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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004.
[ ] 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 0-31152
CRDENTIA CORP.
(Exact name of small business issuer as specified in its charter)
DELAWARE 76-0585701
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
14114 DALLAS PARKWAY, SUITE 600, DALLAS, TEXAS 75254
(Address of principal executive offices)
(972)850-0780
(Issuer's telephone number)
6,302,269 shares of Common Stock, $.0001 par value, outstanding on August 13,
2004.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
CRDENTIA CORP.
Form 10-QSB Quarterly Report
For Quarterly Period Ended June 30, 2004
TABLE OF CONTENTS
Page
----
PART I -- FINANCIAL INFORMATION 3
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets at June 30, 2004
(unaudited) and December 31, 2003 3
Condensed Consolidated Statements of Operations (unaudited)
for the Three and Six Months Ended June 30, 2004 and 2003 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Six Months Ended June 30, 2004 and 2003 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Operations 15
16
Item 3. Controls and Procedures 19
PART II -- OTHER INFORMATION 20
Item 1. Legal Proceedings 20
Item 2. Change in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 25
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CRDENTIA CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2004 December 31, 2003
---------------- -----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 86,362 $ 1,469,076
Accounts receivable, net of allowance for doubtful accounts
of $100,380 in 2004 and $195,465 in 2003 3,186,877 3,058,084
Unbilled receivables 204,179 268,590
Other current assets 640,971 333,383
---------------- ----------------
Total current assets 4,118,389 5,129,133
Property and equipment, net 352,412 363,815
Goodwill 8,562,910 8,519,821
Intangible assets, net 3,108,236 3,462,736
Other assets 709,768 120,895
---------------- ----------------
Total assets $ 16,851,715 $ 17,596,400
================ ================
Current liabilities:
Accounts payable and accrued expenses $ 1,697,035 $ 901,410
Accrued employee compensation and benefits 537,834 612,439
Revolving lines of credit 2,151,616 2,871,890
Current portion of notes payable to lenders -- 191,667
Subordinated convertible notes, net of discount 690,279 250,833
Current portion of notes payable to sellers 1,637,215 1,435,115
Other current liabilities 89,346 86,644
---------------- ----------------
Total current liabilities 6,803,325 6,349,998
Notes payable to lenders, less current portion -- 27,777
Long term bonus payable 841,976 801,000
Notes payable to sellers, less current portion 3,217,434 3,925,983
---------------- ----------------
Total liabilities 10,862,735 11,104,758
---------------- ----------------
Commitments and contingencies
Convertible Preferred Stock, 10,000,000 shares authorized
Series A Convertible Preferred Stock
$0.0001 par value, 2,750,000 issued and outstanding in
2004 and 2003 (liquidation preference of $2,750,000) 2,750,000 1,750,000
Series B Convertible Preferred Stock
$0.0001 par value 6,250,000 issued and outstanding in 2004
(liquidation preference of $1,250,000) 1,250,000 --
---------------- ----------------
4,000,000 1,750,000
---------------- ----------------
Stockholders' equity:
Common stock, par value $0.0001, 738 736
50,000,000 shares authorized in 2004 and 2003,
7,378,675 shares issued and 6,302,269 shares outstanding in 2004
7,355,758 shares issued and 6,279,352 shares outstanding in 2003
Additional paid in capital 60,814,304 60,547,358
Deferred stock compensation (822,057) (828,000)
Accumulated deficit (58,004,005) (54,978,452)
---------------- ----------------
Total stockholders' equity 1,988,980 4,741,642
---------------- ----------------
Total liabilities and stockholders' equity $ 16,851,715 $ 17,596,400
================ ================
See accompanying notes to unaudited condensed consolidated financial statements.
3
CRDENTIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- -------------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
Revenue from services $ 5,489,946 $ -- $ 11,707,498 $ --
Direct operating expenses 4,307,653 -- 9,255,370 --
------------- ------------- ------------- -------------
Gross margin 1,182,293 -- 2,452,128 --
------------- ------------- ------------- -------------
Operating expenses:
Selling, general and administrative expenses 2,141,755 384,864 4,205,679 479,221
Non-cash stock based compensation 142,808 -- 159,455 80,822
------------- ------------- ------------- -------------
Total operating expenses 2,284,563 384,864 4,365,134 560,043
------------- ------------- ------------- -------------
Loss from operations (1,102,270) (384,864) (1,913,006) (560,043)
Interest expense, net 547,645 3,881 999,109 4,858
------------- ------------- ------------- -------------
Loss from operations before income taxes (1,649,915) (388,745) (2,912,115) (564,901)
Income tax expense -- -- -- --
------------- ------------- ------------- -------------
Net loss $ (1,649,915) $ (388,745) $ (2,912,115) $ (564,901)
============= ============= ============= =============
Deemed dividend related to beneficial conversion
feature on Series A convertible preferred stock 1,000,000 -- 1,000,000 --
Deemed dividend related to beneficial conversion
feature on Series B convertible preferred stock 1,250,000 -- 1,250,000 --
------------- ------------- ------------- -------------
Net loss attributable to common stockholders $ (3,899,915) $ (388,745) $ (5,162,115) $ (564,901)
============= ============= ============= =============
Basic and diluted net loss per common share
attributable to common stockholders $ (0.62) $ (0.12) $ (0.82) $ (0.17)
============= ============= ============= =============
Weighted-average shares of common stock outstanding 6,288,166 3,374,423 6,283,759 3,345,576
============= ============= ============= =============
See accompanying notes to unaudited condensed consolidated financial statements.
4
CRDENTIA CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-----------------------------
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss $(2,912,115) $ (564,901)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization of subordinated convertible
note discounts 439,446 --
Depreciation and amortization 483,901 2,007
Net recovery of uncollectible accounts receivable (95,085) --
Non-cash stock based compensation expense 159,455 80,822
Amortization of debt issue costs 73,499 --
Amortization of long term bonus payable 40,976 --
Net loss on disposition of fixed assets 9,888 --
Changes in operating assets and liabilities, net of
effects of purchases of subsidiaries:
Accounts receivable (33,706) --
Unbilled receivables 64,411 --
Other current assets and liabilties (304,890) (15,598)
Other assets 41,275 --
Accounts payable and accrued expenses 350,627 166,507
Accrued employee compensation and benefits (74,605) --
------------ ------------
Net cash used in operating activities (1,756,923) (331,163)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (127,887) --
Proceeds from sale of long term prepaid expenses -- 31,917
Cash paid for acquisition of subsidiaries, net of cash
received (43,089) --
----------- -----------
Net cash provided by (used in) investing activities (170,976) 31,917
----------- -----------
Cash flows from financing activities:
Issuance of preferred stock 2,250,000 --
Net decrease in revolving lines of credit (2,871,890) --
Proceeds from notes payable to lenders 2,767,527 180,000
Payment of notes payable to lenders (835,356) --
Payment of notes payable to sellers (506,448) --
Payment of debt issue costs (258,648) --
----------- -----------
Net cash provided by financing activities 545,185 180,000
----------- -----------
Net decrease in cash (1,382,714) (119,246)
Cash and cash equivalents at beginning of period 1,469,076 125,463
----------- -----------
Cash and cash equivalents at end of period $ 86,362 $ 6,217
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 338,729 $ --
Cash paid for income tax $ -- $ --
See accompanying notes to unaudited condensed consolidated financial statements.
5
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
Organization
------------
Crdentia Corp (the "Company"), a Delaware corporation, is a provider of
healthcare staffing services in the United States. Such services include travel
nursing, per diem staffing, contractual clinical services and private duty home
health care. The Company considers the different services above to be one
segment. Each of these services relate solely to providing healthcare staffing
to customers that are healthcare providers and the Company utilizes commons
systems, databases, procedures, processes and similar methods of identifying and
serving these customers.
At the beginning of 2003, we were a development stage company with no commercial
operations. During the year, we pursued our operational plan of acquiring
companies in the healthcare staffing field and completed the acquisition of four
companies. The companies we acquired in 2003 -- Baker Anderson Christie, Inc.,
New Age Nurses, Inc., Nurses Network, Inc., and PSR Nurse Recruiting, Inc. and
PSR Nurses Holdings Corp., which hold the limited partner and general partner
interests in PSR Nurses, Ltd. -- provide the foundation for our future growth.
Basis of Presentation
---------------------
The accompanying unaudited financial data as of and for the three months and six
months ended June 30, 2004 and 2003 have been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. These unaudited condensed consolidated financial statements
should be read in conjunction with the audited financial statements and the
Fnotes thereto included in the Company's annual Report on Form 10-KSB for the
fiscal year ended December 31, 2003.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows as of and for the three months and six
months ended June 30, 2004 have been made. The results of operations for the
three months and six months ended June 30, 2004 are not necessarily indicative
of the operating results for the full year.
Certain of the prior year financial statement amounts have been reclassified to
conform to the current year presentation. These reclassifications had no impact
on previously reported net loss or accumulated deficit.
The Company has a working capital deficit of $2.7 million and incurred a cash
flow loss from operations of $1.8 million for the six months ended June 30,
2004. Further, the Company was in default of a covenant of its revolving line of
credit at June 30, 2004, for which it received a waiver, and is in default of
multiple covenants of the line of credit in the third quarter. These issues
raise concerns about the ability of the Company to continue as a going concern.
During the six months ended June 30, 2004, the Company raised $2,250,000 through
the issuance of
6
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
Series A and Series B Convertible Preferred Stock. Subsequent to June 30, 2004,
the Company raised an additional $475,000 through the issuance of Series B-1
Convertible Preferred Stock and anticipates raising additional funds during the
third quarter through the issuance of additional preferred stock. In addition,
approximately $2.1 million of the $4.9 million of notes payable to selling
shareholders were paid off or converted to equity during the third quarter.
Also, the Company believes that operational improvements occurring in the third
quarter will result in an improvement to its cash flow. The Company's financial
statements have been prepared assuming the Company will continue as a going
concern. The Company's ability to continue as a going concern is dependent upon
its ability to develop additional sources of capital and to achieve profitable
operations. If the Company's business fails to improve as expected or if the
Company fails to raise additional capital, it will be forced to significantly
curtail its operations until additional capital could be raised. There is no
assurance that additional capital can be raised for operational purposes. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Goodwill and Intangible Assets
------------------------------
Intangible assets other than goodwill consist of customer relationships and
international nurse contracts and are presented net of accumulated amortization.
Intangibles are amortized over their respective useful lives estimated to be
five years. Goodwill is assessed for impairment at least annually. The valuation
of these intangibles is determined based upon valuations performed by
third-party specialists and management's best estimates of fair value. As a
result, the ultimate value and recoverability of these assets is subject to the
validity of the assumptions used.
Income Taxes
------------
The Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax return. A valuation allowance is recorded, based on
currently available information, when it is more likely than not that any or all
of a deferred tax asset will not be realized. The Company files a consolidated
Federal income tax return with its subsidiaries.
Revenue Recognition and Allowances
----------------------------------
The Company recognizes revenue generally on the date the Company's healthcare
staff provides services to healthcare facilities or individuals in their home.
The Company recognizes revenue at the gross amounts billed, as our healthcare
staff are employees of the Company.
Accounts receivable are uncollateralized customer obligations due under normal
trade terms. The Company provides services to various public and private medical
facilities such as hospitals, nursing care facilities, etc. Management performs
continuing credit evaluations of the customers' financial condition. In
addition, the Company provides home healthcare to individuals on a private pay
arrangement. The Company collects one week of services in advance for this type
of service which is recorded as a deposit until services are performed.
7
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
Senior management reviews accounts receivable on a regular basis to determine if
any receivables will potentially be uncollectible. An allowance for doubtful
accounts is recorded based upon management's evaluation of current industry
conditions, historical collection experience and other relevant factors which,
in the opinion of management, require recognition in estimating the allowance.
After all attempts to collect a receivable have failed, the receivable is
written off against the allowance. In the first quarter of 2004, the Company
recovered amounts previously reserved in the allowance in the amount of
approximately $120,000.
Stock-Based Compensation
As permitted under the provisions of Statement of Financial Accounting Standard
(SFAS) No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company continues
to account for Employee stock-based transactions under Accounting Principles
Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. However,
SFAS 123 requires the Company to disclose pro forma net income and earnings per
share as if the fair value method had been adopted. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period. For non-employees, cost is also measured at the grant date, using the
fair value method, but is actually recognized in the financial statements over
the vesting period or immediately if no further services are required.
If the Company had elected the fair value method of accounting for employee
stock-based compensation, compensation cost would be accrued at the estimated
fair value of the stock award grants over the service period, regardless of
later changes in stock prices and price volatility. The date of grant fair
values for options granted have been estimated based on a modified Black-Scholes
pricing model with the assumptions identified in the following table.
JUNE 30, 2004
-------------
Dividend Yield --
Volatility 133.7%
Risk-Free Interest Rates 4.5%
Expected Lives in Years 0-5 years
The table below shows net loss per share for June 30, 2004 as if the Company had
elected the fair value method of accounting for stock options.
8
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net loss as reported attributable to common stockholders $(3,899,315) $ (388,745) $(5,162,115) $ (564,901)
Add:
Stock-based compensation included in reported net income,
net of related tax effects 142,808 -- 159,455 --
Deduct:
Total stock-based employee compensation determined under
the fair value method for all awards, net of related
tax effects (134,546) -- (208,090) --
------------ ------------ ------------ ------------
Proforma net loss, as adjusted $(3,891,053) $ (388,745) $(5,210,750) $ (564,901)
------------ ------------ ------------ ------------
Loss per share attributable to common stockholders:
Basic and diluted, as reported $ (0.62) $ (0.12) $ (0.82) $ (0.17)
Basic and diluted, as adjusted $ (0.62) $ (0.12) $ (0.83) $ (0.17)
NOTE 2. REVOLVING LINES OF CREDIT
---------------------------------
The Company had credit facilities with two commercial financing institutions for
the financing of eligible accounts receivable. These accounts receivables served
as security of the lines of credit. The Company paid interest monthly at 24% per
annum on one obligation and approximately 10% on the other, based on the daily
outstanding balance. Customer payments are used to repay the advances from the
financing institutions after deducting charges for bad debts, reserves for
charge backs, and interest expense. These credit facilities were paid off on
June 16, 2004 with the proceeds from the Loan & Security Agreement, discussed
below.
NOTE 3. NOTES PAYABLE
---------------------
On June 16, 2004, the Company entered into a Loan & Security Agreement with a
company specializing in healthcare finance, pursuant to which the Company
obtained a revolving credit facility up to $15,000,000 (the "Loan"). The Loan
has a term of three years and bears interest at a rate equal to the greater of
three percent (3.0%) per annum over the prime rate or nine and one-half percent
(9.5%) per annum (9.5% at June 30, 2004). Accounts receivable serves as security
for the Loan and it is subject to financial and reporting covenants. Customer
payments are used to repay the advances on the credit facility after deducting
charges for interest expense, unused line and account management fees. The
financial covenants are for the maintenance of minimum net worth, minimum debt
service coverage ratio, minimum EBITDA, maximum capital expenditure limits and
maximum operating lease obligations. The proceeds of the Loan were used to pay
off the revolving lines of credit and a note payable to a financial institution.
At June 30, 2004, the Company was out of compliance with the minimum EBITDA
financial covenants of the Loan, for which a waiver was received from the
lender. Until such time as the Company
9
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
demonstrates its ability to comply with this and other financial covenants of
the Loan, the outstanding balance has been classified as a current liability on
the Balance Sheet.
On August 18, 2003, the Company executed a variable rate installment note with a
financial institution in the amount of $250,000. The note is subject to the same
security and covenants as the related line of credit. On September 12, 2003, the
Company received a loan for this amount. Under the terms of the loan, the
Company is required to make monthly payments of $13,889 plus accrued interest on
the unpaid principal at the institution's Base Rate plus 2% (6% at March 31,
2004). The loan was paid off on June 16, 2004, with the proceeds from the Loan
and Security Agreement.
NOTE 4. SUBORDINATED CONVERTIBLE NOTES
--------------------------------------
On September 2, 2003, the Company issued $675,000 in Convertible Subordinated
Promissory Notes (the "Notes") to six investors. On September 29, 2003 and
October 16, 2003, the Company issued additional Notes for $25,000 and $120,000
to two additional investors, respectively. On December 3 and December 12, 2003,
the Company issued additional Notes for $90,000 to four additional investors.
Subject to the conversion provisions set forth in the Notes, the unpaid
principal together with all accrued interest on the Notes is due and payable in
full one year following the issuance date of each such note. Interest accrues on
the unpaid principal balance at a rate of ten percent (10%) per annum, simple
interest, and is payable in quarterly payments. The notes are convertible to
Common Stock at the holder's option, prior to the due date, at an initial
conversion price of $1.50 per share. The conversion price was subsequently
adjusted to $1.00 per share upon the issuance of the Series A Convertible
Preferred Stock.
NOTE 5. NOTES PAYABLE TO SELLERS
--------------------------------
A note to the sellers of New Age Staffing, Inc. with the principal amount of
$1,385,000 is payable in equal installments of $65,952, beginning January 31,
2004, for 21 months plus interest at 4%.
Two notes to the sellers of Nurses Network, one with a balance of $64,000 is due
in three equal installments on October 2, 2004, October 2, 2005 and October 2,
2006. Interest is accrued at a financial institution's Base Rate plus 1% (5% at
June 30, 2004). The second note, in the amount of $50,432 plus interest accrued
at a financial institution's Base Rate plus 1% (5% at June 30, 2004) is due and
payable on July 2, 2004.
The Company assumed two notes from the PSR entities, one with an approximate
balance of $188,911, which is based on outstanding credit card balances owed by
the previous seller. The Company will make at least minimum payments on the
credit card balances until they are paid in full. The second note had a
principal amount of $2,525,000. Interest only payments are payable each month at
a rate of 8%. Principal and interest payments begin on December 1, 2004 for
10
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
eight years. Both of these notes are convertible to Common Stock at the holder's
option at the then current market price of the Common Stock.
A note to a seller of PSR entities with a principal amount of $1,200,000 is
payable over a three year period beginning November 30, 2003 at an interest rate
of 12%. This note is convertible to Common Stock at the holder's option at the
then current market price for the Common Stock.
At June 30, 2004, the long-term debt discussed in Notes 3, 4, and 5 consisted of
the following:
JUNE 30, 2004
-------------
Subordinated convertible notes, net of discount $ 690,279
Seller note - New Age Staffing 1,029,410
Seller note - Nurses Network 114,432
Convertible Seller note - PSR Nurses original seller 2,711,756
Convertible Seller note - PSR Nurses 999,051
Revolving Line of Credit 2,151,616
-----------
Subtotal 7,696,544
Less current portion 4,479,110
-----------
Long-term portion of notes payable $3,217,434
===========
NOTE 6. LONG TERM BONUS PAYABLE
-------------------------------
On December 16, 2003, the board of directors granted the Chief Executive Officer
two cash bonuses in the amount of $540,000 each. The bonuses are to be paid on
December 31, 2006 and January 4, 2007. The present value of bonuses has been
recorded at our estimated incremental cost of borrowing of 10%.
NOTE 7. STOCKHOLDERS' EQUITY AND PREFERRED STOCK
------------------------------------------------
Common Stock
------------
On June 28, 2004, the Company affected a one-for-three reverse stock split of
the outstanding shares of Common Stock. All common share and per share
information included in these financial statements have been retroactively
adjusted to reflect the reverse stock split.
11
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
On May 18, 2004, the Company and a current investor entered into a Stock
Purchase Agreement pursuant to which both parties agreed to purchase an
aggregate of 588,671 shares of our Common Stock from certain of our
stockholders. Under the Stock Purchase Agreement, the investor purchased 338,671
shares of Common Stock for $762,011 on May 18, 2004. The remaining 250,000
shares of common stock were delivered to an escrow agent. These shares will be
released from escrow as follows: (i) beginning on July 1, 2004 and continuing on
the first day of each month through and including June 1, 2005, the Company, or
its assign, shall pay $31,250 to the escrow agent, and the escrow agent shall
cause 10,417 shares to be transferred to us or our assign; and (ii) beginning on
July 1, 2005 and continuing on the first day of each month through and including
June 1, 2006, the Company, or its assign, shall pay $46,875 to the escrow agent,
and the escrow agent shall cause 10,417 shares to be released to us or our
assign. The escrow agent shall distribute funds received from the Company, or
its assign, to the stockholders who are parties to the Stock Purchase Agreement.
For July and August 2004, the Company assigned its right to purchase under the
Stock Purchase Agreement to an existing shareholder.
Preferred Stock
---------------
The Company is authorized to issue 10,000,000 shares of preferred stock at a par
value of $0.0001. Currently there are 9,000,000 shares issued and outstanding
consisting of 2,750,000 shares of Series A and 6,250,000 shares of Series B.
Series A Preferred Stock
------------------------
On February 4, 2004, the Company issued an additional 1,000,000 shares of Series
A Convertible Preferred Stock at a per share price of $1.00 to one investor. The
holders of the Series A Convertible Preferred Stock are entitled to receive,
when declared by the Board of Directors, a quarterly dividend in the amount
equal to .0083 shares of Common Stock for each share of outstanding Series A
Convertible Preferred Stock held by them. Unless previously voluntarily
converted prior to such time, the Series A Convertible Preferred Stock will
automatically convert into Common Stock at a conversion ratio of one share of
Common Stock for three shares of Series A Preferred Stock, one year from the
date of issuance of such shares.
On April 8, 2004 the Board of Directors declared a dividend to the Series A
stockholders equal to .0083 shares of Common Stock for each holder of Series A
Convertible Preferred Stock. As a result, 7,639 shares of Common Stock were
issued on May 26, 2004.
Series B Preferred Stock
------------------------
On June 16, 2004, the Company issued 6,250,000 shares of Series B Convertible
Preferred Stock at a per share price of $0.20 to an investor who is managed by a
member of the Company's Board of Directors. The holder of the Series B
Convertible Preferred Stock is entitled to receive a quarterly dividend in an
amount equal to .0017 shares of Common Stock for each share of outstanding
Series B Convertible Preferred Stock held by them. In the event of any
liquidation or winding up of the Company, the holder of the Series B shares will
be entitled to receive in
12
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
preference to the holders of Common Stock, and any other series of Preferred
Stock, an amount equal to the amount of their purchase price. Unless previously
voluntarily converted prior to such time the Series B shares will be
automatically converted into Common Stock at a conversion ratio of one share of
Common Stock for three shares of Series B Preferred Stock upon the earlier of
the closing of an underwritten public offering of Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended, with
aggregate net proceeds of at least $25 million or the date specified by written
consent or agreement of the holders of a majority of the then outstanding shares
of Series B Convertible Preferred Stock.
NOTE 8. SUBSEQUENT EVENTS
-------------------------
Conversion of Notes Payable to Sellers
--------------------------------------
As of July 31, 2004, holders of approximately $2.1 million of the $4.9 million
notes payable to selling shareholders of several of the companies we acquired in
2003 have accepted a cash payment of $225,000 and converted their remaining debt
to equity. Approximately $122,000 of the seller debt converted to Common Stock
(40,822 shares at $3.00 per share price) and $1.8 million converted to Series
B-1 Convertible Preferred Stock (29,991 shares at $60.00 per share price).
Issuance of Series B-1 Convertible Preferred Stock
--------------------------------------------------
The holders of the Series B-1 Convertible Preferred Stock are entitled to
receive a quarterly dividend in an amount equal to 1.5 shares of Common Stock
for each share of outstanding Series B-1 Convertible Preferred Stock held by
them. If any dividend is declared on the Common Stock, the holders of the Series
B-1 will be entitled to receive dividends out of the legally available funds as
if each share of Series B-1 had been converted to Common Stock. The holders of
the Series B-1 Convertible Preferred Stock have the right, at the option of the
holder at any time, to convert shares of the Series B-1 into shares of the
Company's Common Stock at an initial conversion ratio of 100 shares of Common
Stock for each one share of Series B-1. Unless previously voluntarily converted
prior to such time the Series B-1 shares will be automatically converted into
Common Stock at an initial conversion ratio of one-to-one upon the earlier of
the closing of an underwritten public offering of Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended, with
aggregate net proceeds of at least $25 million or the date specified by written
consent or agreement of the holders of a majority of the then outstanding shares
of Series B-1 Convertible Preferred Stock.
In addition to the Series B-1 Convertible Preferred Stock issued for the
conversion of the seller notes as described above, the Company issued 3,750
shares of Series B-1 Convertible Preferred Stock at a per share price of $60.00
to an investor during July, 2004 for cash proceeds of $225,000.
13
CRDENTIA CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2004
-------------
Also during July 2004, the Company issued 4,166 shares of Series B-1 Convertible
Preferred Stock at a per share price of $60.00 to the Company's Chief Executive
Officer for cash proceeds of $250,000.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED
IN PART I - ITEM 1 OF THIS REPORT, AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND RISK FACTORS CONTAINED IN OUR REPORT ON FORM 10-KSB FOR THE YEARS
ENDED DECEMBER 31, 2003 & 2002 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 30, 2004.
AVAILABLE INFORMATION
We maintain a corporate website at www.crdentia.com. Our annual reports on Form
10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K, and
amendments to these reports, are made available, free of charge, through this
website as soon as reasonably practicable after being filed with or furnished to
the Securities and Exchange Commission. We will provide reasonable quantities of
electronic or paper copies of filings free of charge upon request. In addition,
we will provide a copy of the above referenced charters to stockholders upon
request.
FORWARD-LOOKING STATEMENTS
Some of the information contained in this report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Any such forward-looking statements are based on current expectations and
projections about future events. The words estimate, plan, intend, expect,
anticipate and similar expressions are intended to identify forward-looking
statements which involve, and are subject to, known and unknown risks,
uncertainties and other factors which could cause our actual results, financial
or operating performance, or achievements to differ materially from future
results, financial or operating performance, or achievements expressed or
implied by such forward-looking statements. Projections and assumptions
contained and expressed herein were reasonably based on information available to
us at the time so furnished and as of the date of this filing. All such
projections and assumptions are subject to significant uncertainties and
contingencies, many of which are beyond our control, and no assurance can be
given that the projections will be realized. Readers are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of
the date hereof. Careful consideration should be given to those risk factors
discussed in our Form 10-KSB for the years ended December 31, 2003 and 2002.
Actual results that we achieve may differ materially from any forward looking
statements due to such risks and uncertainties, and we undertake no obligation
to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
15
OVERVIEW
We are a provider of healthcare staffing services, focusing on the
areas of travel nursing, per diem staffing, contractual clinical services, and
private duty home care. Our travel nurses are recruited domestically as well as
internationally, and placed on temporary assignments at healthcare facilities
across the United States. Our per diem nurses are local nurses placed at
healthcare facilities on short-term assignments. Our contractual clinical
services employees provide complete clinical management and staffing for
healthcare facilities and our private duty home care employees provide nursing
case management and staffing for skilled and non-skilled care in the home. We
consider the different services described above to be one segment as each of
these services relate solely to providing healthcare staffing to customers and
utilize similar recruitment methods, common systems, databases, procedures,
processes and similar methods of identifying and serving these customers.
At the beginning of 2003, we were a development stage company with no
commercial operations. During the year, we pursued our operational plan of
acquiring companies in the healthcare staffing field and completed the
acquisition of four companies. As a result, at the end of 2003 we were providing
temporary healthcare in 25 states and had contracts with approximately 150
healthcare facilities. Approximately 72% of our revenue in the first half of
2004 was derived from the placement of travel nurses and approximately 14% from
per diem services. The balance came from a mix of private duty nursing and
complete clinical management.
The companies we acquired in 2003 -- Baker Anderson Christie, Inc., New
Age Nurses, Inc., Nurses Network, Inc., and PSR Nurse Recruiting, Inc. and PSR
Nurses Holdings Corp., which hold the limited partner and general partner
interests in PSR Nurses, Ltd. -- provide the foundation for our future growth.
During the first half of 2004, we continued to streamline the operations we
acquired in 2003 and began preparing for the integration of future acquisitions.
We have continued to follow our plan to build and strengthen our existing
business and to target acquisition of specialized companies in the healthcare
staffing field.
For the three and six months ended June 30, 2004, sales to one
customer, Rhode Island Hospital, represented more than 10% of our revenues. Our
top ten customers for the three and six months ended June 30, 2004 accounted for
61% and 58% of our revenues, respectively.
During the first half of 2004, most of our customers were acute care
hospitals located throughout the continental United States. As we grow, we
anticipate that acute care facilities will continue to be the majority of our
customer base but that the overall percentage will decline as we increase our
presence in the home health area. We did not have any revenue during the first
half of 2003 and did not have revenue until August 7, 2003, when we closed our
first acquisition.
The gross margin on our revenues has been below the levels that our
business has historically achieved. The decline was caused, generally, by a
softening in the market for travel nurses in the first quarter of 2004. In the
travel nursing industry, the first quarter of each year is commonly a weak
quarter for results. In the second quarter, our results improved to a margin of
approximately 21.5%, primarily due to the efforts of our operational staff in
controlling the costs associated with the revenues and in upgrading the margins
received on some contracts as they renew. Our gross margin is the difference
between the revenue we realize when we bill our customers for the services of
our healthcare professionals and our direct operating costs, which include the
cost of the healthcare professionals and the related housing and travel costs,
16
certain employment related taxes and workers compensation insurance coverage.
Our margin can be increased by our continuing efforts to increase the number of
international nurses under contract and to slightly alter our overall product
mix to include more home health and allied health services, which generally have
higher margins.
Our limited operating history in the healthcare staffing industry makes
it difficult to forecast our future operating results. To date, we have not
achieved profitability in any quarterly period, and as of June 30, 2004, we had
an accumulated deficit of $58.0 million. Our revenues have declined in recent
quarters. We cannot be certain that our revenues will increase and increase at a
rate sufficient to achieve and maintain profitability.
Our success in achieving profitability will depend on our ability to
consummate acquisitions of healthcare companies, to implement our marketing
strategy and to achieve a revenue stream from the sale of services, while not
exceeding budgeted expenses. As we continue to implement our business plan, we
will be subject to all of the risks inherent in an emerging business, including
the need to provide reliable and effective services, to develop marketing
expertise, to generate sales and to raise capital sufficient to fund our growth.
In the event that our market declines significantly or fails to grow as
anticipated, our business, financial condition and results of operations could
be materially adversely affected.
RESULTS OF OPERATIONS
Our revenue in the second quarter of 2004 of $5.5 million was
approximately 12% below the revenue realized in the first quarter of 2004. Since
our average revenue per nurse remained relatively constant between the quarters,
this decline can be attributed to a decrease in the number of nurses we had
under contract. Almost the entire headcount decline is the result of the
termination of a large contract with a hospital group that had a poor payment
history. The termination of this one contract resulted in the loss of a number
of nurse positions. At December 31, 2003, we partially reserved the outstanding
receivables from this hospital group but, ultimately, fully recovered all
amounts owed to us by early in the second quarter of 2004.
During the first half of 2004, our selling, general and administrative
expense was comprised, primarily, of personnel costs, legal, audit and
administrative fees related to being a public company and various other office
and administrative expenses. Almost two-thirds of our selling, general and
administrative expense is personnel related. Our selling, general and
administrative expense in the first half of 2003 was only a fraction of that
experienced in the same period in 2004 because we were in our development stage
in early 2003 and did not have any operations until our first acquisition of an
operating entity in August, 2003.
OUTLOOK
In 2004, we intend to continue growing and strengthening the businesses
acquired in 2003 and to further expand our operations through acquisitions. Our
goal is to acquire at least four additional companies in 2004, generally in the
areas of per diem staffing and private duty home care. We are also exploring
opportunities in the allied health and home health areas. As we acquire
companies, we expect to realize immediate savings in their operations as we
integrate them into our operations and as we decrease their general and
administrative costs by merging their back office and support operation into
ours. We have engaged an independent consulting firm to assist us in identifying
acquisition targets that meet general guidelines with regard to revenue, gross
profit margin and projected earnings. We have begun the process of contacting
the companies that have been so identified and are in various stages of
discussions with several companies.
17
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 2004 the cash flow generated by our operations
was not sufficient to fund our operations and was supplemented by $1.0 million
of convertible preferred stock issued in February 2004 and $1.25 million of
convertible preferred stock issued in June 2004. During the first quarter we
utilized several factoring relationships and one banking relationship to fund
our cash needs on a short-term basis. These were consolidated into a single
relationship in April of 2004, to simplify the record keeping and decrease the
overall cost. In June 2004, we replaced our factoring relationship with a
revolving credit agreement provided by a company specializing in healthcare
finance.
At June 30, 2004, we owed approximately $4.9 million to the selling
shareholders of several of the companies we acquired in 2003. As of July 31,
2004, holders of approximately $2.1 million of this seller debt have accepted a
cash payment of $225,000 and converted their remaining debt to equity.
Approximately $122,000 of seller debt converted to Common Stock and $1.8 million
converted to Series B-1 Convertible Preferred Stock. We continue to negotiate
with the holder of the remaining seller debt.
As noted above in the discussion of revenue and gross margins, our
operating results for the first half of 2004 have been significantly below
expectations. As a result, we have continued to deplete our available cash
resources such that, at June 30, 2004, our cash balance had declined to $86,000,
down from $1.5 million at December 31, 2003. Subsequent to June 30, 2004, we
received $475,000 from the issuance of additional convertible preferred stock
and anticipate that additional equity may be available to us if we consummate
the acquisitions discussed below. Operationally in the third quarter, we are
experiencing an increase in travel nurses under contract and, we expect our
nurse counts to increase such that by the end of the third quarter, the number
of nurses we have under contract will meet or exceed our projected nurse counts.
Management believes that the operational increases noted above will
result in an improvement in our monthly cash flow, such that it will turn
positive sometime in the second half of the year. Through the revolving credit
agreement noted above we have expanded our borrowing capacity and believe that
our current cash on hand, coupled with this increased borrowing capacity, the
additional capital we have raised since the end of the second quarter, the
capital we anticipate we will raise in the third quarter, and anticipated
improvements in cash flow from operations, will provide sufficient resources to
continue operations at our current level, at least for the next twelve months.
If our business fails to improve as we expect or if we fail to raise additional
capital, we would be forced to significantly curtail our operations until
additional capital could be raised. There is no assurance that additional
capital could be raised for operational purposes.
Based on our current acquisition pipeline, we believe that additional
capital will be required to acquire additional companies. We are currently
negotiating with the same finance group that provides our revolving line of
credit to provide us with a term loan facility for the capital required to
acquire additional companies. We also anticipate that if we are successful in
acquiring additional companies, additional equity capital may also be available
to us. While we believe we will be successful in negotiating this term loan,
there can be no assurance to that effect. If additional capital is not readily
available, we will be forced to scale back our acquisition activities and our
operations until our income exceeds our expenses. This would result in a
significant slowdown of our development.
18
Our capital commitments for the next twelve months are minimal as our
business does not require the purchase of extensive capital equipment or
inventory.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and
results of operation are based on the Company's financial statements, which have
been prepared in accordance with accounting policies generally accepted in the
United States of America. The Company believes certain critical accounting
policies affect its more significant judgments and estimates used in the
preparation of financial statements. A description of the Company's critical
accounting policies is set forth in the Company's Form 10-K for the year ended
December 31, 2003. As of, and for the three and six month periods ended June 30,
2004, there have been no material changes or updates to the Company's critical
accounting policies except for the possible outcome of the current Exposure
Draft on Stock Compensation.
ITEM 3. CONTROLS AND PROCEDURES
Subsequent to June 30, 2004 and prior to the filing of this Report, we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures under the supervision of, and with the
participation of, our management, including the Chief Executive Officer and
Chief Financial Officer. Based on that evaluation, our management, including the
Chief Executive Officer and Chief Financial Officer, concluded that our
disclosure controls and procedures were effective at June 30, 2004, and during
the period prior to the execution of this Report with the exception of the
significant deficiency noted below.
During its review of the Company's internal controls over financial
reporting, the Company's management became aware of a significant deficiency,
which is not considered a material weakness, related to the reporting of
stock-based transactions. The Company is addressing this issue with additional
training for key personnel, recruitment of additional key personnel and
increased internal review by management and the audit committee throughout each
reporting period. This significant deficiency in our internal controls arose
from a correction in the application of accounting principles relating to the
recording of a beneficial conversion premium in connection with the purchase of
our Series B Preferred Stock by an investor (see footnote 7 to our Condensed
Consolidated Financial Statements as of June 30, 2004).
There have been no other changes in our internal controls over
financial reporting during our most recent fiscal quarter that have materially
affected or are likely to materially affect our internal control over financial
reporting.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is no material litigation currently pending against us.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
(c) On February 4, 2004 we issued an aggregate of 1,000,000 shares of
Series A Convertible Preferred Stock at a per share price of $1.00 to an
investor. This investor is one of the two investors that purchased $1,750,000 of
the Series A Convertible Preferred Stock as of December 17, 2003. When declared
by the Board of Directors, the holders of the Series A Convertible Preferred
Stock are entitled to receive a quarterly dividend in an amount equal to ..0083
shares of Common Stock for each share of outstanding Series A Convertible
Preferred Stock held by them. Unless previously voluntarily converted prior to
such time, the Series A Convertible Preferred Stock will automatically convert
into shares of our Common Stock at a conversion ratio of one share of Common
Stock for three shares of Series A Preferred Stock, one year from the date of
issuance of such shares, subject to certain conversion price adjustments.
On June 16, 2004, we issued 6,250,000 shares of Series B Convertible
Preferred Stock at a per share price of $0.20 to an investor who is managed by a
member of the Company's Board of Directors. This investor is also a holder of
Series A Convertible Preferred Stock. The holders of the Series B Convertible
Preferred Stock are entitled to receive a dividend on each of September 30,
2004, December 31, 2004, March 31, 2005, June 30, 2005, September 30, 2005 and
December 31, 2005 in the amount equal to .0017 shares of Common Stock for each
share of outstanding Series B Convertible Preferred Stock held by them. In the
event of any liquidation or winding up of the Company, the holders of the Series
B shares will be entitled to receive in preference to the holders of Common
Stock and any other series of Preferred Stock expressly entitled to participate
in such distribution, until the holders of Series B have received, in the
aggregate, an amount equal to the amount of their purchase price. Unless
previously voluntarily converted prior to such time the Series B shares will be
automatically converted into Common Stock at a conversion ratio of one share of
Common Stock for three shares of Series B Preferred Stock upon the earlier of
the closing of an underwritten public offering of our Common Stock pursuant to a
registration statement under the Securities Act of 1933, as amended, with
aggregate net proceeds of at least $25 million or the date specified by written
consent or agreement of the holders of a majority of the then outstanding shares
of Series B Convertible Preferred Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The information set forth in this Item 4 relates to
matters submitted to a vote at the Company's Annual Meeting of
Stockholders on May 27, 2004.
20
(b) Not applicable.
(c) (i) A proposal to approve an amendment to the Company's
Amended and Restated Certificate of Incorporation to affect a reverse
stock split of the Company's Common Stock was approved with 16,239,831
for, and 121,730 against.
(ii) A proposal to reelect the Class II directors to serve for
a three year term ending in 2007 and until their successors are duly
elected and qualified was approved with the following vote:
VOTES FOR VOTES AGAINST
----------- --------------
Robert J. Kenneth 16,238,331 123,230
Robert P. Oliver 16,360,061 1,500
(iii) A proposal to adopt the Company's 2004 Stock Incentive
Plan, pursuant to which an aggregate of 2,400,000 shares of the
Company's Common Stock will be authorized for issuance thereunder, was
approved with 14,021,687 for, 337,630 against and 2,002,244
abstentions.
(iv) A proposal to ratify the appointment of BDO Seidman, LLP
as the Company's independent accountants for the fiscal year ending
December 31, 2004 was approved with 16,360,061 votes for and 1,500
against.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
---------- -------------------------------------------------------------------
3.1(1) Restated Certificate of Incorporation.
3.2(2) Certificate of Amendment to Restated Certificate of Incorporation.
3.3(3) Certificate of Amendment to Restated Certificate of Incorporation.
3.4(4) Certificate of Correction of Certificate of Amendment to Restated
Certificate of Incorporation.
3.5(5) Certificate of Correction of Certificate of Amendment to Restated
Certificate of Incorporation.
3.3(6) Restated Bylaws.
21
4.1(7) Certificate of Designations, Preferences and Rights of Series A
Preferred Stock of Crdentia Corp.
4.2(8) Certificate of Amendment of Certificate of Designations, Preferences
and Rights of Series B Preferred Stock of Crdentia Corp.
4.1(9) Certificate of Designations, Preferences and Rights of Series B
Preferred Stock of Crdentia Corp.
4.2(10) Amended and Restated Registration Rights Agreement dated June 16, 2004
by and among Crdentia Corp. and MedCap Partners L.P.
10.1(11) Stock Purchase Agreement dated May 18, 2004 by and among Crdentia
Corp., MedCap Partners L.P. and the parties listed on the Schedule of
Stockholders attached thereto as Exhibit A.
10.2(12) Loan and Security Agreement dated June 16, 2004 by and among Crdentia
Corp., Baker Anderson Christie, Inc., Nurses Network, Inc., New Age
Staffing, Inc., PSR Nurses, Ltd., PSR Nurse Recruiting, Inc., PSR
Nurses Holdings Corp. and Bridge Healthcare Finance, LLC.
10.3# Notice of Stock Option Award and Stock Option Award Agreement dated May
27, 2004 by and between Crdentia Corp. and Robert Oliver.
10.4# Notice of Stock Option Award and Stock Option Award Agreement dated May
27, 2004 by and between Crdentia Corp. and Joseph DeLuca.
10.5# Notice of Stock Option Award and Stock Option Award Agreement dated May
27, 2004 by and between Crdentia Corp. and Robert Kenneth.
10.6# Notice of Stock Option Award and Stock Option Award Agreement dated May
27, 2004 by and between Crdentia Corp. and C. Fred Toney.
10.7# Notice of Stock Option Award and Stock Option Agreement dated May 27,
2004 by and between Crdentia Corp. and Thomas Herman.
10.8 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and James D. Durham.
10.9 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Thomas Herman.
10.10 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and C. Fred Toney.
10.11 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Robert Oliver.
22
10.12 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Joseph DeLuca.
10.13 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Robert Kenneth.
10.14 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and Pamela Atherton.
10.15 Indemnification Agreement dated February 26, 2004 by and between
Crdentia Corp. and William Leftwich.
31.1 Certification of Chief Executive Officer pursuant to Rules 13a-14(a)
and 15d-14(a) promulgated pursuant to the Securities Exchange Act of
1934, as amended.
31.2 Certification of Chief Financial Officer pursuant to Rules 13a-14(a)
and 15d-14(a) promulgated pursuant to the Securities Exchange Act of
1934, as amended.
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
-----------------------------------------------------
# Indicates management contract or compensatory plan.
(1) Previously filed as Exhibit 3.1 to the Form 8-K filed with the
Securities and Exchange Commission on August 22, 2002 and incorporated
herein by reference.
(2) Previously filed as Exhibit 3.2 to the Form 10-QSB filed with the
Securities and Exchange Commission on August 12, 2003 and incorporated
herein by reference.
(3) Previously filed as Exhibit 4.1 to the Form 8-K/A filed with the
Securities and Exchange Commission on June 28, 2004 and incorporated
herein by reference.
(4) Previously filed as Exhibit 4.2 to the Form 8-K/A filed with the
Securities and Exchange Commission on June 28, 2004 and incorporated
herein by reference.
(5) Previously filed as Exhibit 4.3 to the Form 8-K/A filed with the
Securities and Exchange Commission on June 28, 2004 and incorporated
herein by reference.
(6) Previously filed as Exhibit 3.2 to the Form 8-K filed with the
Securities and Exchange Commission on August 22, 2002 and incorporated
herein by reference.
(7) Previously filed as Exhibit 4.1 to the Form 8-K filed with the
Securities and Exchange Commission on December 30, 2003 and
incorporated herein by reference.
(8) Previously filed as Exhibit 4.1 to the Form 8-K filed with the
Securities and Exchange Commission on February 20, 2004 and
incorporated herein by reference.
(9) Previously filed as Exhibit 4.1 to the Form 8-K filed with the
Securities and Exchange Commission on June 22, 2004 and incorporated
herein by reference.
(10) Previously filed as Exhibit 4.2 to the Form 8-K filed with the
Securities and Exchange Commission on June 22, 2004 and incorporated
herein by reference.
(11) Previously filed as Exhibit 10.1 to the Form 8-K filed with the
Securities and Exchange Commission on May 20, 2004 and incorporated
herein by reference.
23
(12) Previously filed as Exhibit 10.1 to the Form 8-K filed with the
Securities and Exchange Commission on June 22, 2004 and incorporated
herein by reference.
(b) Reports on Form 8-K
On May 20, 2004, we filed a Form 8-K under Item 5, Other Events, to
report a Stock Purchase Agreement we entered with MedCap Partners L.P.
and certain of our stockholders.
On June 22, 2004, we filed a Form 8-K under Item 5, Other Events, to
report that on Jun 16, 2004 we (i) entered a Loan and Security
Agreement with Bridge Healthcare Finance, LLC, and (ii) issued
6,250,000 shares of Series B Preferred Stock to MedCap Partners L.P.
On June 28, 2004, we filed a Form 8-K under Item 5, Other Events, to
report a one-for-three reverse split of our outstanding shares of
common stock.
On June 28, 2004, we filed a Form 8-K/A under Item 5, Other Events, to
amend the Form 8-K previously filed on June 28, 2004 to report that
beginning on June 29, 2004 our common stock would trade with the ticker
symbol "CRDE."
24
SIGNATURES
In accordance with the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed in
its behalf by the undersigned, thereunto duly authorized.
Date: August 16, 2004 By: /s/ James D. Durham
--------------------------------------
James D. Durham
Chief Executive Officer
Date: August 16, 2004 By: /s/ William S. Leftwich
---------------------------------------
William S. Leftwich
Chief Financial Officer and Secretary
25