from the Company and reselling them to hospitals, agents receive commissions on
sales in their territories which are billed directly to hospitals by the
Company. The initiation of this process in late 1997 resulted in reduced sales
to domestic distributors while they minimize their inventory levels in
preparation for this conversion. The process is expected to be substantially
completed, and may have a continued adverse effect on sales, in 1998.
International sales of orthopaedic products, made exclusively to distributors,
increased 57.8% between the respective quarters.
Sales of the Company's OEM products, which consist mostly of porous
hydroxyapatite material for dental applications and for orbital implants,
decreased by 51.6% in the quarter ended March 31, 1998 to $108,000 versus
$223,000 for the first quarter of 1997. This decrease resulted from reduced
orders of orbital implants which are manufactured for a single customer.
Sales of the Company's oral/maxillofacial products (titanium dental implant
systems and Interpore 200) declined by $1.4 million, reflecting the
discontinuance of dental product sales effective April 18, 1997. Sales of
Interpore 200 for dental use subsequent to the sale of the dental business are
classified as OEM product sales.
The gross margins as percentages of sales for the quarters ended March 31, 1998
and 1997 were 85.2% and 72.4%, respectively. The improvement reflects the
discontinuance of dental products sales which had lower gross margins than the
Company's remaining orthopaedic and OEM products, and which also had associated
royalty expense. In addition, gross margins were affected favorably by a first
quarter 1998 selling price increase on orthopaedic products, and by the
initiative to convert domestic distributors to agent relationships. Sales to
hospitals through agents are made at list price versus sales to distributors
which are made at a discount off list price.
Total operating expenses for the quarter ended March 31, 1998 decreased by 23.9%
or $811,000 as compared to the same quarter of 1997. Research and development
expenses decreased by 7.0% or $37,000. Selling and marketing expenses decreased
$760,000 or 33.8% compared to the first quarter of 1997 due to the elimination
of selling and marketing expenses directly related to the dental business.
9
<PAGE> 10
General and administrative expenses decreased by 2.3%, the result of cost
reductions following the sale of the dental business.
The increase in interest income resulted from higher cash and investment
balances while the decrease in other income primarily relates to a contract
under which the Company provided distribution services to another company during
the first quarter of 1997.
No income tax provision was recorded during the first quarters of 1998 and 1997
due to the anticipated utilization of the Company's net operating loss
carryforwards during the two periods.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 and December 31, 1997, cash, cash equivalents and short-term
investments totaled $14.7 million and $13.5 million, respectively. Total working
capital increased to $19.2 million from $18.4 million and the current ratio
improved to 22.9 from 17.1 at March 31, 1998 and December 31, 1997,
respectively. The increase in cash, cash equivalents and short-term investments
of $1.2 million was the result of the final payment received from the sale of
the dental business and positive cash flow from operations during the first
quarter of 1998.
The $14.7 million total of cash, cash equivalents and short-term investments
remains available to support the Company's continued investment in the
development of its business, including the pursuit of regulatory approvals for
additional indications for the use of Pro Osteon, development or acquisition of
new bone graft products or complementary products, and possible acquisitions of
businesses. Also, after the merger with Cross, the Company will use some of the
combined cash, cash equivalents and short- term investments of Interpore and
Cross to pay for transaction costs, costs associated with combining certain
operations of the company and costs associated with facility modifications. In
addition, the Company may be required to repurchase certain outstanding bonds
previously issued by Cross which currently total approximately $5 Million. At
March 31, 1998, Cross had approximately $1.7 million of cash and cash
equivalents. The Company has a $5 million revolving line of credit which expires
in July 1998 and which had no amount outstanding at March 31, 1998.
The Company believes it currently possesses sufficient resources to meet the
cash requirements of its operations for at least the next year.
10
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
Reference is made to the Exhibit Index on Page 13 hereof.
b. Reports on Form 8-K.
On February 11, 1998, the Company filed a report on Form 8-K with the
Securities and Exchange Commission describing an Agreement and Plan
of Merger between the Company, Buckeye International (a wholly-owned
subsidiary of the Company) and Cross Medical Products, Inc., pursuant
to which Buckeye International would merge with and into Cross, with
Cross becoming a wholly-owned subsidiary of the Company.
11
<PAGE> 12
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.
DATE: May 12, 1998 INTERPORE INTERNATIONAL, INC.
(Registrant)
By: /s/ David C. Mercer
--------------------------------
David C. Mercer,
Chairman and Chief
Executive Officer
By: /s/ Richard L. Harrison
--------------------------------
Richard L. Harrison
Sr. Vice President and
Chief Financial Officer
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
3.01 Certificate of Incorporation of Interpore Delaware, Inc.(11)
3.02 Bylaws of Registrant(11)
10.01 Revised License Agreement dated March 12, 1984, between Registrant and Research
Corporation Technologies, Inc., as amended by a First Amendment dated December 7,
1984, and as further amended by a Fourth Amendment dated July 22, 1988(1)
10.02 Single Tenant Lease dated July 25, 1991 between Registrant and The Irvine Company as
amended by a Third Amendment to Lease dated December 11, 1996(10)
10.03 Asset Purchase Agreement dated March 1, 1993 regarding sale of assets of Interpore
Orthopaedics, Inc. to Applied Epigenetics, Inc.(1)
10.04 Cancellation and Release Agreement dated March 1, 1993 among Registrant, Interpore
Orthopaedics, Inc., Pfizer, Inc. and Howmedica, Inc.(1)
10.05 Series E Preferred Stock and Common Stock Warrant Purchase Agreement dated December
19, 1991(1)
10.06 Series E Preferred Stock Purchase Agreement dated October 30, 1992(1)
10.07 Amended Schedule to Loan and Security Agreement dated July 25, 1996 among
Registrant, Interpore Orthopaedics, Inc. and Silicon Valley Bank(9)
10.08 Amendment to the Loan Agreement dated July 6, 1997 among Registrant, Interpore
Orthopaedics, Inc. and Silicon Valley Bank(12)
10.09 Amended and Restated Stock Option Plan dated March 19, 1991 2, First Amendment to
the Amended and Restated Stock Option Plan, effective October 15, 1991(1); Amendment
to the Amended and Restated Stock Option Plan dated September 17, 1994(4)
10.10 Employee Qualified Stock Purchase Plan(3)
10.11 1995 Stock Option Plan(3)
10.12 Stock Option Plan for Non-Employee Directors of Interpore International(7)
10.13 Form of Indemnification Agreement
</TABLE>
13
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<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
10.14 Asset Purchase Agreement dated April 18, 1997 regarding sale of assets of Interpore
Dental, Inc.(11)
10.15 Agreement and Plan of Merger, dated as of February 11, 1998, by and among Interpore
International, Buckeye International and Cross Medical Products, Inc. ("Cross")(13)
10.16 Non-Titled Personal Property Security Agreement, dated February 13, 1995, granting
Bank One Columbus, N.A. a secruity interest in all inventory, raw material, work in
process, supplies, accounts, general intangibles, chattel paper, instruments, other
forms of obligations and receivables, goods, equipment, machinery, supplies and
other personal property of the Cross.(12)
10.17 Non-Titled Personal Property Security Agreement, dated February 13, 1995, granting
Bank One Columbus, N.A. a security interest in all inventory, raw materials, work in
process, supplies, accounts, general intangibles, chattel paper, instruments, other
forms of obligations and receivables, goods, equipment, machinery, supplies and
other personal property of Cross.(12)
10.18 Asset Purchase Agreement, dated March 12, 1997, by and among Cross, Danniger
Healthcare, Inc. and OrthoLogic Corp.(13)
10.19 Confidentiality, Assignment and Non-Competition Agreement for Key Personnel, dated
September 10, 1984, between Cross and Edward R. Funk.(14)
10.20 Cross Amended and Restated 1984 Incentive Stock Option Plan, reserving 750,000
shares of Common Stock, as amended by the Board of Directors of Cross on April 2,
1992.(15)
10.21 Cross Form of Stock Option Agreement Under the Amended and Restated 1984 Incentive
Stock Option Plan.(15)
10.22 Cross Amended and Restated 1984 Non-Statutory Stock Option Plan, reserving 300,000
shares of Common Stock, as amended by the Board of Directors on April 2, 1992.(15)
10.23 Cross Form of Stock Option Agreement Under the Amended and Restated 1984
Non-Statutory Stock Option Plan.(15)
10.24 Cross 1994 Stock Option Plan, reserving 600,000 shares of Common Stock.(16)
10.25 Non-Competition Agreement dated September 6, 1996, between Cross and Stephen R.
Draper.(17)
10.26 Employment Agreement, dated August 15, 1997, between Cross and Joseph A. Mussey.(18)
</TABLE>
14
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<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
10.27 Employment Agreement, dated August 15, 1997, between Cross and Paul A. Miller.(18)
10.28 Employment Agreement, dated August 15, 1997, between Cross and Ira Benson.(18)
10.29 Employment Agreement, dated August 15, 1997, between Cross and Thomas E. Zimmer.(18)
10.30 Employment Agreement, dated August 15, 1997, between Cross and Philip A. Mellinger.(18)
10.31 Agreement between Dr. Edward Funk and Cross, dated February 11, 1998.(19)
11.01 Computations of Net Income per Share
27.01 Financial Data Schedule
</TABLE>
- --------
(1) Incorporated by reference from the Company's Registration Statement on
Form S-1, Registration No. 33-69872.
(2) Incorporated by reference from the Company's Registration Statement on
Form S-8, Registration No. 33-77426.
(3) Incorporated by reference from the Company's Proxy Statement for the
Company's 1994 Annual Meeting of Shareholders.
(4) Incorporated by reference from the Company's Registration Statement on
Form S-8, Registration No. 33-86290.
(5) Incorporated by reference from the Company's Proxy Statement for the
Company's 1995 Annual Meeting of Shareholders.
(6) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1996.
(7) Incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
(8) Incorporated by reference from the Company's Current Report on Form 8-K
dated May 1, 1997.
(9) Incorporated by reference from the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1997.
(10) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 11, 1998.
15
<PAGE> 16
(11) Incorporated by reference from the Company's Registration Statement on
Form S-4, Registration No. 333-49487.
(12) Incorporated by reference from the Cross Annual Report on Form 10-K for
the year ended December 31, 1994.
(13) Incorporated by reference from the Cross Annual Report on Form 10-K for
the year ended December 31, 1996.
(14) Incorporated by reference from the Cross Form 10 filed May 3, 1988.
(15) Incorporated by reference from the Cross Annual Report on Form 10-K for
the year ended December 31, 1992.
(16) Incorporated by reference from the Cross Form 10 filed August 12, 1994.
(17) Incorporated by reference from the Cross Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1996.
(18) Incorporated by reference from the Cross Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1997.
(19) Incorporated by reference from the Cross Annual Report on Form 10-K for
the year ended December 31, 1997.
16
<PAGE> 1
Exhibit 10.13
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the 7th day of May, 1998, by and between
Interpore International, Inc., a Delaware corporation (the "Company"), and
_______________, a ___________________ of the Company (the "Indemnitee"), with
reference to the following facts:
RECITALS:
A. The Indemnitee is currently serving as a _____________________ of the
Company and the Company wishes the Indemnitee to continue in such capacity. The
Indemnitee is willing, under certain circumstances, to continue serving as a
___________ of the Company.
B. The Indemnitee has indicated that he does not regard the indemnities
available under the Company's Certificate of Incorporation as adequate to
protect him against the risks associated with his service to the Company and has
noted that the Company's directors' and officers' liability insurance policy has
numerous exclusions and a deductible and thus does not adequately protect
Indemnitee. In this connection the Company and the Indemnitee now agree they
should enter into this Indemnification Agreement in order to provide greater
protection to Indemnitee against such risks of service to the Company.
C. Section 145 of the General Corporation Law of the State of Delaware,
under which Law the Company is organized, empowers corporations to indemnify a
person serving as a director, officer, employee or agent of the corporation and
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise, and said Section 145 and the Certificate of Incorporation of
the Company specify that the indemnification set forth in said Section 145 and
in the Certificate of Incorporation, respectively, shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise.
D. In order to induce the Indemnitee to continue to serve as a
___________ of the Company and in consideration of his continued service, the
Company has determined and agreed to enter into this agreement with the
Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
___________ of the Company, the parties hereto agree as follows:
1. INDEMNITY. The Company will indemnify the Indemnitee, his
executors, administrators or assigns, for any Damages or Expenses (as defined
below) which the Indemnitee is or becomes legally obligated to pay in connection
with any Proceeding. As used in this Agreement the term "Proceeding" shall
include any threatened, pending or completed claim, action, suit or proceeding,
whether brought by or in the right of the Company or otherwise and whether of a
civil, criminal, administrative or investigative nature, in which the Indemnitee
may be or may have been involved as a party or otherwise, by reason of the fact
that Indemnitee is or was a director or officer of the Company, by reason of any
actual or alleged error or misstatement or misleading statement or omission made
or suffered by the Indemnitee, by reason of any action taken by him or of any
inaction on his part while acting as such director or officer, or by reason of
the fact that he was serving at the request of the Company as a director,
trustee, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise; provided, that in each such case Indemnitee
acted in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company, and, in the case of a criminal
proceeding, in addition had no reasonable cause to believe that his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any
18
<PAGE> 2
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. As used in this Agreement, the term "other enterprise" shall
include (without limitation) employee benefit plans and administrative
committees thereof, and the term "fines" shall include (without limitation) any
excise tax assessed with respect to any employee benefit plan. References to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries, and if
Indemnitee acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
he shall be deemed to have acted in a manner "not opposed to the best interests
of the Company" as referred to above.
2. EXPENSES. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, judgments, fines, penalties, settlements
and costs, attorneys' fees and disbursements and costs of attachment or similar
bonds, investigations, and any expenses of establishing a right to
indemnification under this Agreement and the term "Damages" shall include
damages, judgments, fines, penalties and settlements.
3. ENFORCEMENT. If a claim or request under this Agreement is not
paid by the Company, or on its behalf, within thirty days after a written claim
or request has been received by the Company, the Indemnitee may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, the Indemnitee shall be
entitled to be paid also the Expenses of prosecuting such suit. The Company
shall have the right to recoup from the Indemnitee the amount of any item or
items of Expenses (other than Damages) theretofore paid by the Company pursuant
to this Agreement, to the extent such Expenses are not reasonable in nature or
amount; provided, however, that the Company shall have the burden of proving
such Expenses to be unreasonable. The burden of proving that the Indemnitee is
not entitled to indemnification for any other reason shall be upon the Company.
4. SUBROGATION. In the event that the Company pays any Expenses
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of recovery of the Indemnitee, who shall execute
all papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
5. EXCLUSIONS. Notwithstanding the foregoing, the Company shall
not be liable under this Agreement to pay any Expenses in connection with any
Proceeding:
(a) to the extent that payment of such Expenses is actually
made to the Indemnitee under a valid, enforceable and collectible insurance
policy;
(b) to the extent that the Indemnitee is indemnified and
actually paid otherwise than pursuant to this Agreement;
(c) in connection with a judicial action by or in the right
of the Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable to the Company unless and only
to the extent that the Court of Chancery of the State of Delaware or the court
in which such Proceeding was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, the Indemnitee is fairly and reasonably entitled to indemnity for such
Expenses as such court shall deem proper;
19
<PAGE> 3
(d) if it is proved by final judgment in a court of law or
other final adjudication that the Indemnitee had in fact gained any personal
profit or advantage to which he was not legally entitled;
(e) for a disgorgement of profits made from the purchase and
sale by the Indemnitee of securities pursuant to Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any state
statutory law or common law;
(f) brought about or contributed to by the dishonesty of the
Indemnitee seeking payment hereunder; however, notwithstanding the foregoing,
the Indemnitee shall be protected under this Agreement as to any Proceeding
brought against him by reason of any alleged dishonesty on his part, unless a
judgment or other final adjudication thereof adverse to the Indemnitee shall
establish that he committed (i) acts of active and deliberate dishonesty, (ii)
with actual dishonest purpose and intent and (iii) such acts were material to
the cause of action so adjudicated; or
(g) for any Damages which the Company is prohibited by
applicable law from paying as indemnity.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against any and all
Expenses actually and reasonably incurred in connection therewith.
7. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, but not, however, for the total amount thereof, the Company
shall nevertheless indemnify the Indemnitee for the portion of such Expenses to
which the Indemnitee is entitled.
8. ADVANCE OF EXPENSES. Expenses incurred by the Indemnitee in
connection with any Proceeding, except the amount of any Damages, shall be paid
by the Company in advance of the final disposition thereof upon request of the
Indemnitee that the Company pay such Expenses. The Indemnitee hereby undertakes
to repay to the Company the amount of any Expenses theretofore paid by the
Company to the extent that it is ultimately determined that such Expenses were
not reasonable or that the Indemnitee is not entitled to indemnification
therefor.
9. APPROVAL OF PAYMENT OF DAMAGES. No payment of Damages for
which indemnity shall be sought under this Agreement, other than those in
respect of judgments and verdicts actually rendered, shall be incurred without
the prior consent of the Company, which consent shall not be unreasonably
withheld.
10. NOTICE OF CLAIM. The Indemnitee, as a condition precedent to
his right to be indemnified under this Agreement, shall give to the Company
notice in writing as soon as reasonably practicable of any Proceeding against
him for which indemnity will or could be sought under this Agreement. Notice to
the Company shall be given at its principal office and shall be directed to the
Corporate Secretary (or such other address as the Company shall designate in
writing to the Indemnitee); notice shall be deemed given on the earlier of the
date
20
<PAGE> 4
of receipt or the seventh day after it is sent by properly addressed, prepaid
registered or certified mail, return receipt requested. In addition, the
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within the Indemnitee's power.
11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
12. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing herein shall
be deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
By-Laws of the Company and amendments thereto or under law.
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with Delaware law.
14. SAVING CLAUSE. Wherever there is conflict between any
provision of this Agreement and any applicable present or future statute, law or
regulation contrary to which the Company and the Indemnitee have no legal right
to contract, the latter shall prevail, but in such event the affected provisions
of this Agreement shall be curtailed and restricted only to the extent necessary
to bring them within applicable legal requirements.
15. COVERAGE. The provisions of this Agreement shall apply with
respect to the Indemnitee's service as a ___________ of the Company prior to the
date of this Agreement and with respect to all periods of such service after the
date of this Agreement, even though the Indemnitee may have ceased to be a
___________ of the Company and shall inure to the benefit of the heirs,
executors and administrators of Indemnitee.
16. SURVIVAL OF AGREEMENT. For purposes of this Agreement, any
reference to the "Company" shall include, in addition to the resulting or
surviving corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Agreement with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
21
<PAGE> 5
INTERPORE INTERNATIONAL, INC., A DELAWARE
CORPORATION
By:
--------------------------------------
By:
--------------------------------------
(Name Typed), Indemnitee
22
<PAGE> 1
Exhibit 11.01
Interpore International
Computations of Net Income Per Share
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1998 1997
------ ------
<S> <C> <C>
Net income $ 840 $ 259
====== ======
Shares used in computing net income per share - basic:
Weighted average common shares outstanding 7,107 6,963
Effect of dilutive securities:
Weighted average convertible preferred stock 33 77
Common share equivalents outstanding 356 276
------ ------
Shares used in computing net income per share - diluted 7,496 7,316
====== ======
Net income per share - basic $ 12 $ .04
====== ======
Net income per share - diluted $ .11 $ .04
====== ======
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,680,000
<SECURITIES> 1,970,000
<RECEIVABLES> 2,578,000
<ALLOWANCES> 209,000
<INVENTORY> 1,811,000
<CURRENT-ASSETS> 20,097,000
<PP&E> 2,249,000
<DEPRECIATION> 1,668,000
<TOTAL-ASSETS> 23,361,000
<CURRENT-LIABILITIES> 879,000
<BONDS> 0
0
208,000
<COMMON> 36,049,000
<OTHER-SE> (13,775,000)
<TOTAL-LIABILITY-AND-EQUITY> 23,361,000
<SALES> 3,707,000
<TOTAL-REVENUES> 3,707,000
<CGS> 548,000
<TOTAL-COSTS> 548,000
<OTHER-EXPENSES> 2,519,000
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> (200,000)
<INCOME-PRETAX> 840,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 840,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 840,000
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
