8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

to

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  May 24, 2011

Kensey Nash Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-34388	36-3316412
(State or other jurisdiction	(Commission File Number)	(IRS Employer Identification No.)
of incorporation or organization)

735 Pennsylvania Drive, Exton, Pennsylvania 19341

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code:  (484) 713-2100

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On May 27, 2011, Kensey Nash Corporation (the “Company”) filed a Current Report on Form 8-K (the “Initial Form 8-K”) reporting its acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian Corporation (“Norian”). This Amendment No. 1 on Form 8-K/A amends and supplements the Initial Form 8-K and is being filed to provide the historical financial information required and the pro forma financial information required pursuant to Items 9.01(a) and 9.01(b) of Form 8-K, respectively. In accordance with the requirements of Items 9.01(a)(4) and 9.01(b)(2) of Form 8-K, this Amendment No. 1 on Form 8-K/A is being filed within 71 calendar days of the date that the Initial Form 8-K was required to be filed.

Item 9.01.    Financial Statements and Exhibits.

(a)        Financial Statements of Business Acquired.

The following audited and unaudited financial statements as required by Item 9.01(a) are attached hereto as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated herein by reference.

(i.) Report of Independent Auditors.

(ii.) The Audited Statement of Assets Acquired and Liabilities Assumed of Norian as of December 31, 2010, the Statement of Net Revenues and Direct Costs and Operating Expenses of Norian and the accompanying notes thereto for the Year Ended December 31, 2010, and the Unaudited Statement of Assets Acquired and Liabilities Assumed of Norian as of March 31, 2011, the Statements of Net Revenues and Direct Costs and Operating Expenses of Norian and the accompanying notes thereto for the Three Months Ended March 31, 2011 and 2010.

(b)       Pro Forma Financial Information.

The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as required by Item 9.01(b), giving effect to the Company’s acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian (the “Norian Business”) as if the acquisition had been completed on March 31, 2011, and supplemental forward-looking information are attached hereto as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated herein by reference.

(i.) Unaudited Pro Forma Condensed Consolidated Balance Sheet and accompanying Notes of Kensey Nash Corporation as of March 31, 2011.

(ii.) Supplemental Forward-Looking Information Regarding the Net Asset Acquisition of the Norian Business.

(d)       Exhibits.

2.1 †	Asset Purchase Agreement by and between Norian Corporation, KNC NOR Acquisition Sub, Inc. and Kensey Nash Corporation, a Delaware corporation, dated May 24, 2011.*
2.2 †	Agreement of Sale (for 1230 Wilson Drive, West Chester, Pennsylvania) by and between Norian Corporation and KNC NOR Acquisition Sub, Inc., dated May 24, 2011.*
10.1 †	Supply Agreement by and between Synthes USA Sales, LLC, and KNC NOR Acquisition Sub, Inc., dated May 24, 2011.**
23.1	Consent of Independent Auditors, Ernst & Young LLP.

2

99.1	Press Release of Kensey Nash Corporation dated May 24, 2011 (previously furnished as an exhibit to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 27, 2011).
99.2	Audited Statement of Assets Acquired and Liabilities Assumed and Statement of Net Revenue and Direct Costs and Operating Expenses of the Norian Business as of and for the year ended December 31, 2010, the accompanying notes thereto and the related Report of the Independent Auditors, the Unaudited Statement of Assets Acquired and Liabilities Assumed as of the Three Months Ended March 31, 2011 and Statements of Net Revenue and Direct Costs and Operating Expenses of the Norian Business as of and for the Three Months Ended March 31, 2011 and 2010.
99.3	Unaudited Pro Forma Condensed Consolidated Balance Sheet of Kensey Nash Corporation as of March 31, 2011 and the accompanying notes thereto and Supplemental Forward-looking Information Regarding the Net Asset Acquisition of the Norian Business.

† Previously filed as an exhibit to the Current Report on Form 8-K.

* Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a supplemental copy of an omitted exhibit or schedule to the Securities and Exchange Commission upon request.

** Portions of this exhibit were omitted and have been filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934 and Rule 406 under Securities Act of 1933.

3

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 hereunto duly authorized.

KENSEY NASH CORPORATION
By:	/s/ Michael Celano
	Michael Celano
	Chief Financial Officer

Dated: August 5, 2011

4

EX-23.1

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in Registration Statement No. 333-156427 and Registration Statement No. 333-171317 on Form S-8 of our report dated August 5, 2011, with respect to the statement of assets acquired and liabilities assumed and the related statement of net revenues and direct costs and operating expenses of the Norian Business, included in this Current Report (Form 8-K/A) for the year ended December 31, 2010.

/s/ Ernst & Young LLP

Ernst & Young LLP

Philadelphia, PA

August 5, 2011

EX-99.2

EXHIBIT 99.2

FINANCIAL STATEMENTS

Norian Business

Three Month Period Ended March 31, 2011 and 2010 (unaudited)

and Year Ended December 31, 2010

With Report of Independent Auditors

Norian Business

Financial Statements

Three Month Period Ended March 31, 2011 and 2010 (unaudited) and

Year Ended December 31, 2010

Contents

Report of Independent Auditors	1
Financial Statements
Statements of Assets Acquired and Liabilities Assumed	2
Statements of Net Revenues and Direct Costs and Operating Expenses	3
Notes to Financial Statements	4

Report of Independent Auditors

The Board of Directors of Synthes, Inc.

We have audited the accompanying statement of assets acquired and liabilities assumed by Kensey Nash Corporation, pursuant to an Asset Purchase Agreement (“APA”) dated May 24, 2011, of the Norian Corporation, a wholly owned subsidiary of Synthes, Inc., as of December 31, 2010, and the related statement of net revenues and direct costs and operating expenses for the year then ended. The assets acquired and liabilities assumed pursuant to the APA are referred to as the “Norian Business.” These statements are the responsibility of the Norian Corporation’s management. Our responsibility is to express an opinion on the statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Norian Corporation’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Norian Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The accompanying financial statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in an amendment to the Form 8-K as described in Note 1, and are not intended to be a complete presentation of the financial position or the results of operations of Norian Corporation.

In our opinion, the financial statements referred to above present fairly, in all material respects, the statement of assets acquired and liabilities assumed of the Norian Business as of December 31, 2010, and the statement of net revenues and direct costs and operating expenses for the year then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

August 5, 2011

Philadelphia, Pennsylvania

1

Norian Business

Statements of Assets Acquired and Liabilities Assumed

	March 31		December 31
	2011		2010
	(Unaudited)
Assets acquired
Inventories	$	5,626,835	$	4,738,917
Property, plant and equipment		9,499,182		9,700,494
Total assets acquired	$	15,126,017	$	14,439,411
Liabilities assumed
Accrued expenses	$	123,885	$	341,928
Total liabilities assumed		123,885		341,928
Net assets acquired	$	15,002,132	$	14,097,483

    The accompanying notes are an integral part of these financial statements.

2

Norian Business

Statements of Net Revenues and Direct Costs and Operating Expenses

	Three Month Period Ended				Year Ended
	March 31				December 31, 2010
	2011		2010
	(Unaudited)
Net revenues
Product sales	$	3,935,710	$	5,152,795		$    20,535,329
Royalty revenue		145,632		375,047		1,223,154
Total net revenues	$	4,081,342	$	5,527,842		$    21,758,483
Direct costs and operating expenses
Cost of goods sold	$	2,579,900	$	2,955,324		$    13,174,381
Product development expense		303,484		335,079		1,235,674
Total direct costs and operating expenses	$	2,883,384	$	3,290,403		$    14,410,055
Net revenues less direct costs and operating expenses	$	1,197,958	$	2,237,439		$    7,348,428

The accompanying notes are an integral part of these financial statements.

3

Norian Business

Notes to Financial Statements

Three Month Period Ended March 31, 2011 and 2010 (unaudited) and

Year Ended December 31, 2010

1. Organization and Significant Accounting Policies

Description of the Business and Basis of Presentation

Norian Corporation, a wholly owned subsidiary of Synthes, Inc. (“Synthes”) is engaged in the development, manufacturing, and marketing of bone repair cement, a proprietary cancellous bone replacement material designed for use in structurally compromised cancellous bone. Additionally, Norian Corporation also manufactures and sells related delivery systems including mixers, delivery devices and needles. All product sales are to distributors owned by Synthes.

Pursuant to an asset purchase agreement (the “APA”) dated as of May 24, 2011 between Norian Corporation and Kensey Nash Corporation (“the Acquirer”), the Acquirer purchased operating assets related to the product lines of the Norian Corporation including patents and trademarks, inventories, and property, plant and equipment and assumed certain select accrued liabilities of Norian Corporation in return for approximately $26 million in cash minus accrued vacation and bonus liabilities. Hereinafter, the assets, liabilities and related business sold under the APA are referred to as the “Norian Business.” Simultaneously with the APA, the Acquirer also entered into a ten-year supply agreement (“Supply Agreement”) with Synthes USA Sales, LLC, a wholly owned subsidiary of Synthes. The Acquirer has agreed to sell existing Norian Corporation products exclusively to Synthes under the terms set forth in the Supply Agreement. The Acquirer also entered into a ten-year lease agreement (“Lease Agreement”) on May 24, 2011 with Synthes USA HQ, Inc., a wholly owned subsidiary of Synthes, under which the Acquirer will lease the entire Norian Corporation building located in West Chester, PA to Synthes USA HQ, Inc. Synthes USA HQ, Inc. will in turn sub-lease a portion of the building to the Acquirer for use in connection with the Norian Business over eighteen months.

4

Norian Business

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

The accompanying financial statements of the Norian Business were prepared for the purpose of providing the Acquirer historical information to comply with the rules and regulations of the Securities and Exchange Commission for inclusion in an amendment to a Form 8-K (“Form 8-K/A”) to be filed by the Acquirer. These statements are derived from Norian Corporation’s historical accounting records, which are in accordance with accounting principles generally accepted in the United States. The Norian Business financial statements are not intended to be a complete presentation of Norian Corporation and are not necessarily indicative of the financial position, results of operations and cash flows that would have been achieved if the Norian Business had operated as a separate, stand-alone business.

Throughout the periods presented herein, the Norian Business was controlled by Synthes. The Statements of Net Revenues and Direct Costs and Operating Expenses reflect only those sales and revenues directly attributable to the Norian Business. The direct costs and operating expenses of the Norian Business presented in these statements include cost of goods sold related to the Norian Business’ sales and product development expenses incurred by Synthes that is directly attributed to products included in the Norian Business. The product development expense is allocated from Synthes based on estimates of the employee time spent in product development for products included in the Norian Business and external costs incurred related to products in the Norian Business. Norian Corporation’s management considers these allocations to be a reasonable reflection of the utilization of goods and the services provided. Corporate overhead, other than product development expense, including items such as human resources, legal services and settlements, compliance, finance, tax and treasury functions that are managed by Synthes have not been allocated to the Norian Business in these financial statements. Additionally, depreciation expense of assets not acquired, interest expense and income taxes have also been excluded from the financial statements.

The preparation of complete statements of cash flows and statements of stockholder’s equity was not practicable because of the integration of the Norian Business into the total operations of Synthes prior to the divestiture of the Norian Business. The following selected cash flow information has been prepared from cash flows related solely to cash flows used in or provided by changes in the specific assets and liabilities comprising the Norian Business.

5

Norian Business

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

Selected Cash Flows:

	Three month period ended March 31				Year ended December 31,
	2011		2010		2010
	(unaudited)
Net revenues less direct costs and operating expenses	$	1,197,958	$	2,237,439	$	7,348,428
Change in inventories		(887,918)		(338,742)		207,905
Change in accrued liabilities		(218,044)		(179,486)		(46,304)
Selected operating cash flows		91,996		1,719,211		7,510,029
Purchases of property, plant and equipment		(73,702)		(14,340)		(291,286)
Selected investing cash flows		(73,702)		(14,340)		(291,286)
Net selected cash flows	$	18,294	$	1,704,871	$	7,218,743

The accompanying unaudited statements of assets acquired and liabilities assumed as of March 31, 2011 and the unaudited statements of net revenues and direct costs and operating expenses for the three month period ended March 31, 2011 and 2010 of the Norian Business have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and the instructions to Article 10 of Regulation S-X. In the opinion of management, all adjustments considered necessary for a fair presentation have been made. Such adjustments consist of those of a normal recurring nature. The excess of net revenues less direct costs and operating expenses are not necessarily indicative of the operating results that may be expected in future periods.

6

Norian Business

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

Use of Estimates

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Inventories

Inventories consist principally of raw materials, components and work in process and are stated at the lower of cost or market, using the first-in, first-out method. The Norian Business maintains provisions for excess and obsolete inventory. Management estimates these provisions based on historical experience and expected future results.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful life of the asset. The estimated useful lives are as follows:

Building and building improvements	7 – 30 years
Furniture and fixtures	5 – 8 years
Machinery and equipment	3 – 7 years

7

Norian Business

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

Revenue Recognition

Product sales are recognized on products when the related goods have been shipped, title has passed to a distributor owned by Synthes, and there are no undelivered elements or uncertainties. All of the product sales are generated from sales to distributors owned by Synthes.

Royalty revenue is generated from license agreements with unrelated third parties and recognized when earned.

Cost of Goods Sold

Cost of goods sold consists primarily of product and product-related costs, vendor consideration, freight and handling costs.

Product Development Expense

Product development costs are charged to operations when incurred and are included in direct costs and operating expenses. Product development costs consist of the cost of personnel, material, depreciation and related overhead costs to develop and launch new products.

8

Norian Business

Notes to Financial Statements (continued)

2. Inventories

Inventories are summarized as follows:

	March 31, 2011
	(unaudited)		December 31, 2010
Raw material, components and work in process	$	6,269,529	$	5,143,795
Less provision for excess and obsolescence		(642,694)		(404,878)
	$	5,626,835	$	4,738,917

3. Property, Plant and Equipment

Details of property, plant and equipment are as follows:

	March 31, 2011
	(unaudited)		December 31, 2010
Building and building improvements	$	11,563,481	$	11,517,407
Furniture and fixtures		504,516		504,516
Machinery and equipment		4,480,224		4,459,766
		16,548,221		16,481,689
Accumulated depreciation and amortization		(7,049,039)		(6,781,195)
	$	9,499,182	$	9,700,494

9

Norian Business

Notes to Financial Statements (continued)

4. Commitments and Contingencies

Norian Corporation has been and the Norian Business may continue to be subject to claims that arise from time to time in the ordinary course of business, including those involving product liability, intellectual property, commercial, employment, real estate, environmental, and antitrust matters. Also, governments and regulatory authorities have been stepping up their compliance and law enforcement activities in recent years in key areas, including food and drug regulation, sales and marketing practices, corruption, environmental, and antitrust matters. Norian Corporation has been and the Norian Business may continue to be, subject, from time to time, to governmental information requests and audits by regulatory authorities.

The United States Attorney’s Office for the Eastern District of Pennsylvania filed an indictment against Synthes, Norian Corporation, and four individuals who were executives of Synthes during the period in question, charging them with violations of the U.S. Food, Drug and Cosmetic Act (“the Act”) in connection with certain marketing and promotional practices involving Norian Corporation products during the period from May 2002 to July 2004. In October 2010, Synthes and Norian Corporation entered into agreements (“Agreements”) with the U.S. Department of Justice and the Office of Inspector General of the Department of Health and Human Services (“OIG”) to resolve the investigation, subject to court approval. Under the Agreements, Synthes agreed to pay $808,000 in settlement, fines and forfeiture payments for a single misdemeanor violation of the Act, and also agreed to divest the Norian Business. Norian Corporation agreed to pay fines and forfeitures of approximately $23.5 million for one felony and numerous misdemeanor violations of the Act. In addition, Synthes entered into a Corporate Integrity Agreement (“CIA”) with the OIG. On November 30, 2010, the United States District Court for the Eastern District of Pennsylvania accepted the pleas by Synthes and Norian Corporation referenced in the Agreements, and the Agreements became effective. All amounts due under the Agreements have been paid. The accompanying financial statements do not include the cost of this settlement or the legal and compliance costs incurred related to this matter. The Acquirer will not assume liabilities under the CIA or other liabilities incurred before or after the acquisition of the Norian Business related to the United States Attorney’s Office for the Eastern District of Pennsylvania indictment against Synthes.

5. Subsequent Events

Pursuant to the APA mentioned heretofore and dated as of May 24, 2011 between Norian Corporation and the Acquirer, the Acquirer purchased operating assets related to the product lines of the Norian Corporation including patents and trademarks, inventories, and property, plant and equipment and assumed certain select accrued liabilities of Norian Corporation in return for approximately $26 million in cash minus accrued vacation and bonus liabilities.

The Norian Business has evaluated subsequent events through August 5, 2011, the filing date of these financial statements.

EX-99.3

EXHIBIT 99.3

KENSEY NASH CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2011

INDEX

	PAGE
Overview to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011		2
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011		4
Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011		5
Supplemental Forward-Looking Information Regarding the Net Asset Acquisition of the Norian Business		9

KENSEY NASH CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2011

Overview

On May 24, 2011 (the “Date of Acquisition”), Kensey Nash Corporation (the “Company”) completed its acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian Corporation (“Norian”), a wholly owned subsidiary of Synthes, Inc. (“Synthes”), for a total purchase price of approximately $26 million.

The Company’s Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011 is based on the historical Unaudited Condensed Consolidated Balance Sheet of the Company as of March 31, 2011 (as filed with the Securities and Exchange Commission (the “SEC”) in its quarterly report on Form 10-Q on May 6, 2011), combined with the Unaudited Statement of Assets Acquired and Liabilities Assumed of Norian as of March 31, 2011, as filed as Exhibit 99.2 to the Company’s Amendment No. 1 to the Current Report on Form 8-K/A dated May 24, 2011 (the “Amendment No. 1 to the Current Report on Form 8-K/A”) after giving effect to the Company’s acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian (the “Norian Business”) on May 24, 2011, and includes the assumptions and adjustments as described in the accompanying notes hereto.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if the acquisition of the Norian Business had occurred on March 31, 2011. The Unaudited Pro Forma Condensed Consolidated Balance Sheet is not intended to represent or be indicative of the consolidated financial condition of the proposed combined entity that would have been reported if the acquisition had been consummated on March 31, 2011. In addition, the Unaudited Pro Forma Condensed Consolidated Balance Sheet does not purport to project the future financial position of the consolidated company as of the end of its fiscal year ending June 30, 2011 (“fiscal 2011”), its fiscal year ending June 30, 2012 (“fiscal 2012”) or of any other future periods.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet has been prepared using the purchase method of accounting. The estimated fair values of the acquired assets and assumed liabilities as of the Date of Acquisition, which are based on estimates and assumptions of the Company, the consideration paid and the entries to record the direct transaction costs incurred are reflected therein. As explained in more detail in the accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet, the total purchase price of approximately $26 million to acquire the Norian Business has been allocated to the assets acquired and assumed liabilities of Norian based upon preliminary estimated fair values at the Date of Acquisition. Independent valuation specialists have conducted analyses in order to assist management of the Company in determining the fair values of the selected assets and liabilities. The Company’s management is responsible for these internal and third party valuations and appraisals. The Company is continuing to finalize the valuations of these net assets. The fair value allocation consists of preliminary estimates and analyses and is subject to change upon the finalization of the appraisals and other valuation analyses, which will be completed prior to the Company’s filing of its Annual Report on Form 10-K with the SEC for its fiscal 2011. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to an understanding of the impact of this transaction on the financial results of the Company.

The Supplemental Forward-looking Information Regarding the Net Asset Acquisition of the Norian Business is also based on estimates and assumptions. The data is presented for informational purposes only and is not intended to represent or be indicative of the consolidated financial condition of the proposed combined entity that would have been reported or to be reported for the Company’s fiscal 2011, fiscal 2012 or any other future periods.

2

The Unaudited Pro Forma Condensed Consolidated Balance Sheet and the Supplemental Forward-looking Information Regarding the Net Asset Acquisition of the Norian Business have been provided to comply with the presentation of certain financial information relating to Norian in satisfaction of the requirements of Rule 3-05 of Regulation S-X, as required to be filed pursuant to Items 9.01(a) and 9.01(b) of Form 8-K. Historically, Norian had not maintained certain distinct and separate accounts from Synthes. Consequently, full separate financial statements did not exist. Furthermore, the financial information of Norian included certain assets and liabilities that the Company did not acquire or assume in its completion of its acquisition of the Norian Business.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet and the Supplemental Forward-looking Information Regarding the Net Asset Acquisition of the Norian Business should be read in conjunction with the historical consolidated financial statements and accompanying notes thereto of the Company contained in its Annual Report on Form 10-K for its fiscal year end June 30, 2010 and its Quarterly Reports on Form 10-Q for the quarterly periods ended September 30, 2010, December 31, 2010 and March 31, 2011, as well as the Current Report on Form 8-K (the “Initial Form 8-K”) filed on May 27, 2011, and Norian’s audited financial statements for the year ended December 31, 2010 and unaudited financial statements for the three months ended March 31, 2011 and 2010, included as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A.

3

KENSEY NASH CORPORATION

UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2011

							(Note 3)				KENSEY NASH
ASSETS:	KENSEY NASH			NORIAN			PROFORMA				CORPORATION
CURRENT ASSETS:	CORPORATION			BUSINESS			ADJUSTMENTS				PROFORMA
Cash and cash equivalents	$	16,965,992		$	-		$	(11,855,959	)	(a)	$	5,110,033
Investments		13,778,938			-			-				13,778,938
Trade receivables, net of allowances for doubtful accounts		3,899,261			-			-				3,899,261
Royalties receivable		6,019,671			-			-				6,019,671
Other receivables		608,382			-							608,382
Inventory		9,751,092			5,626,835			1,750,903		(b)		17,128,830
Deferred tax asset, current portion		2,461,576			-							2,461,576
Prepaid expenses and other		3,316,785			-			45,150		(c)		3,361,935
Total current assets		56,801,697			5,626,835			(10,059,906	)			52,368,626
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land		4,883,591						910,010		(c)		5,793,601
Building		46,632,773			11,563,481			(8,173,481	)	(c)		50,022,773
Machinery, furniture and equipment		33,608,889			4,984,740			(3,501,040	)	(c)		35,092,589
Construction in progress		505,050			-			-				505,050
Total property, plant and equipment		85,630,304			16,548,221			(10,764,511	)			91,414,014
Accumulated depreciation		(32,721,043	)		(7,049,039	)		7,049,039		(c)		(32,721,043	)
Net property, plant and equipment		52,909,261			9,499,182			(3,715,472	)			58,692,971
OTHER ASSETS:
Deferred tax asset, non-current		7,277,196			-			215,000		(d)		7,492,196
Acquired patents and other intangibles, net of accumulated amortization		4,750,765			-			13,780,000		(c)		18,530,765
Goodwill		4,366,273			-			-				4,366,273
Cost method investment		2,452,665			-			-				2,452,665
Other non-current assets		67,051			-			-				67,051
Total other assets		18,913,950			-			13,995,000				32,908,950
TOTAL	$	128,624,908		$	15,126,017		$	219,622			$	143,970,547
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,791,662		$	-		$	265,000		(e)	$	2,056,662
Accrued expenses		2,316,278			123,885			72,546		(c)		2,512,709
Other current liabilities		1,609,115			-			136,789		(c)		1,745,904
Deferred tax liability, current		-			-			545,000		(d)		545,000
Current portion of debt		1,399,997			-			-				1,399,997
Deferred revenue		958,019			-			-				958,019
Total current liabilities		8,075,071			123,885			1,019,335				9,218,291
OTHER LIABILITIES:
Long term debt		28,933,333			-			-				28,933,333
Deferred revenue, non-current		2,665,473			-			-				2,665,473
Other non-current liabilities		6,027,512			-			14,068,349		(a),(c)		20,095,862
Total liabilities		45,701,389			123,885			15,087,684				60,912,958
COMMITMENTS AND CONTINGENCIES		-			-			-				-
STOCKHOLDERS’ EQUITY:
Acquired Net Assets and Liabilities					15,002,132			(15,002,132	)	(f)		-
Preferred stock		-			-			-				-
Common stock		8,529			-			-				8,529
Capital in excess of par value		6,038,052			-			-				6,038,052
Retained earnings		79,691,031			-			134,070		(g),(h)		79,825,101
Accumulated other comprehensive loss		(2,814,093	)		-			-				(2,814,093	)
Total stockholders’ equity		82,923,519			15,002,132			(14,868,062	)			83,057,589
TOTAL	$	128,624,908		$	15,126,017		$	219,622			$	143,970,547

See notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.

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KENSEY NASH CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2011

Note 1 – Description of the Transaction and Basis of Presentation

On May 24, 2011 (the “Date of Acquisition”), Kensey Nash Corporation (the “Company”) completed its acquisition of certain operational assets and certain liabilities relating to the business and product lines of Norian Corporation (“Norian”), a wholly owned subsidiary of Synthes, Inc. (“Synthes”), pursuant to an Asset Purchase Agreement and related Property Purchase Agreement, for a total purchase price of approximately $26 million ($22 million pursuant to the Asset Purchase Agreement and $4 million pursuant to the Property Purchase Agreement).

On the Date of Acquisition, the Company paid to Synthes the total cash consideration of $11,855,959 from the Company’s available cash on hand. The Company is required to pay the remaining $14 million on the earlier of the date on which the transfer of manufacturing operation from the purchased West Chester, Pennsylvania facility to the Company’s facility located in Exton, Pennsylvania has been completed or the 18-month anniversary of the Date of Acquisition. The $14 million deferred payment has been classified by the Company as a long-term liability.

The acquisition has been accounted for using the purchase method of accounting under generally accepted accounting principles in the United States of America (“U.S. GAAP”). Under the purchase method of accounting, the total purchase price is allocated to the tangible and intangible acquired assets and assumed liabilities of Norian, based on their respective preliminary estimated fair values as of the Date of the Acquisition.

The Company has prepared the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2011 using the purchase method of accounting. The estimated fair values of the acquired assets and assumed liabilities as of the Date of Acquisition, which are based on estimates and assumptions of the Company, the consideration paid and the entries to record the direct transaction costs incurred are reflected within the pro forma adjustment entries. The Unaudited Pro Forma Condensed Consolidated Balance Sheet gives effect to the acquisition as if it had occurred on March 31, 2011. See Note 2 for information on the Company’s preliminary allocation of the estimated purchase price.

Note 2- Preliminary Purchase Price Allocation

For purposes of the Unaudited Pro Forma Condensed Consolidated Balance Sheet, the approximate $26 million purchase price has been allocated based upon a preliminary estimate of the fair value of assets acquired and liabilities assumed. The determination of the estimated fair value required management to make significant estimates and assumptions. These estimates and assumptions of the fair value allocation are preliminary and subject to change upon the finalization of the appraisals and other valuation analyses, which are in the process of being completed. Independent valuation specialists conducted a valuation to assist management of the Company in determining the estimated fair values of a property, machinery and equipment and intangibles. The Company’s management is responsible for these internal and third party valuations and appraisals. The work performed by the independent valuation specialists, while not yet completed and finalized, has been considered in management’s estimates of fair values reflected. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to an understanding of the impact of this transaction on the financial results of the Company.

The preliminary estimated allocation of the fair values is as follows:

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Elements of Total Purchase Consideration:

		$25,855,959
Cash Paid for the Norian Business	$	11,855,959
Long-Term Liability (See Note 1)		14,000,000
Total Purchase Price	$	25,855,959

Preliminary Purchase Price Allocation:

		$ 7,377,783
Inventory	$	7,377,783
Land		910,010
Building		3,390,000
Machinery, furniture and equipment		1,483,700
Prepaid payroll		45,150
Sub-lease rent credit		(205,183)
Certain operation accruals		(196,431)
Intangible asset (customer relationship)		13,780,000
	$	26,585,029
Total Purchase Price	$	25,855,959
Gain on Bargain Purchase of Net Assets Acquired	$	729,070

Note 3 – Pro Forma Adjustments

The Pro Forma Adjustments within the Unaudited Pro Forma Condensed Consolidated Balance Sheet represent the adjustments to the carrying amounts as of March 31, 2011 for certain assets acquired and assumed liabilities of Norian to reflect the preliminary purchase price allocation to assets and liabilities as of the Date of Acquisition.

Adjustments included in the column under the heading “Pro Forma Adjustments” relate to the following:

(a) Represents the adjustment to record the Company’s cash consideration portion paid of $11,855,959 from the Company’s available cash on hand of the total purchase price of approximately $26 million to Synthes. The Company is required to pay the remaining $14 million of the purchase price on the earlier of the date on which the transfer of manufacturing operation from the purchased West Chester, Pennsylvania facility to the Company’s facility located in Exton, Pennsylvania has been completed or the 18-month anniversary of the Date of Acquisition. The $14 million deferred payment has been classified by the Company as a long-term liability.

(b) Represents the purchase accounting adjustments related to assigning a fair value to the acquired inventory on the Date of Acquisition, which included, amongst others, an adjustment to inventory, commonly referred to as “stepped-up value”, of $1,250,000, representing the estimated capitalized manufacturing profit in acquired inventory. This non-recurring, non-cash charge to cost of products sold will occur over the expected inventory turn-over period, which approximates a 6 month period, as the capitalized manufacturing profit added to inventory under purchase accounting is expected to be sold in approximately 6 months after the Date of Acquisition.

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(c) Represents the adjustment to the Norian carrying amount of the asset to its estimated fair value as of the Date of Acquisition, as part of the allocation of purchase price, as summarized in Note 2.

(d) Represents current and non-current portions of deferred taxes resulting from book and tax basis differences of certain tangible and intangible assets computed using the Company’s estimated statutory income tax rate of 45% (35% federal statutory rate and state rate of 9.99%).

(e) Represents the total fiscal 2011 estimated direct transaction costs, such as professional and legal fees, related to the acquisition of the Norian Business of approximately $505,000 expensed in accordance with ASC 805, and the related tax benefit of approximately $215,000, of which approximately $25,000 was previously reflected in the Company’s historical Unaudited Condensed Consolidated Balance Sheet of the Company as of March 31, 2011.

(f) Represents the elimination of Norian’s historical account balance.

(g) Represents the net impact to Retained Earnings of $399,070, as a result of the Company’s recognition of the gain on bargain purchase of net assets acquired of $729,070 (see Note 2) and the related tax expense of approximately $330,000, (computed using the Company’s estimated statutory income tax rate of 45%), as the excess of the fair value of the net assets acquired of the Norian Business over the allocated purchase price. Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 805 (ASC 805), gain on bargain purchase of net assets is recognized by the acquirer as a gain in earnings on the Date of Acquisition.

(h) Represents the net impact to Retained Earnings, as a result of the Pro Forma Adjustment (e) Direct Transaction Costs (see above), net of taxes, of $265,000.

Note 4 –Accounting Policies

Inventories

Acquired inventory consist principally of raw materials, components and work in process and are stated at the lower of cost or market. Acquired inventory is presented net of excess and obsolete provisions.

Property, Plant and Equipment

Depreciation is expected to be calculated using the straight-line method over the estimated useful life of the asset. The estimated useful lives are as follows:

Buildings	20 Years
Machinery and Equipment	1- 7 Years
Furniture and Fixtures	2- 7 Years

Intangible Assets

The Company is expected to amortize the identified intangible asset (customer relationship) over its remaining period of economic benefit of approximately 15 years.

The table below details the Company’s estimated amortization expense for the next five fiscal years of the intangible asset (customer relationship) acquired by the Company:

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Fiscal Year Ending	Amortization
June 30,	Expense
2011	$                76,556
2012	$              918,667
2013	$              918,667
2014	$              918,667
2015	$              918,667
Thereafter	$         10,028,778

Commitments and Contingencies

The Company did not assume any additional liabilities of Norian on the Date of Acquisition, other than the personnel related bonus and vacation accruals for certain Norian employees. The Company is not responsible for any other past or future liabilities related to matters disclosed in the Statement of Assets Acquired and Liabilities Assumed of Norian as of December 31, 2010 (as filed as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A).

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KENSEY NASH CORPORATION

SUPPLEMENTAL FORWARD-LOOKING INFORMATION

REGARDING THE NET ASSET ACQUISITION OF THE NORIAN BUSINESS

A NOTE ABOUT FORWARD-LOOKING STATEMENTS

As used herein, the terms “the Company,” “we,” “us” and “our” refer to Kensey Nash Corporation and its consolidated subsidiaries, collectively.

The statements and information, other than statements of historical fact, included below are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “expect,” “anticipate,” “estimate,” “plan,” “will,” “would,” “should,” “forecast,” “believe,” “guidance,” “projection” or similar expressions, but these words are not the exclusive means for identifying such statements. We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot provide assurance that such expectations will occur. The Company’s actual future performance could differ materially from such statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially. The Company cautions that a number of risks, uncertainties and other important factors could cause the Company’s actual results to differ materially from those in the forward-looking statements, including, without limitation, the Company’s success and uncertainty of transitioning the Norian manufacturing operations to the Company and the success of Synthes in distributing the Norian products, market acceptance of new products or applications, product defects, ability to manufacture sufficient volumes to fulfill customer demand, future success of our research and development efforts with respect to the Norian products, availability of vendor-sourced components at reasonable prices and unexpected delays or costs associated with the Company’s consolidation of its headquarters and manufacturing operations of the Norian Business and future relocation of the Norian Business from the West Chester facility to the Exton facility. The recently announced acquisition by Johnson & Johnson of Synthes, could adversely affect our operating results; specifically, our business and operating results could suffer if the acquisition is consummated and the combined company diverts focus and attention, in particular, with respect to sales and marketing efforts, or shifts its business strategy, away from the Norian products.

For a detailed discussion of factors that could affect the Company’s future operating results, see the Company’s SEC filings, including the disclosures under “Risk Factors” in those filings. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason.

Overview

The Company’s acquisition of the Norian Business closed on May 24, 2011. We are providing the following supplemental information regarding management’s plans for the combined business going forward. Forward-looking information is being provided for the approximate one-month period from the Date of Acquisition through June 30, 2011, and for the future fiscal year ending June 30, 2012. Although not reflected in the Unaudited Pro Forma Condensed Consolidated Balance Sheet, including the notes thereto, the Company believes there will be potential cost savings and other synergies that could result from the acquisition.

Historically, Norian had not maintained certain distinct and separate accounts from Synthes. Synthes has not allocated certain corporate overhead expenses to Norian, including, but not limited to, human resources, legal, finance, tax and treasury functions, and other expenses such as intangible amortization, and related income taxes, and therefore, such items were not historically identified and accounted for in the separate financial records of Norian. Consequently, full separate financial statements did not exist. In addition, the Norian financial information included total revenue of the Norian product sales sold at arms-length to Synthes, who subsequently sold these products to the end-user market. The historical financial

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statements of Norian, as filed as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A, reflects the manufacturing and selling of the product lines through inter-company arms-length transactions with Synthes at negotiated prices.

The results of operations associated with the Norian Business have been consolidated with those of the Company since the Date of Acquisition. The Company’s annual financial statements for the fiscal year ended June 30, 2011, to be filed on Form 10-K with the SEC, will reflect values allocated under the purchase method of accounting, but will not be restated retroactively to reflect the historical financial position or results of operations of Norian.

Revenue

On May 24, 2011, the Company and Synthes entered into a Supply Agreement pursuant to which the Company will manufacture the Norian products for Synthes under the Asset Purchase Agreement, and Synthes will purchase such products exclusively from the Company for at least 10 years. Synthes will exclusively distribute the products worldwide.

The revenues previously experienced by Norian as presented in the historical financial statements of Norian as filed as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A are not indicative of the future revenues of the Company. The Company’s net sales of the Norian products are expected to be approximately $1 million in fiscal 2011. In the Company’s fiscal year ending June 30, 2012, the Company expects the transaction to add product sales of approximately $14 million.

Royalties

The Company will earn royalty revenues from certain license agreements acquired on the Date of Acquisition with unrelated third parties. Such royalty revenues are not deemed to be significant and are expected to decline in future periods as the terms of such agreements are near expiration.

Operating Expenses

Cost of goods sold will consist primarily of product and product-related costs, vendor consideration, freight, lease expense and handling costs. The Company retained the manufacturing team of Norian, and therefore, the Company will continue to incur personnel related costs, which include, but are not limited to, salaries and benefits.

Under purchase accounting, the Company recorded a stepped-up value of inventory of approximately $1.2 million, representing the estimated capitalized manufacturing profit in acquired inventory. This non-recurring, non-cash charge to cost of product sold will occur over the expected inventory turn-over period, which approximates a 6 month period, as the capitalized manufacturing profit added to inventory under purchase accounting is expected to be sold in approximately 6 months after the Date of Acquisition. The non-cash charge associated with the stepped-up value is expected to be approximately $210,000 in fiscal 2011 and $1 million in fiscal 2012 and will be classified as Cost of Products Sold. In addition, the Company has entered into a 10 year lease with Synthes, whereby Synthes will lease the 37,000 square foot facility under which the Company will earn rental income of approximately $55,000 in fiscal 2011 and $540,000 in fiscal 2012.

The non-cash depreciation expense associated with certain fixed assets acquired in the Company’s acquisition of the Norian Business is expected to be approximately $55,000 in fiscal 2011 and $660,000 in fiscal 2012. While the Company is in the process of transitioning its manufacturing from the West Chester Facility to the Exton Facility, the Company will sub-lease a portion of the 37,000 square feet building back from Synthes for approximately eighteen months. This rental expense is expected to be approximately $54,000 in fiscal 2011 and $650,000 in fiscal 2012.

The gross margin of the Norian products is expected to continue to be dependent on revenue levels and product mix. After transition to the Exton facility, the Company expects manufacturing expenses to be reduced due to lower fixed operating costs and other manufacturing synergies.

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The historical product development costs incurred by Norian as presented in the historical financial statements of Norian as filed as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A, which included, but not limited to, cost of personnel, are not necessarily indicative of the future costs that the Company will incur, primarily because Synthes retained these research and development personnel. On the Date of Acquisition, the Company entered into a research and development agreement with Synthes to develop certain related future products. The Company is expected to incur future costs related to the research and development agreement, though these costs are not expected to be significant.

The amortization of the intangible asset (customer relationship) (see Note 2) is expected to be classified as a Selling, General and Administrative Expense. As described in Note 4, the Company is expected to amortize the intangible asset over its assigned life of 15 years. The non-cash amortization expense will be approximately $77,000 in fiscal 2011 and $919,000 in fiscal 2012.

The Company will incur certain operational expenses that were previously excluded from being reported within the financial statements of Norian. These expenses will include corporate overhead, including items such as legal and professional services expenses, as well as income taxes, which have also been excluded from the historical financial statements of Norian, as filed as Exhibit 99.2 to Amendment No. 1 to the Current Report on Form 8-K/A.

The Company is expected to incur direct transaction costs, such as professional and legal fees, of approximately $510,000 in fiscal 2011 related to the acquisition of the Norian Business.

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