-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RcaE634Ti40bbrDpCGY0RZfk9u/WHecUiec/qz8JPBRAuBdwBud080tYeghm4gSD qgDwU/LYUlHg6j6dgXJ53Q== 0000216184-96-000002.txt : 19960329 0000216184-96-000002.hdr.sgml : 19960329 ACCESSION NUMBER: 0000216184-96-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: INCSTAR CORP CENTRAL INDEX KEY: 0000216184 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 411254731 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09800 FILM NUMBER: 96539732 BUSINESS ADDRESS: STREET 1: 1990 INDUSTRIAL BLVD CITY: STILLWATER STATE: MN ZIP: 55082 BUSINESS PHONE: 6124399710 FORMER COMPANY: FORMER CONFORMED NAME: IMMUNO NUCLEAR CORP DATE OF NAME CHANGE: 19861214 10-K405 1 _______________________________________________________________________________ FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 1-9800 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 INCSTAR CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 41-1254731 (State of Incorporation) (I.R.S. Employer Identification No.) 1990 Industrial Boulevard Stillwater, Minnesota 55082 (Address of principal executive offices) (Zip Code) (612) 439-9710 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $.01 Par Value American Stock Exchange Per Share SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934: None. 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, [ X ]. The aggregate market value of voting stock held by non-affiliates of the Registrant as of March 20, 1996 was approximately $39,749,000. The number of shares of the Registrant's Common Stock outstanding on March 20, 1996 was 16,413,350. _______________________________________________________________________________ DOCUMENTS INCORPORATED BY REFERENCE: Documents Form 10-K Reference Proxy Statement for annual meeting to be held May 21, 1996 Part III PART I. ITEM 1. BUSINESS GENERAL INCSTAR Corporation and its subsidiaries (the "Company") develop, manufacture, and market test kits and related products used by major hospitals, clinical reference laboratories and researchers involved in diagnosing and treating immunological conditions. Since December 1989, the Company has been majority-owned by BioFin Holding International B.V. (BFHI), a subsidiary of Sorin Biomedica Diagnostics S.p.A. (Sorin) which is an Italian affiliate of Fiat, Inc. The Company was incorporated in Minnesota in 1975 under the name of Immuno Nuclear Corporation. The Company's principal executive offices are located at 1990 Industrial Boulevard, Stillwater, Minnesota, 55082. PRODUCTS The Company currently markets, develops and manufactures individual test reagents and test kits, using primarily RIA, EIA, immunoturbidimetric assay (ITA) and immunofluorescent assay (IFA) technologies for clinical diagnostic and medical research purposes. The Company also produces and markets histochemical antisera and natural and synthetic peptides also used in clinical diagnostic and medical research. The Company's product focus is on diagnostic tests for autoimmune, infectious disease, endocrinology and bone and mineral metabolism product segments, utilizing a variety of technologies. The immunodiagnostic market is shifting away from manual testing to automated or semi-automated testing in an effort to reduce laboratory costs involved in processing medical diagnostic tests. As a result, the research and development activities of the Company are mainly focused on developing non-isotopic tests that can be run on open instrument systems that are either currently in the customers labs, or can be placed there in a cost effective manner. DIAGNOSTIC AND RESEARCH KITS. The Company believes that it is one of the largest producers of RIA products in the world. The total RIA market, however, has been significantly decreasing in recent years due to two factors: (1) isotopic technologies such as RIA are not easily convertible to automated instrument testing systems and (2) disposal issues relative to radioactive materials. Current trends in the immunodiagnostic market are to employ technologies such as EIA, which require less labor to process test results. Consequently, the challenge facing the Company is, and will continue to be, to develop products that are non-isotopic and amiable to semi and fully automated assay systems. Although the current trend in the domestic market, and to a lesser degree in the international market, is away from manual, RIA testing, the Company feels that its strengths in RIA manufacturing and marketing will allow it to maintain or grow its share of this declining market. The Company believes that in the near-term its RIA products will provide it with the capital resources necessary to pursue new research and development activities. RIA test procedures are used to precisely measure the extremely low levels of certain hormones, peptides and other substances present in the human body. Antibodies are proteins produced by higher animals in response to some foreign material, known as the "antigen," entering the blood or tissue. The antibody protects the animal by binding to the antigen and helping other body mechanisms destroy it. When human hormones and peptides are injected as antigens into a laboratory animal, the animal develops antibodies to eliminate the antigens. Serum containing these antibodies (antiserum) is taken from the laboratory animals and processed into a binding reagent for the specific human hormone or peptide. The reagent is then combined with other reagents in a test kit to create an analytical system to measure the level of that human hormone or peptide present in the specimen to be tested. Precise amounts of antiserum, which act as the binder, are mixed with radioactively-labeled (isotopic) tracer antigen and a lower concentration unlabeled antigen. The tracer antigen and the unlabeled antigen compete for binding locations on the antibody in the antiserum. The bound antigen is measured by a radiation counter and the level of bound antigen is calculated. The results of this controlled procedure are repeated for several concentrations of known antigen and a standard curve is plotted. A fluid specimen is then taken from a patient for testing and substituted for the unlabeled antigen. The results of the competitive binding of the tracer antigen and the antigen in the fluid specimen are compared with the standard curve, and the precise quantity of hormone or peptide being measured is determined. The sensitivity and accuracy of RIA tests depend primarily upon the quality of the binding antisera and tracer antigen. The Company currently markets approximately 90 RIA products, primarily used in the analysis of endocrine, neuroendocrine, bone and mineral metabolism, therapeutic drug monitoring and thyroid function. The majority of thyroid function testing products are marketed under the Clinical Assays product line that the Company, together with Sorin, acquired in 1990 from Baxter International Inc. (Baxter). Each RIA kit contains the following: an antiserum consisting of primary antibodies and, in most cases, a reagent used to precipitate the primary antigen antibody complex; a radioactively-labeled antigen to act as tracer; a non-radioactive or cold antigen to act as test calibrators; and a protocol booklet that provides specific test instructions. The tracers in the RIA kits have shelf lives of six to twelve weeks depending on the product. The process of RIA testing requires the use of skilled labor in diagnostic laboratories. The Company markets approximately 55 EIA products primarily for infectious disease and autoimmune disorders. The basic principles of EIA technology is very similar to RIA in that a highly specific and sensitive reaction of an antigen and antibody must take place. With EIA, the result is measured by color development intensity rather than radioactivity. EIA technology uses standard laboratory procedures and facilitates throughput of large testing volumes such as those of a large reference laboratory. EIA product lines include the Epstein Barr Virus ("EBV") and TheraTest products, as discussed below, and the ToRCH group of tests (toxoplasmosis, rubella, cytomegalovirus and herpes). The Company also markets approximately 20 products based on IFA technology for infectious disease and autoimmune disorders. The kits based on IFA technology are employed in sophisticated diagnostic laboratories for antibody detection and semi-quantitation in infectious disease and autoimmune disorders. Patient serum samples are incubated on microscope slides containing prepared antigen substrate, for example, virus-infected mammalian cells. The antibody, if present, will bind to the antigen. After a saline rinse which removes unbound serum, the microscope slide is reacted with a fluorescein conjugate which binds to antigen-antibody complexes, which formed during initial incubation. Following a saline rinse, the slides are viewed under a fluorescence microscope and examined for fluorescent staining on the specific antigen sites. Immunofluorescence kits provide prepared multi-sample slides, positive and negative reference serum controls, fluorescein conjugate, buffered saline and mounting medium as ready-to-use stabilized reagents. The Company's infectious disease IFA assays include Toxoplasmosis, Cytomegalovirus, Herpes and a confirmatory test for syphilis. The autoimmune product offerings incorporate a broad range of kits and components intended for detection of antinuclear antibodies and anti-native DNA antibodies (useful in systemic lupus erythematosus testing), antimitochondrial antibody testing and antithyroid antibodies intended for diagnosis of primary biliary cirrhosis and Grave's disease, respectively. In addition to the distribution of those products which the Company develops and manufactures, the Company is the exclusive distributor in the United States and Canada of certain of Sorin's hepatitis in vitro diagnostic products. Sorin has developed RIA and EIA microplate hepatitis tests that are used worldwide in the diagnosis of Hepatitis A and Hepatitis B. Each of Sorin's RIA and EIA hepatitis markers consist of 7 different marker-reagent kits that are FDA approved. SERUM PROTEIN MEASUREMENT. The Company currently markets 16 ITA kits for the assessment of specific human serum proteins. Sold under the trade name "SPQ Test System", the tests are designed for use on common automated clinical chemistry analyzers. The ITA kits are utilized on a large number of different automated analyzers. Consequently, the development of new instrument-specific applications is required on an ongoing basis. Each assay is based on the principle of immunoturbidimetric or immunonephelometric measurement of antigen- antibody complexes. These antigen-antibody complexes are formed when patient samples are combined with the specific antibody of the test kit. As a part of the SPQ Test System, specific human protein controls, patient sample diluents and specific antibodies are provided as separate products. ITA technology offers the clinical laboratory the advantages of superior speed, precision and automation. Included in the ITA product line are specific assays for Apolipoprotein A-, Apolipoprotein B and Lipoprotein(a), which are useful in cardiac risk assessment. The remaining ITA assays in the SPQ Test System are used in the assessment of immunological disorders, nutritional status, acute response and kidney failure. ANTISERA PRODUCTS. The antisera product lines from the Company are used for the analysis of human serum proteins present in the human serum. Common clinical laboratory procedures using the antisera products include immunofixation electrophoresis, immunoelectrophoresis and radial immunodiffusion methods. The techniques utilized by the laboratory result in the determination of specific protein levels and the assessment of specific protein components following the binding of the antiserum to a specific serum protein. The presence of the serum protein is determined by protein staining or through the use of fluorescent or enzyme staining procedures. BULK AND CUSTOM ANTISERA PRODUCTS. The bulk and custom antisera products produced by the Company are used by major medical diagnostic instrumentation manufacturers worldwide in the production of diagnostic test kits to be used on their instruments. The Company offers an extensive line of antisera products to human serum proteins that are monospecific, avid, and of high titer. Antisera products are produced as nephelometric quality, standard antisera, IgG fractions and fluorescent or enzyme conjugated preparations. The Company also produces calibrators to be used as reference standards in conjunction with the various antisera products offered. Custom antisera from the Company's standard supply are also produced according to specifications provided by customers. The Company also performs custom immunization and development of specific antibodies upon customer request. HISTOCHEMICAL ANTISERA. Unlike RIA, ITA and EIA methods which are used to analyze fluid samples taken from the human body, histochemical antisera are utilized in an in vitro procedure to determine the presence of hormones or peptides in body tissue. A histochemical antiserum is used as a binding reagent for a specific hormone or peptide. Once binding has occurred, the presence of the hormone or peptide is determined by fluorescent or enzyme staining procedures performed on the tissue specimen. The Company's histochemical products are used in clinical diagnoses and medical research, frequently in conjunction with RIA, ITA or EIA technologies. RECENT DEVELOPMENTS Dr. Pierre M. Galletti, currently affiliated with Brown University in Providence, Rhode Island, was appointed to the position of Chairman of the Board effective March 1, 1995, replacing Dr. Orwin L. Carter, who resigned from this position. During the second quarter of 1995 the Company announced the completion of the manufacturing transfer of its TheraTest trademark product line of diagnostic assays to its Stillwater facility. INCSTAR acquired this Food and Drug Administration (FDA)-cleared ELISA-based panel of autoimmune diagnostic assays in May 1994 from TheraTest Laboratories, Inc. of Chicago. The TheraTest products are used as a confirmatory test for the diagnosis of rheumatoid arthritis and other connective tissue diseases such as systemic lupus erythematosus and scleroderma. The TheraTest products are also an extension of the Company's existing immunofluorescence autoimmunity product line and complement the Company's Enzyme Immunoassay (EIA) product offerings. Also during the second quarter of 1995 the Company received approval from the FDA for its second generation EBV diagnostic tests. EBV is the causative agent of infectious mononucleosis, and can cause lymphomas, chronic fatigue syndrome and a variety of other diseases in patients with a weakened immune system. International market introduction of these tests began in the third quarter of 1994. The Company launched two autoimmune products in the international market during the second quarter of 1995 -- a quantitative thyroid stimulating autoantibodies assay (TRAb), which is used for the diagnosis of Grave's disease and the complement activation enzyme assay (CAE) which provides general information about the immune system in disease states such as rheumatic and rare connective tissue disorders as well as tissue injury. The Company received 510K clearance from the FDA in the fourth quarter of 1995 for its CAE kit. During the third quarter of 1995 the Company launched worldwide its second generation Parathyroid Hormone-related Protein (PTHrP) assay. PTHrP is the agent responsible for the condition of humoral hypercalcemia of malignancy (HHM). This is a condition in which serum calcium is increased to potentially life threatening levels. This assay provides customers with a superior product that has significantly improved sensitivity and better definition of the protein under investigation than the first generation product. This product is being distributed as a "research use only" product in the US and is targeted to the clinical research market. Internationally, the Company is pursuing registration in several European countries as well as Japan. During the third quarter of 1995, the Company experienced an increase in demand for one of its hepatitis assays due to a competitor's kit becoming unavailable to the market. This opportunity resulted in approximately $2.9 million in sales during 1995. The competitor re-entered the marketplace during the first quarter of 1996. While the Company believes that a portion of these sales may be maintained, the impact on future sales is uncertain at this time. During the fourth quarter of 1995 the Company received the approved licensure from the FDA for the final two assays within the Hepatitis line which gave the Company a complete panel of seven EIA approved/licensed assays used in the diagnosis of hepatitis A and B infections. MARKETING The Company's medical products are sold to commercial and public health laboratories, blood banks, research and teaching institutions and hospital laboratories, which use the Company's kits to conduct tests ordered by physicians. Increased frequency of use of the Company's kits will depend, in part, upon the acceptance by practicing physicians of the need and desirability for measuring certain therapeutic drug, hormone, peptide and serology levels in the evaluation of diseases and body disorders. In North America, the Company's principal market for its medical products includes approximately 1,200 clinical reference laboratories and 2,500 hospitals, which have laboratories that perform immunodiagnostic testing. In the United States and Canada, the Company utilizes a direct sales force, combined with selected independent distributors, to market its products. The Company also utilizes foreign distributors in conjunction with a subsidiary in the United Kingdom to market its products abroad. Since 1989 Sorin has been the distributor for the Company's products in Italy, Spain, Portugal, Germany and the Benelux countries. As part of the 1990 acquisition from Baxter, the Company manufactures and sells to Sorin the Clinical Assays products for distribution in the above mentioned countries and France. Pursuant to these arrangements, the Company recorded sales to Sorin of $7,625,000 for the year ended December 31, 1995, which comprised 16.7% of total sales. Other transactions entered into with Sorin and its subsidiaries are set forth in Note 6 of the Company's consolidated financial statements contained elsewhere herein. Other than Sorin, the Company is not dependent on any single customer for more than 15% of its business. The Company's international sales constitute 46% of sales for the year ended December 31, 1995; 50% of sales for the year ended December 31, 1994 and 46% of sales for the year ended December 31, 1993. Because of the limited shelf life of the Company's radioactive tracer, the Company delivers products by international air freight to its foreign markets. RESEARCH AND PRODUCT DEVELOPMENT The ability of the Company to compete effectively in the marketplace will depend upon the success of its efforts to improve existing products and to develop new products, primarily non-isotopic and conducive to instrumentation, that are useful to the medical diagnostic and research markets. The levels of research and development expenditures by the Company during the periods shown below were as follows:
Percent of Amount Net Sales Year ended December 31, 1995 $3,748,000 8.2% Year ended December 31, 1994 $5,069,000 11.9% Year ended December 31, 1993 $5,719,000 13.2%
The reduction in research spending in 1995 from previous years levels, results primarily from the discontinuance of a development program discussed in Note 2 of the financial statements contained elsewhere herein. The Company has established scientific advisory panels for its autoimmune and bone and mineral metabolism segments. In addition, the Company intends to establish a third scientific panel in its infectious disease segment. These panels are overseen by a scientific advisory board led by INCSTAR's Chairman Dr. Pierre M. Galetti. Also, Dr. Michael Steffes, a director of the Company, is a member of the Scientific Advisory Board. These panels are intended to enhance and strengthen the Company's ties with the scientific community. MANUFACTURING The Company manufactures its immunoassay kits and serum protein products in two locations within the United States. It maintains manufacturing and administration activities in its principal facility in Stillwater, Minnesota, which consists of 120,000 square feet. Additionally, the Company is vertically integrated into the production of bulk antisera and maintains a USDA licensed animal facility on 116 acres in Windham, Maine (the Serum Proteins segment of the Company's business). Management believes that it will have adequate capability to meet its anticipated manufacturing needs in all current product lines for the foreseeable future. The steps involved in manufacturing the Company's immunoassay and serum protein kits include the following: i) the isolation and production of antigens; ii) the development and production of antibodies; iii) the design and development of the required reagent system; iv) the iodination or conjugation of precursors; v) the manufacture and packaging of the components in the kit format; and vi) ongoing quality control to meet all regulatory requirements. As a result of strategic alliances and acquisitions over the past several years, the Company has an extensive line of immunoassay and serum protein assays which are manufactured in a cost effective manner in a quality environment. The Company's products and kits consist of the components necessary to perform specific assays in consistent and reproducible fashion. Antisera are a critical component in the products which are manufactured using RIA, ITA, EIA and IFA technologies and the Company insures the quality of this raw material from its source in its Serum Protein segment of the business. In addition to these antiserums, the components of the immunoassay kits include specialized chemical reagents, reference standards and performance data required to properly calibrate test results. Raw materials used in these components meet design specifications. The Company is not dependent on any particular supplier for ongoing operations. Some raw materials critical in the production of the Company's products have extensive lead times for supply. Lack of supply of critical raw materials would have a materially adverse affect on the Company. For this reason the Company continually strives to maintain multiple sources for its most critical raw materials. The Company maintains quality controls for the assurance of accurate and reliable test kits and to meet FDA good manufacturing standards. The Company also complies with procedures mandated by the Nuclear Regulatory Commission (NRC) for the use and disposal of radioactive materials. COMPETITION Historically the Company has developed and marketed diagnostic and research products serving specialized markets not adequately served by its largest competitors. Included here are the fields of endocrinology, bone and mineral metabolism and therapeutic drug monitoring. However, as a result of the Company's acquisition of the Clinical Assay product lines from Baxter and relationship with Sorin, the Company now competes with a number of the larger immunodiagnostic companies offering similar lines of RIA and EIA products. The Company's major competition, outside the specialty product area, includes Abbott Diagnostics, Diagnostic Products Corporation, Hybritech, Ares- Serono, and CIBA Corning Diagnostic Corporation. The principle elements of competition for the Company are based upon providing quality, consistent and reliable products and services. Price is only a factor for those tests in the larger, more competitive markets. The Company intends to maintain its competitive differentiation in the market by selecting new and innovative technology approaches to both the routine and specialty market analytes. The Company intends to develop and maintain quality customer relationships with health care professionals. GOVERNMENT REGULATION Under the Medical Device Amendments of 1976, the Company is required to file an annual registration statement with the FDA and to provide updated device listings. The Company is also required to submit a pre-market notification submission to the FDA for each new diagnostic product. This submission may be either a 510(k), a premarket approval application, or a product license application, unless the product is being distributed for research or investigational use only. The FDA also imposes rules with respect to good manufacturing practices (GMP). The Company believes it is in compliance with FDA regulations. The Company also complies with foreign government regulations, specifically for Japan, France, Germany, Canada, England and other countries where required. These requirements include adherence to GMP, device listings, premarket notifications, or product licenses where applicable. Additionally, the Company is in the process of certifying its Quality Assurance system to ISO 9000 standards and hopes to complete the registration process under this standard by the end of 1996. Because the Company uses radioactive isotopes in the manufacture of some of its products, it is required to maintain licenses authorizing the possession, use and distribution of radioactive material. The licenses were renewed in 1993 and will expire by their terms in 1998. To maintain the licenses, the Company is required to keep certain records and to demonstrate continued compliance with NRC regulations and the conditions of its radioactive licenses. Although not expected, loss of these licenses would have a materially adverse affect on the Company. The Company believes it is in compliance with all federal, state and local regulations regarding the discharge of material into the environment. Additionally, the cost to maintain licenses and meet environmental and safety requirements is not material to the Company's consolidated financial statements and the Company does not expect any material financial commitment in the near- term. FOREIGN AND DOMESTIC OPERATIONS AND INTERNATIONAL SALES Company information with respect to foreign and domestic operations and international sales is set forth in Note 12 to the Company's consolidated financial statements contained elsewhere herein. PATENTS The Company has been issued patents covering (i) the method and radioactive tracers used for the immunoassay of C-terminal parathyroid hormone, (ii) bioassay for parathyroid hormone, and (iii) usage of iodinated or fluorescent forms of cyclosporin in immunoassay kits. These patents expire on July 26, 1999; January 17, 2000; and April 1, 2002, respectively. The Company does not believe patent protection will be a material factor in its operations because of the Company's proprietary know-how regarding the production and development of its product lines. Certain other companies may have been issued or applied for patents with respect to products or technology manufactured by, or of interest to the Company. Management is unable at this time to determine the impact, if any, which any such patents may have on the Company. LICENSES AND TRADEMARKS The Company holds certain licenses for technology, intellectual property and distribution rights. The Company also holds certain registered trademarks such as CYCLO-Trac registered trademark, N-tact registered trademark and PTH-MM registered trademark as well as several other non-registered trademarks. The terms of these licenses and trademarks vary. The Company does not believe that any of these licenses or trademarks is material to its business or operations. EMPLOYEES As of December 31, 1995 the Company had 290 employees, including part- time employees. EXECUTIVE OFFICERS OF THE COMPANY The executive officers of the Company are listed below: John J. Booth President and Chief Executive Officer since September, 1994 and Senior Vice President and Chief Financial Officer since May, 1992, age 41. Mr. Booth joined the Company in December, 1989 as Vice President of Finance and Administration and prior to that was Vice President, Controller and Secretary of CSI from October, 1989 to December, 1989. Fabio Lunghi Executive Vice President and Chief Operating Officer of the Company since September, 1994, age 51. Prior to joining the Company, from 1986 to 1994 Mr. Lunghi was Vice President and General Manager of the radiopharmaceutical business unit at Sorin Biomedica, S.p.A. Gerald L. Majewski, Ph.D. Vice President of Research and Development since October 1992, age 46. Prior to joining the Company, from 1983 to 1992 Dr. Majewski held a variety of positions at Fisher Scientific/Instrumentation Laboratory, most recently as Director of Research and Development, Reagents Development from 1989 to 1992. Thomas P. Maun Vice President and Chief Financial Officer of the Company since September, 1994 and Director of Finance since January, 1990, age 42. Mr. Maun joined the Company in 1987 as Corporate Controller. George E. Wellock Vice President of Manufacturing of the Company since March 1991, age 46. From June 1988 to March 1991, Mr. Wellock was Vice President of Operations of Baxter Dade in Cambridge, Massachusetts, a subsidiary of Baxter International. From June 1984 to June 1988, he served as Manufacturing Manager for Travenol Genentech Diagnostics and Baxter Dade. At each annual meeting of the Board of Directors, the board elects executive officers as necessary. Such elected officers hold office until the next annual meeting of the directors or until their successors are elected and qualified. ITEM 2. PROPERTIES The Company presently owns three adjacent concrete buildings totaling approximately 120,000 square feet located on a 14 acre site in Stillwater, Minnesota, which is part of the metropolitan area of Minneapolis-St. Paul. One building houses all manufacturing operations. A second building houses a research laboratory. The third building houses the Company's executive offices. The Company believes this capacity to be adequate for present and future needs. The Company owns a farm operation of 116 acres and related buildings in Windham, Maine, which houses laboratory animals. ITEM 3. LEGAL PROCEEDINGS The Company is engaged in routine litigation incident to its business, which management believes will not have an adverse effect upon its operations or consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's Common Stock is currently traded on the American Stock Exchange (AMEX) under the symbol: "ISR". As of December 31, 1995, there were approximately 1,425 shareholders of record holding 16,363,477 shares. The following table sets forth for the calendar quarters indicated the high and low sales prices as reported by the AMEX.
High Low 1994 First Quarter $ 3 15/16 $ 2 3/4 Second Quarter 3 5/16 2 3/8 Third Quarter 2 3/4 1 3/4 Fourth Quarter 2 3/8 1 11/16 1995 First Quarter 2 3/4 1 1/2 Second Quarter 3 3/4 2 1/2 Third Quarter 5 5/16 2 7/8 Fourth Quarter 5 3 3/4
DIVIDENDS. The Company did not pay cash dividends on its common stock during 1994 or 1995. It is not currently anticipated that cash dividends will be paid in the future on the Company's Common Stock. The Board of Directors of the Company will review its dividend policy from time to time. Any future determination as to the payment of dividends on the Company's Common Stock will depend upon future earnings, results of operations, capital requirements, the financial condition of the Company and any other factors the Board of Directors of the Company may consider relevant. ITEM 6. SELECTED FINANCIAL DATA
Summary Operations Statement Year Ended December 31, 1995 1994 1993 1992 1991 Domestic sales $24,494,000 $21,282,000 $23,321,000 $24,712,000 $18,601,000 International sales 21,266,000 21,221,000 19,967,000 21,272,000 19,585,000 Net sales 45,760,000 42,503,000 43,288,000 45,984,000 38,186,000 Cost of goods sold 23,271,000 22,039,000 23,007,000 22,052,000 16,450,000 Inventory valuation adjustment --- 750,000a --- --- --- Gross profit 22,489,000 19,714,000 20,281,000 23,932,000 21,736,000 Operating expenses: Selling,general and administrative 12,592,000 12,853,000 12,761,000 13,621,000 12,001,000 Research and development 3,748,000 5,069,000 5,719,000 3,277,000 3,023,000 Unusual items --- 5,750,000a 750,000a --- --- Total operating expenses 16,340,000 23,672,000 19,230,000 16,898,000 15,024,000 Operating income (loss) 6,149,000 (3,958,000) 1,051,000 7,034,000 6,712,000 Interest expense (348,000) (365,000) (472,000) (656,000) (1,551,000) Investment and other income (expenses) 33,000 11,000 (42,000) 73,000 116,000 INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 5,834,000 (4,312,000) 537,000 6,451,000 5,277,000 Provision for income taxes 1,571,000 193,000 284,000 1,577,000 1,521,000 INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 4,263,000 (4,505,000) 253,000 4,874,000 3,756,000 Extraordinary items --- --- --- --- 329,000 NET INCOME (LOSS) $ 4,263,000 $(4,505,000)$ 253,000 $ 4,874,000 $ 4,085,000 INCOME (LOSS) PER SHARE BEFORE EXTRAORDINARY ITEMS $ 0.26 $ (0.28)$ 0.02 $ 0.30 $ 0.23 NET INCOME (LOSS) PER SHARE $ 0.26 $ (0.28)$ 0.02 $ 0.30 $ 0.25 Weighted average shares and equivalents 16,491,501 16,322,301 16,432,883 16,337,857 16,203,750 Balance Sheet Information December 31, 1995 1994 1993 1992 1991 Total assets $38,761,000 $38,154,000 $43,426,000 $45,069,000 $43,985,000 Working capital 14,947,000 13,873,000 14,555,000 13,863,000 12,434,000 Long-term debt 3,000 4,143,000 6,501,000 8,167,000 12,295,000 Shareholders'equity 28,384,000 23,889,000 28,240,000 27,277,000 21,974,000 Book value per share 1.72 1.46 1.73 1.69 1.38 Note 1.For information with respect to dividends, see Item 5 above. a) Relates to the write off of certain tangible and intangible costs, severance and related costs and inventory write downs as discussed in Note 2 to the consolidated financial statements contained elsewhere herein.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales in 1995 were $45,760,000, an 8 percent increase from $42,503,000 in 1994. Contributing to the increase were sales from the Company's hepatitis assays, as discussed below, and many new products introduced during the last 16 months in the Company's autoimmune disease, bone and mineral metabolism and infectious disease market segments. These gains were partially offset by declines in the Company's oncology and endocrinology market segments due to the continued shift in the diagnostic industry from isotopic, manual testing to non- isotopic, automated and semi-automated testing. 1994 sales declined 2 percent from $43,288,000 in 1993 due to these shifts away from isotopic, manual testing. Domestic sales increased to $24,494,000, a 15 percent increase from 1994 sales of $21,282,000. Sales increased in the autoimmune disease market segment due primarily to sales of an ELISA-based panel of diagnostic assays acquired from TheraTest Laboratories, Inc. in May, 1994. The manufacturing transfer of these tests to the Company's Stillwater facility was completed in the second quarter of 1995. The bone and mineral metabolism market segment has been favorably impacted by sales of the Company's Vitamin D assays. In addition, since June, 1995, the Company has experienced an increase in demand for one of its hepatitis assays due to a competitor's kit becoming unavailable to the market. This opportunity resulted in approximately $2.9 million in sales during 1995. The competitor re-entered the marketplace during the first quarter of 1996. While the Company believes that a portion of these sales may be maintained, the impact on future sales is uncertain at this time. Domestic sales have continued to be negatively impacted by declines in the Company's oncology and endocrinology market segments, as discussed above. 1994 sales decreased from $23,321,000 in 1993 due primarily to these declines. 1995 international sales of $21,266,000 remained flat with 1994 sales of $21,221,000. Sales were favorably impacted in 1995 due to the introduction of a second generation Epstein Barr Virus diagnostic kit and a Thyroid Receptor Autoantibody (TRAb) assay. Sales were negatively impacted, however, in the serum protein segment resulting mainly from declines in demand for the Company's bulk antisera products. 1994 sales increased from $19,967,000 in 1993 primarily due to the introduction of new products in the Company's bone and mineral metabolism market segment. Gross margins were 49 percent of sales in 1995 compared with 46 percent of sales in 1994 and 47 percent in 1993. The decline in 1994 was attributable to the $750,000 charge for excess inventories as discussed in Note 2 of the Company's consolidated financial statements contained elsewhere herein. Exclusive of the inventory write down, gross margins were 48 percent of sales in 1994. Gross margins have improved during the last two years due to improved product mix as well as efficiencies derived from operational restructuring. Pricing pressures associated with healthcare cost containment measures, and shifts away from isotopic testing resulting in production volume declines in the Company's endocrinology market segment, continue to negatively impact gross margins. Despite these negative pressures, the Company expects to maintain or slightly improve its gross margins during 1996. The Company's ratio of selling, general and administrative expenses to sales was 28 percent in 1995, 30 percent in 1994 and 29 percent in 1993. These expenses, as a percentage of sales, are expected to remain relatively consistent with 1995. Research and development expenses were $3,748,000 in 1995, compared with $5,069,000 in 1994 and $5,719,000 in 1993. The continued decreases are attributable to the discontinuance during 1994 of the Fluorescence Polarization Immunoassay (FPIA) development project as discussed in Note 2 of the Company's consolidated financial statements contained elsewhere herein. Exclusive of FPIA, these expenses represent 8 percent, 9 percent and 7 percent of sales in 1995, 1994 and 1993, respectively. Research and development expenses are projected to increase slightly due to the Company's increased emphasis on new development activities. Interest expense declined by 5 percent in 1995 to $348,000 compared with $365,000 in 1994 and 26 percent from $472,000 in 1993. The decrease was attributable to lower average debt levels. 1995 expense includes interest on certain tax obligations. Income tax expense was 27 percent of income before taxes or $1,571,000, compared with $193,000 in 1994 and $284,000 in 1993. The tax expense in 1994 related primarily to book reserves and liabilities not deductible for tax purposes until paid. These book reserves and liabilities created deferred tax assets subject to a valuation allowance. The effective rate is expected to decline slightly in 1996 as this valuation allowance is reduced. Net income in 1995 was $4,263,000, or 26 cents per share, compared with a net loss of $4,505,000, or 28 cents per share, in 1994 and net income of $253,000, or 2 cents per share, in 1993. The 1994 loss results from $6.5 million in charges, as discussed in Note 2 to the Company's consolidated financial statements contained elsewhere herein. 1993 net income was impacted by a $750,000 pre-tax charge in the first quarter relating to employee severance and related costs. LIQUIDITY AND CAPITAL RESOURCES INCSTAR's free cash flow (operating cash flow less investment activities) was $5,190,000 in 1995, compared to $3,118,000 in 1994 and $1,954,000 in 1993. These funds were used to eliminate all outstanding debt obligations, which were in excess of $4.0 million at the beginning of the year. The Company's ratio of total debt to total capital was 16 percent in 1994 and 20 percent in 1993. Working capital increased to $14,947,000 at year-end 1995 from $13,873,000 at the end of 1994, resulting from higher accounts receivable and inventory balances associated with increased sales levels. Capital expenditures for 1995 were $1,557,000, compared with $923,000 in 1994 and $1,535,000 in 1993. For 1996, capital expenditures are expected to be approximately $2.8 million, primarily for manufacturing improvements and laboratory equipment. The Company's primary sources of liquidity are a $1 million revolving bank credit line secured by Company assets and a $4.5 million unsecured credit line with Fiat Finance USA, Inc. (Fiat). At year-end, the Company had no outstanding borrowings under these credit lines. The Company anticipates that the generation of free cash flow and the resources available within the Fiat Group will provide sufficient sources of liquidity for planned capital and research and development expenditures. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company and financial statement schedules are listed under Items 6, 14 (a) (1) and 14 (a) (2) of this report and contained elsewhere herein. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. [The remainder of this page left blank intentionally.] PART III Part III, Items 10, 11, 12 and 13, except for certain information relating to Executive Officers included in Part I, Item 1, is omitted inasmuch as the Company intends to file with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended December 31, 1995, a definitive proxy statement containing such information pursuant to Regulation 14A of the Securities Exchange Act of 1934 and such information shall be deemed to be incorporated herein by reference from the date of filing such document. [The remainder of this page left blank intentionally.] PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of this report: (1) Consolidated Statements of Operations - Years Ended December 31, 1995, December 31, 1994, and December 31, 1993 Consolidated Balance Sheets - As of December 31, 1995 and 1994 Consolidated Statements of Cash Flows - Years Ended December 31, 1995, December 31, 1994; and December 31, 1993 Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1995; December 31, 1994; and December 31, 1993 Consolidated Quarterly Results (unaudited) for the Years Ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements Independent Auditors' Report (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts All other financial statement schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto or is not applicable or required. (3) Exhibits: Number Description 3.1 Restated Articles of Incorporation of INCSTAR Corporation, as amended to date [incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (File No. 33-84498)]. 3.2 Bylaws of INCSTAR Corporation, as amended to date [incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (File No. 33-84498)]. 4.1 Specimen Certificate representing the Registrant's Common Stock [incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3 (File No. 33-37805)]. 4.2 Note Purchase Agreement, dated December 27, 1991 between the Registrant and Fiat Finance, U.S.A. Inc. [incorporated by reference to Exhibit 4.2 to the Registrant's Report on Form 10-K for the year ended December 31, 1991 (File No. 1-9800)] 4.3 Form of Warrant Certificate issued by the Registrant in favor of Bioengineering International B.V. (now BioFin Holding International B.V.) [incorporated by reference to Exhibit 10.11 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 4.4 Form of Purchase Rights Agreement between Bioengineering International B.V. (now BioFin Holding International B.V.) and the Registrant [incorporated by reference to Exhibit 10.12 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.1+* INCSTAR Corporation Stock Option Plan, as amended to date, filed herewith. 10.2* Economic Value Sharing Plan [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.3* Form of Executive Survivor Benefit Income Continuation Agreement between the Registrant and certain of its employees [incorporated by reference to Exhibit 10.4 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.4* Executive Survivor Benefit Income Continuation Plan covering certain executive officers of the Registrant [incorporated by reference to Exhibit 10.4 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.5* Form of Employment Agreement between the Registrant and John J. Booth [incorporated by reference to Exhibit 10.13 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.6* Amendments to Employment Agreement between the Registrant and John J. Booth [incorporated by reference to Exhibit 10.8 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.7* Employment Continuation Agreement between the Registrant and Orwin L. Carter [incorporated by reference to Exhibit 10.1 of the Registrant's report on Form 10-Q for the quarter ended September 30, 1994 (File No. 1-9800)]. 10.8* Separation Agreement between the Registrant and Jacques A. Bagdasarian [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.9+ Form of Scientific Advisory Board agreement between the Registrant and Dr. Pierre M. Galetti and Dr. Michael Steffes filed herewith. 10.10+ Consulting Agreement between the Registrant and Dr. Michael Steffes filed herewith. 10.11 Form of Distributorship Agreement between the Registrant and Sorin Biomedica S.p.A., without exhibits or schedules [incorporated by reference to Exhibit 10.15 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.12 Form of Distributorship Agreement between Sorin Biomedica S.p.A. and the Registrant [incorporated by reference to Exhibit 10.16 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.13 Distribution Agreement, dated October 30, 1986, between Clinical Sciences Inc. and Sorin Biomedica S.p.A., as amended [incorporated by reference to Exhibit 10.17 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.14 Form of Technology Transfer Agreement between the Registrant and Sorin Biomedica S.p.A. [incorporated by reference to Exhibit 10.18 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.15 Distribution and Supply Agreement between Baxter International Inc. and the Registrant dated September 19, 1990 [incorporated by reference to Exhibit 10(b) of the Registrant's report on Form 10-Q for the quarter ended September 30, 1990 (File No. 1-9800)]. 10.16 Product Distribution Agreement between Centocor, Inc. and the Registrant dated December 2, 1991 [incorporated by reference to Exhibit 10.14 of the Registrant's Report on Form 10-K for the year ended December 31, 1991 (File No. 1-9800)]. 10.17.1 Letter agreements dated August 3, 1992 and February 19, 1993 amending the product distribution agreement filed as Exhibit 10.15 [incorporated by reference to Exhibit 10.14.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.18 Revolving Credit, Security and Note Agreement, with exhibits thereto, dated as of December 27, 1993 between Norwest Bank Minnesota, National Association and the Registrant [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.1 First Amendment dated January 3, 1995 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.2 Second Amendment dated February 15, 1995 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.3+ Third Amendment dated January 29, 1996 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16. 10.19 Agreement for Purchase, Sale and Distribution of Assets between TheraTest Laboratories Inc. and the Registrant dated May 16, 1994 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 11+ Statement Re: Computation of Net Income (Loss) Per Common Share. 21+ Subsidiaries of the Registrant. 23+ Independent Auditors' Consent 27+ Financial Data Schedules * Executive Compensation Plans and Arrangements + Filed with this Annual Report on Form 10-K (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INCSTAR CORPORATION Dated: March 28, 1996 By: /s/John J. Booth John J. Booth President Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 21, 1996. /s/Pierre M. Galetti Chairman of the Board, Pierre M. Galletti, M.D., Ph.D. Director /s/John J. Booth President and Director John J. Booth (Principal Executive Officer) /s/Thomas P. Maun Vice President and Chief Financial Officer Thomas P. Maun (Principal Accounting and Financial Officer) /s/Ennio Denti Director Ennio Denti /s/Michael W. Steffes Director Michael W. Steffes, M.D., Ph.D. _________________ Director George H. Dixon _________________ Director Umberto Rosa /s/Carlo Vanoli Director Carlo Vanoli /s/D. Ross Hamilton Director D. Ross Hamilton /s/Franco Fornasari Director Franco Fornasari /s/Ezio Garibaldi Director Ezio Garibaldi INCSTAR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1995 1994 1993 Net sales $45,760,000 $ 42,503,000 $ 43,288,000 Cost of goods sold 23,271,000 22,039,000 23,007,000 Inventory valuation adjustment --- 750,000 --- Gross profit 22,489,000 19,714,000 20,281,000 Operating expenses: Selling, general and administrative 12,592,000 12,853,000 12,761,000 Research and development 3,748,000 5,069,000 5,719,000 Unusual items --- 5,750,000 750,000 Total operating expenses 16,340,000 23,672,000 19,230,000 Operating income (loss) 6,149,000 (3,958,000) 1,051,000 Interest expense (348,000) (365,000) (472,000) Investment and other income (expense) 33,000 11,000 (42,000) INCOME (LOSS) BEFORE INCOME TAXES 5,834,000 (4,312,000) 537,000 Provision for income taxes 1,571,000 193,000 284,000 NET INCOME (LOSS) $ 4,263,000 $ (4,505,000) $ 253,000 INCOME (LOSS) PER SHARE: Net income (loss) per share $ 0.26 $ (0.28) $ 0.02 Weighted average shares and equivalents 16,491,501 16,322,301 16,432,883
The accompanying notes are an integral part of the consolidated financial statements. INCSTAR CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, December 31, 1995 1994 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 460,000 $ 153,000 Restricted cash 251,000 251,000 Accounts receivable, net of allowance for doubtful accounts of $107,000 and $113,000, respectively 7,575,000 6,759,000 Other receivables 24,000 119,000 Inventories 13,445,000 12,368,000 Other current assets 294,000 562,000 TOTAL CURRENT ASSETS 22,049,000 20,212,000 PROPERTY AND EQUIPMENT: Land and land improvements 1,573,000 1,573,000 Buildings and improvements 13,252,000 13,103,000 Equipment and furniture 18,170,000 16,924,000 Construction in progress 6,000 114,000 33,001,000 31,714,000 Less allowance for depreciation and amortization (18,387,000) (16,482,000) 14,614,000 15,232,000 INTANGIBLE ASSETS 1,105,000 1,744,000 OTHER ASSETS 993,000 966,000 $ 38,761,000 $ 38,154,000 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 76,000 $ 278,000 Accounts payable and cash overdraft 1,914,000 2,262,000 Accrued compensation 1,972,000 1,418,000 Accrued expenses 2,928,000 2,286,000 Income taxes payable 212,000 95,000 TOTAL CURRENT LIABILITIES 7,102,000 6,339,000 LONG-TERM DEBT 3,000 4,143,000 OTHER NON-CURRENT LIABILITIES 3,272,000 3,783,000 SHAREHOLDERS' EQUITY: Undesignated stock, authorized 5,000,000 shares - - - - - - Common stock, par value $.01, authorized 25,000,000 shares; issued and outstanding 16,363,477 and 16,322,521 shares, respectively 164,000 163,000 Additional paid-in capital 17,940,000 17,676,000 Foreign currency translation adjustment (151,000) (118,000) Retained earnings 10,431,000 6,168,000 TOTAL SHAREHOLDERS' EQUITY 28,384,000 23,889,000 $ 38,761,000 $ 38,154,000
The accompanying notes are an integral part of the consolidated financial statements. INCSTAR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995 1994 1993 OPERATING ACTIVITIES: Net income (loss) $4,263,000 $(4,505,000) $ 253,000 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for deferred taxes -- -- (79,000) Cumulative effect of accounting change -- -- 16,000 Provision (payments) for unusual items and inventory valuation adjustment (1,060,000) 5,371,000 -- Provision for retirement plans 272,000 529,000 489,000 Depreciation and amortization 2,910,000 3,395,000 3,280,000 Changes in operating assets and liabilities: Accounts receivable (816,000) 39,000 297,000 Other receivables 95,000 (29,000) 82,000 Inventories (1,077,000) 194,000 414,000 Other current assets 212,000 (21,000) 75,000 Accounts payable 254,000 (229,000) 156,000 Accrued compensation 554,000 (108,000) 51,000 Accrued expenses 975,000 90,000 (380,000) Income taxes payable 320,000 (56,000) (27,000) Other, net (33,000) 35,000 (11,000) Net cash provided by operating activities 6,869,000 4,705,000 4,616,000 INVESTING ACTIVITIES: Proceeds from sale of property and equipment -- -- 610,000 Additions to property and equipment, net (1,557,000) (923,000) (1,535,000) Payments for product distribution rights -- (599,000) (1,350,000) Payments for intellectual property and purchased technology (86,000) -- (508,000) (Increase) decrease in other assets (36,000) (65,000) 121,000 Net cash used in investing activities (1,679,000) (1,587,000) (2,662,000) FINANCING ACTIVITIES: Net repayments under lines of credit -- (422,000) (563,000) Net increase (decrease) in cash overdraft (602,000) (512,000) 275,000 Increase in restricted cash -- (11,000) (10,000) Payments on long-term debt (4,342,000) (2,364,000) (2,059,000) Payments on officer loans -- -- 35,000 Issuance of common stock -- -- 296,000 Issuance of common stock to employees 61,000 119,000 219,000 Net cash used in financing activities (4,883,000) (3,190,000) (1,807,000) Effects of exchange rate changes on foreign currency cash balances -- -- 1,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 307,000 (72,000) 148,000 Cash and cash equivalents at beginning of year 153,000 225,000 77,000 Cash and cash equivalents at end of year $ 460,000 $ 153,000 $ 225,000
The accompanying notes are an integral part of the consolidated financial statements. INCSTAR CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Foreign Common Stock Additional Currency Number of Paid-In Translation Retained Shares Amount Capital Adjustment Earnings Balance at December 16,156,615 $ 162,000 $16,832,000 $ (137,000) $10,420,000 31, 1992 Common stock issued under employee stock purchase plan and and upon exercise of stock options 46,847 -- 219,000 -- -- Officer loans related to options exercised -- -- 35,000 -- -- Issuance of shares to BFHI 77,595 1,000 295,000 -- -- Compensation expense on executive stock options -- -- 176,000 -- -- Translation adjustments -- -- -- (16,000) -- Net income -- -- -- -- 253,000 Balance at December 31, 1993 16,281,057 $ 163,000 $17,557,000 $ (153,000) $10,673,000 Common stock issued under employee stock purchase plan and upon exercise of stock options 41,464 -- 119,000 -- -- Translation adjustments -- -- -- 35,000 -- Net loss -- -- -- -- (4,505,000) Balance at December 31, 1994 16,322,521 $ 163,000 $17,676,000 $ (118,000) $ 6,168,000 Common stock issued under employee stock purchase plan and upon exercise of stock options 40,956 1,000 61,000 -- -- Translation adjustments -- -- -- (33,000) -- Compensation expense on executive stock options -- -- 203,000 -- -- Net income -- -- -- -- 4,263,000 Balance at December 31, 1995 16,363,477 $ 164,000 $17,940,000 $ (151,000) $10,431,000
The accompanying notes are an integral part of the consolidated financial statements. INCSTAR CORPORATION QUARTERLY RESULTS (UNAUDITED): (in thousands, except per share data)
Net Sales Gross Profit Year Ended Year Ended December 31, December 31, Quarter 1995 1994 Quarter 1995 1994 First $ 11,117 $ 10,657 First $ 5,130 $ 5,036 Second 11,041 11,188 Second 5,319 5,434 Third 11,664 10,451 Third 5,873 5,131 Fourth 11,938 10,207 Fourth 6,167 4,113 Net Income (Loss) Net Income (Loss) Per Share Year Ended Year Ended December 31, December 31, Quarter 1995 1994 Quarter 1995 1994 First $ 799 $ 104 First $ 0.05 $ 0.01 Second 827 (2,443) Second 0.05 (0.15) Third 1,092 487 Third 0.07 0.03 Fourth 1,545 (2,653) Fourth 0.09 (0.16)
INCSTAR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1_SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS INCSTAR Corporation (the "Company") is a medical immunodiagnostics company focused on the development, production and worldwide marketing of reagents, particularly for bone/mineral metabolism, endocrinology, infectious and autoimmune diseases. The Company predominantly markets these products in North America, Europe and Asia. PRICIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of INCSTAR Corporation and its wholly-owned subsidiaries, Atlantic Antibodies, Inc., INCSTAR Ltd. and Immuno Nuclear Export Ltd. All material inter-company accounts and transactions have been eliminated in consolidation. Certain amounts for periods prior to the year ended December 31, 1995 have been reclassified to conform with the current classifications. CASH EQUIVALENTS Cash equivalents consist primarily of investments in mutual funds with current maturities. The Company's cash management system is designed to maintain zero balances at certain banks in order to minimize interest expense by reducing outstanding debt. Accounting records classify checks written but not presented to these banks as cash overdraft in the balance sheet heading Accounts payable and cash overdraft. RESTRICTED CASH Through December 31, 1995 the Company maintained a self insured workers compensation insurance plan. Pursuant to the plan, the Company holds a certificate of deposit with current maturity as a compensating balance with a bank. These funds are restricted to assure future credit availability for the potential self insured aggregate limits under the plan. The funds are required to be on deposit with a bank under Minnesota state regulations and are expected to be released in the second quarter of 1996. As of January 1, 1996, the Company is no longer self insured. INVENTORIES Inventories are valued at the lower of average cost, which approximates the first-in, first-out (FIFO) method, or market. PROPERTY AND EQUIPMENT Property and equipment, including equipment under capital leases, is reported at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred. The Company computes depreciation and amortization using the straight-line method based on estimated useful lives of three to seven years for equipment and furniture and seven to thirty years for buildings and improvements. INTANGIBLE ASSETS Intangible assets includes patents, trademarks, intellectual property and purchased technology, goodwill and product distribution rights. Patents and trademarks are amortized using the straight-line method over a five-year period. Goodwill, which represents the cost in excess of the fair value of net assets acquired, is amortized using the straight-line method over a ten-year period. Intellectual property and purchased technology is amortized using the straight line method over the properties estimated useful lives which range from seven to ten years. Product distribution rights are amortized using the straight line method over the life of the agreement or the estimated product life, whichever is shorter. RESEARCH AND DEVELOPMENT Research and development costs are expensed when incurred. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standard (SFAS) No. 109. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. INCOME (LOSS) PER SHARE Income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents, consisting of stock options and warrants, outstanding during the period. For all periods presented, fully diluted and primary income or loss per share are the same. For 1994, the effects of stock options and warrants were excluded from the computation of weighted average shares outstanding because their effects were antidilutive. FOREIGN CURRENCY TRANSLATION Assets and liabilities of foreign operations are translated at rates of exchange in effect at period end. Statement of operations amounts are translated at the average rate of exchange for the period. Gains and losses resulting from translation are accumulated in a separate component of shareholders' equity. Foreign currency transaction gains and losses, which are not material, are included in the consolidated statements of operations. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS 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. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in March, 1995. This statement will be effective for the Company's year ended December 31, 1996. Management believes that adoption of this pronouncement will not have a significant impact on the financial position or results of operations of the Company. In addition, the Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Awards for Stock-Based Compensation to Employees" in October, 1995. This statement will be effective for the Company's year ended December 31, 1996. Management intends to adopt the disclosure provisions of SFAS No. 123 during 1996. NOTE 2_ UNUSUAL ITEMS AND INVENTORY VALUATION ADJUSTMENTS In December, 1994 the Company recorded a $750,000 charge related to the write down of excess inventories and a $2,450,000 unusual charge related to the termination of certain distribution and supply agreements ($540,000) as well as severance and other costs related to senior management changes ($1,910,000). Amounts remaining to be paid at December 31, 1995 pursuant to this charge are $498,000 included in Accrued expenses and $102,000 included in Other non- current liabilities, exclusive of amounts included in Note 9, Executive Retirement Plans. The non-current portion will be paid in 1997. In May, 1994 the Company discontinued the development of certain purchased technology acquired in 1992 from Robert Dowben Associates, a diagnostic research company, and incurred a one-time pre-tax charge of $3,300,000. The majority of this charge related to the write off of tangible and intangible assets ($1,560,000), costs incurred to terminate contracts with outside vendors and consultants ($797,000), as well as severance and related costs for terminated employees ($943,000). Amounts remaining to be paid at December 31, 1995 pursuant to this charge, exclusive of amounts included in Note 9, Executive Retirement Plans, are $49,000, and are included in Accrued expenses. In March, 1993 the Company reduced its workforce by approximately 40 positions, or 10% of its employee base. This resulted in a $750,000 pre-tax charge to earnings for severance and related costs. None of this amount remains to be paid on December 31, 1995. This reduction was accomplished through lay-offs and elimination of open positions. NOTE 3 - INVENTORIES Inventories consist of the following:
December 31, December 31, 1995 1994 Raw materials $ 2,281,000 $ 2,242,000 Work in progress 9,421,000 8,521,000 Finished goods 1,743,000 1,605,000 $ 13,445,000 $ 12,368,000
NOTE 4 - INTANGIBLE ASSETS Intangible assets consist of the following:
December 31, December 31, 1995 1994 Patents $ 717,000 $ 717,000 Trademarks 17,000 17,000 Goodwill 619,000 619,000 Intellectual property and purchased 734,000 648,000 technology Product distribution rights 2,700,000 2,700,000 4,787,000 4,701,000 Less accumulated amortization (3,682,000) (2,957,000) $ 1,105,000 $ 1,744,000
NOTE 5_LONG-TERM DEBT, LEASE AND ROYALTY COMMITMENTS Long-term debt consists of the following:
December 31, December 31, 1995 1994 Long-term note from affiliate due December 1996, interest at LIBOR plus 125 basis $ --- $ 4,020,000 points Capitalized lease obligations, 8.0%, due through 1996 72,000 390,000 Other 7,000 11,000 79,000 4,421,000 Less current portion (76,000) (278,000) Total long-term debt $ 3,000 $ 4,143,000
The Company has a revolving line of credit from a bank which provides for maximum borrowings of $1,000,000 through January 31, 1996 and is secured by accounts receivable. This credit line has been renegotiated for another one- year term at the prime interest rate or LIBOR plus 2.50%. In addition, the Company has a $4,500,000 revolving line of credit with Fiat Finance U.S.A., Inc. which expires on April 29, 1996. It is anticipated that this credit line will continue to be renewed at one year terms. At December 31, 1995 and 1994, property and equipment includes capital lease costs of $842,000 and accumulated amortization of $773,000 and $615,000, respectively. Lease amortization included in depreciation was $158,000 for the year ended December 31, 1995 and $264,000 for the year ended December 31, 1994. Aggregate annual maturities of long-term debt are $76,000 in 1996 and $3,000 in 1997. These amounts include payments on capitalized leases, net of $2,000 representing future interest payments. The Company leases certain manufacturing and other equipment in connection with its normal operations. Rent expense under these operating leases was $295,000 for the year ended December 31, 1995 and $238,000 for the year ended December 31, 1994. Future minimum lease payments for all noncancelable operating leases having a remaining term in excess of one year are as follows: 1996_$226,000; 1997_$145,000; 1998_$21,000. The Company is obligated to make royalty payments under several distribution and licensing agreements. The majority of these agreements call for payments based on a percentage of sales and contain no minimum royalty clause. Royalty expense under these agreements was $1,715,000 in 1995, $1,099,000 in 1994 and $1,564,000 in 1993. NOTE 6 - RELATED PARTY TRANSACTIONS As part of the ongoing operations of the Company, various transactions were entered into during 1995, 1994 and 1993 with its affiliates, Sorin Biomedica S.p.A. and its subsidiaries (Sorin), an affiliate of the Fiat group, and Fiat Finance U.S.A., Inc. The following tables summarize transactions and related year end balances:
Operating Sorin Fiat Finance U.S.A., Inc. Statement Data: Year Ended December 31, Year Ended December 31, 1995 1994 1993 1995 1994 1993 Product sales $7,625,000 $6,903,000 $6,842,000 $ --- $ --- $ --- Product purchases 1,807,000 1,248,000 1,240,000 --- --- --- Royalty expense 582,000 176,000 211,000 --- --- --- Interest expense --- --- --- 170,000 312,000 389,000 Balance Sheet Data: December 31, December 31, 1995 1994 1995 1994 Assets Trade receivables $1,965,000 $ 1,743,000 $ --- $ --- Other receivables 6,000 5,000 --- --- Liabilities Accounts payable $ 675,000 $ 389,000 $ --- $ --- Accrued royalty 480,000 47,000 --- --- Accrued interest --- --- 4,000 3,500 Long-term debt --- --- --- 4,020,000
NOTE 7_INCOME TAXES The provision for income taxes is summarized as follows:
Year Ended December 31, Federal State Foreign Total 1995 Current $1,505,000 $ 89,000 $ (23,000) $ 1,571,000 Deferred - - - - - - - - - - - - Provision for Income Taxes $1,505,000 $ 89,000 $ (23,000) $ 1,571,000 1994 Current $ 123,000 $ 34,000 $ 36,000 $ 193,000 Deferred - - - - - - - - - - - - Provision for Income Taxes $ 123,000 $ 34,000 $ 36,000 $ 193,000 1993 Current $ 428,000 $ (58,000) $ (7,000) $ 363,000 Deferred (79,000) - - - - - - (79,000) Provision for Income Taxes $ 349,000 $ (58,000) $ (7,000) $ 284,000
The provision for income taxes differs from the statutory federal tax rate of 34% applied to income (loss) before income taxes as follows:
Year Ended December 31, 1995 1994 1993 Federal tax calculated at the statutory rate $1,984,000 $(1,466,000) $ 183,000 Tax credits - - - - - - (120,000) Change in the valuation allowance for deferred taxes (532,000) 1,872,000 528,000 Amortization and depreciation of intangible and fixed assets acquired 34,000 34,000 34,000 Exempt income attributable to foreign sales (333,000) (288,000) (269,000) Tax differential of foreign subsidiary income 6,000 13,000 6,000 State taxes, net of federal benefit 59,000 22,000 52,000 State refunds, net of federal tax benefit - - - - - - (90,000) Compensation expense on executive stock options 203,000 - - - 47,000 Other, net 150,000 6,000 (87,000) Provision for income taxes $1,571,000 $ 193,000 $ 284,000
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 1995 and 1994 are as follows:
December 31, December 31, 1995 1994 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 29,000 $ 32,000 Accrued vacation pay 27,000 33,000 Inventories, reserves and additional costs inventoried for tax purposes 728,000 798,000 Patents, due to different book and tax lives 27,000 30,000 Retirement plans 1,066,000 984,000 Tax credits 492,000 527,000 Net operating loss carryforward --- 72,000 Severance and related costs not currently deductible 189,000 650,000 Other 26,000 75,000 Gross deferred tax assets 2,584,000 3,201,000 Valuation allowance (2,553,000) (3,084,000) Net deferred tax asset $ 31,000 $ 117,000 Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation and capitalized interest $ 41,000 $ 127,000 Other 5,000 5,000 Deferred tax liability $ 46,000 $ 132,000 Total net deferred tax liability $ ( 15,000) $ ( 15,000)
At December 31, 1995, the Company has research and development tax credits of $492,000, expiring in years through 2005. NOTE 8_EMPLOYEE SAVINGS RETIREMENT AND VALUE SHARING PLAN The Company adopted a Salary Savings Plan under Section 401(k) of the Internal Revenue Code, effective November 1, 1985. Participants make pre-tax contributions of up to 15% of their wages subject to an annual limit of $9,500. The Company is required to match 50% of that portion of the participant's pre- tax contribution which does not exceed 6% of the participant's compensation. The Company contributed $262,000 for the year ended December 31, 1995, $273,000 for the year ended December 31, 1994, and $230,000 for the year ended December 31, 1993. In 1994 the Company changed its profit sharing plan to a non-contributory value sharing plan. Cash payments to all eligible employees are based on the improvement in economic value as well as a targeted performance factor for economic value added (EVA). The Company incurred $984,000 and $0 expense under this plan for the years ended December 31, 1995 and 1994, respectively. Prior to the adoption of an EVA value sharing plan the Company sponsored a non-contributory profit sharing plan covering all eligible employees. Cash payments to participants were based on a sliding scale of pre-tax income. There was no expense under this plan for the year ended December 31, 1993. NOTE 9_EXECUTIVE RETIREMENT PLANS The Company has individual retirement agreements with certain current and prior executive officers which are intended to provide continued compensation to such individuals or their respective beneficiaries upon the later of their retirement from the Company after attainment of sixty years of age (fifty-five years of age for one plan participant) or attainment of sixty years of age (fifty-five years of age for one plan participant) following termination of employment, or upon death during the term of employment (the "triggering events"). Subject to vesting requirements, the retirement agreements provide for the payment to these individuals or their respective beneficiaries, of annual benefits for a period of fifteen years following the occurrence of a triggering event. The amount of annual benefits is adjusted annually to reflect changes in the cost of living. The annual benefit amounts vest at the rate of 10% per year. The Company maintains an executive income continuation plan for the benefit of executive officers not covered under the agreements discussed above. The plan provides payments for fifteen years to such officers or their respective beneficiaries upon the later of an officer's retirement from the Company after attainment of sixty years of age or attainment of sixty years of age following termination of employment, or upon death during the term of employment. The annual retirement payment is the product of an annual benefit rate set by the Board of Directors ($3,333 for 1995) multiplied by the number of years of employment, up to a maximum of fifteen years, and as adjusted to reflect the cost of living changes during the payment period. An officer's rights under the plan are fully vested after ten years of employment. In connection with both of the above plans, included in other noncurrent liabilities at December 31, 1995 and 1994 is $3,136,000 and $2,895,000, respectively, representing the present value of the future liability. Also, included in Accrued expenses at December 31, 1995 is $31,000 representing the current portion of this liability. The Company intends to fund this obligation through life insurance contracts on the individual executives. Included in Other assets at December 31, 1995 and 1994 is $934,000 and $905,000, respectively, of cash surrender value in connection with these policies. NOTE 10_EMPLOYEE STOCK PURCHASE AND OPTION PLAN The Company's Employee Stock Purchase Plan enables eligible employees to purchase the Company's Common Stock at the lower of 85% of the fair market value on the first or the last day of each plan year. The number of shares reserved for sale under this plan is 300,000, of which 250,127 shares have been sold. Under the Company's Stock Option Plan, as amended, stock options are awarded to key employees, consultants and directors at a price equal to the fair market value at the date of grant. All options have five or ten year terms and become exercisable in varying amounts after the grant date. A summary of activity under the Company's various options plans follows:
Shares Options Outstanding reserved Option for grant Shares price Balance December 31, 1992 109,968 582,875 $ 1.44/8.50 Exercised --- (13,500) 2.50/3.63 Canceled 49,200 (49,200) 3.63/8.25 Granted (322,000) 322,000 3.375/5.63 Additional shares reserved -1989 plan as amended 500,000 --- --- Balance December 31, 1993 337,168 842,175 $ 1.44/8.50 Exercised --- (1,500) 1.44/2.50 Canceled 136,000 (136,000) 2.50/8.50 Granted (119,000) 119,000 2.50/3.00 Balance December 31, 1994 354,168 823,675 $ 2.50/8.50 Exercised outside the plan (1,000) 1.44 Canceled 206,000 (206,000) 2.50/8.25 Canceled outside the plan (14,035) 1.44/2.50 Granted (103,000) 103,000* 2.375/4.75 Balance December 31, 1995 457,168 705,640 $ 2.375/8.25
As of December 31, 1995 options for 464,923 shares were exercisable at prices ranging from $1.44 to $8.25 per share. *Includes 12,000 options issued subject to approval at the Company's annual shareholder meeting to be held May 21, 1996. NOTE 11_SUPPLEMENTARY CASH FLOW INFORMATION
Year Ended December 31, 1995 1994 1993 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 192,000 $ 369,000 $ 474,000 Income taxes, net 1,151,000 242,000 390,000 Schedule of non-cash investing and financing activities: Capital lease obligations incurred under new equipment leases --- --- 510,000
NOTE 12_GEOGRAPHIC SEGMENT DATA Comparative geographical data for the Company's operations is summarized as follows:
1995 1994 1993 SALES United States $ 24,494,000 $ 21,282,000 $ 23,321,000 Europe 13,110,000 12,478,000 12,562,000 Asia 4,798,000 5,290,000 3,949,000 Other Foreign 3,358,000 3,453,000 3,456,000 Total $ 45,760,000 $ 42,503,000 $ 43,288,000 OPERATING INCOME United States $ 3,515,000 $ 877,000 $ 638,000 Europe 938,000 639,000 388,000 Asia 971,000 290,000 76,000 Other Foreign 725,000 736,000 699,000 6 ,149,000 2,542,000 1,801,000 Unusual items --- (5,750,000) (750,000) Inventory valuation adjustment --- (750,000) --- Other expenses, net (315,000) (354,000) (514,000) Income (loss) before income taxes $ 5,834,000 $ (4,312,000) $ 537,000 TOTAL ASSETS United States $ 38,059,000 $ 37,272,000 $ 42,615,000 Europe 702,000 882,000 811,000 Asia --- --- --- Other Foreign --- --- --- Total $ 38,761,000 $ 38,154,000 $ 43,426,000
NOTE 13_WARRANTS AND STOCK PURCHASE RIGHTS The Company has issued to BFHI a warrant to purchase up to 730,720 shares of Common Stock at the prevailing market price and has granted BFHI the right to purchase additional Common Stock at a price identical to any new issuances. These agreements enable BFHI to maintain a minimum 51% ownership in the Company. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of INCSTAR Corporation: We have audited the consolidated financial statements of INCSTAR Corporation and subsidiaries as listed in the accompanying index in Item 14(a)(1) on page 17. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index in Item 14(a)(2) on page 17. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of INCSTAR Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material aspects, the information set forth therein. KPMG Peat Marwick LLP Minneapolis, Minnesota January 26, 1996 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS INCSTAR CORPORATION AND SUBSIDIARIES
Column A Column B Column C Column D Column E Balance at Charged the to Balance at Beginning Charged Other the of to Costs & Accounts Deductions End of Period Expenses Describe (Describe) Period Allowance for doubtful accounts receivable: Year ended December 31, 1995 $113,000 $ 16,000 $ - - $22,000(A) $107,000 Year ended December 31, 1994 195,000 23,000 - - 105,000(A) 113,000 Year ended December 31, 1993 170,000 39,000 - - 14,000(A) 195,000 (A) Uncollectible accounts written off, net of recoveries
EXHIBIT INDEX (a) List of documents filed as part of this report: (1) Consolidated Statements of Operations - Years Ended December 31, 1995, December 31, 1994, and December 31, 1993 Consolidated Balance Sheets - As of December 31, 1995 and 1994 Consolidated Statements of Cash Flows - Years Ended December 31, 1995, December 31, 1994; and December 31, 1993 Consolidated Statements of Shareholders' Equity - Years Ended December 31, 1995; December 31, 1994; and December 31, 1993 Consolidated Quarterly Results (unaudited) for the Years Ended December 31, 1995 and 1994 Notes to Consolidated Financial Statements Independent Auditors' Report (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts All other financial statement schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto or is not applicable or required. (3) Exhibits: Number Description 3.1 Restated Articles of Incorporation of INCSTAR Corporation, as amended to date [incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (File No. 33-84498)]. 3.2 Bylaws of INCSTAR Corporation, as amended to date [incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-8 (File No. 33-84498)]. 4.1 Specimen Certificate representing the Registrant's Common Stock [incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-3 (File No. 33-37805)]. 4.2 Note Purchase Agreement, dated December 27, 1991 between the Registrant and Fiat Finance, U.S.A. Inc. [incorporated by reference to Exhibit 4.2 to the Registrant's Report on Form 10-K for the year ended December 31, 1991 (File No. 1-9800)] 4.3 Form of Warrant Certificate issued by the Registrant in favor of Bioengineering International B.V. (now BioFin Holding International B.V.) [incorporated by reference to Exhibit 10.11 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 4.4 Form of Purchase Rights Agreement between Bioengineering International B.V. (now BioFin Holding International B.V.) and the Registrant [incorporated by reference to Exhibit 10.12 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.1+* INCSTAR Corporation Stock Option Plan, as amended to date, filed herewith. 10.2* Economic Value Sharing Plan [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.3* Form of Executive Survivor Benefit Income Continuation Agreement between the Registrant and certain of its employees [incorporated by reference to Exhibit 10.4 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.4* Executive Survivor Benefit Income Continuation Plan covering certain executive officers of the Registrant [incorporated by reference to Exhibit 10.4 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.5* Form of Employment Agreement between the Registrant and John J. Booth [incorporated by reference to Exhibit 10.13 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.6* Amendments to Employment Agreement between the Registrant and John J. Booth [incorporated by reference to Exhibit 10.8 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.7* Employment Continuation Agreement between the Registrant and Orwin L. Carter [incorporated by reference to Exhibit 10.1 of the Registrant's report on Form 10-Q for the quarter ended September 30, 1994 (File No. 1-9800)]. 10.8* Separation Agreement between the Registrant and Jacques A. Bagdasarian [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.9+ Form of Scientific Advisory Board agreement between the Registrant and Dr. Pierre M. Galetti and Dr. Michael Steffes filed herewith. 10.10+ Consulting Agreement between the Registrant and Dr. Michael Steffes filed herewith. 10.11 Form of Distributorship Agreement between the Registrant and Sorin Biomedica S.p.A., without exhibits or schedules [incorporated by reference to Exhibit 10.15 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.12 Form of Distributorship Agreement between Sorin Biomedica S.p.A. and the Registrant [incorporated by reference to Exhibit 10.16 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.13 Distribution Agreement, dated October 30, 1986, between Clinical Sciences Inc. and Sorin Biomedica S.p.A., as amended [incorporated by reference to Exhibit 10.17 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.14 Form of Technology Transfer Agreement between the Registrant and Sorin Biomedica S.p.A. [incorporated by reference to Exhibit 10.18 of the Registrant's Registration Statement on Form S-4 (File No. 33-30785)]. 10.15 Distribution and Supply Agreement between Baxter International Inc. and the Registrant dated September 19, 1990 [incorporated by reference to Exhibit 10(b) of the Registrant's report on Form 10-Q for the quarter ended September 30, 1990 (File No. 1-9800)]. 10.16 Product Distribution Agreement between Centocor, Inc. and the Registrant dated December 2, 1991 [incorporated by reference to Exhibit 10.14 of the Registrant's Report on Form 10-K for the year ended December 31, 1991 (File No. 1-9800)]. 10.17.1 Letter agreements dated August 3, 1992 and February 19, 1993 amending the product distribution agreement filed as Exhibit 10.15 [incorporated by reference to Exhibit 10.14.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1993 (File No. 1-9800)]. 10.18 Revolving Credit, Security and Note Agreement, with exhibits thereto, dated as of December 27, 1993 between Norwest Bank Minnesota, National Association and the Registrant [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.1 First Amendment dated January 3, 1995 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.2 Second Amendment dated February 15, 1995 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 10.18.3+ Third Amendment dated January 29, 1996 to Revolving Credit, Security and Note Agreement filed as Exhibit 10.16. 10.19 Agreement for Purchase, Sale and Distribution of Assets between TheraTest Laboratories Inc. and the Registrant dated May 16, 1994 [incorporated by reference to Exhibit 10.1 of the Registrant's Report on Form 10-K for the year ended December 31, 1994 (File No. 1-9800)]. 11+ Statement Re: Computation of Net Income (Loss) Per Common Share. 21+ Subsidiaries of the Registrant. 23+ Independent Auditors' Consent 27+ Financial Data Schedules * Executive Compensation Plans and Arrangements + Filed with this Annual Report on Form 10-K EX-10.1 2 EXHIBIT 10.1 INCSTAR CORPORATION STOCK OPTION PLAN (as amended September 14, 1995) 1. Purpose of Plan. This Plan shall be known as the "INCSTAR Corporation Stock Option Plan" and is hereinafter referred to as the "Plan". The purpose of the Plan is to aid in attracting and retaining key personnel, consultants or independent contractors of INCSTAR or any of its subsidiaries and members of the Scientific Advisory Board and the Scientific Advisory Panels, in order to assure the future success of INCSTAR Corporation, a Minnesota corporation ("INCSTAR"), to offer such personnel additional incentives to put forth maximum efforts for the success of the business of INCSTAR, and to afford such personnel an opportunity and incentive to acquire a proprietary interest in INCSTAR and in its future success and progress. Options granted under this Plan may be either incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options which do not qualify as Incentive Stock Options. 2. Stock Subject to Plan. Subject to the provisions of Section 14 hereof, the stock that is subject to options under the Plan is shares of INCSTAR's authorized common stock, par value $0.1 per share (the "Common Stock"). Subject to adjustment as provided in Section 14 hereof, the maximum number of shares with respect to which options may be exercised under this Plan shall be 1,200,000 shares. If an option under the Plan expires or for any reason is terminated without being exercised with respect to any shares, or for any other reason is or becomes unexercisable with respect to any shares, such shares shall again be available for options thereafter granted during the term of the Plan. 3. Administration of Plan. (a) The Plan shall be administered by a committee (the "Committee") consisting of two or more "outside directors" of INCSTAR, who satisfy the requirements of Section 162(m) of the Code and who are "disinterested persons" with respect to the Plan within the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934 as presently in effect or as hereafter modified or amended. The members of the Committee shall be appointed by and serve at the pleasure of the Board of Directors. (b) The Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan, to: (i) determine (A) the purchase price of the shares covered by each option, (B) the employees to whom and the times at which such options shall be granted and the number of shares to be subject to each option, (C) the terms of exercise of each option, (D) the form of payment to be made upon the exercise of an SAR as provided in Section 10 hereof of each option and (E) whether an option will be an Incentive Stock Option; (ii) accelerate the time at which all or any part of an option may be exercised; (iii) amend or modify the terms of any option with the consent of the optionee; (iv) interpret the Plan; (v) prescribe, amend and rescind rules and regulations relating to the Plan; (vi) determine the terms and provisions of each option agreement under this Plan (which agreements need not be identical), and (vii) make all other determinations necessary or advisable for the administration of the Plan, subject to the exclusive authority of the Board of Directors under Section 15 hereof to amend or terminate the Plan. The Committee's determinations with respect to such matters, unless otherwise disapproved by the Board of Directors of INCSTAR, shall be final and conclusive. (c) The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. 4. Eligibility. Incentive Stock Options may be granted under this Plan only to full or part-time employees of INCSTAR or any of its subsidiaries, including officers and directors of INCSTAR and such subsidiaries who are also employees. Options which do not qualify as Incentive Stock Options and SARs may be granted under this Plan to any full or part-time employee of INCSTAR or any of its subsidiaries, including officers and directors of INCSTAR and such subsidiaries, to consultants or independent contractors of INCSTAR or any of its subsidiaries, including members of the Scientific Advisory Board and the Scientific Advisory Panels as provided in Section 19 hereof, and to nonemployee directors of INCSTAR as provided in Section 9 hereof. In determining the persons to whom options or SARs shall be granted and the number of shares subject to each option, the Committee may take into account the nature of services rendered by the proposed grantees, their past, present and potential contributions to the success of INCSTAR, and such other factors as the Committee in its discretion shall deem relevant. A person who has been granted an option or SAR under this Plan may be granted an additional option or options or SAR or SARs under the Plan if the Committee shall so determine; provided, however, that to the extent that the aggregate fair market value determined at the time an Incentive Stock Option is granted of the stock with respect to which all Incentive Stock Options owned by an optionee are exercisable for the first time by such optionee during any calendar year under all plans of his employer corporation and its parent and subsidiary corporations exceeds $100,000, such options shall be treated as options that do not qualify as Incentive Stock Options. 5. Price. The option price for all Incentive Stock Options granted under the Plan shall be determined by the Committee but shall not be less than 100% of the fair market value of the Common Stock at the date of granting of such options. Except as provided in Section 9 hereof, the option price for options granted under the Plan which do not qualify as Incentive Stock Options shall also be determined by the Committee, but shall not be less than 50% of the fair market value of the Common Stock at the date of granting of such options. For such purposes and for all other valuation purposes under the Plan, the fair market value of the Common Stock shall be as reasonably determined by the Committee, but shall not be less than (a) the closing price of the Common Stock as reported for composite transactions, if the Common Stock is then traded on a national securities exchange, or (b) the last sale price of the Common Stock if the Common Stock is then quoted on the NASDAQ National Market System, or (c) the average of the closing representative bid and asked prices of the Common Stock as reported on NASDAQ on the date as of which fair market value is being determined, or (d) if the Common Stock is not publicly traded, such value as the Committee shall in good faith determine after taking into account such facts and circumstances and taking such action as it determines are appropriate. 6. Term. Subject to the provisions of Sections 9, 11 and 19 hereof, each option and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the option agreement with respect thereto, which date shall be no later than the tenth anniversary of the date of grant. The Committee shall be under no duty to provide terms of like duration for options granted under the Plan. 7. Exercise of Option. (a) Subject to the provisions of Section 11 hereof, the Committee shall have full and complete authority to determine whether an option will be exercisable in full at any time or from time to time during the term of the option, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such times during the term of the option as the Committee may determine. (b) The exercise of any option shall only be effective at such time as the sale of Common Stock pursuant to such exercise will not violate any state or federal securities or other laws. (c) An optionee electing to exercise an option shall give written notice to INCSTAR of such election and of the number of shares subject to such exercise. The full purchase price of such shares shall be tendered with such notice of exercise. Payment shall be made to INCSTAR either in cash (including check, bank draft or money order) or, at the discretion of and as specified by the Committee, (i) by delivering certificates representing Common Stock already owned by the optionee having a fair market value equal to the full purchase price of the shares, or (ii) a combination of cash and such shares. Until the optionee has been issued a certificate or certificates representing the shares subject to such exercise, he shall possess no rights as a shareholder with respect to such shares. 8. Additional Restrictions. (a) The Committee shall have full and complete authority to determine whether all or any part of the Common Stock acquired upon exercise of any option shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner the optionee's rights with respect thereto. Any such restriction shall be set forth in the agreement relating to such options. (b) No person may be granted any option or options, for more than 200,000 shares of Common Stock, in the aggregate, in any three calendar year period beginning with the period commencing January 1, 1994 and ending December 31, 1996. 9. Options to Nonemployee Directors. (a) Each director of INCSTAR who is not an employee of INCSTAR or any of its subsidiaries shall be granted an option to purchase 10,000 shares of Common Stock on (i) the date of the director's initial election to the Board of Directors, and (ii) on the date of the annual meeting of shareholders in each third year thereafter if the director has served continuously during the interim period and will continue in office after the annual meeting. The exercise price of each option shall be equal to 100% of the fair market value of the Common Stock on the date of grant. Such options shall not qualify as Incentive Stock Options, shall become exercisable in equal portions on the first, second and third anniversaries of the date of grant and shall expire on the tenth anniversary of the date of grant. Clause (ii) of the first sentence of this paragraph was adopted on September 7, 1993. For the initial implementation of clause (ii), each director who would have been eligible to receive an option on the date of the 1993 annual meeting of shareholders shall be granted an option as of September 7, 1993 on the terms set forth in this paragraph and shall not be eligible to receive another option pursuant to the Plan until the annual meeting of shareholders in 1996. No portion of the option may be exercised until the Plan, as amended, has been approved by the shareholders of the Company. (b) Options shall be subject to the terms and conditions of Sections 7, 11, 13 and 17, except that the provisions with respect to termination for changes in status set forth in to Section 11 shall be modified by substituting service as a director in lieu of employment. (c) This Section 9 shall not be amended more than once every six months other than to comport with changes in the Code, the Employees Retirement Income Security Act or the rules and regulations thereunder. 10. Alternative Stock Appreciation Rights. (a) At the time of grant of an option under the Plan (or at any time thereafter as to options which are not Incentive Stock Options), the Committee, in its discretion, may grant to the holder of such option an alternative Stock Appreciation Right ("SAR") for all or any part of the number of shares covered by the holder's option. Any such SAR may be exercised as an alternative, but not in addition to, an option granted hereunder, and any exercise of an SAR shall reduce an option by the same number of shares as to which the SAR is exercised. An SAR granted to an optionholder shall provide that such SAR, if exercised, must be exercised within the time period specified therein. Such specified time period may be less than (but may not be greater than) the time period during which the corresponding option may be exercised. An SAR may be exercised only when the corresponding option is eligible to be exercised. The failure of the holder of an SAR to exercise such SAR within the time period specified shall not reduce his option rights. If an SAR is granted for a number of shares less than the total number of shares covered by the corresponding option, the Committee may later (as to options which are not Incentive Stock Options) grant to the optionholder an additional SAR covering additional shares; provided, however, that the aggregate amount of all SARs held by any optionholder shall at no time exceed the total number of shares covered by his unexercised options. (b) SARs shall be exercised by the delivery to INCSTAR of a written notice which shall state that the optionee elects to exercise an SAR as to the option shares specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests be paid to him in cash and what portion, if any, he requests be paid to him in Common Stock. The Committee promptly shall cause to be paid to such holder the SAR exercise amount either in cash, in Common Stock or in any combination of cash and Common Stock as the Committee may determine. Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Committee. The SAR exercise amount is the excess of the fair market value of one share of Common Stock on the date of exercise over the per share option price for the option in respect of which the SAR is exercised multiplied by the number of shares as to which the SAR is exercised. An SAR may be exercised only when the SAR exercise amount is positive. (c) An SAR may only be exercised in compliance with Rule 16b-3 of the Securities Exchange Act of 1934 as presently in effect or as hereafter modified or amended if the same shall be in effect on the date of exercise. (d) All provisions of this Plan applicable to options granted hereunder shall apply with equal effect to an SAR. 11. Effect of Termination of Employment, Death or Disability. (a) In the event that an optionee shall cease to be employed by INCSTAR or any of its subsidiaries for any reason other than willful and material misconduct, death or disability, such optionee shall have the right to exercise the option at any time within 3 months after such termination of employment to the extent of the full number of shares that such optionee was entitled to purchase under the option on the date of termination, subject to the condition that no option shall be exercisable after the expiration of the term of the option. (b) In the event that an optionee shall cease to be employed by INCSTAR or any of its subsidiaries by reason of his willful and material misconduct, his options shall be terminated as of the date of the misconduct. (c) If an optionee shall die while in the employ of INCSTAR or a subsidiary or within 3 months after termination of employment for any reason other than willful and material misconduct, or if such optionee's employment by INCSTAR or any of its subsidiaries shall terminate by reason of optionee's disability, and such optionee shall not have fully exercised any option granted under the Plan, such option may be exercised at any time within 12 months after such death or (in the case of disability) termination of employment by the personal representatives, administrators or guardian of the optionee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, but only to the extent of the full number of shares such optionee was entitled to purchase under the option on the date of such death or termination of employment. (d) Nothing in the Plan or in any agreement thereunder shall confer on any employee any right to continue in the employ of INCSTAR or any of its subsidiaries or affect, in any way, the right of INCSTAR or any of its subsidiaries to terminate any optionee's employment at any time. 12. Ten Percent Shareholder Rule. Notwithstanding any other provision of the Plan, if at the time an option is otherwise to be granted pursuant to the Plan the optionee owns directly or indirectly (within the meaning of Section 424(d) of the Code) Common Stock of INCSTAR possessing more than 10% of the total combined voting power of all classes of stock of INCSTAR or its parent or subsidiary corporations (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee pursuant to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and the option price shall be not less than 110% of the fair market value of the Common Stock of INCSTAR on the date of grant, and such option by its terms shall not be exercisable after the fifth anniversary of such date of grant. 13. Non-Transferability. Except as provided in Section 11(c), (a) no option granted under the Plan shall be transferable by an optionee, otherwise than by will or the laws of descent or distribution, and (b) during the lifetime of an optionee the option shall be exercisable only by such optionee. 14. Dilution or Other Adjustments. If there shall be any change in the Common Stock through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or other change in the capitalization or corporate structure of INCSTAR, the Committee shall make appropriate adjustments in the Plan and any options or SARs outstanding under the Plan. Such adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan and such changes in the number of shares and the price per share subject to outstanding options and the amount payable upon exercise of outstanding SARs as are necessary in order to prevent dilution or enlargement of option or SAR rights. 15. Amendment or Discontinuance of Plan. The Board of Directors may amend or discontinue the Plan at any time. Except as provided in Section 14 hereof, however, no amendment of the Plan that is not approved by the shareholders of INCSTAR shall (a) increase the maximum number of shares subject to the Plan, (b) decrease the minimum option price provided in Section 5 hereof, (c) extend the maximum option term under Section 6 hereof, or (d) modify the eligibility requirements for participation in the Plan. The Board of Directors shall not alter or impair any option granted under the Plan without the consent of the holder of the option. 16. Time of Granting. The granting of an option pursuant to the Plan shall be effective only if a written agreement shall have been duly executed and delivered by and on behalf of INCSTAR and the person to whom such right is granted. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or by the shareholders of INCSTAR, and no action taken by the Committee or the Board of Directors other than the execution and delivery of an option agreement, shall constitute the granting of an option hereunder. 17. Income Tax Withholding. In order to comply with all applicable federal or state income tax laws or regulations, INCSTAR may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes which are the sole and absolute responsibility of an optionee under the Plan are withheld or collected from such optionee. In order to assist an optionee in paying all federal and state taxes to be withheld or collected upon exercise of an option which does not qualify as an Incentive Stock Option hereunder, the Committee, in its absolute discretion and subject to such additional terms and conditions as it may adopt, may permit the optionee to satisfy such tax obligation by (a) electing to have INCSTAR withhold a portion of the shares otherwise to be delivered upon exercise of such option having a fair market value equal to the amount of such taxes or (b) delivering to INCSTAR shares of Common Stock other than the shares issuable upon exercise of such option with a fair market value, determined in accordance with Section 5 hereof, equal to such taxes. The election must be made on or before the date that the amount of tax to be withheld is determined. 18. Effective Date and Termination of Plan. (a) Subject to approval of the Plan by the shareholders of INCSTAR, the effective date of the Plan, as amended, is March 4, 1994, the date of adoption of the most recent amendments to the Plan by the Board of Directors of INCSTAR. (b) Unless the Plan shall have been discontinued as provided in Section 15 hereof, the Plan shall terminate on the tenth anniversary of the effective date set forth in (a) above. No option may be granted after such termination, but termination of the Plan shall not, without the consent of an optionee, alter or impair any rights or obligations under any option theretofore granted. 19. Options to Members of Scientific Advisory Board and Scientific Advisory Panels. (a) If permitted by the academic, research, medical or other institution or institutions with which a member of the Scientific Advisory Board of INCSTAR, may be associated, each such member shall be granted an option to purchase 4,000 shares of Common Stock on the date such member executes a Scientific Advisory Board Agreement with the Company; provided, that no such grant shall be made to a member of the Committee; and provided, further, that the number of shares of Common Stock subject to such grant, together with the aggregate number of shares of Common Stock subject to grants made to such person pursuant to Section 19(b) within the preceding two years, shall not exceed 4,000 shares. The exercise price of each such option shall be the fair market value of the Common Stock (as determined in accordance with Section 5) on such date. Such options shall not qualify as Incentive Stock Options, shall become exercisable in equal portions on the first and second anniversaries of the date of grant, provided in each case that the recipient of the option is a member of the Scientific Advisory Board on such date, and shall expire on the fifth anniversary of the date of grant. (b) If permitted by the academic, research, medical or other institution or institutions with which a member of a Scientific Advisory Panel of INCSTAR, may be associated, each such member shall be granted an option to purchase 2,000 shares of Common Stock of the Company on the date such member executes a Scientific Advisory Panel Agreement with the Company; provided, that no such grant shall be made to a member of the Committee; and provided, further, that no such grant shall be made to any person who has been granted an option pursuant to Section 19(a) within the preceding two years. The exercise price of each such option shall be the fair market value of the Common Stock (as determined in accordance with Section 5) on such date. Such options shall not qualify as Incentive Stock Options, shall become exercisable in equal portions on the first and second anniversaries of the date of grant, provided in each case that the recipient of the option is a member of the relevant Scientific Advisory Panel on such date, and shall expire on the fifth anniversary of the date of grant. (c) Options granted pursuant to this Section 19 shall be subject to the terms and conditions of Sections 7, 11, 13, 14, 16 and 17, except that the provisions with respect to termination for changes in status set forth in Section 11 shall be modified by substituting service on the Scientific Advisory Board or the relevant Scientific Advisory Panel in lieu of employment. This Section 19 was adopted on September 14, 1995, and no portion of any option granted pursuant to this Section 19 may be exercised until the Plan, as amended on such date, has been approved by the shareholders of INCSTAR. EX-10.9 3 EXHIBIT 10.9 SCIENTIFIC ADVISORY BOARD AGREEMENT This SCIENTIFIC ADVISORY BOARD AGREEMENT (this "Agreement") is entered into this__________day of______________________, 1995 (the "Effective Date"), between______________________("Advisor") and INCSTAR Corporation (the "Company"). WHEREAS, the Board of Directors of the Company has authorized the establishment of a scientific advisory board (the "Scientific Advisory Board"), comprised of internationally recognized experts in various fields to provide the Company a broad background on the scientific advances and medical trends that are likely to impact the Company's current and future products; WHEREAS, the Company desires that Advisor be appointed as a member of the Scientific Advisory Board; WHEREAS, as a member of the Scientific Advisory Board, Advisor will advise the Company on certain matters as more fully described below; and WHEREAS, the Company desires to compensate Advisor upon the terms and conditions described below for such advisory services performed pursuant to this Agreement. NOW, THEREFORE, in consideration of the premises, the respective covenants and commitments set forth in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and Advisor agree as follows: 1. Appointment to Scientific Advisory Board. The Company hereby appoints Advisor as a member of the Scientific Advisory Board. Advisor hereby agrees to serve as a member of the Scientific Advisory Board in accordance with the terms of this Agreement and to provide the advisory services described in Section 3. 2. Term and Termination. 2.01 Unless earlier terminated pursuant to Section 2.02 below, the term of this Agreement shall be for a period of two years from the Effective Date. 2.02 At any time after the first anniversary of the Effective Date, this Agreement may be terminated prior to the expiration of the term hereof upon 30 days prior written notice given by either the Company or Advisor to the other. 3. Advisory Services. As a member of the Scientific Advisory Board, Advisor agrees to attend one meeting per year with other board members and/or employees or agents of the Company or its affiliates for the purpose of advising the Company of technical and scientific advances in the field of immunodiagnostic/ molecular diagnostic testing, assessing the feasibility of new programs of the Company and offering technical and scientific guidance. Subject to the direction of the Company, Advisor agrees to utilize his or her best efforts to further the interests of the Company and to discharge his or her responsibilities under this Agreement. If the Company asks Advisor to perform special tasks and/or to collaborate on specific projects requiring a sizable amount of time in addition to the basic advisory function described above, the additional activities will be scheduled on an "as available" basis and at an agreed upon fee to be negotiated in writing between the Company and Advisor. 4. Compensation and Reimbursements. 4.01 As a member of the Scientific Advisory Board, the Company agrees to pay Advisor an annual fee of $1,500 per annum during the term of this Agreement. Upon the execution of this Agreement, the Company will pay Advisor $750 and the Company agrees to pay Advisor one half of the annual fee every six months thereafter, as payment in advance for his or her advisory services during the succeeding six months. The Company also agrees to pay Advisor a meeting fee of $1,000 for each meeting he or she attends in connection with his or her advisory services pursuant to this Agreement, subject to a maximum of one meeting per year, as provided in Section 3. The Company agrees to pay Advisor his or her meeting fee on the date of the meeting. 4.02 In addition, if permitted by the academic, research, medical or other institution or institutions with which Advisor may be associated (the "Institutions"), the Company will grant Advisor a non-qualified stock option to purchase 4,000 shares of the common stock of the Company (the "Option"). The Option will have an exercise price equal to the "fair market value" of the Company's common stock as determined in accordance with the terms of the INCSTAR Corporation Stock Option Plan (the "Plan"). The Option will be granted as of the Effective Date pursuant to the terms of the Plan and will be subject to the terms of the Plan and the stock option agreement evidencing the Option. The Option will vest to the extent of one-half of the full amount on the first anniversary of the Effective Date, and the remaining one-half will vest on the day immediately preceding the second anniversary of the Effective Date, provided in each case that Advisor is a member of the Scientific Advisory Board on such date. The Option will have a term of five years, subject to the earlier termination thereof in certain circumstances as provided in the stock option agreement and the Plan. Advisor acknowledges and agrees that he or she shall not be entitled to any additional or other compensation under this Agreement if Advisor is not permitted by one or more of the Institutions with which he or she may be associated to accept the Option to be granted pursuant to this Section 4.02 or otherwise voluntarily does not accept the Option. 4.03 The Company agrees to reimburse Advisor for all authorized expenses incurred in performing the advisory services under this Agreement upon presentation of the pertinent documentation. The Company also will reimburse Advisor for other travel and living expenses for specifically requested meetings with the employees and agents of the Company or its affiliates or meetings with the members of the Scientific Advisory Board or with other individuals involved in the development of projects of the Company and its affiliates. 5. Confidentiality. Except as permitted by the Company in writing, during the term of this Agreement and for a period of three years thereafter, Advisor shall not divulge, furnish or make accessible to anyone or use in any way (other than in advising the Company) any confidential or secret knowledge or information of the Company that Advisor has acquired from the Company concerning trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. The foregoing obligation of confidentiality, however, shall not apply to any knowledge or information that is now part of the public domain or that subsequently becomes generally publicly known other than as a direct or indirect result of the breach of this Agreement by Advisor, any knowledge or information that was known to Advisor prior to disclosure by the Company or any knowledge or information is obtained from a third party. Advisor acknowledges that the above-described confidential or secret knowledge or information constitutes a unique and valuable asset to the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. 6. Relationship to the Company. The relationship created by this Agreement shall be that of an independent contractor and Advisor shall not be deemed an employee of the Company for any purpose whatsoever. The Company shall have no obligation to deduct from compensation due to Advisor hereunder any sums required for social security and withholding taxes or for any other federal, state, or local tax or charge that may be in effect or hereafter enacted or required. 7. Relationship of Advisor to Certain Institutions. The Company acknowledges that Advisor may be associated with certain Institutions, and is subject to certain agreements and policies of such Institutions. Advisor represents that he is not a party to any existing agreement with such Institutions that would prevent him from performing any of the advisory services for the Company contemplated in this Agreement. Advisor represents that he will ensure that any services he performs outside of such Institutions are not in conflict with any policy or agreement of such Institutions. 8. No Other Conflicts. The Advisor also represents to the Company that the Advisor has disclosed to the Company any and all other obligations, arrangements, agreements or interests of the Advisor that may constitute or give rise to a conflict of interest on the part of the Advisor given the nature and terms of this Agreement. The Advisor represents to the Company that the Advisor is not now under any obligation of a contractual or other nature to any person, firm, corporation or other entity which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair the execution of this Agreement or the performance by the advisor of the Advisor's obligations hereunder. 9. Entire Understanding; Binding Agreement. This Agreement constitutes the final and complete agreement between the Company and Advisor with respect to the subject matter hereof, superseding any previous oral or written communication, representation, understanding or agreement with the Company or any officer or representative of the Company. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assigns and upon Advisor and his or her executors, administrator or representatives. 10. Legal and Equitable Remedies. Advisor agrees that the advisory services to be rendered hereunder are personal and unique and because Advisor may have access to and become acquainted with confidential or secret knowledge or information of the Company, as described in Section 6 above, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. 11. Captions. The section captions are inserted only as a matter of convenience and reference and in no way define, limit, or describe the scope of this Agreement or the intent of any provisions hereof. 12. Modification of Agreement. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. 13. Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be deemed effective upon the personal delivery thereof, if mailed, forty-eight (48) hours after having been deposited in the United States mails, postage prepaid, and addressed to the party to whom it is directed at the address set forth below: If to Company: INCSTAR Corporation 1990 Industrial Boulevard P.O. Box 285 Stillwater, Minnesota 55082 Attention: Vice President Research and Development If to Advisor, then to the address listed under Advisor's name below. Any party may change the address to which such notices are to be addressed, by giving the other parties notice in the manner herein set forth. 14. Assignment. Advisor may not assign any right nor delegate any obligation under this Agreement without the prior written consent of the Company. Any such attempted assignment or delegation without proper consent shall be void. 15. Governing Law. This Agreement shall be governed by the laws of the State of Minnesota. INCSTAR CORPORATION __________________________ __________________________ By____________________ Its___________________ EX-10.10 4 EXHIBIT 10.10 CONSULTING AGREEMENT This Agreement is entered into this 1st day of January, 1996 by and between INCSTAR Corporation, a Minnesota corporation having its principal place of business at 1990 Industrial Boulevard, P.O. Box 285, Stillwater, Minnesota 55082 (the "Company"), and Michael Steffes, M.D., Ph.D., an individual residing at 1583 Fulham Street, St. Paul, Minnesota 55108 ("Consultant"). Recitals A. Consultant has been involved in the field of immunodiagnostic technology and has substantial technical and business knowledge of the development, manufacturing and marketing of immunodiagnostic products. B. The Company values the knowledge and expertise of Consultant and desires to obtain consulting services from Consultant on the terms and conditions set forth in this Agreement. NOW, THEREFORE, the Company and Consultant agree as follows: 1. Retention of Consultant; Services to be Performed. The Company hereby retains Consultant for the term of this Agreement to perform consulting services in the field of immunodiagnostic products (the "Field"), including attendance at meetings of the Company's Scientific Advisory Panels, and general consulting services relating to such field and such other consulting services as the parties may agree. 2. Compensation. For Consultant's services hereunder, the Company shall pay to Consultant a fee of $12,000 per year. The Company shall pay such fee in equal quarterly amounts on the first day of the applicable quarter. Consultant shall be responsible for the payment of all federal, state or local taxes payable with respect to all amounts paid to Consultant under this Agreement. 3. Expenses. The Company shall reimburse Consultant for all reasonable travel and other out-of-pocket expenses incurred by Consultant in rendering consulting services hereunder; provided that the Company has approved such expenses in advance. The Company shall pay such reimbursement within 30 days after receipt of appropriate receipts or documentation of the expenses. 4. Ownership and Assignment of Inventions. a. Notification of Inventions. Consultant shall promptly notify the Company in writing of the existence and nature of, and shall promptly and fully disclose to the Company, any and all ideas, designs, practices, processes, apparatus, improvements and inventions, whether or not they are believed to be patentable, which Consultant has conceived or first actually reduced to practice and/or may conceive or first actually reduce to practice during the term of this Agreement or which Consultant may conceive or reduce to practice within six (6) months after termination of this agreement, if such inventions relate to a product or process upon which Consultant worked during the term of his consulting arrangement with the Company ("Inventions"). b. Assignment to Company. Consultant agrees to assign, and hereby does assign, to the Company, all right, title and interest in and to all such Inventions. At the request of the Company, Consultant shall execute all papers, including patent applications, assignments of inventions, patents and copyrights, and other instruments that the Company shall deem necessary or convenient in order to perfect the Company's rights in the Inventions. c. Limitation. Section 4(b) shall not apply to any invention meeting the following conditions: (1) such invention was developed entirely on Consultant's own time; (2) such invention was made without the use of any of the equipment, supplies, facility or trade secret information of the Company; (3) such invention does not relate (i) directly to the business of the Company, or (ii) to the Company's actual or demonstrably anticipated research or development; and (4) such invention does not result from any work performed by Consultant for the Company. d. Copyrights. All right, title, and interest in all copyrightable material which Consultant shall conceive or originate, either individually or jointly with others, and which arise out of the performance of this Agreement, will be the property of the Company and are by this Agreement assigned to the Company along with ownership of any and all copyrights in the copyrightable material. Consultant agrees to execute all papers and perform all other acts necessary to assist the Company to obtain and register copyrights on such materials in any and all countries. Where applicable, works of authorship created by Consultant for the Company in performing his responsibilities under this Agreement shall be considered "works made for hire" as defined in the U.S. Copyright Act. e. Know-How. All know-how and trade secret information conceived or originated by Consultant which arises out of the performance of his obligations or responsibilities under this Agreement or any related material or information shall be the property of the Company, and all rights therein are by this Agreement assigned to the Company. 5. Confidential Information. a. Confidentiality Obligation. Except as permitted by the Company in writing, during the term of this Agreement or for a period of three (3) years thereafter, Consultant shall not divulge, furnish or make accessible to anyone or use in any way (other than in the consultancy for the Company) any confidential or secret knowledge or information of the Company which Consultant has acquired from the Company concerning trade secrets, confidential or secret designs, processes, formulae, plans, devices or material (whether or not patented or patentable) directly or indirectly useful in any aspect of the business of the Company, any confidential or secret development or research work of the Company, or any other confidential information or secret aspects of the business of the Company. The foregoing obligation of confidentiality, however shall not apply to any knowledge or information which is now part of the public domain, which subsequently becomes generally publicly known other than as a direct or indirect result of the breach of this Agreement by Consultant, the knowledge or information was known to Consultant prior to disclosure by Company or the knowledge or information is obtained from a third party having the right to make such disclosure. b. Irreparable Harm. Consultant acknowledges that the above- described confidential or secret knowledge or information constitutes a unique and valuable asset to the Company and represents a substantial investment of time and expense by the Company, and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company would be wrongful and would cause irreparable harm to the Company. 6. Relationship to an Academic Institution. The Company acknowledges that Consultant is a member of the faculty of the University of Minnesota (the "University"), and is subject to certain agreements and policies of the University. Consultant represents that he is not a party to any existing agreement with the University that would prevent him from performing any of the consulting services for the Company contemplated in this Agreement. Consultant represents that he will ensure that any services he performs outside of the University are not in conflict with any University policy or agreement. 7. Competing Activities. Consultant represents to the Company that (a) Consultant has disclosed to the Company any and all other obligations, arrangements, agreements or interests of Consultant that may constitute or give rise to a conflict of interest on the part of Consultant given the nature and terms of this Agreement and (b) Consultant is not now under any obligation of a contractual or other nature to any person, firm, corporation or other entity which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair the execution of this Agreement or the performance by Consultant of Consultant's obligations hereunder. Consultant further agrees that he will not, during the term of this Agreement and for six (6) months thereafter, provide to any other business or entity any services relating to the research, development, production, marketing or sale of any product in the Field that is similar to or competitive with any in vitro immunodiagnostic product researched, developed, produced, marketed or sold by the Company during the term of this Agreement. 8. Term and Termination. Unless terminated as provided herein, this Agreement shall continue until the one (1) year anniversary of the date set forth above, and shall be renewed automatically for one (1) year terms thereafter, unless either party notifies the other party at least sixty (60) days prior to the renewal date. This Agreement shall be terminated earlier (a) in the event of the death or serious disability of Consultant or (b) upon thirty (30) days written notice by either party. If this Agreement is terminated prior to the expiration of the term hereof, Consultant shall be entitled to receive the quarterly consulting fee through the date of termination, pro rated as of the date of termination. Sections 4 and 5 shall survive termination of this Agreement. 9. Miscellaneous. a. Assignment. Consultant may not assign any right nor delegate any obligation under this Agreement without the prior written consent of the Company. Any such attempted assignment or delegation without proper consent shall be void. b. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Minnesota, excluding its choice of law rules. c. Entire Understanding; Binding Agreement. This Agreement constitutes the final and complete agreement between the Company and Consultant with respect to the subject matter hereof, superseding any previous oral or written communication, representation, understanding or agreement with the Company or any officer or representative of the Company. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assigns and upon Consultant and his executors, administrator or representatives. No modification of this Agreement shall be valid unless made in writing and signed by the parties hereto. d. Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be deemed effective upon the personal delivery thereof, if mailed, forty-eight (48) hours after having been deposited in the United States mails, postage prepaid, and addressed to the party to whom it is directed at the address set forth above (or such other address provided in writing to the other party). e. Injunctive Relief. Consultant acknowledges that it would be difficult to fully compensate the Company for damages resulting from any breach by Consultant of the provisions of Section 4 or 5 of this Agreement. Accordingly, in the event of any actual or threatened breach of such provisions, the Company shall (in addition to any other remedies that it may have) be entitled to temporary and/or permanent injunctive relief to enforce such provisions, and such relief may be granted without the necessity of proving actual damages. f. Status of Consultant. Consultant is an independent contractor and not an employee of the Company. Consultant has no authority to obligate the Company by contract or otherwise. Consultant shall not be entitled to any employee benefits that the Company provides to its employees. Consultant shall be free to exercise discretion and independent judgment as to the method and means of performance of the services to be provided pursuant to this Agreement. IN WITNESS WHEREOF, the Company and Consultant have executed this Agreement as of the date set forth in the first paragraph. INCSTAR CORPORATION By /s/John Booth___________ /s/Michael Steffes_________ Michael Steffes, M.D., Ph.D. EX-10.18.3 5 EXHIBIT 10.18.3 THIRD AMENDMENT TO CREDIT AGREEMENT THIS THIRD AMENDMENT is made as of the 29th day of January, 1996, and is by and between INCSTAR Corporation (the "Borrower"), and Norwest Bank Minnesota, National Association, a national banking association ("Norwest"). REFERENCE IS HEREBY MADE to that certain credit agreement dated as of December 27, 1993 and amended January 3, 1995 and amended February 15, 1995 (the "Credit Agreement") made between the Borrower and Norwest. Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them in the Credit Agreement. WHEREAS, the Borrower has requested Norwest to extend the Line to January 31, 1997; and WHEREAS, the Borrower has requested Norwest to amend Section 2.1(a) of the Credit Agreement; and WHEREAS, Norwest is willing to grant the Borrower's request, subject to the provisions of this Third Amendment; NOW, THEREFORE, in consideration of the premises and for other valuable consideration received, it is agreed as follows: 1. Section 1.2 of the Credit Agreement is hereby amended by changing the said Section so that, when read in its entirety, it provides as follows: Line Availability Period. The Line Availability Period will mean the period from the Effective Date to January 31, 1997 (the "Line Expiration Date"). 2. Section 2.1(a) of the Credit Agreement is hereby amended by changing the said Section so that, when read in its entirety, it provides as follows: Line Fee. During the Line Availability Period the Borrower will pay the Bank a Line fee of 1/8 of 1% per annum on the average daily unused amount of the Line. This fee will be paid quarterly in arrears beginning March 31, 1996. 3. Simultaneously with the execution of this Third Amendment, the Borrower shall execute and deliver to Norwest a Third Amendment to Note (the "Third Note Amendment"), duly executed by the Borrower and in form and content acceptable to Norwest. Pursuant to the Third Amendment to Note, the maturity date of the Note shall be extended to January 31, 1997. All references in the Credit Agreement to "the Note" shall be deemed to mean the Note as modified by the First Note Amendment and the Second Note Amendment and the Third Note Amendment. 4. The Borrower hereby represents and warrants to Norwest as follows: A. As of the date of this Third Amendment, the outstanding principal balance of the Note is $0, and accrued but unpaid interest thereon equals $0. B. The Credit Agreement and the Note constitute valid, legal and binding obligations owed by the Borrower to Norwest, subject to no counter claim, defense, offset, abatement or recoupment. C. The execution, delivery and performance of this Third Amendment and the Third Amendment to Note by the Borrower are within its corporate powers, have been duly authorized, and are not in contravention of law or the terms of the Borrower's Articles of Incorporation or By-laws, or of any undertaking to which the Borrower is a party or by which it is bound. D. All financial statements delivered to Norwest by or on behalf of the Borrower, including any schedules and notes pertaining thereto, fully and fairly present the financial condition of the Borrower at the dates thereof and the results of operations for the periods covered thereby, and there have been no material adverse changes in the financial condition or business of the Borrower from December 31, 1995 to the date hereof. 5. This Third Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but which taken together shall constitute one and the same instrument. This Third Amendment shall not become effective until this Third Amendment and the Third Note Amendment have been duly executed by the Borrower and Norwest. 6. Except as expressly modified by this Third Amendment, the Credit Agreement remains unchanged and in full force and effect. Without limiting the generality of the foregoing, all advances under the Line shall continue to be evidenced by the Note, as amended by the First Note Amendment and The Second Note Amendment and the Third Note Amendment. IN WITNESS WHEREOF, the Borrower and Norwest have executed this Third Amendment as of the date first written above. INCSTAR CORPORATION NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION By:___________________ By:______________________ Its:__________________ Its:_____________________ By:___________________ Its:__________________ EX-11 6 EXHIBIT 11 COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE INCSTAR CORPORATION
Year Ended December 31, 1995 1994 1993 PRIMARY EARNINGS PER COMMON SHARE: Average shares outstanding 16,362,916 16,322,301 16,258,929 Dilutive stock options and warrants-- based on the treasury stock method (1) 128,585 -- 173,954 16,491,501 16,322,301 16,432,883 Net income (loss) $ 4,263,000 $(4,505,000) $ 253,000 Net income (loss) per share $ 0.26 $ (0.28) $ 0.02 (1) The effects of stock options and warrants were excluded from the calculation of weighted average shares outstanding for 1994 because their effects were antidilutive.
EX-21 7 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Atlantic Antibodies, Inc. Incorporated in the State of Delaware d.b.a. Atlantic Antibodies, Inc. INCSTAR UK Ltd. Incorporated in the United Kingdom d.b.a. INCSTAR Limited Immuno Nuclear Export, Limited Incorporated in Jamaica d.b.a. Immuno Nuclear Export Limited EX-23 8 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors INCSTAR Corporation: We consent to incorporation by reference in the Registration Statements No. 33- 34055, No. 33-84498, No. 33-32162, and No. 33-32736 on Form S-8 of INCSTAR Corporation of our report dated January 26, 1996, relating to the consolidated balance sheets of INCSTAR Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statement of operations, shareholders' equity and cash flows and related schedule for each of the years in the three- year period ended December 31, 1995, which reports appears in the 1995 Annual Report on Form 10-K of INCSTAR Corporation. KPMG Peat Marwick LLP Minneapolis, Minnesota March 27, 1996 EX-27 9
5 EXHIBIT 27 FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the consolidated balance sheet for the period ended December 31, 1995 and the related statements of income, cash flows and retained earnings for the period ended December 31, 1995 and is qualified in its entirety by reference to such financial statements. YEAR Dec-31-1995 Dec-31-1995 711,000 0 7,682,000 107,000 13,445,000 22,049,000 33,001,000 18,387,000 38,761,000 7,102,000 3,000 0 0 164,000 28,220,000 38,761,000 45,760,000 45,760,000 23,271,000 23,271,000 0 10,000 348,000 5,834,000 1,571,000 4,263,000 0 0 0 4,263,000 0.26 0.26
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