<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                                 AMENDMENT NO. 2

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED                     COMMISSION FILE NUMBER 0-19890
    DECEMBER 31, 1996

                              LIFECELL CORPORATION

     A DELAWARE                                  IRS EMPLOYER IDENTIFICATION
     CORPORATION                                 NO. 76-0172936

                           3606 RESEARCH FOREST DRIVE
                           THE WOODLANDS, TEXAS 77381

                         Telephone Number (281) 367-5368


           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          Common Stock, $.001 Par Value

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
     Yes[X]    No[ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     Aggregate market value of the voting stock (Common Stock and Series B
Preferred Stock, assuming conversion of such Preferred Stock into Common Stock
at the current conversion rate) held by non-affiliates of registrant as of March
26, 1997 $40,933,000

                 Number of shares of registrant's Common Stock
                   outstanding as of March 26, 1997 6,754,761

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of registrant's proxy statement relating to the 1997 annual
meeting of stockholders have been incorporated by reference into Part III
hereof.
                                       1


<PAGE>   2

The Company hereby amends the following item of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (Commission File No.
0-19890 (the Form 10-K)) as set forth below:

         1. Item 8, "Exhibits, Financial Statement Schedules, and Reports on
Form -8K" is hereby amended as set forth herein:

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements and supplementary financial information
required to be filed under this Item are presented commencing on page F-1 of
this Annual Report on Form 10-K, and are incorporated herein by reference.

<PAGE>   3
 
                              FINANCIAL STATEMENTS
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
AUDITED FINANCIAL STATEMENTS
  Report of Independent Public Accountants..................   F-2
  Balance Sheets as of December 31, 1995 and 1996...........   F-3
  Statements of Operations for the years ended December 31,
     1994, 1995 and 1996....................................   F-4
  Statements of Stockholders' Equity for the years ended
     December 31, 1994, 1995 and 1996.......................   F-5
  Statements of Cash Flows for the years ended December 31,
     1994, 1995 and 1996....................................   F-7
  Notes to Audited Financial Statements.....................   F-8
</TABLE>
 
                                       F-1
<PAGE>   4
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To LifeCell Corporation:
 
     We have audited the accompanying balance sheets of LifeCell Corporation (a
Delaware corporation) as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LifeCell Corporation as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
 
                                            ARTHUR ANDERSEN LLP
 
Houston, Texas
March 26, 1997
 
                                       F-2
<PAGE>   5
 
                              LIFECELL CORPORATION
 
                                 BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                              ----------------------------
                                                                  1995            1996
                                                              ------------    ------------
<S>                                                           <C>             <C>
CURRENT ASSETS
  Cash and cash equivalents.................................  $  3,015,332    $ 10,748,250
  Accounts and other receivables............................       251,509         436,839
  Inventories...............................................       351,502         839,821
  Prepayments and other.....................................        51,838          52,780
                                                              ------------    ------------
          Total current assets..............................     3,670,181      12,077,690
FURNITURE AND EQUIPMENT, net................................       415,563         478,098
INTANGIBLE ASSETS, net......................................       290,295         334,227
                                                              ------------    ------------
          Total assets......................................  $  4,376,039    $ 12,890,015
                                                              ============    ============
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
  Accounts payable..........................................  $    384,780    $    514,848
  Accrued liabilities.......................................       218,351         539,271
  Deferred revenues.........................................       179,002         138,792
                                                              ------------    ------------
          Total current liabilities.........................       782,133       1,192,911
DEFERRED CREDIT.............................................     1,500,000       1,500,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A preferred stock, $.001 par value, 300,000 shares
  authorized, 264,500 and 260,000 issued and outstanding,
  including accrued dividends of $70,533 and $86,667........     5,496,793       5,291,473
Series B preferred stock, $.001 par value, 182,205 shares
  authorized, none and 124,157 issued and outstanding and
  accrued dividends of none and 1,426 shares................            --             126
Undesignated preferred stock, $.001 par value, 1,517,795
  shares authorized, none issued and outstanding............            --              --
Common stock, $.001 par value, 12,500,000 and 25,000,000
  shares authorized, respectively, 4,403,658 and 4,899,944
  shares issued and outstanding, respectively...............         4,404           4,900
Warrants outstanding to purchase 574,066 and 3,378,264
  shares of Common Stock, respectively......................       226,560         423,218
Additional paid-in capital..................................    21,160,808      33,788,321
Unearned portion of restricted stock compensation &
  warrants..................................................       (19,906)             --
Accumulated deficit.........................................   (24,774,753)    (29,310,934)
                                                              ------------    ------------
          Total stockholders' equity........................     2,093,906      10,197,104
                                                              ------------    ------------
          Total liabilities and stockholders' equity........  $  4,376,039    $ 12,890,015
                                                              ============    ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-3
<PAGE>   6
 
                              LIFECELL CORPORATION
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                            FOR THE YEAR ENDED DECEMBER 31,
                                                       -----------------------------------------
                                                          1994           1995           1996
                                                       -----------    -----------    -----------
<S>                                                    <C>            <C>            <C>
REVENUES
  Product sales......................................  $    93,940    $   742,238    $ 2,012,205
  Corporate alliance.................................      358,331        825,221        546,461
  Grants and contracts...............................      364,344        239,116        386,904
                                                       -----------    -----------    -----------
          Total revenues.............................      816,615      1,806,575      2,945,570
                                                       -----------    -----------    -----------
COSTS AND EXPENSES
  Cost of goods sold.................................      515,500        925,174      1,281,353
  Funded research and development....................      722,675      1,064,337        933,365
  Proprietary research and development...............    1,363,176      1,105,427        654,821
  General and administrative.........................    1,381,470      1,422,588      1,911,254
  Selling and marketing..............................      727,615      1,475,296      2,389,573
                                                       -----------    -----------    -----------
          Total costs and expenses...................    4,710,436      5,992,822      7,170,366
                                                       -----------    -----------    -----------
LOSS FROM OPERATIONS.................................   (3,893,821)    (4,186,247)    (4,224,796)
                                                       -----------    -----------    -----------
  Interest income....................................      167,300        280,843        135,082
                                                       -----------    -----------    -----------
NET LOSS.............................................  $(3,726,521)   $(3,905,404)   $(4,089,714)
                                                       ===========    ===========    ===========
Loss per share before effect of preferred dividends,
  accretion of preferred stock and warrant
  exercises..........................................  $     (0.87)   $     (0.91)   $     (0.90)
Effect of preferred dividends, accretion of preferred
  stock and warrant exercises........................  $     (0.03)   $     (0.19)   $     (0.24)
                                                       -----------    -----------    -----------
LOSS PER COMMON SHARE................................  $     (0.90)   $     (1.10)   $     (1.14)
                                                       ===========    ===========    ===========
SHARES USED IN COMPUTING LOSS PER
  COMMON SHARE.......................................    4,294,179      4,313,366      4,542,519
                                                       ===========    ===========    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-4
<PAGE>   7
 
                              LIFECELL CORPORATION
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                            SERIES A             SERIES B                                  CLASS I
                                        PREFERRED STOCK      PREFERRED STOCK       COMMON STOCK          COMMON STOCK
                                      --------------------   ----------------   ------------------   --------------------
                                      SHARES      AMOUNT     SHARES    AMOUNT    SHARES     AMOUNT     SHARES     AMOUNT
                                      -------   ----------   -------   ------   ---------   ------   ----------   -------
<S>                                   <C>       <C>          <C>       <C>      <C>         <C>      <C>          <C>
Balance at December 31, 1993........       --   $       --        --    $ --    1,473,359   $1,473    2,803,812   $ 2,804
  Class I common converted to
    common..........................       --           --        --      --    2,803,812   2,804    (2,803,812)   (2,804)
  Purchase of common stock..........       --           --        --      --           --      --            --        --
  Issuance for cash ($7.77 per
    share)..........................       --           --        --      --       20,421      21            --        --
  Issuance of Series A preferred
    stock and warrants for cash.....  264,500    4,877,995        --      --           --      --            --        --
  Warrant issued to purchase common
    stock...........................       --           --        --      --           --      --            --        --
  Earned portion of restricted
    stock...........................       --           --        --      --           --      --            --        --
  Earned portion of warrants........       --           --        --      --           --      --            --        --
  Dividends accrued on preferred
    stock...........................       --      333,246        --      --           --      --            --        --
  Accretion of preferred stock......       --       68,668        --      --           --      --            --        --
  Expiration of warrants............       --           --        --      --           --      --            --        --
  Net Loss..........................       --           --        --      --           --      --            --        --
                                      -------   ----------   -------    ----    ---------   ------   ----------   -------
Balance at December 31, 1994........  264,500   $5,279,909        --    $ --    4,297,592   $4,298           --   $    --
  Warrant issued to purchase common
    stock...........................       --           --        --      --           --      --            --        --
  Stock options exercised...........       --           --        --      --        1,000       1            --        --
  Warrants exercised................       --           --        --      --        1,250       1            --        --
  Issuance of common stock as
    dividends on Series A Preferred
    stock...........................       --     (317,400)       --      --      103,816     104            --        --
  Earned portion of restricted
    stock...........................       --           --        --      --           --      --            --        --
  Earned portion of warrants........       --           --        --      --           --      --            --        --
  Dividends accrued on preferred
    stock...........................       --      190,947        --      --           --      --            --        --
  Accretion of preferred stock......       --      343,337        --      --           --      --            --        --
  Net Loss..........................       --           --        --      --           --      --            --        --
                                      -------   ----------   -------    ----    ---------   ------   ----------   -------
Balance at December 31, 1995........  264,500   $5,496,793        --    $ --    4,403,658   $4,404           --   $    --
  Stock options exercised...........       --           --        --      --        6,062       6            --        --
  Warrants exercised................       --           --        --      --      339,066     339            --        --
  Expiration of warrants............       --           --        --      --           --      --            --        --
  Conversion of preferred stock.....   (4,500)     (90,000)       --      --       30,104      30            --        --
  Issuance of common stock as
    dividends on Series A Preferred
    stock...........................       --     (415,920)       --      --      121,054     121            --        --
  Earned portion of restricted
    stock...........................       --           --        --      --           --      --            --        --
  Issuance of stock options for
    services........................       --           --        --      --           --      --            --        --
  Issuance of Series B preferred
    stock and common stock warrants
    for cash........................       --           --   124,157     124           --      --            --        --
  Dividends accrued on preferred
    stock...........................       --      300,600        --       2           --      --            --        --
  Net Loss..........................       --           --        --      --           --      --            --        --
                                      -------   ----------   -------    ----    ---------   ------   ----------   -------
Balance at December 31, 1996........  260,000   $5,291,473   124,157    $126    4,899,944   $4,900           --   $    --
                                      =======   ==========   =======    ====    =========   ======   ==========   =======
</TABLE>
 
                                  (Continued)
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   8
 
                              LIFECELL CORPORATION
 
               STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                              UNEARNED
                                         WARRANTS TO         PORTION OF
                                          PURCHASE           RESTRICTED
                                        COMMON STOCK           STOCK       ADDITIONAL                                   TOTAL
                                    ---------------------   COMPENSATION     PAID IN     TREASURY    ACCUMULATED    STOCKHOLDERS'
                                     SHARES      AMOUNT     AND WARRANTS     CAPITAL       STOCK       DEFICIT         EQUITY
                                    ---------   ---------   ------------   -----------   ---------   ------------   -------------
<S>                                 <C>         <C>         <C>            <C>           <C>         <C>            <C>
Balance at December 31, 1993......    165,933   $ 116,260    $(529,942)    $21,073,701   $      --   $(16,618,635)   $ 4,045,661
  Class I common converted to
    common........................         --          --           --              --          --            --              --
  Purchase of common stock........         --          --           --              --    (307,755)           --        (307,755)
  Issuance for cash ($7.77 per
    share)........................         --          --           --         174,341     307,755            --         482,117
  Issuance of Series A preferred
    stock and warrants for cash...    264,500     105,800           --              --          --            --       4,983,795
  Warrant issued to purchase
    common stock..................     90,816       5,000           --              --          --            --           5,000
  Earned portion of restricted
    stock.........................         --          --      238,872              --          --            --         238,872
  Earned portion of warrants......         --          --       21,958              --          --            --          21,958
  Dividends accrued on preferred
    stock.........................         --          --           --              --          --      (333,246)             --
  Accretion of preferred stock....         --          --           --         (68,668)         --            --              --
  Expiration of warrants..........     (5,933)         --           --              --          --            --              --
  Net Loss........................         --          --           --              --          --    (3,726,521)     (3,726,521)
                                    ---------   ---------    ---------     -----------   ---------   ------------    -----------
Balance at December 31, 1994......    515,316   $ 227,060    $(269,112)    $21,179,374   $      --   $(20,678,402)   $ 5,743,127
  Warrant issued to purchase
    common stock..................     60,000          --           --              --          --            --              --
  Stock options exercised.........         --          --           --           2,999          --            --           3,000
  Warrants exercised..............     (1,250)       (500)          --           4,574          --            --           4,075
  Issuance of common stock as
    dividends on Series A
    Preferred stock...............         --          --           --         317,198          --            --             (98)
  Earned portion of restricted
    stock.........................         --          --      238,872              --          --            --         238,872
  Earned portion of warrants......         --          --       10,334              --          --            --          10,334
  Dividends accrued on preferred
    stock.........................         --          --           --              --          --      (190,947)             --
  Accretion of preferred stock....         --          --           --        (343,337)         --            --              --
  Net Loss........................         --          --           --              --          --    (3,905,404)     (3,905,404)
                                    ---------   ---------    ---------     -----------   ---------   ------------    -----------
Balance at December 31, 1995......    574,066   $ 226,560    $ (19,906)    $21,160,808   $      --   $(24,774,753)   $ 2,093,906
  Stock options exercised.........         --          --           --          17,274          --            --          17,280
  Warrants exercised..............   (339,066)   (104,300)          --       1,155,617          --            --       1,051,656
  Expiration of warrants..........    (15,000)     (6,000)          --           6,000          --            --              --
  Conversion of preferred stock...         --          --           --          89,970          --            --              --
  Issuance of common stock as
    dividends on Series A
    Preferred stock...............         --          --           --         409,700          --            --          (6,099)
  Earned portion of restricted
    stock.........................         --          --       19,906              --          --            --          19,906
  Issuance of stock options for
    services......................         --          --           --         150,000          --            --         150,000
  Issuance of Series B preferred
    stock and common stock
    warrants for
    cash..........................  3,158,264     306,958           --      10,653,087          --            --      10,960,169
  Dividends accrued on preferred
    stock.........................         --          --           --         145,865          --      (446,467)             --
  Net Loss........................         --          --           --              --          --    (4,089,714)     (4,089,714)
                                    ---------   ---------    ---------     -----------   ---------   ------------    -----------
Balance at December 31, 1996......  3,378,264   $ 423,218    $      --     $33,788,321   $      --   $(29,310,934)   $10,197,104
                                    =========   =========    =========     ===========   =========   ============    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-6
<PAGE>   9
 
                              LIFECELL CORPORATION
 
                            STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                         ---------------------------------------
                                                            1994          1995          1996
                                                         -----------   -----------   -----------
<S>                                                      <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Loss.............................................  $(3,726,521)  $(3,905,404)  $(4,089,714)
  Adjustments to reconcile net loss to net cash used in
     operating activities --
     Depreciation and amortization.....................      107,351       138,518       229,237
     Stock and warrant compensation expense............      260,830       249,206       169,906
  Change in assets and liabilities --
     (Increase) in accounts and other receivables......      (67,237)      (87,014)     (185,330)
     (Increase) in inventories.........................      (54,834)     (243,720)     (488,319)
     (Increase) decrease in prepayments and other......       (8,580)       11,347          (942)
     Increase in accounts payable and accrued
       liabilities.....................................      270,219       118,494       450,988
     Increase (decrease) in deferred revenues and
       credit..........................................    1,769,640       (90,638)      (40,210)
                                                         -----------   -----------   -----------
          Total adjustments............................    2,277,389        96,193       135,330
                                                         -----------   -----------   -----------
          Net cash used in operating activities........   (1,449,132)   (3,809,211)   (3,954,384)
                                                         -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures.................................      (90,509)     (190,199)     (278,673)
  Intangible assets....................................      (34,012)      (24,354)      (57,032)
  Short-term investments...............................   (2,138,313)    5,154,824            --
                                                         -----------   -----------   -----------
          Net cash provided by (used in) investing
            activities.................................   (2,262,834)    4,940,271      (335,705)
                                                         -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of stock and warrants.........    5,163,157         6,977    12,029,105
  Proceeds from issuance of notes payable..............           --            --       370,000
  Dividends paid.......................................           --            --        (6,098)
  Payments of notes payable............................           --            --      (370,000)
                                                         -----------   -----------   -----------
          Net cash provided by financing
            activities.................................    5,163,157         6,977    12,023,007
                                                         -----------   -----------   -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS..............    1,451,191     1,138,037     7,732,918
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.........      426,104     1,877,295     3,015,332
                                                         -----------   -----------   -----------
CASH AND CASH EQUIVALENTS AT END
  OF YEAR..............................................  $ 1,877,295   $ 3,015,332   $10,748,250
                                                         ===========   ===========   ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest...............  $        --   $        --   $    13,766
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
  During 1995 and 1996, the Company issued common stock
     as payment for dividends in the amount of $317,400
     and $415,920, respectively.
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-7
<PAGE>   10
 
                              LIFECELL CORPORATION
 
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1996
 
1. ORGANIZATION:
 
     LifeCell Corporation, a Delaware corporation (LifeCell or the Company), is
engaged in the research, development and commercialization of transplantable
tissue and transfusable blood products. The Company was incorporated on January
6, 1992 for the purpose of merging with its predecessor entity, which was formed
in 1986. LifeCell began commercial sales of its first transplantable tissue
product, AlloDerm(R), during 1994. Sales of AlloDerm to date have not been
sufficient to fund the Company's operations, and the Company expects continued
operating losses during 1997. The future operating results of the Company will
be principally dependent on the market acceptance of its current and future
products, competition from other products or technologies, protection of the
Company's proprietary technology, and access to funding as required.
Accordingly, there can be no assurance of the Company's future success. See
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" elsewhere herein.
 
2. ACCOUNTING POLICIES:
 
  Cash and Cash Equivalents and Short-Term Investments
 
     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Investments
that the Company intends to hold to maturity are classified as either current or
non-current assets based on the maturity date of the security. As of December
31, 1995 and 1996, the Company held $3,009,376 and $10,638,981, respectively, of
interest bearing money market accounts and A1/P1 commercial paper which were
classified as "held to maturity" securities. The carrying basis of these
investments approximated fair value and amortized cost. The securities held at
December 31, 1996 matured prior to March 31, 1997.
 
  Inventories
 
     Inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out (FIFO) basis.
 
  Furniture and Equipment
 
     Furniture and equipment are stated at cost. Maintenance and repairs that do
not improve or extend the life of the assets are expensed as incurred.
Expenditures for renewals and betterments are capitalized. The cost of assets
retired and the related accumulated depreciation are removed from the accounts
and any gain or loss is included in the results of operations.
 
     Depreciation of furniture and equipment is provided on the straight-line
method based on the estimated useful lives of the assets of five years.
Leasehold improvements are depreciated over the life of the lease.
 
  Intangible Assets
 
     Intangible assets primarily consist of the costs of obtaining patents for
the proprietary technology owned by or licensed to the Company. These costs are
being amortized over the lesser of the legal (generally 17 years) or economic
life of the patent. Accumulated amortization at December 31, 1995 and 1996,
amounted to $39,933 and $53,033, respectively.
 
                                       F-8
<PAGE>   11
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Revenue Recognition
 
     Product sales are recognized as revenue when the product is shipped to fill
customer orders. Revenues from corporate alliances and from government grants
and contracts are recognized as the work is performed unless the Company has
continuing performance obligations, in which case revenue is recognized upon the
satisfaction of such obligations. Revenue received, but not yet earned, is
classified as deferred revenue.
 
  Research and Development Costs
 
     Research and development costs are expensed when incurred. The Company
performs research funded by others, including research funded through the
corporate alliance with Medtronic (see Note 8), as well as its own independent
proprietary research, development and clinical testing of its products.
Externally funded research consists of direct costs associated with specific
projects as well as an allocation of overhead associated with administering
these activities.
 
  Loss Per Share
 
     Loss per share has been computed by dividing net loss, which has been
increased for periodic accretion and imputed and stated dividends on outstanding
Preferred Stock and the discount offered on warrant exercises induced during
1996, by the weighted average number of shares of Common Stock outstanding
during the periods. In all applicable years, all Common Stock equivalents,
including the Series A Preferred Stock and the Series B Preferred Stock, were
antidilutive and, accordingly, were not included in the computation.
 
     In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Statement 128
establishes standards for computing and presenting earnings per share (EPS).
This statement simplifies the standards for computing earnings per share
previously found in APB Opinion No. 15, Earnings Per Share, and makes them
comparable to international EPS standards. The statement also retroactively
revises the presentation of earnings per share in the financial statements. The
Company will adopt this Standard for the year ended December 31, 1997, and has
not currently quantified the effect of applying the new Standard.
 
  Stock-Based Compensation
 
     The Company accounts for employee stock-based compensation pursuant to the
provisions of Accounting Principles Board Opinion No. 25. Compensation expense
for stock options issued to employees and directors is generally recorded at the
intrinsic value (the discount, if any, of the option price from the market price
of the Common Stock under option) of the option at the date of grant. Subsequent
changes in the market price of the underlying stock do not affect the accounting
treatment of the option. Options granted to others are accounted for under the
provisions of Statement of Financial Accounting Standards No. 123, which
requires that the option be recorded at its estimated fair value using
option-pricing formulas used in the financial markets.
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
                                       F-9
<PAGE>   12
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
3. INVENTORIES:
 
     Inventories consist of products in various stages produced for sale and
includes the costs of raw materials, labor, and overhead.
 
     A summary of inventories is as follows:
 
<TABLE>
<CAPTION>
                                                                1995        1996
                                                              --------    --------
<S>                                                           <C>         <C>
Raw Materials...............................................  $ 29,171    $ 52,738
Work-In-Process.............................................   107,988     437,221
Finished Goods..............................................   214,343     349,862
                                                              --------    --------
                                                              $351,502    $839,821
                                                              ========    ========
</TABLE>
 
4. FURNITURE AND EQUIPMENT:
 
     A summary of furniture and equipment is as follows:
 
<TABLE>
<CAPTION>
                                                                 1995          1996
                                                              ----------    ----------
<S>                                                           <C>           <C>
Office furniture and fixtures...............................  $   57,636    $   61,130
Machinery and equipment.....................................   1,097,480     1,342,243
Leasehold improvements......................................     189,877       220,293
                                                              ----------    ----------
                                                               1,344,993     1,623,666
Less --
  Accumulated depreciation and amortization.................     929,430     1,145,568
                                                              ----------    ----------
  Net furniture and equipment...............................  $  415,563    $  478,098
                                                              ==========    ==========
</TABLE>
 
5. CAPITAL STOCK:
 
  Authorized Capital Stock
 
     As of December 31, 1996, the authorized capital of the Company consisted of
25,000,000 shares of Common Stock, $.001 par value, and 2,000,000 shares of
Preferred Stock, $.001 par value, of which 300,000 shares were designated as
Series A Convertible Preferred Stock and 182,205 shares were designated as
Series B Preferred Stock. As of December 31, 1996, there were 4,899,944 shares
of Common Stock, 260,000 shares of Series A Convertible Preferred Stock and
124,157 shares of Series B Preferred Stock outstanding. During March 1997, all
outstanding shares of Series A Convertible Preferred Stock and a portion of the
accrued dividends were converted into 1,772,433 shares of Common Stock.
 
  Series A Preferred Stock
 
     During November 1994, the Company issued 264,500 shares of Series A
Convertible Preferred Stock (Series A Preferred Stock) and warrants to acquire
264,500 shares of Common Stock for gross proceeds of approximately $5.3 million
in a private placement. Each share of Series A Preferred Stock was convertible
at any time at the option of the holder into 6.69 shares of Common Stock. During
1996, 4,500 shares of Series A Preferred Stock were converted into 30,104 shares
of Common Stock. The Series A Preferred Stock had a liquidation preference of
$20 per share, or $5,200,000 as of December 31, 1996.
 
     The Series A Preferred Stock bore dividends at annual rates of $1.20,
$1.60, and $2.00 per share for each of the first, second and third years,
respectively, after the date of original issuance. Dividends were payable in
cash, Common Stock, or any combination of cash and Common Stock at the Com-
 
                                      F-10
<PAGE>   13
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
pany's discretion. The Series A Preferred Stock had no ordinary voting rights.
While the preferred shares were outstanding or any dividends were owed thereon,
the Company could not declare or pay cash dividends on its Common Stock. During
1995 and 1996, respectively, the Company paid $317,400 and $415,920 in accrued
dividends on the Series A Preferred Stock by issuing 103,816 shares and 121,054
shares of Common Stock.
 
     The preferred stock was automatically convertible into Common Stock on
November 9, 1997 and could be redeemed sooner by the Company if, after November
9, 1995, the closing bid price of the Company's Common Stock averaged or
exceeded $5.17 per share for 20 consecutive days. Pursuant to such provisions,
during February 1997, the Company called for redemption all outstanding shares
of Series A Preferred Stock. During March 1997 the Company issued 1,739,128
shares of Common Stock to redeem the Series A Preferred Stock and paid a cash
dividend of $65,000 and issued an additional 33,305 shares of Common Stock for
dividends accrued through the date of redemption.
 
     The carrying amount of the Series A Preferred Stock was increased for
accrued and unpaid stated dividends plus periodic accretion, using the effective
interest method, such that the carrying amount equaled the redemption amount on
November 9, 1995. In November 1994, the Series A Preferred Stock was also
increased by imputed dividends resulting from the increasing dividend rates.
 
  Series B Preferred Stock
 
     During November 1996, the Company issued 124,157 shares of Series B
Preferred Stock (Series B Preferred Stock) and warrants to acquire 2,803,530
shares of Common Stock for gross proceeds of approximately $12.4 million in a
private placement. Each share of Series B Preferred Stock is initially
convertible at any time at the option of the holder into approximately 32.26
shares of Common Stock (or 4,005,064 shares of Common Stock at December 31,
1996), subject to adjustment for dilutive issuances of securities. The Series B
Preferred Stock has a liquidation preference of $100 per share, or $12,415,700
as of December 31, 1996, and shares ratable in any residual assets after payment
of such liquidation preference.
 
     The Series B Preferred Stock bears cumulative dividends, payable quarterly,
for five years at the greater of the annual rate of $6.00 per share or the rate
of any dividends paid on the Series A Preferred Stock (effectively $10 per share
until the Series A Preferred Stock was redeemed in March 1997). Dividends may be
paid in cash, in additional shares of Series B Preferred Stock based on the
stated value of $100 per share, or any combination of cash and Series B
Preferred Stock at the Company's option. On all matters for which the Company's
stockholders are entitled to vote, each share of Series B Preferred Stock will
entitle the holder to one vote for each share of Common Stock into which the
share of Series B Preferred Stock is then convertible. Additionally, the holders
of Series B Preferred Stock have the right to elect up to three directors to the
Board of Directors of the Company. While the preferred shares are outstanding or
any dividends are owned thereon, the Company may not declare or pay cash
dividends on its Common Stock. During 1996 the Company declared accrued
dividends on the Series B Preferred Stock of $145,867 payable through the
issuance of 1,426 additional shares of Series B Preferred Stock on February 15,
1997.
 
     The preferred stock will be automatically converted into Common Stock if
(i) the closing price of the Company's Common Stock averages or exceeds $9.30
per share for 30 consecutive trading days and (ii) the Company conducts an
underwritten public offering of newly issued Common Stock with gross proceeds,
net of underwriting discounts and commissions, exceeding $20 million.
Additionally, the preferred stock will be automatically converted into Common
Stock if the Company conducts an underwritten public offering of newly issued
Common Stock with gross proceeds, net of underwriting discounts and commissions,
exceeding $20 million and the price per share in such offering equals or exceeds
$9.30.
 
                                      F-11
<PAGE>   14
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Common Stock
 
     During February 1994, all previously outstanding shares of Class I Common
Stock were automatically converted into 2,803,812 shares of Common Stock and the
Class I Common Stock was eliminated during June 1995.
 
     During 1995 and 1996, respectively, the Company issued 103,816 shares and
121,054 shares of Common Stock as payment of accrued dividends on Series A
Preferred Stock. Additionally, during 1996, the Company induced the exercise of
warrants by temporarily lowering exercise prices and issued 339,066 shares of
Common Stock at a weighted average price of $3.10 upon exercise of certain
warrants.
 
     During March 1997, the Company issued 1,739,128 shares of Common Stock to
redeem all outstanding shares of the Series A Preferred Stock and paid a cash
dividend of $65,000 and issued an additional 33,305 shares of Common Stock for
dividends accrued through the date of redemption.
 
     During 1994, the Company purchased 43,965 shares of Common Stock from
several employees, including officers and directors, for the purpose of
satisfying their income tax liabilities for shares and options previously
granted under a deferred compensation arrangement. These treasury shares were
subsequently reissued during 1994.
 
     In 1992, the Company adopted a Restricted Stock Plan and issued 241,372
shares of Common Stock to employees, a director and a consultant of the Company
for $.001 per share. The restricted stock vested over a four year period.
Deferred compensation expense totaling $965,000 was expensed over the vesting
period of the grants. The non-cash charge related to these stock grants was
$239,000 for 1994 and 1995 and $20,000 for 1996.
 
  Options
 
     The Company's 1992 Stock Option Plan, as amended (1992 Plan), provides for
the grant of options to purchase up to 1,000,000 shares of Common Stock. Granted
options generally become exercisable over a four year period, 25 percent per
year beginning on the first anniversary of the date of grant. To the extent not
exercised, options generally expire on the tenth anniversary of the date of
grant, except for employees who own more than 10 percent of all the voting
shares of the Company, in which event the expiration date is the fifth
anniversary of the date of grant. All options granted under the plan have
exercise prices equal to the fair market value at the dates of grant.
 
     The 1993 Non-Employee Director Stock Option Plan (Director Plan) was
adopted in 1993 and amended during 1996. A total of 750,000 shares of Common
Stock are available for grant under the Director Plan. Upon amendment of the
Director Plan in 1996, options to purchase 50,000 shares of Common Stock were
granted to each then-current non-employee director of the Company at an exercise
price equal to the fair market value of a share of Common Stock on the date of
the Director Plan. Options to purchase 25,000 shares of Common Stock will be
granted to newly elected directors at an exercise price equal to the fair market
value of a share of Common Stock on such election date. The provisions of the
Director Plan provide for an annual grant of an option to purchase 10,000 shares
of Common Stock to each non-employee director. Options under the Director Plan
generally vest one year after date of grant and expire after 10 years.
 
                                      F-12
<PAGE>   15
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of stock option activity is as follows:
 
<TABLE>
<CAPTION>
                                                     1992 STOCK OPTION PLAN         DIRECTOR PLAN
                                                    ------------------------   ------------------------
                                                                 WEIGHTED-                  WEIGHTED-
                                                               AVG. EXERCISE              AVG. EXERCISE
                                                    OPTIONS      PRICE($)      OPTIONS      PRICE($)
                                                    --------   -------------   --------   -------------
<S>                                                 <C>        <C>             <C>        <C>
Balance at December 31, 1993......................   224,593        9.06         40,000       11.00
  Granted.........................................   192,819        2.87         10,000        3.00
  Exercised.......................................        --          --             --          --
  Forfeited.......................................    (2,650)       7.68             --          --
                                                    --------                   --------
Balance at December 31, 1994......................   414,762        6.19         50,000        9.40
                                                    --------                   --------
  Granted.........................................   266,350        2.46         10,000        2.75
  Exercised.......................................    (1,000)       3.00             --          --
  Forfeited.......................................  (225,917)       8.97             --          --
                                                    --------                   --------
Balance at December 31, 1995......................   454,195        2.63         60,000        8.29
                                                    --------                   --------
  Granted.........................................   558,000        3.80        240,000        3.07
  Exercised.......................................    (1,062)       2.74         (5,000)       2.88
  Forfeited.......................................   (42,313)       3.18             --          --
  Reissue.........................................        --          --       (220,000)       4.14
                                                    --------                   --------
Balance at December 31, 1996......................   968,820        3.28         75,000        4.11
                                                    --------                   --------
Exercisable at December 31, 1994..................    57,606        9.11         40,000       11.00
Exercisable at December 31, 1995..................   158,330        2.61         50,000        9.40
Exercisable at December 31, 1996..................   255,429        2.61         15,000        8.29
</TABLE>
 
     At December 31, 1996, 28,718 and 670,000 options were available for future
grant under the 1992 Plan and the Director Plan, respectively. The exercise
prices of options outstanding under the 1992 Plan and the Director Plan at
December 31, 1996 range from $0.07 to $4.375 and $2.75 to $11.00, respectively.
The weighted average contractual life of options outstanding at December 31,
1996 was 9.1 years for the 1992 Plan and 7.8 years for the Director Plan.
 
     In addition to the amounts set forth in the table above, during 1996, the
Company granted options to purchase 220,000 shares of Common Stock to directors
who resigned upon the closing of the sale of the Series B Preferred Stock in
exchange for options previously granted under the Director Plan. These options
have provisions identical to the options previously granted under the Director
Plan, including exercise prices and vesting periods. The weighted average
exercise price of the options granted was $4.14. The weighted average remaining
contractual life of the grants was 8.8 years as of December 31, 1996. The
Company expensed $150,000, which was the difference between the market price and
the option price on the date of the grant, during 1996 related to this
reissuance.
 
     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 "Accounting for Stock-Based Compensation" which, if fully adopted, requires
the Company to record stock-based compensation at fair value. The Company has
adopted the disclosure requirements of SFAS No. 123 and has elected to record
employee compensation expense in accordance with Accounting Principles Board
Opinion (APB) No. 25.
 
                                      F-13
<PAGE>   16
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company accounts for its employee stock-based compensation plans under
APB No. 25 and its related interpretations. Accordingly, deferred compensation
expense is recorded for stock options based on the excess of the market value of
the common stock on the date the options were granted over the aggregate
exercise price of the options. This deferred compensation is amortized over the
vesting period of each option. As the exercise price of options granted under
the 1992 Plan and the Director Plan has been equal to or greater than the market
price of the Company's stock on the date of grant, no compensation expense
related to these plans has been recorded. Had compensation expense for its 1992
Plan and Director Plan been determined consistent with SFAS No. 123, the
Company's net loss and loss per share would have been increased to the following
pro forma amounts:
 
<TABLE>
<CAPTION>
                                                           1995         1996
                                                        ----------   ----------
<S>                                                     <C>          <C>
Net Loss:
  As reported.........................................  $3,905,404   $4,089,714
  Pro forma...........................................  $3,940,041   $5,372,049
Loss Per Share:
  As reported.........................................  $     1.10   $     1.14
  Pro forma...........................................  $     1.10   $     1.42
</TABLE>
 
     Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
 
     Under the provisions of SFAS No. 123, the weighted average fair value of
options granted in 1995 and 1996 was $1.88 and $3.21, respectively, under the
1992 Plan. The weighted average fair value of options granted in 1995 and 1996
was $2.21 and $2.40, respectively, under the Director Plan. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants in 1995 and 1996, respectively: a weighted average risk-free interest
rate of 6 percent for both years; no expected dividend yields for both years;
expected lives of 3 years for both years and expected volatility between 96 and
100 percent.
 
     The stock options issued to retiring directors in 1996 had a weighted
average fair value of $2.57. The fair values of such options are estimated on
the date of grant using Black-Scholes option price model with the following
assumptions used: a weighted average risk-free interest rate of 6 percent,
expected lives of 3 to 5 years, expected volatility of 99 percent and no
expected dividends.
 
     During 1995, options to purchase 225,917 shares of Common Stock at exercise
prices of $9.00 and $14.50 were canceled and reissued at substantially the same
terms, but with an exercise price equal to the then current market price of
$2.50.
 
  Warrants
 
     As of December 31, 1996, warrants to acquire a total of 3,378,264 shares of
Common Stock were outstanding as set forth below.
 
     During 1996, the Company issued warrants to acquire 2,803,530 shares of
Common Stock in conjunction with the sale of the Series B Preferred Stock (the
1996 Warrants). The 1996 Warrants are exercisable at an exercise price of $4.13
per share. The warrants expire on the fifth anniversary of the date of grant,
are callable if the average closing price of the Company's Common Stock for 30
trading days equals or exceeds three times the then-exercise price, and allow
cashless exercise. The warrants also have provisions for adjustment of the
exercise price and number of shares for below-exercise price issuance of
securities.
 
                                      F-14
<PAGE>   17
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     Additionally, the Company issued a warrant to acquire 354,734 shares of
Common Stock to the placement agent for the Series B Preferred Stock (Agent
Warrant). The Agent Warrant is exercisable at an exercise price of $4.50 per
share. The warrant expires on the fifth anniversary of the date of grant and
allows cashless exercise. The warrant also has provisions for adjustment of the
exercise price and number of shares for below-exercise price issuance of
securities.
 
     In connection with the sale of the Series A Preferred Stock, the Company
issued warrants to acquire 264,500 shares of Common Stock at exercise prices of
$3.26 per share during the first year and $3.54 per share during the second
year. Additionally, the placement agent was issued a warrant to purchase 90,816
shares of Common Stock at $6.00 per share. A total of 339,066 warrants were
exercised during 1996 through inducement of exercise by lowering the exercise
price to $3.10 per share. The difference between the market price on the date of
inducement and the induced exercise price has been deducted from net income to
determine loss per Common share. A total of 15,000 warrants expired unexercised.
 
     As of December 31, 1996, additional warrants to acquire 100,000 shares of
Common Stock were outstanding with exercise prices ranging from $2.50 to $11.05.
Such warrants expire during periods ranging from December 31, 1997 to December
13, 2000. Additionally, as of December 31, 1996, warrants to acquire 120,000
shares of Common Stock were outstanding but expired unexercised on February 27,
1997.
 
6. EMPLOYEE BENEFIT PLANS:
 
     The Company maintains a retirement savings plan as described in Section
401(k) of the Internal Revenue Code of 1986. The Company may, at its discretion,
contribute amounts not to exceed each employee's contribution. During January
1996 and January 1997, the Company made total contributions of $5,292 and $8,187
to the plan for a partial matching of employee contributions during 1995 and
1996, respectively.
 
     During 1996, the Company established an Employee Stock Purchase Plan to
allow for the purchase of the Company's Common Stock on the open market using
employee and any employer matching contributions. During 1996, the Company
contributed $1,328 to this plan.
 
                                      F-15
<PAGE>   18
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
7. FEDERAL INCOME TAXES:
 
     The Company has not made any income tax payments since inception. As of
December 31, 1996, the Company has a net operating loss (NOL) carryforward for
federal income tax purposes of approximately $26 million, subject to the
limitations described below, expiring as follows:
 
<TABLE>
<CAPTION>
                        YEAR EXPIRES
                        ------------
<S>                                                           <C>
  2001......................................................  $   500,000
  2002......................................................    1,500,000
  2003......................................................    2,800,000
  2004......................................................    2,200,000
  2005......................................................    1,700,000
  2006......................................................    1,400,000
  2007......................................................    2,400,000
  2008......................................................    3,000,000
  2009......................................................    2,500,000
  2010......................................................    4,000,000
  2011......................................................    4,000,000
                                                              -----------
                                                              $26,000,000
                                                              ===========
</TABLE>
 
     Additionally, the Company has approximately $385,000 of research and
development tax credit carryforwards which will expire in varying amounts
commencing in 2001. The Company's ability to utilize its tax loss and credit
carryforwards to reduce future taxable income may be limited by either the prior
expiration of such loss or credit or by the occurrence of a "change in
ownership," as such term is defined by federal income tax laws and regulations.
A change in ownership may occur upon the sale of additional equity securities by
the Company, conversion of existing shares of Series B Preferred Stock or by
sales of stock by existing stockholders. In the event of a change in ownership,
the amount of the tax loss and credit carryforwards that may be utilized to
offset taxable income in any year may be limited and result in the payment of
federal income taxes that otherwise would be offset by such tax losses or
credits.
 
     For financial reporting purposes, a valuation allowance of $9,897,000 has
been recorded as of December 31, 1996 to fully offset the deferred tax asset
related to these carryforwards. The principal components of the deferred tax
asset as of December 31, 1995 and 1996, assuming a 34% federal tax rate, are as
follows:
 
<TABLE>
<CAPTION>
                                                                 1995          1996
                                                              ----------    ----------
<S>                                                           <C>           <C>
Temporary differences:
  Deferred revenue..........................................     582,000       510,000
  Restricted stock compensation.............................    (196,000)      154,000
  Uniform capitalization of inventory costs.................     160,000        37,000
  Other items...............................................      66,000       (29,000)
                                                              ----------    ----------
  Total temporary differences...............................     612,000       672,000
  Federal tax losses and credits not currently utilizable...   7,845,000     9,225,000
                                                              ----------    ----------
Total deferred tax assets...................................   8,457,000     9,897,000
  Less valuation allowance..................................  (8,457,000)   (9,897,000)
                                                              ----------    ----------
Net deferred tax asset......................................          --            --
                                                              ----------    ----------
</TABLE>
 
                                      F-16
<PAGE>   19
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The net increase in the deferred tax valuation allowance for 1995 and 1996
was $1,691,000, and $1,440,000, respectively. Other than the net operating loss
and tax credit carryforwards, there is no significant difference between the
statutory federal income tax rate and the Company's effective tax rate during
1994, 1995 and 1996.
 
8. COLLABORATIONS AND CORPORATE ALLIANCES
 
  Medtronic Collaboration
 
     During March 1994, the Company entered into a collaboration with Medtronic,
Inc. (Medtronic) for the development and commercialization of universal tissue
heart valves engineered with LifeCell's proprietary technology. Medtronic paid
the Company an initial licensing fee of $1,500,000, agreed to fund development
of heart valve products, and acquired $500,000 of the Company's Common Stock at
a price of $7.77 per share. Medtronic is obligated to pay royalties, up to a
maximum of $25,000,000, on any product sales. Medtronic was also granted rights
of first refusal to evaluate technology and negotiate license and development
agreements for vascular conduit products utilizing the Company's technology. In
the event Medtronic terminates funding of the heart valve program, Medtronic may
convert its initial $1.5 million license fee into newly issued shares of the
Company's Common Stock at the then-current market price. Accordingly, the
Company has deferred recognition of the initial license fee and recorded a $1.5
million deferred credit in the accompanying balance sheet. Medtronic also has
the right, subject to certain restrictions, to purchase additional shares of the
Company's Common Stock, to have the Company register the resale of any Common
Stock acquired from it, and to appoint one member of the Board of Directors of
the company through March 1999.
 
  Other Product Sales Arrangements
 
     The Company has negotiated other distribution or sales collaboration
arrangements with various parties with exclusive regional or international
territories under each agreement. The agreements generally provide that the
distributor must meet certain performance measures or the agreement may be
terminated by the Company. The markets served by these arrangements include
plastic and reconstructive surgery.
 
9. COMMITMENTS AND CONTINGENCIES:
 
  External Funding for Research
 
     Certain of the Company's research programs have been funded by Small
Business Innovation Research (SBIR) grants and other direct federal government
funding contracts. The grants and contracts generally obligate the Company to
perform specified research activities in return for such funding, and the
utilization of funds under the grants is subject to audit by the appropriate
governmental agencies. At December 31, 1996, the Company had received $138,792
of deferred revenue, including advance payments from a corporate alliance, for
research to be conducted during 1997. Additionally, as of December 31, 1996, the
Company has unfunded awards totaling $1,597,000 for research that is expected to
occur and be funded during 1997 and 1998.
 
  Exclusive License Agreement
 
     The Company has an exclusive license agreement with the Board of Regents of
the University of Texas System (Board) to technology and patents related to the
analysis or preservation of certain cells or tissues. The Company is required to
pay the Board royalties on net sales of products encompassing the licensed
technologies. For the periods ended December 31, 1994, 1995 and 1996 no
significant royalties were paid under the agreement.
 
                                      F-17
<PAGE>   20
 
                              LIFECELL CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
  Leases
 
     The Company leases approximately 20,000 square feet for office and
laboratory space. The future minimum lease payments under noncancelable lease
terms in excess of one year as of December 31, 1996 were as follows:
 
<TABLE>
<S>                                                           <C>
1997........................................................  $218,028
1998........................................................   221,320
1999........................................................   221,320
2000........................................................   221,320
2001........................................................    18,443
                                                              --------
     Total..................................................  $900,431
                                                              --------
</TABLE>
 
10. TRANSACTIONS WITH RELATED PARTIES:
 
     The Company leases office space from an affiliate of a stockholder of the
Company. The Company paid rent expense of approximately $139,000, $129,000 and
$142,000 during 1994, 1995, and 1996 respectively, related to this lease.
 
     The Company paid consulting fees and expenses to an affiliate of a
stockholder and a former director of the Company, totaling approximately
$96,000, $91,000 and $80,000 during the years ended December 31, 1994, 1995 and
1996 respectively, pursuant to a consultant agreement.
 
     As of December 31, 1996, the Company has notes receivable totaling $95,060
from participants, two of whom are directors of the Company, in a previous
deferred compensation plan. Such notes represent loans of federal income tax
amounts payable by the individuals as a result of grants under the plan.
 
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     The following table presents summary unaudited financial data for the years
ended December 31, 1995 and 1996. The Company believes that this information
reflects all adjustments, consisting of only normal recurring items, considered
necessary for a fair presentation of the quarterly financial information
presented. The operating results for any quarterly period are not necessarily
indicative of the results that may be expected for future periods.
 
<TABLE>
<CAPTION>
                                                    FIRST      SECOND     THIRD      FOURTH
                                                   QUARTER    QUARTER    QUARTER    QUARTER
                                                   --------   --------   --------   --------
                                                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>        <C>        <C>        <C>
1995
  Product Sales..................................   $   98     $   130    $   251    $   263
  Total Revenues.................................   $  430     $   399    $   514    $   464
  Gross Margin...................................   $   (5)    $   (52)   $    (7)   $  (119)
  Net loss.......................................   $ (958)    $(1,016)   $  (867)   $(1,064)
  Loss per share.................................   $(0.27)    $ (0.29)   $ (0.25)   $ (0.29)
1996
  Product Sales..................................   $  421     $   429    $   561    $   602
  Total Revenues.................................   $  576     $   678    $   816    $   876
  Gross Margin...................................   $  149     $   157    $   205    $   220
  Net loss.......................................   $ (949)    $  (909)   $(1,023)   $(1,209)
  Loss per share.................................   $(0.25)    $ (0.24)   $ (0.33)   $ (0.32)
</TABLE>

12. EVENT SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
    (UNAUDITED) 

        On November 4, 1997, Integra (Artificial Skin) Corporation ("Integra")
a subsidiary of Integra LifeSciences Corporation, and Massachusetts Institute
of Technology ("MIT") filed a lawsuit in the United States District Court for
the District of Massachusetts, alleging that the Company infringes two patents
licensed by MIT to Integra (the "Integra Patents"). The lawsuit seeks injunctive
relief, an accounting of revenues, enhanced monetary damages and attorneys'
fees. On November 14, 1997, LifeCell responded to the complaint denying the
infringement claims and asserting certain affirmative defenses and
counterclaims. The Company has received an opinion from its patent counsel to
the effect that the intended uses of AlloDerm do not infringe the Integra
Patents. This opinion represents only the reasoned professional judgment of the
Company's patent counsel and is not binding on any court or third party. Patent
litigation involves complex legal and factual questions. As a result, the
outcome of such litigation is inherently unpredictable, and there can be no
assurance that the result of this proceeding will be favorable to the Company or
that it will not have a material adverse effect on the Company's business,
operating results or financial condition. If it is determined that the Company
is infringing the Integra Patents, the court could issue an injunction
prohibiting the Company from making, using or selling its AlloDerm product for
some or all of its intended uses. Such injunction could also extend to the
Company's other potential products under development. In addition, the
court could assess significant damages and attorneys' fees against the Company,
which would have a material adverse effect on the Company's business, operating
results and financial condition and otherwise affect the ability of the Company
to continue as a viable enterprise. In addition, an adverse determination in
this proceeding could require the Company to seek licenses from Integra, which
may not be available on reasonable terms, if at all. Regardless of the outcome,
defending such claims could involve significant costs and diversion of
management resources, which could have a material adverse effect on the
Company's business, operating results or financial condition. 

                                      F-18
<PAGE>   21
                                   SIGNATURES

        In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            LIFECELL CORPORATION
                                               (Registrant)

                                         By: /s/ PAUL M. FRISON
                                                 Paul M. Frison,
                                             President and Chief  Executive
                                             Officer and Chairman of the
                                             Board of Directors
Dated:  November 17, 1997.

<PAGE>   22
                              [INDEX TO EXHIBITS]

EXHIBIT
NUMBER                          DESCRIPTION
------                          -----------
 23.1                           Consent of Arthur Andersen LLP