-----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, Fpow1yWEKwgBd/QzfzVp8OOMBRBATS5nIKD7SZe3VlMxv9I0vJjwxDthxVv0xuFs dc7SzyAA6+lE/uDr16ZRcw== 0000736822-01-500017.txt : 20010914 0000736822-01-500017.hdr.sgml : 20010914 ACCESSION NUMBER: 0000736822-01-500017 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010531 FILED AS OF DATE: 20010913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUCOR INC CENTRAL INDEX KEY: 0000736822 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 222408354 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14820 FILM NUMBER: 1736737 BUSINESS ADDRESS: STREET 1: 3130 GATWAY STREET 2: PO BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 BUSINESS PHONE: 7704412051 MAIL ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: P O BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091-5625 10-K 1 may0110k.txt MAY200110K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF X THE SECURITIES EXCHANGE ACT OF 1934 --- For the fiscal year ended May 31, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-14820 IMMUCOR, INC. (Exact name of registrant as specified in its charter) Georgia 22-2408354 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3130 GATEWAY DRIVE, 30091 P.O. BOX 5625 (Zip Code) Norcross, Georgia (Address of principal executive offices) Registrant's telephone number, including area code, is (770) 441-2051 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.10 PAR VALUE (Title of Class) COMMON STOCK PURCHASE RIGHTS (Title of Class) 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 a 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 ] As of July 31, 2001, the aggregate market value of the voting stock held by non-affiliates of the registrant was $23,690,578. As of July 31, 2001, there were 7,277,617 shares of common stock outstanding. PART I Item 1.--Business Founded in 1982, Immucor, Inc., a Georgia corporation ("Immucor" or the "Company"), develops, manufactures and sells a complete line of reagents and automated systems used primarily by hospitals, clinical laboratories and blood banks in a number of tests performed to detect and identify certain properties of the cell and serum components of human blood prior to blood transfusion. During fiscal 1999 the Company implemented its strategic plans to consolidate the U.S. blood bank market, leaving Immucor and Ortho Clinical Diagnostics as the only two companies offering a complete line of blood banking reagents in the U.S., and to strengthen Immucor's direct presence in Europe and Canada. The Company executed its plans through a series of acquisitions, which are listed below: Acquisition of Canadian Distribution Rights. On September 1, 1998, the Company acquired the Canadian distribution rights for the Company's complete line of reagents from its Canadian distributor for a total transaction value of approximately $2.1 million. Immucor's wholly owned Canadian subsidiary, Dominion Biologicals, Ltd. ("Dominion"), took over distribution of the entire range of products. Dominion is currently the leader in the market for conventional reagents in Canada. Acquisition of Gamma Biologicals, Inc. On October 27, 1998, the Company completed the acquisition of Gamma Biologicals, Inc. ("Gamma") for a total transaction value of approximately $27.8 million (see Note 3 to the Consolidated Financial Statements). Located in Houston, Texas, Gamma manufactures and distributes a wide variety of in-vitro diagnostic reagents to blood donation centers, transfusion departments of hospitals, medical laboratories and research institutions in the U.S. and internationally. Gamma was the third largest domestic blood bank serology company before the acquisition. This acquisition significantly strengthened the Company's competitive position in the U.S. market and added to its customer base and product offerings, thereby extending the Company's global marketing reach. Combining Immucor's Automated Product Family and Capture(R) with Gamma's line of monoclonal reagents and red cell products represents a natural fit and creates an enhanced selection of products for our customers worldwide (see Products). At the time of acquisition, Gamma Biologicals was a party to an existing legal proceeding. On May 12, 1998, Gamma Biologicals received notification that a claim of patent infringement had been filed on that date in U.S. District Court, Southern District of Florida, Miami Division, by Micro Typing Systems, Inc. and Stiftung fur Diagnostiche Forschung (the Foundation). Subsequently, in February 1999 the Company received notification that a second claim was filed in the U.S. District Court for the Northern District of Georgia, against Immucor, Inc. and Gamma Biologicals for patent infringement on the first patent described above and a second patent recently granted to the Foundation. The claim alleged that the recently introduced Gamma ReACT Test System infringed U.S. patent No. 5,512,432 granted to the Foundation on April 30, 1996 and U.S. patent No. 5,863,802 granted to the Foundation on January 26, 1999. The plaintiffs sought a preliminary and permanent injunction against the continued alleged infringement by Gamma Biologicals and Immucor, and an award of treble damages, with interest and costs and reasonable attorney's fees. On September 5, 2000 a third patent was issued to the Foundation. The plaintiffs had asserted infringement of this patent and sought to add this patent to the lawsuit. The Company, in light of this new patent, evaluated its position and negotiated a settlement with the Foundation. Effective February 28, 2001 the Company no longer markets the ReACT Test System and its related reagents. The automated filling machine was turned over to the Foundation and all related instruments and manufacturing materials have been destroyed. The ReACT product line represented $1.3 million in sales and $0.79 million in gross profit for the fiscal year ended May 31, 2001. Acquisition of French and Belgian Distributor's Rights. On March 15, 1999, the Company acquired its former distributors in France (Immunochim s.a.r.l.) and Belgium (Medichim S.A.), for a combination of cash, Immucor stock options and an incentive earn out, representing a total transaction value of approximately $1.8 million. The Company's direct presence will allow it to take advantage of the large potential for blood bank automation installations in the French market, which the Company believes is the second largest market in Europe. Acquisition of the BCA blood bank division assets of Biopool International, Inc. On April 30, 1999 the Company purchased certain assets of the BCA blood bank division of Biopool International, Inc. for approximately $4.5 million. This acquisition added three well-accepted products to the Company's reagent portfolio. As a result of the above acquisitions, Immucor became the North American market leader in terms of sales and strengthened its market position worldwide. See - Competition and Marketing and Distribution. The Company financed the acquisitions with cash reserves and the proceeds of a loan from its primary U.S. bank. See Liquidity and Capital Resources and Note 3 to the Consolidated Financial Statements. Since 1992 the Company has worked with the medical instrument manufacturer Bio-Tek Instruments, Inc., a wholly owned subsidiary of Lionheart Technologies, Inc., to develop an automated, "walk-away", blood bank analyzer called the ABS2000, using Immucor's proprietary Capture(R) technology. In March 1996, the Company filed a 510(k) application with the U.S. Food and Drug Administration (the "FDA") for market clearance. On July 6, 1998, the Company announced that the FDA cleared the ABS2000 for marketing in the U.S. The instrument is designed for patient testing in hospital transfusion laboratories and is the first blood bank system that fully automates blood compatibility tests currently performed manually by blood bank technologists. The Company introduced the ABS2000 in the U.S. market during the second quarter of fiscal 1999. See also, Business - Products Under Development. During the quarter ended August 31, 2000, isolated performance issues arose at certain ABS2000 installations that resulted in mistypings not directly affecting any patient transfusions. The Company issued a safety notification, requesting customers to confirm ABS2000 results with manual backup testing until the cause of the difficulty was identified and corrected. The Company believes it has identified the factors that caused the performance issues and submitted this information to the FDA. On December 6, 2000, with the FDA's approval, the safety notification for antibody screening and crossmatch assays was removed. Customers no longer have to perform manual backup tests for either of these procedures. In addition, the Company's corrective action plan for blood grouping was accepted by the FDA. In connection with the plan, a special 510(k) was submitted to the FDA. The plan called for Company service engineers to complete field corrective action on the ABS2000 and to accumulate clinical data for group and type assays for selected customers. The Company has completed these tasks and has submitted data to the FDA for expedited review. Upon clearance by the FDA, the safety alert for group and type assays will be lifted. These performance issues may result in further delays in customers accepting instruments, and continue to affect sales of reagents used in the instruments, and both of these factors will adversely impact sales and earnings. See Item 7--Management's Discussion and Analysis--Results of Operations. In addition, the Company has received requests for refunds on instruments already placed in service and requests for financial concessions attributable to inconveniences associated with these performance issues. As of May 31, 2001, $0.76 million in credits have been issued for instruments and the Company has an allowance of $0.13 million remaining for potential future returns of instruments. A private label leasing company that finances customer purchases of ABS2000 instruments has advised the Company that it is not willing to provide financing for additional purchases of this instrument while it is under the safety notification. The Company expects that once the leasing company satisfies itself that the performance issues related to the ABS2000 are resolved to the satisfaction of the FDA, they will resume offering financing to instrument customers. Instrument sales revenues declined from $10.4 million in fiscal 2000 to $3.5 million due primarily to this safety alert. In March 1998, Immucor signed an exclusive distribution agreement with IBG Systems Limited ("IBG") headquartered in England whereby Immucor assumed the sale, marketing and service of all current and future IBG products in North America. IBG presently has the only semi-automated microtitration plate reader available for sale in the U.S., which interprets Immucor's proprietary solid phase Capture(R) assays. With this agreement, Immucor also obtained the North American distribution rights for blood bank applications of the ROSYS Plato system manufactured by ROSYS Anthos Ag of Switzerland. The system provides medium sized donor centers and large hospital transfusion laboratories with automated liquid and sample handling for processing microtitration plates and also uses Immucor's proprietary solid phase Capture(R) assays. The Company introduced the system in the U.S. and European markets during fiscal 1999. In July 1999 the Company purchased the exclusive distribution rights of the ROSYS Plato from IBG for approximately $250,000 in cash. The Company has entered into a distribution agreement directly with ROSYS Anthos Ag for the distribution of the ROSYS Plato (marketed as ABS Precis in Europe) in North America and Europe. In 1998, the Company began marketing an automated medical instrument, previously referred to as the ABSHV, utilizing DYNEX Technologies, Inc.'s 510(k) clearance for its product called the DIAS PLUS. The instrument, marketed as ABSHV in Europe, provides large blood donor centers and clinical reference laboratories automated batch processing and positive sample identification of routine blood donor tests, and uses the Company's solid phase Capture(R) assays. On September 1, 1999, the Company entered into a manufacturing and development agreement with Stratec Biomedical AG ("Stratec") with headquarters in Germany. Under the terms of the agreement, Stratec will manufacture and develop a fully automated analyzer known as the Galileo that will be initially targeted to the European community utilizing the Company's Capture(R) technology. The instrument will be marketed exclusively by Immucor to hospital transfusion laboratories and blood donor centers for patient and donor blood typing and antibody screening and identification. In order to maintain exclusive European distribution rights the Company must purchase 250 instruments over the five year initial term of the agreement. If the Company purchases less than 250 instruments over the period it will be allowed to negotiate a good faith extension. European results for fiscal 2001 were adversely affected by the interrupted supply of IMAGN 2000 reagents produced by Becton, Dickinson and Company. These products were on a backorder status for the majority of this fiscal year and caused sales to decline by approximately $1.0 million. On December 28, 2000, the Company initiated arbitration against Becton, Dickinson and Company with the American Arbitration Association. The Company's claims against Becton, Dickinson and Company relate to a Distributor Agreement between the Company and Biometric Imaging, Inc., and Becton, Dickinson and Company became a party to this agreement when they acquired Biometric Imaging, Inc. in 1999. The Company sought specific performance by Becton, Dickinson and Company of the Distributor Agreement or, in the alternative, compensatory and punitive damages. On June 11, 2001, the company reached a settlement of the arbitration proceeding it had initiated against Becton, Dickinson and Company. The settlement called for Becton to pay Immucor, Inc. a total of $1.8 million, payable in two installments. The first payment of $1.2 million was made on June 11, 2001 with the second installment of $0.6 million payable not later than April 1, 2002. This settlement represents a reimbursement for asset impairment and lost profits. In return, Immucor agreed to give up its right to distribute the IMAGN instrument and associated reagents in Italy and Portugal and to cooperate with Becton in the transition of customers and product re-launch. Industry Immucor is part of the immunohematology industry, which generally seeks to prevent or cure certain diseases or conditions through the transfusion of blood and blood components. In the U.S., the FDA regulates human blood as a drug and as a biological product, and it regulates the transfusion of blood as the administration of a drug and of a biological product. The FDA regulates all phases of the immunohematology industry, including donor selection and the collection, classification, storage, handling and transfusion of blood and blood components. The FDA requires all facilities that manufacture products used for any of those purposes, and the products themselves, to be registered or licensed by the FDA. See Regulation of Business. The principal components of blood are plasma (the fluid portion) and cells. Blood also contains antibodies and antigens. Antibodies are proteins that are naturally produced by the human body in response to the introduction of foreign substances (antigens). Antigens are substances that stimulate the production of antibodies. Red blood cells, which transport oxygen from the lungs to other parts of the body, and return carbon dioxide to the lungs, are categorized by four blood groups (A, B, AB and O) and two blood types (Rh positive and Rh negative), based on the presence or absence of certain antigens on the surface of the cells. It is crucial that the health care provider correctly identify the antibodies and antigens present in patient and donor blood. For example, if a donor's red blood cells contain antigens that could react with the corresponding antibody in the patient's plasma, the transfusion of the red blood cells may result in the potentially life threatening destruction of the patient's red blood cells. Because of the critical importance of matching patient and donor blood, compatibility testing procedures are generally performed by highly educated technologists in hospitals, blood banks and laboratories. At present, with few exceptions, these tests are performed manually using procedures which the Company believes can be significantly improved using its instrumentation and solid phase system to automate the testing procedures. See Products -- Blood Bank Automation and Solid Phase Technology. The Company believes that the worldwide market for traditional blood bank reagents is approximately $320 million, and that this market is relatively mature given current technology. The industry is labor-intensive and the Company estimates worldwide industry labor costs approach $1 billion. Therefore, the introduction of labor-saving products will provide additional growth in the market. The Company believes that its blood bank automation and solid phase testing systems improve test results and reduce the time necessary to perform certain test procedures, thereby offering a cost-effective alternative for its customers. See Products -- Blood Bank Automation and Solid Phase Technology. The Company anticipates that automation will increase the available market for traditional and automated reagents to $425 million while decreasing the overall cost of blood testing by reducing the labor component by approximately $400 million. Immucor Strategy The Company's strategy is to further strengthen its competitive position in the blood bank testing market by restructuring the market through automation of the transfusion laboratory and to firmly establish Immucor as the world leader in blood bank automation. In order to implement this strategy, the Company intends to: Maximize Instrument Placements. The Company's market research has been unable to find another company that has filed an application for FDA clearance of an automated blood bank device. Management estimates that Immucor should have a two-to-three year window of opportunity to establish itself as the leading blood bank device company in the United States. The Company's strategy is to strengthen its leadership position in the automation of blood bank testing by establishing a large base of installed instruments that future market entrants must overcome. To facilitate instrument placements, the Company offers customers a selection of automated analyzers, which address the various needs of low-, medium-, and high-volume testing facilities. In order to satisfy the broad spectrum of customers' operational and financial criteria, the Company intends to continue to offer several instrument procurement options, including third-party financing leases, direct sales and reagent rentals and to expand the range and price points of its instrument offerings. Substantial Market Price Adjustment. Over the past several years manufacturers have been facing increased costs of manufacturing while during the same period market prices for blood bank products have decreased. The Company has begun to utilize its market leadership position in the United States to realign its prices with its costs. The Company expects this adjustment will have significant favorable impact on the Company's financial performance while adding only slightly to the cost of a patient transfusion. Maximize Revenue Stream Per Placement. Each instrument placed typically provides the Company with a recurring revenue stream through the sale of reagents and supplies. Immucor's family of blood bank testing systems operates exclusively with the Company's proprietary reagent lines and Capture(R) technology. Because these reagents have been developed for automated technology, they command a premium price over traditional products. The average annual revenue per placement is $18,000 to $100,000, depending on facility testing volume. The Company also continues to develop new reagent applications and upgrade system software and hardware in order to expand instrument test menus, thereby increasing consumable usage per placement. Develop New and Enhanced Products. Immucor continually seeks to improve existing products and develop new ones to enhance its market share. The Company has successfully introduced and commercialized the ABS2000, the ROSYS Plato and the DIAS PLUS automated analyzers, all of which operate with Immucor's proprietary solid phase Capture(R) assays. Expand Intellectual Property Position. The Company seeks to expand its intellectual property position by entering into strategic alliances, acquiring rights of first refusal on future commercial developments and licensing existing technologies. Products Most of Immucor's current reagent products are used in tests performed prior to blood transfusions to determine the blood group and type of patients' and donors' blood, in the detection and identification of blood group antibodies, in platelet antibody detection, in paternity testing and in prenatal care. The FDA requires the accurate testing of blood and blood components prior to transfusions using only FDA licensed reagents such as those manufactured and sold by the Company. The following table sets forth the products sold by or exclusively for the Company, most of which are manufactured by or exclusively for the Company.
Product Group Principal Use ABO Blood Grouping Detect and identify ABO antigens on red blood cells in order to classify a specimen's blood group as either A, B, AB or O. Rh Blood Typing Detect Rh antigens in order to classify a specimen as either Rh positive or Rh negative, and to detect other Rh-hr antigens. Anti-human Globulin Used with other products for routine crossmatching, Serums (Coombs Serums) and antibody detection and identification; allows a reaction to occur by bridging between antibodies that by themselves could not cause a reaction. Reagent Red Blood Cells Detect and identify antibodies in patient or donor blood, confirm ABO blood grouping results and validate the performance of anti-human serum in the test system. Rare Serums Detect the presence or absence of rare antigens. Antibody Potentiators Increase the sensitivity of antigen-antibody tests. Quality Control Systems Daily evaluation of the reactivity of routine blood testing reagents. Monoclonal (Hybridoma) Detect and identify ABO and other antigens on red Antibody-based Reagents blood cells. Technical Proficiency Reagent tests used to determine technical profici- Systems ency and provide continuing education for technical staff. Fetal Bleed Screen Kit Used to detect excessive fetal-maternal hemorrhage in Rh-negative women. Capture-P(R) Used for the detection of platelet antibodies. Capture-R(R) Used to detect and identify unexpected blood group antibodies. Capture-CMV(R) Used for the detection of antibodies to cytomegalo- virus. Capture-S(R) Used for the detection of antilipid antibodies for syphilis screening. SegmentSampler-(TM) Disposable blood handling safety device. ABS2000 Fully automated blood bank system used for patient ABO/Rh grouping, antibody screening, donor ABO/Rh confirmation testing and crossmatching. Rh (D) Immune Globulin Administered by injection once during and once (Human) after pregnancy to an Rh negative woman who delivers an Rh positive infant to prevent hemolytic disease of the newborn. HLA Serums Transplant typing and paternity testing. Infectious Diseases Diagnosis of certain infectious diseases by the methods of ELISA, Immunofluorescence and Latex Slide Tests. Clinical Chemistry Blood analysis and pathological testing. Product Group Principal Use (continued) Immunofluorescent Used in clinical research to identify rare cell Monoclonal Antibodies surface antigens. Automated Microtitration Instruments providing laboratories automated batch Plate Processors and processing and positive sample identification of Liquid Handlers routine blood donor tests. Microtitration Plate Instrument that reads and interprets test results of Reader Immucor's proprietary Capture(R) products.
Systems The Company believes that the blood banking industry today is labor-intensive, and that a market exists for further automation of blood compatibility tests currently being performed manually by hospital and donor center blood bank technologists. Based on the results of independent workflow studies, the Company believes that its Blood Bank Automation products significantly reduce the amount of blood bank technologist time required to perform routine blood compatibility tests. ABS2000: Fully Automated Blood Bank System. On July 6, 1998, the Company announced it received FDA clearance to market the ABS2000 in the U.S. This automated, "walk-away", blood bank analyzer uses Immucor's proprietary Capture(R) reagent product technology to perform blood bank patient testing and is manufactured exclusively for Immucor by Bio-Tek Instruments, Inc., a wholly owned subsidiary of Lionheart Technologies, Inc. During fiscal 1999, the Company began to implement its marketing plan for domestic sale of the product. ROSYS Plato: Microplate Liquid Handler and Sample Processor. The system provides medium sized donor centers, clinical reference laboratories and large hospital transfusion laboratories with automated liquid and sample handling for processing of microtitration plates and also uses Immucor's proprietary solid phase Capture(R) assays. DIAS PLUS: High Volume Microplate Processor. The instrument provides large blood donor centers and clinical reference laboratories with automated batch processing and positive sample identification of routine blood donor tests, and uses the Company's Capture-R(R), Capture-CMV(R) and Capture(R)-S products. Multireader Plus: Microplate Reader. Semi-automated spectraphotometric microtitration plate reader that reads and interprets test results of Immucor's proprietary Capture(R) products. Together with the ROSYS Plato or the DIAS PLUS, the Multireader Plus completes a semi-automated blood bank system ideally suited for blood donor centers, large hospital transfusion laboratories and large reference laboratories. Laboratory Equipment. Immucor also distributes laboratory equipment designed to automate certain blood testing procedures and used in conjunction with the Company's Capture(R) product. Proprietary Technology Under current agglutination blood testing techniques, the technologist mixes serum with red blood cells in a test tube, performs several additional procedures, and then examines the mixture to determine whether there has been an agglutination reaction. A positive reaction will occur if the cells are drawn together in clumps by the presence of corresponding antibodies and antigens. However, when the mixture remains in a fluid state, it is sometimes difficult for the technologist to determine whether a positive reaction has occurred. Because of the critical importance of matching patient and donor blood, testing procedures using agglutination techniques are usually performed manually by highly educated technologists. Depending on the technical proficiency of the person performing the test, the process can take from 30 minutes to one hour, and if the test results are ambiguous the entire process may need to be repeated. Thus, a significant amount of expensive labor is involved in manual agglutination testing. Based on industry sources, the Company believes that labor costs are the largest component of the total cost of operating a hospital blood bank. The Company believes that its solid phase blood testing system improves test results and reduces the time necessary to perform certain blood testing procedures related to the transfusion of blood and blood components. Solid Phase Technology. In the Company's proprietary solid phase blood test system, one of the reactants (either an antigen or an antibody) is applied or bound to a solid support, such as a well in a microtitration plate. During testing, the bound reactant captures other reactants in a fluid state and binds those fluid reactants to the solid phase (the bound reactant). The binding of the fluid reactants into the solid phase occurs rapidly and results in clearly defined test reactions that are often easier to interpret than the subjective results sometimes obtained from existing agglutination technology. Based on results obtained with Capture-P(R), Capture-R(R), Capture-CMV(R), Capture-S(R) and the Company's ongoing research, the Company believes that solid phase test results, in batch test mode, can generally be obtained in substantially less time than by existing techniques. Immucor has obtained FDA clearance for sale of four test systems using its solid phase technology: a Platelet Antibody Detection System, Capture-P(R); a Red Cell Antibody Detection System, Capture-R(R); and two Infectious Disease Tests, Capture-CMV(R) and Capture-S(R). In these four test systems, antigens are applied and bound to the surface of a small well in a plastic microtitration plate, and patient or donor serum or plasma is placed in the well. After the addition of special proprietary indicator cells manufactured by Immucor, positive reactions indicating the presence of blood group antibodies adhere to the well as a thin layer and negative reactions do not adhere but settle to the bottom as a small cell button. Products Under Development Immucor continually seeks to improve its existing products and to develop new ones in order to enhance its market share. Prior to their sale, any new products will require licensing or premarket approval by the FDA. The Company employs several persons in the U.S., whose specific duties are improving existing products and developing new products for the Company's existing and potential customers. The Company also has established relationships with other individuals and institutions that provide similar services and the Company expects that it will continue to form and maintain such relationships. The Company intends to continue focusing its product development efforts primarily in the areas of blood bank automation and solid phase technology and in several other areas that may also be useful in connection with the development of these products. For the fiscal years ended May 31, 2001, 2000 and 1999, the Company spent $1,893,600, $2,002,600 and $1,293,600, respectively, for research and development. The Company may in the future acquire related technologies and product lines, or the companies that own them, to improve the Company's ability to meet the needs of its customers. For the nine-year period ending May 31, 2001 the Company has invested $6.6 million in instrument research and development principally under research contracts with Bio-Tek, Stratec and DYNEX. Blood Bank Automation. The Company believes that the blood banking industry today is labor-intensive, and that a market exists for further automation of blood compatibility tests currently being performed manually by hospital and donor center blood bank technologists. Since 1992 the Company has worked with Bio-Tek Instruments, Inc., a wholly owned subsidiary of Lionheart Technologies, Inc., combining Immucor's reagent manufacturing expertise with Bio-Tek's medical instrumentation expertise to develop an automated, "walk-away", blood bank analyzer, the ABS2000. Bio-Tek has been responsible for engineering, software development and manufacturing. The Company announced clearance to market the ABS2000 in the U.S. from the FDA on July 6, 1998 and continues to develop system software/hardware upgrades to add additional tests to its menu, increase ease of use, improve throughput and add stat testing capabilities. Second generation ABS2000 software is currently under review by the FDA. In June 2000 isolated performance issues arose at certain ABS2000 installations that resulted in mistypings not directly affecting any patient transfusions. The Company issued a safety notification, requesting customers to confirm ABS2000 results with manual backup testing until the cause of the difficulty was identified and corrected. The Company believes it has identified the factors that caused the performance issues and submitted this information to the FDA. On December 6, 2000, with the FDA's approval, the safety notification for antibody screening and crossmatch assays was removed. Customers no longer have to perform manual backup tests for either of these procedures. In addition to this, the Company's corrective action plan for blood grouping was accepted by the FDA and in connection with the plan, a special 510(k) was submitted to the FDA. The plan called for Company service engineers to complete field corrective action on the ABS2000 and to accumulate clinical data for group and type assays for selected customers. The Company has completed these tasks and has submitted data to the FDA for expedited review. Upon clearance by the FDA, the safety alert for group and type assays will be lifted. We cannot predict how long it will take to resolve these issues with the FDA. See also, Management's Discussion and Analysis--Liquidity and Capital Resources. On September 1, 1999, the Company entered into a manufacturing and development agreement with Stratec Biomedical AG ("Stratec") with headquarters in Germany. Under the terms of the agreement, Stratec will manufacture and develop a fully automated analyzer known as the Galileo that will be initially targeted to the European community utilizing the Company's Capture(R) technology. The instrument will be marketed exclusively by Immucor to hospital transfusion laboratories and blood donor centers for patient and donor blood typing and antibody screening and identification. In order to maintain exclusive European distribution rights the Company must purchase 250 instruments over the five year initial term of the agreement. If the Company purchases less than 250 instruments over the period it will be allowed to negotiate a good faith extension. Planned capital expenditures for fiscal 2002 include approximately $1,173,000 for final stage development and introduction of the Galileo fully automated analyzer. The Company expects to launch the Galileo in the European market late in calendar 2001. Additional Solid Phase Applications. The Company plans to continue to develop and refine its patented solid phase technology. Currently, the Company is developing a screening test for the detection of weak D antigens on donor red cells. Monoclonal Antibodies. Monoclonal antibodies are derived by fusing an antibody-producing cell with a tumor cell, resulting in a hybridoma cell that manufactures the original antibody. The Company is actively engaged in the development of additional monoclonal antibodies for a variety of uses, including the detection of blood group and infectious disease antigens, and for use in its solid phase test systems. Monoclonal antibodies are highly specific, a trait which allows them to detect and identify antigens with greater efficiency than other reagents. Product quality and consistency is maintained from production lot to production lot. The Company continues to pursue the development of such antibodies principally through Gamma and Dominion, the Company's Canadian subsidiary. Marketing and Distribution Immucor's potential U.S. customers are approximately 6,000 blood banks, hospitals and clinical laboratories. The Company maintains an active client base of over 5,500 customers worldwide, and no single customer purchases in excess of 5% of the Company's current annual sales volume. The Company believes there is little seasonality to its sales activity and there is no material backlog of orders. During fiscal 1999, the Company increased its market share through the successful implementation of its acquisition strategy (see Item 1. - Business). The Company believes it is now the market leader in North America. In addition, the Company seeks to continue to increase its worldwide market share through the use of its experienced direct sales force and through the expansion of its product line to offer customers a full range of products for their reagent needs. The Company believes it can increase its market share by marketing products based on its blood bank automation strategy and solid phase technology. The Company markets and sells its products to its customers directly through 114 sales, marketing and support personnel employed by the Company in the U.S., Canada, Germany, Portugal, Italy, Spain, France, and Belgium. In addition, the Company utilizes 16 sales agents in Italy. The Company has hired personnel whom the Company considers to be highly experienced and respected for their knowledge of the blood bank diagnostic business and/or individuals with previous success in laboratory instrument reagent sales. To effect the smooth transition to a systems company, the Company conducted extensive capital sales training of its existing sales force and added specialized capital sales representatives to the organization. Continuing technical support and service is also provided to customers through the Company's Consultation Laboratory, which was significantly strengthened with the acquisition of Gamma in October 1998. The Consultation Laboratory assists the Company's customers in identifying certain blood group antibodies that are rare or difficult to detect. Immucor also sponsors workshops in the U.S., Europe, Latin America and Asia to which customers are invited to hear the latest developments in the field. The Company also markets its products internationally through distributors located throughout the world. For the fiscal years ended May 31, 2001, 2000 and 1999, the Company had foreign net sales, including net domestic export sales to unaffiliated customers, of approximately $31,255,000, $35,147,000, $30,241,000, respectively. These sales accounted for approximately 45%, 46%, and 51% of the Company's total net sales for the respective fiscal years. During the years ended May 31, 2001, 2000 and 1999, the Company's U.S. operations made net export sales to unaffiliated customers of approximately $5,782,000, $6,712,000, and $5,558,000, respectively. Most of the Company's foreign sales occurred in Europe and Canada where the Company maintains subsidiaries. The Company's German operation made net export sales to unaffiliated customers of $1,093,000, $1,515,000 and $1,309,000 for the years ended May 31, 2001, 2000, and 1999, respectively. The Company's Canadian operation made net export sales to unaffiliated customers of $2,361,000, $2,224,000 and $2,542,000 for the years ending May 31, 2001, 2000, and 1999, respectively. The Company's Italian operation made sales in Italy of $5,600,000, $6,656,000, and $6,804,000 for the years ending May 31, 2001, 2000, and 1999, respectively. Please refer to Note 14 to our audited financial statements for revenue and profit information for each of our last three fiscal years attributable to the different geographic areas in which we do business. Fluctuations in foreign exchange rates, principally with the U.S. dollar versus the Euro, could impact operating results when translations of the Company's subsidiaries' financial statements are made in accordance with current accounting guidelines. For the two-year period ending May 31, 2001 sales declined $4.8 million due to the exchange fluctuation of the Euro. Suppliers The Company obtains raw materials from numerous outside suppliers. The Company is not dependent on any single supplier, except for certain manufacturers of instrumentation, including Lionheart Technologies Inc. for the ABS2000, Dynex Technologies Inc. for the DIAS Plus, and ROSYS Anthos AG for the ROSYS Plato (see Note 13 to the Consolidated Financial Statements), and the joint manufacturer of some of the Company's monoclonal antibody-based products. The Company believes that its business relationship with suppliers is excellent. Management believes that if the supply of instrumentation were interrupted, alternate suppliers could be found, but the commencement of supply could take one to two years. Certain of the Company's products are derived from blood having particular or rare combinations of antibodies or antigens, which are found in a limited number of individuals. The Company to date has not experienced any major difficulty in obtaining sufficient quantities of such blood for use in manufacturing its products, but there can be no assurance that a sufficient supply of such blood will always be available to the Company. Regulation of Business The manufacture and sale of blood banking products is a highly regulated business and is subject to continuing compliance with various federal and state statutes, rules and regulations that generally include licensing, product testing, facilities compliance, product labeling, and consumer disclosure (see Industry). An FDA license is issued for an indefinite period of time, subject to the FDA's right to revoke the license. As part of its overview responsibility, the FDA makes plant and facility inspections on an unannounced basis. Further, a sample of each production lot of many of the Company's products must be submitted to and approved by the FDA prior to its sale or distribution. The Company operates under U.S. Government Establishment License No. 886 granted by the FDA in December 1982 to the Company and U.S. Government Establishment License No. 435, granted by the National Institutes of Health in 1971 to Gamma Biologicals, Inc. On March 9, 2000, Dominion Biologicals Limited received a letter from the FDA detailing deficiencies found in the most recent inspection and providing notice that unless the company demonstrated or achieved compliance with applicable regulations the FDA would begin action to revoke the Establishment License. In reviewing the cost of bringing the facility to current standard and in view that the licensed product generated less than $200,000 in annual revenues the Company, on March 20, 2000, voluntarily surrendered its U.S. Government Establishment License No. 1151 granted by the FDA in May 1992. On June 20, 2000, the FDA revoked said license. On April 13, 2000, Gamma Biologicals, Inc. received a letter from the FDA detailing deficiencies found in the most recent inspection and providing notice that unless the company demonstrated or achieved compliance with applicable regulations the FDA would begin action to revoke the Establishment License. The Company responded to the FDA on May 15, 2000, with a detailed plan to bring the Houston facility to current standard. The FDA advised the Company, on July 14, 2000 that its proposed corrective action plan was satisfactory. During fiscal 2001, the Company funded approximately $500,000 of capital improvements necessary to meet FDA quality requirements and expand manufacturing operations at its Houston facility. As a follow-up the FDA performed a non-voluntary inspection beginning December 27, 2000, and reported only minor observations for management consideration. Immucor, Inc. received a warning letter dated May 3, 2000, detailing deficiencies found during the January 10-25, 2000, FDA inspection of the Norcross facility. The Company responded to the FDA on May 19, 2000 with a detailed plan to bring the facility into compliance. The FDA advised the Company on July 14, 2000, that its proposed corrective action plan was satisfactory. The FDA performed a non-voluntary inspection beginning October 24, 2000, and reported several observations. Management responded with corrective actions to be taken to the FDA observations. In addition to its facilities license, the Company holds several product licenses to manufacture blood grouping reagents. To obtain a product license, the Company must submit the product manufacturing methods to the FDA, perform a clinical trial of the product, and demonstrate to the satisfaction of the FDA that the product meets certain efficacy and safety standards. There can be no assurance that any future product licenses will be obtained by the Company. To sell its products in Germany, Immucor GmbH must license its products with the Paul-Ehrlich-Institute prior to product introduction. In addition, an import license for products purchased outside the European Economic Community is required. To date, Immucor GmbH has been able to obtain licenses needed to effectively promote its products in Germany and throughout Europe. In North America, the Company has hired and retained several employees who are highly experienced in FDA and other regulatory authority compliance, and the Company believes that its manufacturing and on-going quality control procedures conform to the required federal and state rules and regulations. Patents, Trademarks and Royalties Since 1986, the U.S. Patent Office has issued to Immucor six patents pertaining to its solid phase technology. Immucor's solid phase technology, including patent rights, was acquired from five researchers at the Community Blood Center of Greater Kansas City ("Blood Center") pursuant to an agreement entered into on March 11, 1983, and amended in 1985 and 1987. In 1987, one of the researchers joined the Company as Director of Research and Development to continue to develop new products using the solid phase technology. The agreement terminates on August 26, 2006, the date on which the first patent issued on the technology expires. The Company has agreed to pay the Blood Center royalties equal to 4% of the net sales from products utilizing the solid phase technology. For the fiscal years ended May 31, 2001, 2000 and 1999 the Company paid royalties of approximately $435,200, $409,300, and $411,100 under this agreement. See Note 12 to the Consolidated Financial Statements. The Company has registered the trademark "Immucor" and several product names, such as "ABS2000", "ImmuAdd", "Capture", "Capture-P", "MCP", "Capture-R", "Ready-Screen", "Ready-ID", and "Capture-CMV". Dominion Biologicals, Limited has registered the trademark "NOVACLONE". Gamma Biologicals, Inc. has registered the trademark "Gamma" and several product names including "RQC", "ELU-Kit", "Quin", "EGA-Kit", "RiSE", "Tech-Chek", and "SegmentSampler". Through the acquisition of the BCA blood bank division of Biopool International, Inc., the Company acquired several registered trademarks but plans to continue production of only one of the products with the registered trademark "RESt". Competition Competition is based on quality of product, price, the talent of sales forces, ability to furnish a range of existing and new products, customer services and continuity of product supply. During the past several years, the industry has experienced aggressive price competition, particularly among manufacturers that target large hospitals and institutions as key customers. In spite of this competitive environment, the Company has maintained its worldwide sales and increased its domestic reagent market share. Management believes that this is due to the Company's emphasis on product quality, the introduction of new products, specialty products, customer service and training. With the Company's fiscal 1999 purchases of Gamma and the assets of the BCA blood bank division of Biopool International, Inc., the Company believes that Ortho-Clinical Diagnostics, a Johnson & Johnson company, is now its sole competitor with licenses to manufacture a complete line of blood banking reagents in the United States. The Company believes that it became the North American market leader in terms of sales during fiscal 1999. Additional European competitors for blood bank products include Biotest, a German company; and Diamed, a Swiss company. Both of these companies have been established longer than the Company and may have greater financial and other resources than the Company. Diamed has a larger global market share than the Company. However, the Company believes that it is well positioned to compete favorably in the business principally because of the quality and price of its products, the sale of innovative products such as blood bank automation, the Company's Capture(R) products (see Products), continuing research efforts in the area of blood bank automation (see Products Under Development), the experience and expertise of its sales personnel (see Marketing and Distribution) and the expertise of its technical and customer support staff. Employees At July 31, 2001, the Company and its subsidiaries had a total of 419 employees. At July 31, 2001, the Company had 274 full time employees in the U.S., of whom 40 were in sales and marketing, 200 were in manufacturing, research and distribution, and 34 were in administration. At July 31, 2001, in Germany, Portugal, Italy, Spain, Canada, France, and Belgium, the Company had 145 full-time employees, of whom 74 were in sales and marketing, 41 were in research, distribution and administration and 30 were in manufacturing. The Company has experienced a low turnover rate among its technical and sales staff and none of the Company's employees are represented by a union. The Company considers its employee relations to be good. Item 2.--Properties. The Company leases approximately 81,000 square feet in Norcross, Georgia, a suburb of Atlanta, as its executive offices, laboratories and manufacturing facilities. Rent charges for the fiscal year ended May 31, 2001 were $536,000. The term of the lease is for a six-year period ending August 2005 with a right to renew for an additional five years. The Company owns a 41,000 square foot building on a three-acre tract of land in northwest Houston, which is used primarily for manufacturing and shipping. In Germany, the Company leases 1,566 square meters near Frankfurt. Rent expense for the fiscal year ended May 31, 2001 totaled $165,000. The term of the lease in Germany is through April 2009. In Italy rent expense for the fiscal year ended May 31, 2001 totaled $51,000 for 650 square meters. The Company has five separate lease agreements for the facility in Italy with terms expiring between May 2002 and October 2006. In Portugal, the Company leases 120 square meters of office space and rent expense for the fiscal year ended May 31, 2001 was $14,300. In Spain, the Company leases 165 square meters of office space and rent expense for the fiscal year ended May 31, 2001 was $67,000. In the Netherlands, the Company leased 232 square meters of office and warehouse space near Amsterdam. Rent expense for the fiscal year ended May 31, 2001 totaled $30,300. The Netherlands facility was officially closed as of May 31, 2001. In France, the Company leases 60 square meters and the term of the lease is through October 2007. Rent expense for the fiscal year ended May 31, 2001 totaled $13,000. In Belgium, the Company owns land and a 575 square meter building subject to a first lien mortgage. In Canada, the Company owns the facility. The Company believes all of its facilities and lease terms are adequate and suitable for the Company's current and anticipated business for the foreseeable future. Item 3.--Legal Proceedings. No material proceedings are pending against the Company, and no similar proceedings are known by the Company to be contemplated by governmental authorities. Item 4.--Submission of Matters to a Vote of Security Holders. Not applicable. PART II Item 5.--Market for Registrant's Common Equity and Related Stockholder Matters. Immucor's Common Stock trades on The NASDAQ National Market System of The NASDAQ Stock Market under the Symbol: BLUD. The following table sets forth the quarterly high and low sale prices of the Common Stock for the fiscal periods indicated. These prices represent inter-dealer quotations without retail markups, markdowns or commissions and may not represent actual transactions.
High Low ---------------- ---------------- Period June 1 through July 31, 2001 $ 4.800 $ 2.480 Fiscal Year Ended May 31, 2001 First Quarter $8.313 $3.438 Second Quarter 5.438 3.000 Third Quarter 4.406 2.688 Fourth Quarter 4.219 2.200 Fiscal Year Ended May 31, 2000 First Quarter $18.875 $11.500 Second Quarter 16.875 11.000 Third Quarter 15.313 11.250 Fourth Quarter 15.000 7.500
As of July 31, 2001, there were 366 holders of record of the Company's Common Stock. The last reported sales price of the Common Stock on such date was $3.470. Immucor has not declared any cash dividends with respect to its Common Stock. The Company presently intends to continue to retain all earnings in connection with its business. Item 6.--Consolidated Selected Financial Data. (All amounts are in thousands, except per share amounts)
Year Ended May 31, --------------------------------------------------------------------------------- 2001 2000 1999 (2) 1998 1997 (1) Net sales $69,438 $76,541 $59,525 $39,790 $35,653 Cost of sales 38,086 36,408 27,551 18,168 15,055 --------------- -------------- -------------- --------------- -------------- Gross profit 31,352 40,133 31,974 21,622 20,598 --------------- -------------- -------------- --------------- -------------- Operating expenses: Research and development 1,894 2,003 1,294 971 907 Selling, general, and administrative 33,582 30,771 23,812 16,918 16,647 Merger-related expenses - - 559 - - --------------- -------------- -------------- --------------- -------------- Total operating expenses 35,476 32,774 25,665 17,889 17,554 --------------- -------------- -------------- --------------- -------------- (Loss) income from operations (4,124) 7,359 6,309 3,733 3,044 --------------- -------------- -------------- --------------- -------------- Other: Interest income 58 31 313 789 848 Interest expense (3,747) (2,911) (1,416) (616) (486) Other 229 231 202 (27) (264) --------------- -------------- -------------- --------------- -------------- Total other (3,460) (2,649) (901) 146 98 --------------- -------------- -------------- --------------- -------------- (Loss) income before income taxes (7,584) 4,710 5,408 3,879 3,142 Income taxes 465 1,898 1,847 1,810 1,302 --------------- -------------- -------------- --------------- -------------- Net (loss) income $ (8,049) $ 2,812 $ 3,561 $ 2,069 $ 1,840 =============== ============== ============== =============== ============== (Loss) income per share: Basic $(1.10) $0.36 $0.47 $0.26 $0.23 =============== ============== ============== =============== ============== Diluted $(1.10) $0.33 $0.45 $0.25 $0.22 =============== ============== ============== =============== ============== Weighted average shares outstanding Basic 7,286 7,713 7,646 8,095 8,066 =============== ============== ============== =============== ============== Diluted 7,286 8,520 7,959 8,443 8,535 =============== ============== ============== =============== ============== Balance Sheet Data: Working capital $ 20,823 $ 21,868 $ 21,141 $ 32,948 $ 31,868 Total assets 95,813 102,775 99,734 57,544 57,726 Long-term debt, less current portion 39,738 34,815 31,548 8,912 10,666 Retained earnings 20,262 28,311 25,499 21,938 19,869 Shareholders' equity 29,843 40,919 40,053 42,433 41,221
(1) Includes results of Dominion Biologicals Limited since December 11, 1996. (2) Includes results of Gamma Biologicals, Inc. since October 27, 1998, Medichim and Immunochim since March 15, 1999 and BCA, a division of Biopool, since April 30, 1999. Item 7.--Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained anywhere herein that are not statements of historical fact are forward-looking statements as that term is defined in the Private Securities Reform Act of 1995, including, without limitation, statements concerning the Company's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this discussion are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. Specifically, the statements regarding the Company's estimated return to profitability, the effectiveness of the cost reduction plan, the Company's ability to obtain junior capital, and the regulatory costs related to the ABS2000 are forward-looking statements. A number of factors could adversely affect our ability to achieve these things, such as delays in FDA clearance of the ABS2000 safety notification for blood grouping, the decision of customers to defer capital spending, increased competition in the sale of instruments and reagents, our ability to maintain adequate working capital considering recent Company performance, changes in interest rates and general economic conditions. In addition, the strengthening of the dollar versus the Euro would adversely impact reported European results. (a) Liquidity and Capital Resources Net cash provided by operating activities totaled $2,055,000, $6,024,100, and $5,985,100 for the fiscal years 2001, 2000 and 1999, respectively. As of May 31, 2001, the Company's cash and cash equivalents balance totaled $3.1 million. For the year the Company had a net increase in borrowings on long-term debt and capital lease obligations of $5.8 million to fund capital improvements of approximately $500,000 necessary to meet FDA quality requirements, to repay approximately $3.1 million in U.S. and German debt and to repurchase $1.5 million of the Company's common stock. During the third quarter the Company revised its loan agreement with its primary lender, restructuring the loan covenants and debt repayment schedule. Borrowings under the new loan agreement and related lines of credit which totaled $29.4 million, including loan fees of $220,000, were used to retire borrowings under the old loan of $26.0 million and repay $1.2 million on the existing German subsidiary loan. The Company incurred higher borrowing costs to renegotiate the loan. Interest rates have increased to LIBOR plus additional percentage points ranging from 2.0% to 3.75% based on certain calculations as defined in the Loan Agreement that were formerly LIBOR plus 0.5% to 1.4%. In connection with the Company's new agreement with its principal lender, the Company granted its principal lender a security interest in substantially all of the Company's assets in addition to other security. Additionally, the new loan agreement contains certain financial and other covenants which, among other things, limit annual capital expenditures, prevent payment of dividends or the repurchase of stock, limit the incurrence of additional debt, and require the maintenance of certain financial ratios. Under the new agreement Term Loan A (as such loan is described in the loan agreement with our primary lender) for $20,000,000 will be repaid in quarterly installments of increasing amounts through December 2005. The balance of the Canadian term loan ($3,827,333 CDN$) will continue with equal quarterly principal installments plus interest through December 2002. A temporary line of credit of $2,000,000 is due October 2001. Retirement of the temporary line of credit is expected to be funded by operating cash flows. Three lines of credit, one for the US amounting to $7,000,000, one for Canada amounting to $4,035,670 ($6,200,000 CDN$) and one for Germany amounting to $2,335,851 (5,400,000 DM) mature in February 2003. These borrowings bear interest at LIBOR plus additional percentage points ranging from 2.0% to 3.25% based on certain calculations as defined in the Loan Agreement. At the inception of the original acquisition term note, the Company entered into an interest rate swap agreement with an effective date of December 1, 1998, for a notional amount of $15,000,000, also maturing December 2005. This transaction effectively converts Term Loan A's floating rate to a fixed rate of 5.33% on the principal balance of $15,000,000. The fair value of the interest rate swap agreement was $(87,321) at May 31, 2001. At the inception of the original Canadian revolving line of credit, the Company simultaneously entered into an interest rate swap agreement with a notional amount of $2,338,166 ($3,500,000 CDN$). This transaction effectively converts the revolver's floating rate to a fixed rate of 6.6375% on the principal balance of $2,338,166. The fair value of the interest rate swap agreement was $(41,619) at May 31, 2001. Term Loan B for $6,000,000 will be due in full in December 2005. Term Loan B bears interest at LIBOR plus additional percentage points ranging from 2.5% to 3.75% based on certain calculations as defined in the Loan Agreement. As of May 31, 2001 the Company had paid all principal and interest payments under the loan agreement. But as a result of the nonrecurring charges to earnings, recent losses, and other factors, the Company was not in compliance with covenants in its agreement with its principal lender requiring the Company to maintain specified ratios of (i) fixed charge coverage, (ii) funded debt to EBITDA (earnings before interest, taxes, depreciation, and amortization), (iii) leverage, and (iv) interest coverage. The Company's non-compliance with the leverage ratio covenant was also affected by the Company's write-down of goodwill related to its Belgian and French operations--see Management's Discussion and Analysis--Operating Expenses. These covenant violations impacted all of the Company's outstanding term loans and lines-of-credit. On September 6, 2001 the Company successfully completed negotiations with its primary lender to issue a waiver of covenant defaults and to reset the loan covenants for the next four quarters in the Loan Agreement dated February 23, 2001. A waiver fee of $750,000 will be paid in twelve equal monthly payments beginning September 30, 2001. Any remaining balance will be paid upon receipt of junior capital. The interest rate on the revolving lines of credit and Term Loan A will be prime plus 0.50% and the interest rate on Term Loan B will be prime plus 2.00%. The Company is required to meet quarterly and cumulative EBITDA covenants in addition to quarterly senior funded debt to EBITDA ratios. Once the Company's trailing twelve-month Senior Funded Debt to EBITDA reaches 2.50 to 1 or less the Company will revert back to the pricing matrix as stated in the Loan Agreement. An additional requirement of the waiver is that the Company successfully obtain a minimum of $5.0 million in junior capital by December 31, 2001. If the Company is not successful, the lender will earn an additional fee of $450,000 payable in twelve equal monthly installments beginning January 31, 2002. The lender will also fully earn warrants to purchase 750,000 shares of Immucor, Inc. stock issued at the then current market price of the stock. If the Company meets all of its quarterly EBITDA covenants and no other events of default are then occurring, the lender will return a portion of the warrants to the Company based on when the Company raises the junior capital after December 31, 2001. Specifically, 562,500 warrants would be returned if the $5.0 million of junior capital is raised by January 31, 2002, 375,000 warrants would be returned if the $5.0 million of junior capital is raised by February 28, 2002, and 187,500 warrants would be returned if the $5.0 million of junior capital is raised by March 31, 2002. If the junior capital is not received by December 31, 2001, then the revolving lines of credit and Term Note A would be re-priced at prime plus 2.0% and Term Note B would be re-priced at prime plus 4.0% until the junior capital is received. If the junior capital is not received by April 30, 2002, all existing credit facilities would be reset to mature on February 28, 2003. The FDA agreed to lift the ABS2000 safety notification for antibody screening and crossmatch assay in December 2000, but due to delays in the completion of the corrective action plan for blood grouping assay on the ABS 2000, instrument sales have not increased as previously expected. Instead, instrument sales were reduced the entire fiscal year. The Company's corrective action plan for blood grouping has been accepted by the FDA. In connection with the plan, a special 510(k) was submitted to the FDA. The plan called for Company service engineers to complete field corrective action on the ABS2000 and to accumulate clinical data for group and type assays for selected customers. The Company has completed these tasks and has submitted data to the FDA for expedited review. Reduced instrument sales together with costs relating to additional safety procedures and customer concessions related to the FDA safety notification have been a drain on the Company's working capital rather than a source of working capital as in past periods. Before December, the Company supplied product to the ABS2000 customers free of charge to perform their backup tests. The Company expensed approximately $275,000 to cost of sales for these product supplies. Since December, the Company has charged for these products which is expected to improve cash flows for fiscal 2002. See Item I--Business. For fiscal 2001, the Company experienced a $1.65 million, or 2.5%, increase in sales of its core reagent products. The Company expects this trend to continue for fiscal 2002 with the addition of a large purchasing group that will bring an additional $2.5 million in revenues. The Company launched an aggressive reagent price increase in the third quarter that improved revenues by approximately $0.45 million for fiscal 2001, and is expected to continue improving sales by $8.0 million, or 12%, and profits while only adding minor increases to the overall cost of patient care. In fiscal 2002 the Company expects a larger revenue effect as the cycle of contract renewal is completed. These revenue improvements are expected to have a likewise effect on cash flow from operations. However, unforeseen factors may cause revenues to be less than expected. In the fourth quarter, the Company implemented a cost savings plan to generate liquidity and return to profitability in future quarters. The plan is expected to reduce costs over $3.0 million annually through layoffs, the closure of operations in the Netherlands and curtailed spending. Officers of the Company agreed to a salary reduction, which approximated an average of eight percent of their total base compensation. Layoffs are projected to provide approximately $2.0 million in savings, while the remainder of the savings are to be achieved through a reduction in programs and the closure of the Dutch operations. In the third quarter the Company recorded approximately $1.3 million in nonrecurring expenses related to the implementation of the plan. The balance of the fourth quarter realized savings in operating expenses of approximately $180,000, or 2.3% over the third quarter, with the implementation of the plan. In fiscal 1998, the Company authorized a program to repurchase up to 10% of its common stock in the open market. During fiscal 2001, 2000 and 1999, the Company repurchased 184,500, 415,500 and 822,800 shares of its common stock for approximately $1.5, $3.5 and $7.4 million, respectively. The Company is restricted from the repurchase of additional shares under debt covenants of the current loan agreement. On September 1, 1998 the Company acquired the Canadian distribution rights for the Company's complete line of reagents from its Canadian distributor for a total transaction value of approximately $2 million. On October 27, 1998, the Company acquired Gamma Biologicals, Inc. for a cash tender offer of $5.40 per share and certain transaction costs for a total value of $27,859,500. The Company has made severance payments related to the acquisition in the amount of $2,473,000. On March 15, 1999, the Company acquired the distribution rights to market its products in France and Belgium through the purchase of its former distributors, Immunochim s.a.r.l. (France) and Medichim S.A. (Belgium), for a combination of cash and Immucor stock options for a total transaction value of approximately $1.8 million. On April 30, 1999 the Company purchased certain assets of the BCA blood bank division of Biopool International, Inc. for approximately $4.5 million. During fiscal 2001, the Company funded approximately $500,000 of capital improvements necessary to meet FDA quality requirements and expand manufacturing operations at its Houston facility. See Item I, Business--Regulation of Business. Also, the Company increased its investment in the enterprise software system by implementing improvements on June 1, 2001 of $950,000, including $135,000 in capitalized interest. Planned capital expenditures for fiscal 2002 include approximately $1,173,000 for final stage development and introduction of the Galileo fully automated analyzer. The Company expects to launch the Galileo in the European market late in calendar 2001. Additionally, the Company has budgeted $500,000 for manufacturing improvements at its Norcross and Houston facilities during fiscal 2002. The Company's Italian and Spanish subsidiaries had approximately $2,047,000 in borrowings under lines of credit as of May 31, 2001 with an additional $436,000 available. The Belgian subsidiary had $667,000 in line of credit agreements at May 31, 2001 with an additional $297,000 available. There are no additional funds available under the U.S. and German lines of credit and $64,000 available under the Canadian line of credit. The Company has nearly exhausted its borrowing capacity. Alternative sources of financing include the issuance of various forms of equity and high-yield debentures. If additional capital is raised through the issuance of equity or securities convertible into equity, our stockholders may experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of common stock. However, Management expects that the projected savings from the cost savings plan, revenue generated from reagent price increases, cash and cash equivalents and internally generated funds will be sufficient to support operations and planned capital expenditures for the next 12 months. In addition, Management believes that most capital expenditures planned for the next 12 months can be delayed in the event capital resources become inadequate. (b) Results of Operations Comparison of Years Ended May 31, 2001 and May 31, 2000 Net sales Total sales declined to $69.4 million in fiscal 2001 from $76.5 million in fiscal 2000. Instrument sales, $3.5 million compared to $10.4 million recorded for the prior year, reflect delays in customers accepting instruments. During June 2000 isolated performance issues were experienced by certain ABS2000 customers. The Company took a prudent approach and issued a safety notification, requesting customers to confirm ABS2000 results until the cause of the difficulty was corrected. On December 6, 2000, the Company removed the safety alert for the antibody screening and crossmatch assays performed on the ABS2000, however, the safety alert remains in place for blood grouping assays. The Company's corrective action plan for blood grouping was accepted by the FDA and the Company has implemented this plan. These performance issues may result in further delays in customers accepting instruments, which would further adversely impact sales and earnings. For the year, the Company has issued credits reducing sales by $0.76 million for returned instruments and has a reserve of $0.13 million remaining for possible future returns. The Company has an installed instrument backlog of $0.7 million of unbilled revenue awaiting customer acceptance. The strength of the U.S. dollar versus the Euro had the effect of reducing reported European sales by approximately $2.4 million compared to the prior year. Italian and Portuguese revenues were also adversely affected by the interrupted supply of IMAGN 2000 reagents of approximately $1.0 million. See Item 1, -- Business. The revenue fall was mitigated by $2.3 million in revenue improvements. First, the Company experienced a $1.65 million, or 2.5%, increase in sales of its core reagent products. The Company expects this trend to continue for fiscal 2002. Secondly, the Company launched an aggressive reagent price increase in the third quarter that improved revenues by approximately $0.45 million for fiscal 2001, is expected to continue improving sales by $8.0 million, or 12%, and profits while only adding minor increases to the overall cost of patient care. The Company expects to experience a larger revenue effect as the cycle of contract renewal is completed. Last of all, late in the fiscal year the Company renewed important national account purchasing agreements at higher prices and added a new national account with a significant number of hospitals at prices that will bring an additional $2.5 million in revenues. The Company realized $0.2 million in additional sales from the new national account in fiscal 2001. Unforeseen factors may cause revenues to be less than expected. Gross profit Gross profit, as a percentage of sales, totaled 45.2% for the year ended May 31, 2001 versus 52.4% for the year ended May 31, 2000; a decline of 7.2%. Cost of sales increased by $1.7 million as compared to the prior year, despite the decrease in sales. There were additional expenditures of $637,000 incurred to resolve the ABS2000 issue, instrument backlog installation costs of $30,000 incurred in advance of revenue recognition, under-absorption of fixed instrumentation support costs of $924,000, and reagents provided free of charge to customers performing backup testing amounting to $275,000 that all contributed to the negative impact on gross profit. All of these expenditures, except the reagents provided free of charge, likely will continue until the ABS2000 issue is resolved. Additionally, approximately $0.3 million of the increase was caused by higher production costs due to increased FDA regulatory requirements. Also, biological contamination and other isolated manufacturing problems with certain production lots in the third quarter resulted in additional manufacturing costs of approximately $0.2 million. The strength of the U.S. dollar versus the Euro reduced European gross profit by $1.2 million. Gross profit should improve for fiscal year 2002 with the reagent price increase and additional revenue improvements described above. Unforeseen factors may cause gross profit to be less than expected. Operating expenses When compared to the prior year, research and development costs, as a percentage of sales, remained relatively constant. Instrument development initiatives for the Galileo for the European market continue. The project is on track for a launch in late calendar year 2001. The Galileo is designed to fulfill the need in Europe for a high throughput blood serology-testing device with a test menu that includes antibody screening. Selling and marketing expenses decreased over $530,000, as compared to last year. The Company was developing an infrastructure to support an increased level of instrument sales, but in light of the current issues with the ABS2000 and continued customer migration to purchasing groups, the Company reevaluated the focus of the sales and marketing efforts. Of the over $4.0 million in projected cost savings mentioned in Liquidity and Capital Resources, $1.7 million, or nearly 50% of the savings are expected to be seen in this area. The fourth quarter benefited from the initial cost reduction. The remainder of the savings is expected to be realized in fiscal 2002. Distribution expenses as a percentage of sales have increased from 7.8% to 8.2% for fiscal 2001 as compared to the prior year, although costs decreased approximately $300,000, due primarily to a $324,000 decrease in domestic shipping expense. Approximately 40% of the domestic decrease was attributable to volume discounts offered by carriers and reduced overnight shipments. Consolidated shipments of core reagent products continued at or above historical levels. The decrease in sales in the current period was due primarily to the impact of the ABS2000 safety alert and the strength of the U.S. dollar. Neither factor had a significant impact on distribution activities. The major portion of the nonrecurring expenses related to the implementation of the cost savings plan was classified as general and administrative. Of the $1.3 million in nonrecurring expenses, $1.1 million was charged to general and administrative and was primarily related to severance. Amortization expense remained relatively constant with the prior period. Due to continued operating losses and a reorganization at the Company's French and Belgian operations, an impairment in value of the goodwill related to these acquisitions caused a non-cash charge to earnings of approximately $3.1 million. This charge amounts to $0.42 per share of the loss recorded this year and will not recur. Interest expense When compared to the prior year, interest expense increased $836,000. This is the result of increased borrowings and increased borrowing costs on long-term debt and capitalized leases as outlined in Financial Condition and Liquidity. Other income Other income for the current year remained relatively constant as compared to the prior year, and it is comprised primarily of foreign currency transaction gains. Income taxes Income tax expense decreased during the year, as compared to the prior year, due to the operating losses outlined above. Operating losses, for tax purposes, will be used to offset future earnings as the Company returns to profitability. During the fourth quarter, the Company elected to record a valuation allowance in an amount equal to the net deferred tax assets of the Company, amounting to $1.1 million. Effectively, this non-cash allowance reflects the elimination of domestic deferred taxes as a balance sheet asset and will have no impact on Immucor's ability to utilize these amounts to reduce future taxes in profitable periods. Without the valuation allowance, the Company's net loss per share was $0.03, compared with a loss of $0.09 per share in the same period last year. With the valuation allowance, the Company's net loss for the fourth quarter of this year was $0.19 per share. Comparison of Years Ended May 31, 2000 and May 31, 1999 Net Sales Net sales realized a 29% increase from $59,525,000 in fiscal 1999 to $76,541,000 in fiscal 2000. Net sales from the operations of companies acquired during fiscal 1999 accounted for $10,091,000, or 59%, of the sales increase ($8,041,000 from Gamma, and $2,051,000 from Medichim, Immunochim, and BCA). Gamma product sales, on a pro forma basis, realized a 9% increase, or $1,300,000. Blood bank automation products and reagent products used with automation had a 61% increase of approximately $4,000,000 reinforcing the Company's strategy to differentiate itself in the marketplace via instrumentation. The remaining increase in sales of approximately $13,000,000 in traditional reagents represents a 25% increase over fiscal 1999. The Company's European operations increased sales by $2,926,000, of which $1,581,000 was a result of the Company's acquisitions. Revenues of the Company's European affiliates were adversely affected by the strength of the U.S. Dollar versus the Euro, which caused a decrease in reported sales of approximately $2,400,000. Gross profit As a percent of sales revenue, the gross profit margin decreased from 54% to 52%. The decrease was related to the $6,400,000 increase in sales of instruments and the $10,091,000 sales increase related to fiscal 1999 acquisitions. Such sales carry lower gross margins than sales of other proprietary products marketed by the Company. Additionally, the strength of the U.S. Dollar versus the Euro reduced European gross margins by approximately $1,102,400. Operating expenses When compared to the prior year, research and development costs increased $709,000. This increase is due to development work the Company undertook with Stratec Biomedical Systems AG to develop a fully automated instrument designed to allow the Company to effectively compete in the European market. Selling and marketing expenses for the year increased $1,779,000 as compared to the prior fiscal year. Part of the increase was due to fiscal 1999 acquisitions, with Medichim and Immunochim accounting for $534,000. The remainder of the increase is primarily due to higher payroll expense for additional personnel required for the Company's instrumentation strategy, the reorganization of the marketing organization of the German affiliate and increased expenses for the expansion of the Company's Spanish operations. Distribution expenses increased $2,318,000 when compared to last fiscal year of which Gamma accounts for $1,047,000, and Medichim and Immunochim account for $213,000. The remaining increase relates to increased shipping activity. General and administrative expenses increased $2,073,000 over the previous year, with additional personnel expenses to support the growth of the Company through acquisitions and implementation of the new enterprise wide resource planning (ERP) system to give management more timely and extensive information on sales and operations. The Company also experienced increases in operating costs such as rent, utilities and depreciation in connection with the Company's expansion at its U.S. headquarters. Amortization Expense Amortization expense increased $788,000 due to the Company's acquisition of Gamma, BCA, Medichim, Immunochim, and the Canadian distribution rights during fiscal 1999. Interest Income Interest income decreased $282,000 for the year due to lower cash balances as compared to last year caused by the fiscal 1999 acquisitions of Gamma, Medichim and Immunochim, and BCA, which were partially funded with the Company's cash. Interest Expense Interest expense increased from $1,416,000 in fiscal 1999 to $2,911,000 in fiscal 2000 as a result of financing the acquisitions of Gamma, Medichim and Immunochim, and BCA. Other income(expense) The increase in other income of $29,000 as compared to prior year was caused by reduced foreign currency transaction losses recorded in Europe. Income Taxes As a percent of pretax income, the provision for income taxes increased in fiscal 2000, as compared to 1999, from 34% to 40%. The increase was the result of minimum tax charges in Europe. These minimums became relevant during the year as the strength of the U.S. dollar compared to the Euro caused local operating profits to decline. (c) Impact of Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, (FAS 133), Accounting for Derivative Instruments and Hedging Activities. This statement provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. In July 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 137, which deferred the effective date of FAS 133 for one year. In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, (FAS 138), Accounting for Certain Derivative Instruments and Certain Hedging Activities-an amendment to FASB Statement No 133. This statement amended certain provisions of FAS 133. Accordingly, the Company will adopt FAS 133, as amended by FAS 138, effective the first quarter of fiscal 2002. Management believes this statement will not have a material impact on the Company's financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, (SAB 101) Revenue Recognition in Financial Statements. SAB 101 summarizes the SEC Staff's views regarding the recognition and reporting of revenues and certain transactions. The effective date of this pronouncement was the fourth quarter of the fiscal year beginning after December 15, 1999. The Company has evaluated its current revenue recognition policy and found it in compliance with the Staff Accounting Bulletin. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, collectively, the Statements. These Statements drastically change the accounting for business combinations, goodwill and intangible assets. Statement 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Statement 141 also changes the criteria to recognize intangible assets apart from goodwill. Under Statement 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assets that have finite lives will continue to be amortized over their useful lives. The amortization provisions of Statement 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the amortization provisions of Statement 142 are effective upon adoption of Statement 142. Pre-existing goodwill and intangibles will be amortized during the transition period until adoption. Companies are required to adopt Statement 142 in their fiscal year beginning after December 15, 2001. Early adoption is permitted for companies with fiscal years beginning after March 15, 2001. The Company plans to adopt Statement 142 effective June 1, 2002. Goodwill will be tested for impairment at least annually using a two-step process that will start with an estimation of the fair value. The first step will screen for potential impairment, and the second step will measure the amount of impairment, if any. (d) Effects of Inflation on Operations Since the rate of inflation has slowed during the past few years, raw material prices for the Company's products have not materially increased. The Company believes that any increase in personnel-related expenses or material costs would also be experienced by others in the industry. Item 7A.--Quantitative and Qualitative Disclosures About Market Risk Market Risk. The Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates which could adversely impact its results of operations and financial condition. To manage the volatility relating to these typical business exposures, the Company may enter into various derivative transactions when appropriate. The Company does not hold or issue derivative instruments for trading or other speculative purposes. Interest Rate Risk. Interest rate swap agreements are entered into with the objective of managing exposure to interest rate changes. The Company has entered into interest rate swaps to effectively convert a portion of variable rate bank debt into fixed rates. At May 31, 2001 and May 31, 2000, the Company had an interest rate swap agreement in the Company's functional currency, maturing in 2005 with an aggregate notional principal amount of $15 million. At May 31, 2001 and May 31, 2000, the Company had an interest rate swap agreement in Canadian dollars, maturing in December 2001 with an aggregate notional principal amount of $2.4 million. The fair value of the interest rate swap agreements represents the estimated receipts or payments that would be made to terminate the agreements. At May 31, 2001 and May 31, 2000, the Company would have (paid) received $(87,321) and $767,700, respectively, to terminate the agreement in the Company's functional currency. At May 31, 2001 and May 31, 2000, the Company would have (paid) received $(41,619) and $600, respectively, to terminate the Canadian dollar agreement. See Note 4 to the Consolidated Financial Statements. Foreign Currency. Operating income generated outside the United States was 17% in 2001, 43% in 2000 and 54% in 1999. Fluctuations in foreign exchange rates, principally with the U.S. dollar versus the Euro, could impact operating results when translations of the Company's subsidiaries' financial statements are made in accordance with current accounting guidelines. It has not been the Company's practice to actively hedge its foreign subsidiaries' assets or liabilities denominated in local currency except for the occasional purchase of forward exchange contracts. Most of the foreign currency exposures are managed locally by the Company's foreign subsidiaries through the hedging of purchase commitments with the advance purchase of the required non-functional currencies. However, the Company believes that over time weaknesses in one particular currency are offset by strengths in others. In 2001, 2000, and 1999 the Company recorded foreign currency transaction gains (losses) of approximately $(10,000), $152,000, and $202,000, respectively. Item 8.--Financial Statements and Supplementary Data. The following consolidated financial statements of the Company are included under this item: -Report of Independent Auditors -Consolidated Balance Sheets, May 31, 2001 and 2000 -Consolidated Statements of Operations for the Years Ended May 31, 2001, 2000 and 1999 -Consolidated Statements of Shareholders' Equity for the Years Ended May 31, 2001, 2000 and 1999 -Consolidated Statements of Cash Flows for the Years Ended May 31, 2001, 2000 and 1999 -Notes to Consolidated Financial Statements -Consolidated Financial Statement Schedule REPORT OF INDEPENDENT AUDITORS To Board of Directors and Shareholders Immucor, Inc. We have audited the accompanying consolidated balance sheets of Immucor, Inc. (the "Company") as of May 31, 2001 and 2000 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended May 31, 2001. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits 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 consolidated financial position of Immucor, Inc. at May 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Atlanta, Georgia August 29, 2001, except for paragraph 6 of Note 17 as to which the date is September 11, 2001 IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - ---------------------------------------------------------------------------------------------------------------------------------
May 31, ------------------------------------------ ASSETS 2001 2000 CURRENT ASSETS: Cash and cash equivalents $ 3,124,517 $ 3,505,926 Accounts receivable, trade (less allowance for doubtful accounts of $1,244,488 in 2001 and $1,164,582 in 2000) 21,167,490 21,726,062 Loan to officer 395,826 - Inventories 15,668,637 16,813,239 Income taxes receivable 402,243 752,470 Deferred income taxes 631,797 902,409 Prepaid expenses and other 891,356 1,321,363 -------------------- -------------------- Total current assets 42,281,866 45,021,469 LONG-TERM INVESTMENT - At cost 1,000,000 1,000,000 PROPERTY, PLANT AND EQUIPMENT - Net 18,333,952 17,475,882 DEFERRED INCOME TAXES 1,525,936 1,120,238 OTHER ASSETS - Net 2,104,845 2,251,293 DEFERRED LICENSING COSTS - Net 1,652,102 2,044,850 EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED - Net 28,913,981 33,861,147 -------------------- -------------------- $95,812,682 $102,774,879 ==================== ====================
See notes to consolidated financial statements. IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) - ----------------------------------------------------------------------------------------------------------------------------------
May 31, ------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY 2001 2000 CURRENT LIABILITIES: Current portion of borrowings under bank line of credit agreements $ 2,417,121 $ 2,952,307 Current portion of long-term debt 5,563,363 4,277,598 Note payable to related party 349,654 - Current portion of capital lease obligations 768,142 618,240 Accounts payable 8,647,066 9,442,977 Income taxes payable 23,102 74,715 Accrued salaries and wages 1,530,772 1,346,874 Deferred income taxes 98,308 164,243 Other accrued liabilities 3,561,676 4,276,554 --------------------- -------------------- Total current liabilities 22,959,204 23,153,508 BORROWINGS UNDER BANK LINE OF CREDIT AGREEMENTS 3,268,740 8,006,213 LONG-TERM DEBT 34,839,576 25,144,272 CAPITAL LEASE OBLIGATIONS 1,629,705 1,664,165 DEFERRED INCOME TAXES 3,119,402 3,062,331 OTHER LIABILITIES 152,588 825,592 SHAREHOLDERS' EQUITY: Common stock - authorized 45,000,000 shares and 30,000,000 shares at May 31, 2001 and May 31, 2000, respectively, $0.10 par value; issued and outstanding 7,277,617 at May 31, 2001 and 7,462,118 at May 31, 2000 727,762 746,212 Additional paid-in capital 15,439,889 16,848,804 Retained earnings 20,261,628 28,310,741 Accumulated other comprehensive loss (6,585,812) (4,986,959) --------------------- -------------------- Total shareholders' equity 29,843,467 40,918,798 --------------------- -------------------- $ 95,812,682 $ 102,774,879 ===================== ====================
See notes to consolidated financial statements. IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS - ----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31, ----------------------------------------------------------------- 2001 2000 1999 NET SALES $ 69,438,114 $ 76,540,476 $ 59,524,539 COST OF SALES 38,086,270 36,407,764 27,550,548 -------------------- -------------------- --------------------- GROSS PROFIT 31,351,844 40,132,712 31,973,991 OPERATING EXPENSES: Research and development 1,893,580 2,002,597 1,293,576 Selling and marketing 11,854,242 12,391,837 10,612,516 Distribution 5,659,707 5,966,178 3,648,456 General and administrative 11,107,861 10,533,826 8,460,525 Merger-related expenses - - 558,973 Loss on impairment of goodwill 3,062,519 - - Amortization expense 1,897,582 1,879,049 1,091,278 -------------------- -------------------- --------------------- 35,475,491 32,773,487 25,665,324 -------------------- -------------------- --------------------- (LOSS) INCOME FROM OPERATIONS (4,123,647) 7,359,225 6,308,667 OTHER: Interest income 57,530 30,801 313,219 Interest expense (3,746,928) (2,911,029) (1,416,179) Other, net 229,383 230,658 202,093 -------------------- -------------------- --------------------- (3,460,015) (2,649,570) (900,867) -------------------- -------------------- --------------------- (LOSS) INCOME BEFORE INCOME TAXES (7,583,662) 4,709,655 5,407,800 INCOME TAXES 465,451 1,897,635 1,846,776 -------------------- -------------------- --------------------- NET (LOSS) INCOME $ (8,049,113) $ 2,812,020 $ 3,561,024 ==================== ==================== ===================== (LOSS) INCOME PER SHARE Basic $(1.10) $0.36 $0.47 ==================== ==================== ===================== Diluted $(1.10) $0.33 $0.45 ==================== ==================== =====================
See notes to consolidated financial statements. IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -----------------------------------------------------------------------------------------------------------------------------------
Accumulated Additional Other Total Common Stock Paid-In Retained Comprehensive Shareholders' ------------------------- Shares Amount Capital Earnings Loss Equity --------------------------------------------------------------------------------------- BALANCE, JUNE 1, 1998 8,078,811 $ 807,881 $ 22,079,468 $ 21,937,697 $ (2,392,496) $ 42,432,550 Exercise of stock options and warrants 232,400 23,240 1,661,232 - - 1,684,472 Tax benefits related to stock options and other - - 188,855 - - 188,855 Issuance of warrants - - 310,000 - - 310,000 Stock repurchase (822,800) (82,280) (7,293,670) - - (7,375,950) Comprehensive income: Foreign currency translation adjustment - - - - (748,284) (748,284) Net income - - - 3,561,024 - 3,561,024 --------------------------------------------------------------------------------------- Total comprehensive income - - - 3,561,024 (748,284) 2,812,740 --------------------------------------------------------------------------------------- BALANCE, MAY 31, 1999 7,488,411 748,841 16,945,885 25,498,721 (3,140,780) 40,052,667 Exercise of stock options and warrants 389,207 38,921 2,947,602 - - 2,986,523 Tax benefits related to stock options and other - - 377,375 - - 377,375 Stock repurchase (415,500) (41,550) (3,422,058) - - (3,463,608) Comprehensive income: Foreign currency translation adjustment - - - - (1,846,179) (1,846,179) Net income - - - 2,812,020 - 2,812,020 --------------------------------------------------------------------------------------- Total comprehensive income - - - 2,812,020 (1,846,179) 965,841 --------------------------------------------------------------------------------------- BALANCE, MAY 31, 2000 7,462,118 746,212 16,848,804 28,310,741 (4,986,959) 40,918,798 Tax benefits related to stock options and other - - 57,348 - - 57,348 Stock repurchase (184,501) (18,450) (1,466,263) - - (1,484,713) Comprehensive income: Foreign currency translation adjustment - - - - (1,598,853) (1,598,853) Net loss - - - (8,049,113) - (8,049,113) --------------------------------------------------------------------------------------- Total comprehensive loss - - - (8,049,113) (1,598,853) (9,647,966) --------------------------------------------------------------------------------------- BALANCE, MAY 31, 2001 7,277,617 $ 727,762 $ 15,439,889 $ 20,261,628 $ (6,585,812) $ 29,843,467 =======================================================================================
See notes to consolidated financial statements IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - ---------------------------------------------------------------------------------------------------------------------------
Year Ended May 31, ----------------------------------------------------- 2001 2000 1999 OPERATING ACTIVITIES: Net (loss) income $(8,049,113) $2,812,020 $3,561,024 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization of property and equipment 4,228,545 2,936,615 2,215,848 Amortization of other assets and excess of cost over net tangible assets acquired 1,897,582 1,879,049 1,091,278 Impairment of goodwill 3,062,519 - - Deferred tax provision (143,950) 79,110 36,190 Changes in operating assets and liabilities, net of effects of business acquisitions: Accounts receivable, trade 558,572 (227,173) (2,382,232) Accounts receivable from former officer and director - 140,946 554,484 Loan to officer (395,826) - - Income taxes 358,633 370,222 (34,608) Inventories 1,144,602 (1,228,317) (2,749,627) Other current assets 528,254 (231,492) (767,083) Accounts payable (795,911) (675,764) 2,383,200 Other current liabilities (336,232) 91,979 1,887,806 ---------------- ----------------- ---------------- Total adjustments 10,104,117 3,212,081 2,424,111 ---------------- ----------------- ---------------- Cash provided by operating activities 2,055,004 6,024,101 5,985,135 INVESTING ACTIVITIES: Purchases of / deposits on property and equipment (5,522,107) (3,418,430) (3,129,404) Cash paid for acquisition, net of cash acquired - (523,682) (32,571,040) Acquisition-related severance - (85,960) (2,387,449) Increase in other assets - (258,972) (2,709,599) ---------------- ----------------- ---------------- Cash used in investing activities $(5,522,107) $(4,287,044) $(40,797,492)
See notes to consolidated financial statements. IMMUCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) - ---------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31, ------------------------------------------------------------- 2001 2000 1999 FINANCING ACTIVITIES: Borrowings net of repayments under line of credit agreements $ 2,058,297 $ 555,068 $ 5,379,103 Proceeds from issuance of long term debt 33,786,131 7,474,196 24,131,114 Repayment of long-term debt and capital lease obligations (30,349,314) (5,362,814) (1,737,409) Borrowings (repayments) of long-term debt to related party-net 349,654 (1,633,947) - Exercise of stock options - 2,986,523 1,684,472 Stock repurchases (1,484,713) (3,463,608) (7,375,950) ------------------- ------------------- ------------------- Cash provided by financing activities 4,360,055 555,418 22,081,330 EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,274,361) (1,580,141) (291,598) ------------------- ------------------- ------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (381,409) 712,334 (13,022,625) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,505,926 2,793,592 15,816,217 ------------------- ------------------- ------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,124,517 $ 3,505,926 $ 2,793,592 =================== =================== =================== Noncash investing and financing activities: Capital lease obligations $ 710,129 $ 1,644,737 $ 435,400 Fair value of assets acquired - (1,019,453) 25,463,127 Cost in excess of assets acquired - 1,576,920 23,207,232 Liabilities assumed - (33,785) (15,789,319) Notes and warrants / options issued for assets acquired - - (310,000) ------------------- ------------------- ------------------- Net cash paid for acquisition, net of cash acquired $ - $ 523,682 $ 32,571,040 =================== =================== =================== CASH PAID DURING THE YEAR FOR: Interest, net of amounts capitalized of $135,000 in 2001 $ 3,981,977 $ 2,886,256 $ 1,270,147 Income taxes 381,133 1,225,635 1,459,500
See notes to consolidated financial statements. IMMUCOR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business - The Company's principal business activities are the development, manufacture and marketing of immunological diagnostic medical products. The Company operates facilities in North America and Europe. Consolidation Policy - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications - Certain prior year balances have been reclassified to conform to the current year presentation. Concentration of Credit Risk - At May 31, 2001 and 2000 the Company's entire cash balance of $3,124,517 and $3,505,926, respectively, was on deposit with high quality financial institutions, located primarily in the U.S. The Company obtains raw materials from numerous outside suppliers. The Company is not dependent on any single supplier other than certain instrumentation manufacturers (see Note 13) and the joint manufacturer of some of the Company's monoclonal antibody-based products. The Company believes that its business relationships with suppliers are excellent. Certain of the Company's products are derived from blood having particular or rare combinations of antibodies or antigens that are found in a limited number of individuals. The Company to date has not experienced any major difficulty in obtaining sufficient quantities of such blood for use in manufacturing its products, but there can be no assurance that the Company will always have available to it a sufficient supply of such blood. The Company generally does not require collateral from its customers. Cash and Cash Equivalents - The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents. Inventories - Inventories are stated at the lower of first-in, first-out cost or market. Cost includes material, labor and manufacturing overhead. Long-Term Investment - The long-term investment, representing a 3.4% Common Stock investment in Lionheart Technologies, Inc. acquired in April 1992, is accounted for using the cost method of accounting. Bio-Tek Instruments, Inc. (see Note 13) is a wholly owned subsidiary of Lionheart Technologies, Inc. Property, Plant and Equipment - Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated lives of the related assets ranging from three to 30 years. Interest Rate Swap - The Company uses interest rate swaps to hedge interest rate risk associated with its borrowings. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. The Company has established strict counterparty credit guidelines and only enters into transactions with financial institutions of investment grade or better. As a result, the Company estimates the risk of counterparty default to be minimal. Fair Value of Financial Instruments - The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, long-term investment and accounts payable approximate their fair values. The fair values of the Company's long-term debt approximate the reported amounts in the accompanying consolidated balance sheets as their interest rates approximate the May 31, 2001 and 2000 market rates for similar debt instruments. Prior to the adoption of Statement of Financial Accounting Standards No. 133, (SFAS 133), the fair value of the interest rate swaps are not recognized in the financial statements. Intangible Assets Deferred Licensing Costs - Deferred licensing costs primarily consist of distribution rights for the Company's complete line of reagents purchased from its Canadian distributor, Immucor Canada, Inc., on September 1, 1998, which are being amortized using the straight-line method over ten years. The remaining balance is attributed to license fees for cell lines acquired in the purchase of Gamma Biologicals, Inc. Once a product is developed from a cell line, the related license fee is amortized over the term of the respective agreement, generally five years. Accumulated amortization related to deferred licensing costs at May 31, 2001 and 2000 was $690,900 and $445,600, respectively. Excess of Cost Over Net Assets Acquired - Excess of cost over net assets acquired comprises the cost of purchased businesses in excess of values assigned to net tangible assets received, and is being amortized using the straight-line method over 20 to 30 years. Accumulated amortization at May 31, 2001 and 2000 was $5,444,000 and $4,471,300 respectively. The Company evaluates long-lived assets for impairment when events and circumstances indicate that the assets might be impaired and records an impairment loss if the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The impairment loss recognized is equal to the difference between the discounted cash flows and the carrying amount of the assets. In February 2001, due to continued operating losses and a reorganization of the Company's French and Belgian operations, an impairment in value of the goodwill related to these acquisitions caused a non-cash, nonrecurring impact on earnings of approximately $3.1 million. The Company believes that the carrying value of the remaining recorded long-lived assets is not impaired. Foreign Currency Translation - The financial statements of foreign subsidiaries have been translated into U.S. dollars in accordance with FASB Statement No. 52, Foreign Currency Translation. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet dates. Income statement amounts have been translated using the average exchange rates for each year. The gains and losses resulting from the changes in exchange rates from year to year have been reported separately as a component of comprehensive income. The effect of foreign currency transaction gains and losses has been recorded in the accompanying statements of operations. Revenue Recognition - Revenue from the sale of the Company's reagents is recognized upon shipment. Revenue from the sale of the Company's medical instruments is recognized upon shipment and completion of contract obligations relating to training and/or installation based on terms of the related agreements. Revenue from rentals of the Company's medical instruments is recognized over the life of the rental agreement. Shipping and Handling Revenues and Costs - The amounts charged customers for shipping and handling of orders are classified as revenue and reported in the statement of operations as net sales as invoiced. The cost of handling customer orders and the cost of shipments are reported in the operating cost section of the statement of operations as distribution expense as incurred. The cost of handling customer orders and the cost of shipments were $5,659,000, $5,966,000 and $3,648,000 for the years ended May 31, 2001, 2000 and 1999, respectively. Stock Based Compensation - The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of the grant. The Company accounts for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and accordingly does not recognize compensation expense for the stock option grants. As required by FASB Statement No. 123, Accounting for Stock-Based Compensation, the Company presents supplemental information disclosing pro forma net income and net income per common share as if the Company had recognized compensation expense on stock options granted subsequent to May 31, 1995 under the fair value method of that statement (see Note 8). Impact of Recently Issued Accounting Standards - In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, (FAS 133), Accounting for Derivative Instruments and Hedging Activities. This statement provides a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities. In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 138, (FAS 138), Accounting for Certain Derivative Instruments and Certain Hedging Activities-an Amendment to FASB Statement No 133. This statement amended certain provisions of FAS 133. Accordingly, the Company will adopt FAS 133, as amended by FAS 138, effective the first quarter of fiscal 2002. Management believes this statement will not have a material impact on the Company's financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, (SAB 101) Revenue Recognition in Financial Statements. SAB 101 summarized the SEC Staff's views regarding the recognition and reporting of revenues and certain transactions. The effective date of this pronouncement was the fourth quarter of the fiscal year beginning December 15, 1999. The Company has evaluated its current revenue recognition policy and found it in compliance with SAB 101. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, collectively, the Statements. These Statements drastically change the accounting for business combinations, goodwill and intangible assets. Statement 141 eliminates the pooling-of-interests method of accounting for business combinations except for qualifying business combinations that were initiated prior to July 1, 2001. Statement 141 also changes the criteria to recognize intangible assets apart from goodwill. Under Statement 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Separable intangible assets that have finite lives will continue to be amortized over their useful lives. The amortization provisions of Statement 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the amortization provisions of Statement 142 are affective upon adoption of Statement 142. Pre-existing goodwill and intangibles will be amortized during the transition period until adoption. Companies are required to adopt Statement 142 in their fiscal year beginning after December 15, 2001. Early adoption is permitted for companies with fiscal years beginning after March 15, 2001. The Company plans to adopt Statement 142 effective June 1, 2002. 2. BALANCE SHEET DETAIL
May 31, ----------------------------------- 2001 2000 Inventories: Raw materials and supplies $ 5,524,301 $ 4,983,303 Work in process 2,095,363 1,603,117 Finished goods and goods purchased for resale 8,048,973 10,226,819 ---------------- ---------------- $ 15,668,637 $ 16,813,239 ================ ================ Property, Plant and Equipment: Land $ 344,447 $ 347,579 Buildings and improvements 6,345,663 5,822,161 Leasehold improvements 935,159 951,420 Furniture and fixtures 1,537,346 1,453,071 Machinery and equipment 19,228,774 16,622,631 ---------------- ---------------- 28,391,389 25,196,862 Less accumulated depreciation (10,057,437) (7,720,980) ---------------- ---------------- Property and equipment - net $ 18,333,952 $ 17,475,882 ================ ================
3. ACQUISITIONS Gamma Biologicals, Inc. Pursuant to a definitive merger agreement dated September 21, 1998, the Company, through a newly formed subsidiary ("Gamma Acquisition Corporation"), acquired on October 27, 1998 94.27% of the issued and outstanding shares of Gamma Biologicals, Inc. ("Gamma"). The Company purchased the shares from Gamma shareholders ("Shareholders") for a cash tender offer of $5.40 per share for a total transaction value of $24,831,841 plus acquisition costs of $3,027,615 for an aggregate of $27,859,456 ("Purchase Price"). According to the depository for the offer, 4,361,110 shares were tendered pursuant to the offer and Immucor purchased all shares tendered. On October 30, 1998 all remaining shares were acquired by merging Gamma Acquisition Corporation with and into Gamma which became a majority owned subsidiary of Immucor. As a result of the merger, the 5.73% of the shares that had not been tendered were cancelled and converted into a right to receive $5.40 per share. As of May 31, 2001 Immucor had purchased or satisfied its obligation to pay $5.40 per share with respect to a total of 4,603,112 (99.5%) of the issued and outstanding shares of Gamma. The total transaction value of $24,831,841 was satisfied with $5,000,000 paid in cash and $19,831,841 funded by a $20,000,000 loan from the Company's primary U.S. bank to Gamma Acquisition Corporation. Included in the liabilities assumed was an accrual for severance payments of $2,474,000 to Gamma employees of which $2,387,000 was paid prior to May 31, 1999, with the remainder paid during the year ended May 31, 2000. During the years ended May 31, 1999 and 2000, the Company paid out $2,516,875 and $510,740 in acquisition costs, respectively. Located in Houston, Texas, Gamma manufactured and sold a wide variety of in-vitro diagnostic reagents to blood donation centers, transfusion departments of hospitals, medical laboratories and research institutions through a direct sales force and distributor network. The Company accounted for the transaction as a purchase business combination. The results of the operations of Gamma since October 27, 1998 are included in the Consolidated Statements of Operations. The excess of costs over net assets acquired, including goodwill and customer lists, is being amortized using the straight-line method over the related assets' useful life ranging from 20, for the customer lists, to 30 years.
The final purchase price allocation is as follows: Current assets $ 9,773,473 Property, plant and equipment, net 7,535,909 Other assets 2,584,253 Excess of costs over net assets acquired 18,798,691 Less: Liabilities assumed (10,832,870) ----------------- $27,859,456 =================
Medichim, S.A. and Immunochim, s.a.r.l. On March 15, 1999, the Company, through a newly formed subsidiary ("Immucor Acquisitions Inc., S.A."), acquired the available issued and outstanding shares of Immunochim s.a.r.l. (France) ("Immunochim") and Medichim S.A. (Belgium) ("Medichim") for a cash payment of $990,000, Company stock options valued at $310,000, acquisition costs of $105,719 and an incentive earnout of up to $501,000, which was to be earned over the course of three years from the acquisition date based on attaining certain operating profit goals, as defined. Amounts earned, if any, would have been reflected as compensation expense in the Statement of Operations. In light of the continued operating losses being generated, it is unlikely that any of the incentive will be earned. In conjunction with the acquisition, a non-compete agreement and intellectual property rights were purchased for $100,000 and $257,148, respectively. Such amounts are being amortized over the terms of the related agreements and are classified as other assets. The acquisition was accounted for as a purchase business combination. The results of the operations of Medichim and Immunochim since March 15, 1999 are included in the Consolidated Statements of Operations. Excess of costs over net assets acquired was amortized using the straight-line method over 25 years until February 2001. At that time, due to continued operating losses and a reorganization of the French and Belgian operations, an impairment was recorded writing off the value of the goodwill for these acquisitions.
The final purchase price allocation was as follows: Fair value of assets acquired $ 3,695,751 Excess of costs over net assets acquired 2,738,316 Less: Liabilities assumed (4,671,200) ----------------- $ 1,762,867 =================
BCA On April 30, 1999, the Company acquired certain assets of the BCA blood bank division of Biopool International, Inc. ("BCA") for a total purchase price of approximately $4.5 million. During the years ended May 31, 1999 and 2000, the Company paid out $6,621 and $12,942 in acquisition costs, respectively. The acquisition was accounted for as a purchase business combination. The results of the operations of BCA since April 30, 1999 are included in the Consolidated Statements of Operations. Excess of costs over net assets acquired is being amortized using the straight-line method over 20 years.
The final purchase price allocation is as follows: Fair value of assets acquired $ 1,543,452 Excess of costs over net assets acquired 3,247,146 Less: Liabilities assumed (319,034) ----------------- $ 4,471,564 =================
The pro forma unaudited results of operations for the year ended May 31, 1999, assuming consummation of all of the above purchases as of June 1, 1998, including financing from the proceeds of a bank loan and ignoring any cost-saving initiatives are presented below:
Year Ended May 31, 1999 ----------------------- Net sales $75,214,000 Net income 2,484,000 Net income per common share: Basic $0.32 Diluted $0.31
4. BANK LINE OF CREDIT AGREEMENTS AND DEBT OBLIGATIONS
May 31, ----------------------------------- 2001 2000 Term Loan A (Acquisition term note) ($15,000,000 at 5.33% and remaining balance at rates ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing December 2005) $ 19,625,000 $ 18,125,000 Term Loan B (Additional term loan) (interest rate ranging from LIBOR rate plus 6.25% to LIBOR rate plus 7.5% maturing December 2005) 6,000,000 4,250,000 Temporary line of credit (Fourth additional term loan) (interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing October 2001) 1,934,921 3,200,000 Revolving Line of credit (Master note) (interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 7,000,000 5,000,000 CAD Term Loan (Third additional term loan) (interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 2,176,741 3,515,655 Revolving line of credit - Canadian subsidiary (denominated in Canadian dollars with interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 3,971,782 3,053,523 Line of credit - German subsidiary (denominated in Deutsche Marks at an interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 2,335,851 - Lines of credit - Italian subsidiary (denominated in Lira with interest rates ranging from 5.650% to 8.625% maturing in fiscal 2002) 659,252 369,785 Line of credit - Spanish subsidiary (denominated in Pesetas with an interest rate of 5.8% maturing in fiscal 2002) 1,388,124 1,313,268 Note payable - German subsidiary (denominated in Deutsche Marks at an interest rate of 4.14% maturing September 2000) - 719,217 Mortgage note payable - Belgian subsidiary (denominated in Belgian Francs at an interest rate of 6.25% maturing November 2007) 242,794 247,133 Notes payable - Belgian subsidiary (denominated in Belgian Francs at interest rates ranging from 5.03% to 10.29%) 68,534 36,570 Line of credit - Belgian subsidiary (denominated in Belgian Francs with interest rates ranging from 5.5% to 6.0% maturing in November 2007) 369,745 502,727 Note Payable - Biotek (interest rate 8.5% maturing January 2002) 349,654 - Notes payable - Various vendors (interest rates ranging from 8.0% to 8.5% with maturity dates ranging from August 2001 to November 2001) 316,056 - Mortgage note payable (interest rate of 10.50%) - 47,512 ----------------- ---------------- 46,438,454 40,380,390 Less current portion (8,330,138) (7,229,905) ----------------- ---------------- $ 38,108,316 $ 33,150,485 ================= ================
In connection with the acquisition of Gamma in October 1998, and the subsequent acquisitions of Medichim, Immunochim and BCA, the Company entered into a bank loan agreement (the "Loan Agreement") with the Company's primary U.S. bank that included an acquisition term note of $20,000,000 maturing in December 2005, an additional term loan of $4,500,000 maturing in March 2004 and a line of credit of $2,000,000 maturing in October 2001. On April 30, 1999 the line of credit for $2,000,000 was canceled and a new line of credit was executed for $5,000,000. These borrowings bore interest rates at LIBOR plus additional percentage points ranging from .5% to 1.4% based on certain calculations as defined in the Loan Agreement. Debt issue costs of $56,250 for advisory fees were paid to an investment banker in conjunction with the acquisition of Gamma. These debt issue costs have been deferred and are being amortized over the life of the Loan Agreement. In connection with the acquisition of Dominion Biologicals Limited in December 1996, the Company entered into a $4,566,200 ($6,200,000 CDN$) long-term revolving line of credit facility with the Company's primary U.S. bank that bore interest charges at LIBOR plus .4375%. The interest rate on the remaining principal balance of $715,357 ($1,000,000 CDN$) was LIBOR plus .4375%, and was adjusted every 90 days. The Company also issued subordinated promissory notes to the former shareholders of Dominion bearing interest at 6% payable semiannually with principal due in December 1999. On December 17, 1999 the Company entered into an additional term loan of $3,884,800 ($5,741,000 CDN$) to retire the Canadian subordinated promissory notes. Principal and interest payments were due quarterly commencing March 1, 2000 and continuing through September 1, 2002. On April 20, 2000 the Company entered into an additional term loan of $5,000,000 to finance the repurchase of 415,500 shares common stock. Principal and interest payments were due quarterly commencing September 1, 2001 and continuing through June 1, 2006. In February 2001, the Company revised its loan agreement covering the above-mentioned debt with its primary lender, restructuring the loan covenants and debt repayment schedule. Borrowings under the new loan agreement and related lines of credit totaled $29.4 million, including loan fees of $220,000, retired borrowings under the old loan of $26.0 million and repayment of $1.2 million on the existing German subsidiary loan. Under the new agreement Term Loan A for $20,000,000 will be repaid in quarterly installments of increasing amounts through December 2005. The balance of the Canadian term loan ($3,827,333 CDN$) will continue with equal quarterly principal installments plus interest through December 2002. A temporary line of credit of $2,000,000 is due October 2001. Three lines of credit, one for the U.S. amounting to $7,000,000, one for Canada amounting to $4,035,670 ($6,200,000 CDN$) and one for Germany amounting to $2,335,851 (5,400,000 DM) mature in February 2003. These borrowings bear interest at LIBOR plus additional percentage points ranging from 2.0% to 3.25% based on certain calculations as defined in the Loan Agreement. At the inception of the original acquisition term note, the Company entered into an interest rate swap agreement with an effective date of December 1, 1998, for a notional amount of $15,000,000, also maturing December 2005. This transaction effectively converts Term Loan A's floating rate to a fixed rate of 5.33% on the principal balance of $15,000,000. The fair value of the interest rate swap agreement was $(87,321) at May 31, 2001. At the inception of the original Canadian revolving line of credit, the Company simultaneously entered into an interest rate swap agreement with a notional amount of $2,338,166 ($3,500,000 CDN$). This transaction effectively converts the revolver's floating rate to a fixed rate of 6.6375% on the principal balance of $2,338,166. The fair value of the interest rate swap agreement was $(41,619) at May 31, 2001. Term Loan B for $6,000,000 will be due in full in December 2005. Term Loan B bears interest at LIBOR plus additional percentage points ranging from 2.5% to 3.75% based on certain calculations as defined in the Loan Agreement. There are no additional funds available under the U.S. and German lines of credit and $64,000 available under the Canadian line of credit. In connection with the Company's new agreement with its principal lender, the Company granted its principal lender a security interest in substantially all of the Company's assets in addition to other security. Additionally, the new loan agreement contains certain financial and other covenants which, among other things, limit annual capital expenditures, prevent payment of dividends or the repurchase of stock, limit the incurrence of additional debt, and require the maintenance of certain financial ratios. The Dominion revolving line of credit and German line of credit are guaranteed by the Company. The interest rate swap agreements with the U.S. bank are also guaranteed by the Company. On September 6, 2001 the Company reached a new agreement with its principal lender that substantially affects the terms of such agreement. See Note 17, Subsequent Events. The Company's Italian subsidiary has $983,000 in line of credit agreements denominated in Lira with three Italian banks bearing interest between 5.650% to 8.625%. At May 31, 2001, the Company had $324,000 available under these line of credit agreements. The Company has an additional $1,500,000 line of credit agreement for the Spanish subsidiary denominated in Pesetas with a Spanish bank bearing interest at 5.8%. At May 31, 2001, the Company had $112,000 available under the Spanish line of credit agreement. In March 1995, the Company refinanced its Deutsche Mark denominated debt through the issuance of a note payable to the Company's primary U.S. bank in Deutsche Marks with interest of LIBOR plus .375%. At the same time, the Company entered into an interest rate swap agreement with the bank that expired September 1998, which effectively converted the note payable's floating rate to a fixed rate of 4.14% per annum up to September 1998. The note was retired in September 2000. Upon the acquisition of Medichim, the Company assumed a mortgage note that is collateralized by a first lien on Medichim's land and building. The approximate carrying value of the land and building is $397,000. Medichim has various notes payable with a local bank bearing interest between 5.03% and 10.29%. Medichim also has $666,667 in line of credit agreements denominated in Belgian Francs with one Belgian bank bearing interest between 5.5% and 6.0%. Such lines are guaranteed by the Company. At May 31, 2001, the Company had $296,922 available under these line of credit agreements. The Company entered into various notes payable totaling $666,000 as a means of financing certain obligations in fiscal year 2001. This includes a note payable to Bio-tek Instruments, Inc., a related party. (See Note 13) Interest rates range from 8.0% to 8.5% and maturity dates range from August 2001 to January 2002. When the Company acquired Gamma, it assumed a mortgage note that was collateralized by a first lien on Gamma Biologicals' land and building located in northwest Houston. The mortgage note matured in November 2000 and bore interest at the bank's base rate, but not less than 7% nor more than 13%. Aggregate maturities of all long-term obligations for each of the next five years and thereafter are as follows:
Year Ending May 31: 2002 $ 8,330,138 2003 18,186,046 2004 5,057,838 2005 5,030,124 2006 9,778,976 Thereafter 55,332 ----------------- $ 46,438,454 =================
On September 6, 2001 the Company reached a new agreement with its principal lender which could affect the maturity dates of the Company's long term obligations. See Note 17, Subsequent Events.
5. CAPITAL LEASE OBLIGATIONS May 31, ----------------------------------- 2001 2000 ----------------- ---------------- Manufacturing equipment, bearing interest at rates ranging from 5.46% to 9.89% and with maturities ranging from April 2003 to September 2005. $ 824,414 $ 985,666 Enterprise resource planning (ERP) computer system and related equipment, bearing interest at rates ranging from 5.52% to 8.23% and with maturities ranging from June 2001 to December 2005. 1,035,049 782,227 Office furniture and build-outs for facility expansion, bearing interest at rates ranging from 5.6% to 7.63% and with maturities ranging from January 2003 to December 2004. 253,602 357,351 Office equipment, bearing interest at rates ranging from 4.54% to 10.5% and with maturities ranging from December 2003 to December 2005. 284,782 157,161 ----------------- ---------------- 2,397,847 2,282,405 Less current portion (768,142) (618,240) ----------------- ---------------- $ 1,629,705 $ 1,664,165 ================= ================
All of the above capital lease obligations are collateralized by the indicated assets. Amortization on related assets is included in depreciation expense. Aggregate maturities of capital leases for each of the next five years and thereafter are as follows:
Year Ending May 31: 2002 $ 768,142 2003 742,553 2004 455,977 2005 326,092 2006 105,083 ----------------- $ 2,397,847 =================
Total imputed interest to be paid out under existing capital leases as of May 31, 2001 is $295,693. 6. LOANS TO OFFICERS AND DIRECTORS On June 6, 2000, Edward L. Gallup, President and CEO of Immucor, Inc. entered into a loan agreement with Immucor, Inc. to borrow up to $400,000 in order to meet margin calls related to loans made by brokerage companies. The Company acknowledges that certain benefits would accrue to Immucor, Inc. and its shareholders if such margin calls were satisfied by some means other than having those shares sold by the broker. The interest rate on the loan is LIBOR plus 1%, which was the Company's current borrowing rate. As of May 31, 2001, the amount owed to Immucor, Inc. is $396,000 and is included in Loan to officer on the Balance Sheet. 7. COMMON STOCK At May 31, 2001, the following shares of Common Stock are reserved for future issuance:
Common stock options - directors and employees 1,531,875 Common stock warrants - other 878,417 --------- 2,410,292
In connection with the acquisition of Medichim, S.A. and Immunochim, s.a.r.l., the Company issued to the seller an option to acquire, in whole or in part, 100,000 shares of Immucor stock at $8.938 per share. The 100,000 options became exercisable at the rate of 33% per year commencing March 2001, expire in fiscal year 2010 and were valued at $310,000 at the date of the acquisition. As part of the acquisition of Dominion Biologicals Limited, the Company issued to the sellers five and ten year warrants to acquire, in whole or in part, 478,417 and 150,000 shares of Immucor stock at $12.00 and $11.98 per share, respectively. These warrants became exercisable one year after the issuance date, with the five-year warrants expiring in December 2001 and the ten-year warrants expiring in 2006. Immucor has submitted the required registration to the Securities and Exchange Commission for approval of the resale of the shares covered by both sets of warrants. In connection with other prior years' business acquisitions, the Company issued to the sellers warrants to acquire, in whole or in part, 150,000 and 375,000 shares of the Company's Common Stock at $26.95 and $7.75 per share, respectively. The 150,000 warrants became exercisable at the rate of 20% per year commencing August 1993, and expire in September 2001. At May 31, 2001, 375,000 warrants had been exercised. The Company has a Shareholders' Rights Plan under which one Common Stock purchase right is presently attached to and trades with each outstanding share of the Company's Common Stock. The rights become exercisable and transferable apart from the Common Stock ten days after a person or group, without the Company's consent, acquires beneficial ownership of, or the right to obtain beneficial ownership of, 15% or more of the Company's Common Stock or announces or commences a tender offer or exchange offer that could result in at least 15% ownership. Once exercisable, each right entitles the holder to purchase one share of the Company's Common Stock at an exercise price of $45, subject to adjustment to prevent dilution. The rights have no voting power and, until exercised, no dilutive effect on net income per common share. The rights expire on April 20, 2009, and in most cases are redeemable at the discretion of the Board of Directors at $.01 each. All reservations of shares of Common Stock for purposes other than the rights plan shall take precedence and be superior to any reservation of shares in connection with or under the rights plan. If a person or a group acquires at least 15% ownership, except in an offer approved by the Company under the rights plan, then each right not owned by the acquirer or related parties will entitle its holder to purchase, at the right's exercise price, Common Stock or Common Stock equivalents having a market value immediately prior to the triggering of the right of twice that exercise price. In addition, after an acquirer obtains at least 15% ownership, if the Company is involved in certain mergers, business combinations, or asset sales, each right not owned by the acquirer or related persons will entitle its holder to purchase, at the right's exercise price, shares of Common Stock of the other party to the transaction having a market value immediately prior to the triggering of the right of twice that exercise price. 8. STOCK OPTIONS The Company has various stock option plans that authorize the Company's Compensation Committee to grant employees, officers and directors options to purchase shares of the Company's Common Stock. Exercise prices of stock options are determined by the Compensation Committee and have generally been the fair market value at the date of the grant. The Company's 1995 Non-Incentive Stock Option Plan authorizes the grant of options to employees, officers and directors for up to 1,000,000 shares of the Company's Common Stock. All options have 10 year terms and vest and become fully exercisable 50% at the end of two years, 25% at the end of three years, and 25% at the end of four years of continued employment. The Company's 1998 Non-Incentive Stock Option Plan authorizes the grant of options to employees, officers and directors for up to 1,000,000 shares of the Company's Common Stock. All options have 10 year terms and vest and become fully exercisable 50% at the end of two years, 25% at the end of three years, and 25% at the end of four years of continued employment. The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25) and related Interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation, requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation is recognized. Pro forma information regarding net income and earnings per share is required by Statement 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to June 1, 1995 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with certain weighted average assumptions. The assumptions include a risk-free interest rate of 5.83%, 6.27% and 5.34% in fiscal 2001, 2000 and 1999 respectively, no dividend yields; a volatility factor of the expected market price of the Company's common stock of 1.023 for 2001, .584 for 2000, and .525 for 1999 based on quarterly closing prices since 1986; and an expected life of each option of eight years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's pro forma information follows:
2001 2000 1999 ---- ---- ---- Net (loss) income as reported $(8,049,113) $2,812,020 $3,561,024 Pro forma net (loss) income $(8,845,439) $1,753,101 $2,980,206 (Loss) earnings per share as reported: Basic $(1.10) $ 0.36 $ 0.47 Diluted $(1.10) $ 0.33 $ 0.45 Pro forma (loss) earnings per share: Basic $(1.21) $ 0.23 $ 0.39 Diluted $(1.21) $ 0.21 $ 0.37
Because Statement 123 is applicable only to options granted subsequent to May 31, 1995, its pro forma effect is not fully reflected until fiscal year 2000. The Company is authorized to issue up to 1,531,875 shares of its Common Stock under various employee and director stock option arrangements. These arrangements include employee incentive plans and various voluntary salary reduction plans. Options granted under these plans become exercisable at various times and unless exercised expire at various dates through 2009. Transactions involving these stock option arrangements are summarized as follows:
Weighted Range Average of Exercise Exercise Shares Prices Price ------------------- ------------------------------------------ Outstanding at May 31, 1998 1,790,966 $3.130 - 15.375 $ 7.84 Granted 779,750 $8.750 - 9.688 $ 9.35 Exercised (88,650) $3.130 - 9.330 $ 6.43 Canceled (27,144) $8.000 - 12.000 $ 8.41 ------------------- Outstanding at May 31, 1999 2,454,922 $3.330 - 15.375 $ 8.37 Granted 114,400 $8.375 - 14.500 $11.93 Exercised (377,706) $3.330 - 12.000 $ 7.67 Canceled (97,025) $8.000 - 14.500 $ 9.32 ------------------- Outstanding at May 31, 2000 2,094,591 $5.400 - 15.375 $ 8.65 Granted 101,000 $2.550 - 5.625 $ 4.26 Exercised - - - - $ - Canceled (663,716) $3.750 - 15.375 $ 9.29 ------------------- Outstanding at May 31, 2001 1,531,875 $2.550 - 14.500 $ 8.09 ===================
At May 31, 2000 and 1999, options for 1,140,716 and 1,355,797 shares of Common Stock, respectively, were exercisable, at weighted average exercise prices of $7.95 and $7.82, respectively. At May 31, 2001, 1,381,871 shares of Common Stock were available for future grants. The following table as of May 31, 2001 sets forth by group of exercise price ranges, the number of shares, weighted average exercise prices and weighted average remaining contractual lives of options outstanding, and the number and weighted average exercise prices of options currently exercisable.
Options Outstanding Options Exercisable ------------------------------------------- ------------------------------- Weighted Range of Number Weighted Average Number Weighted Exercise of Average Contractual of Average Prices Shares Exercise Life (Years) Shares Exercise Price Price --------------------- ------------- -------------- -------------- -------------- ---------------- $ 2.55 $ 5.63 107,000 $4.38 8.7 11,000 $5.50 6.00 9.99 1,319,200 8.08 6.1 947,525 7.65 10.00 14.50 105,675 11.91 6.8 34,625 10.62 ------------- -------------- 1,531,875 8.09 6.3 993,150 7.73 ============= ==============
9. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted (loss) earnings per share.
Year Ended May 31, ---------------------------------------------------- 2001 2000 1999 Numerator for basic and diluted earnings per share: Net (loss) income $(8,049,113) $2,812,020 $3,561,024 ==================================================== Denominator: For basic earnings per share - weighted average shares 7,286,163 7,713,229 7,645,769 Effect of dilutive stock options and warrants - 806,992 312,844 ---------------------------------------------------- Denominator for diluted earnings per share - Adjusted weighted-average shares 7,286,163 8,520,221 7,958,613 ==================================================== Basic (loss) earnings per share $(1.10) $0.36 $0.47 ==================================================== Diluted (loss) earnings per share $(1.10) $0.33 $0.45 ====================================================
10. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases domestic office and warehouse facilities under an operating lease agreement expiring in 2005 with a right to renew for an additional five years. The Company leases foreign office and warehouse facilities and automobiles under operating lease agreements expiring at various dates through 2009. Total rental expense, principally for office and warehouse space, was $920,600 in fiscal 2001, $945,300 in fiscal 2000 and $776,800 in fiscal 1999. In Germany, the office facility is leased from a company owned by the family of a former officer. Rental payments under this lease were $165,000, $172,000 and $189,000 for fiscal 2001, 2000 and 1999, respectively. The following is a schedule of approximate future annual lease payments under all operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of May 31, 2001:
Year Ending May 31: 2002 $ 1,160,783 2003 1,135,323 2004 1,025,298 2005 938,637 2006 353,103 Thereafter 531,990 ----------------- $ 5,145,134 =================
The Company may, at its option, extend its office and warehouse facilities lease terms through various dates. Other Commitments In order to satisfy the broad spectrum of customers' operational and financial criteria, the Company offers several instrument procurement options, including third-party financing leases, direct sales and reagent rentals. In connection with certain sales of the Company's automated systems, the customers are committed to purchasing reagent products exclusively from the Company and the Company is committed to supply such products based on the terms of the agreements. On July 1, 1999 the Company entered into a purchase agreement with an equipment manufacturer for an instrument product currently marketed by the Company which requires the Company to purchase a minimum number of instruments with an aggregate purchase price totaling $315,000 on or before July 1, 2001. The Company has purchased approximately $289,000 and $121,000 for the fiscal years ended May 31, 2001 and May 31, 2000, respectively, and thus has met this requirement. Contingencies During the quarter ended August 31, 2000, isolated performance issues arose at certain ABS2000 installations that resulted in mistypings not directly affecting any patient transfusions. The Company issued a safety notification, requesting customers to confirm ABS2000 results until the cause of the difficulty is identified and corrected. The Company believes it has identified the factors that caused the performance issues and submitted this information to the FDA. On December 6, 2000, with the FDA's approval, the safety notification for antibody screening and crossmatch assays was removed. Customers no longer have to perform manual backup testing for either of these procedures. In addition to this, the Company's corrective action plan for blood grouping was accepted by the FDA and in connection with the plan, a special 510(k) was submitted to the FDA. The plan called for Company service engineers to complete field corrective action on the ABS2000 and to accumulate clinical data for group and type assays for selected customers. The Company has completed these tasks and has submitted data to the FDA for expedited review. Upon clearance by the FDA, the safety alert for group and type assays will be lifted. These performance issues may result in further delays in customers accepting instruments, and continue to affect sales of reagents used in the instruments, and both of these factors will adversely impact sales and earnings. In addition, the Company has received requests for refunds on instruments already placed in service or requests for financial concessions attributable to inconveniences associated with these performance issues. As of May 31, 2001, $0.76 million in credits have been issued for ABS 2000 instruments. In the third quarter, the Company recorded an allowance of $0.3 million for potential future returns of ABS 2000 instruments. These costs were treated as warranty costs and are included in cost of sales. The balance of the reserve at May 31, 2001 was $0.13 million. A private label leasing company that finances customer purchases of ABS2000 instruments has advised the Company that it is not willing to provide financing for additional purchases of this instrument until it satisfies itself that the performance issues related to the ABS2000 are resolved to the satisfaction of the FDA. When the Company acquired Gamma Biologicals, Inc. ("Gamma Biologicals") in October 1998, Gamma Biologicals was a party to an existing legal proceeding. On May 12, 1998, Gamma Biologicals received notification that a claim of patent infringement had been filed on that date in U.S. District Court, Southern District of Florida, Miami Division, by Micro Typing Systems, Inc. and Stiftung fur Diagnostiche Forschung (the Foundation). Subsequently, in February 1999 the Company received notification that a second claim was filed in the U.S. District Court for the Northern District of Georgia, against Immucor, Inc. and Gamma Biologicals for patent infringement on the first patent described above and a second patent recently granted to the Foundation. The claim alleged that the recently introduced Gamma ReACT Test System infringed U.S. patent No. 5,512,432 granted to the Foundation on April 30, 1996 and U.S. patent No. 5,863,802 granted to the Foundation on January 26, 1999. The plaintiffs sought a preliminary and permanent injunction against the continued alleged infringement by Gamma Biologicals and Immucor, and an award of treble damages, with interest and costs and reasonable attorney's fees. On September 5, 2000 a third patent was issued to the Foundation. The plaintiffs had asserted infringement of this patent and sought to add this patent to the lawsuit. The Company, in light of this new patent, evaluated its position and negotiated a settlement with the Foundation. Effective February 28, 2001 the Company no longer markets the ReACT Test System and its related reagents. The automated filling machine was turned over to the Foundation and all related instruments and manufacturing materials have been destroyed. The reserve for the lawsuit that was recorded with the acquisition of Gamma Biologicals offset the majority of the costs to exit the ReACT market. Remaining charges of $166,500 of exit costs were recorded in the quarter ended February 28, 2001. 11. INCOME TAXES Sources of (loss) income before income taxes are summarized below:
Year Ended May 31, ------------------------------------------------------ 2001 2000 1999 Domestic Operations $(3,877,674) $2,629,676 $2,799,843 Foreign Operations (3,705,987) 2,079,979 2,607,957 ----------------- ---------------- ----------------- Total $(7,583,661) $4,709,655 $5,407,800 ================= ================ =================
The provision for income taxes is summarized as follows:
Year Ended May 31, ------------------------------------------------------- 2001 2000 1999 Current: Federal $(34,169) $ 448,706 $ 481,466 Foreign 934,472 1,317,178 1,083,622 State (290,902) 52,641 56,643 ----------------- ----------------- ----------------- 609,401 1,818,525 1,621,731 ----------------- ----------------- ----------------- Deferred: Federal (471,516) 123,913 181,162 Foreign 85,196 (59,340) 22,570 State 242,370 14,537 21,313 ----------------- ----------------- ----------------- (143,950) 79,110 225,045 ----------------- ----------------- ----------------- Income taxes $465,451 $1,897,635 $1,846,776 ================= ================= =================
Deferred income taxes reflect the net tax effects of: (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes; and (b) operating loss carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Based on an assessment of all available evidence including, but not limited to, the operating history and lack of profitability of certain subsidiaries, the Company is uncertain as to the realizability of these net operating loss carryforwards and, as a result, a deferred tax valuation allowance has been recorded against these deferred tax assets. The tax effects of significant items comprising the Company's net deferred tax liability at May 31, 2001 and 2000 are as follows:
Year Ended May 31, --------------------------------------- 2001 2000 Deferred tax liabilities: Amortization $ (895,400) $ (902,368) Depreciation (1,431,273) (1,558,230) Other (847,103) (768,023) Deferred tax assets: Reserves not currently deductible 1,030,915 1,411,319 Operating loss carryforwards 2,452,814 740,563 Uniform capitalization 576,967 594,958 ------------------ ----------------- 886,920 (481,781) Valuation allowance (1,946,897) (722,146) ------------------ ----------------- Net deferred tax liability $ (1,059,977) $ (1,203,927) ================== =================
The Company's effective tax rate differs from the federal statutory rate as follows:
Year Ended May 31, ----------------------------------------------- 2001 2000 1999 Federal statutory tax rate 34% 34% 34% State income taxes, net of federal tax benefit 2 1 1 Interest on state municipal obligations - - (1) Foreign Sales Corporation commissions 3 (5) (4) Higher effective income tax rates of other countries (26) 9 4 Excess of cost over tangible assets acquired - net (4) 6 4 Change in deferred tax valuation allowance (15) - (9) Research and development tax credits - - - Change in entity classification for Spanish subsidiary (1) (7) - Other 1 2 5 -------- --------- --------- (6%) 40% 34% ======== ========= =========
As a result of utilizing compensation cost deductions arising from the exercise of nonqualified employee stock options for federal and state income tax purposes, the Company realized income tax benefits of $0, $320,027, and $133,713 in fiscal 2001, 2000 and 1999, respectively. Additionally, the Company recorded income tax benefits of $57,348 in fiscal 2001 and 2000 and $55,142 in 1999, caused by patent amortization expense deductions resulting from a 1993 exercise of stock options previously issued in connection with the acquisition of certain technology (see Note 12). These income tax benefits are recognized in the accompanying financial statements as additions to additional paid-in capital rather than as reductions of the respective income tax provisions because the related compensation deductions are not recognized as compensation expense for financial reporting purposes. In the U.S., the Company recorded a valuation allowance of $1,109,139 as a reserve against its net deferred tax assets. The Company has domestic net operating loss carryforwards of $8,790,787. The Company's Spanish subsidiary had net operating loss carryforwards for income tax purposes of $710,934, which expire in 2002, 2003 and 2004. The Company's French subsidiary had net operating loss carryforwards for income tax purposes of $380,395, which expire in 2002, 2003 and 2004. The Company's Belgian subsidiary had net operating loss carryforwards for income tax purposes of $932,918, which do not expire. 12. TECHNOLOGY RIGHTS In March 1983, the Company acquired rights to technology to be used in developing diagnostic testing products. In connection with this acquisition, the Company has agreed to pay to the Blood Center of Greater Kansas City royalties equal to 4% of the net sales from products utilizing the technology. Royalties under this agreement amounted to approximately $435,200, $409,300 and $411,100 in fiscal 2001, 2000 and 1999, respectively. In May 1997 Gamma Biologicals entered into a license agreement with Pasteur Sanofi Diagnostics ("Sanofi") with headquarters in France for the use and sale of their microcolumn test for the detection of antibodies called ReACT. Under the terms of the agreement the Company paid Sanofi a license fee of $200,000 and royalties equal to 12% of the net sales from the ReACT products in six countries of Europe. The agreement would have expired on the expiration of the patent of the technology. At the time of acquisition, Gamma Biologicals was a party to an existing legal proceeding. On May 12, 1998, Gamma Biologicals received notification that a claim of patent infringement had been filed on that date in U.S. District Court, Southern District of Florida, Miami Division, by Micro Typing Systems, Inc. and Stiftung fur Diagnostiche Forschung (the Foundation). During the course of the litigation, an additional patent was issued to the Foundation. After this, the Company evaluated its position and negotiated a settlement with the Foundation. Effective February 28, 2001 the Company no longer markets the ReACT Test System and its related reagents. The automated filling machine was turned over to the Foundation and all related instruments and manufacturing materials have been destroyed. The license agreement is no longer in effect with the settlement of the ReACT lawsuit. The license was being amortized over 10 years and the remaining balance of $138,000 was written off with the settlement of the suit. See Note 10. Commitments and Contingencies. 13. INSTRUMENT DEVELOPMENT AND MANUFACTURING AGREEMENTS The Company has contracted with Bio-Tek Instruments, Inc. for the development of a fully automated, "walk-away", blood bank analyzer. Known as the ABS2000, the analyzer utilizes the Company's patented Capture(R) technology and is being marketed in Europe and the United States to hospital transfusion laboratories for patient testing. Under the terms of the 15 year agreement, the Company reimburses Bio-Tek Instruments, Inc. for its development costs, and the Company is granted worldwide marketing rights to sell the instrument for use in the human clinical diagnostic market for testing of human blood or blood components with centrifugation. Bio-Tek Instruments, Inc. may sell the product in other markets paying the Company up to a 4% royalty of the selling price. To date, Bio-Tek has not exercised this option. In order to maintain the exclusive worldwide marketing rights the Company must purchase 250 instruments over a six-year period beginning with the delivery of the first production instrument that occurred in fiscal 1997. If the Company purchases less than 250 instruments over a six -year period, it has the right to continue to purchase the instruments on a non-exclusive basis. Based upon the Company's current projections, the Company presently does not believe it will maintain its exclusivity rights for the term of the agreement. During fiscal 1996, the Company entered into a second development and manufacturing agreement with DYNEX Technologies, Inc. ("DYNEX"). Under the terms of the agreement, DYNEX will design and manufacture a second analyzer known as the ABSHV utilizing the Company's Capture(R) technology which will be marketed by the Company to blood donor centers for donor testing. In exchange for reimbursing DYNEX for its development costs and pursuing FDA 510(k) approval, the Company is granted exclusive distribution rights to sell the instrument to blood banks and centralized and hospital transfusion laboratories. In order to maintain exclusive distribution rights the Company must purchase 240 instruments over a three-year period beginning on the date FDA 510(k) clearance is granted. If the Company does not purchase the minimum amount of instruments within the time period specified the Company has the right to continue purchasing the instruments on a non-exclusive basis. Based upon the Company's current projections, it does not appear that these minimums will be met. In April 1999 the Company entered into a manufacturing and development agreement with Rosys Anthos AG ("Rosys") with headquarters in Switzerland. Under the terms of the agreement, Rosys will manufacture and develop an analyzer known as the ROSYS Plato in the U.S. and the ABS Precis in Europe utilizing the Company's Capture(R) technologies. The instrument will be marketed exclusively by Immucor to hospital transfusion laboratories and blood donor centers for patient and donor blood typing and antibody screening and identification. In order to maintain exclusive worldwide distribution rights the Company must purchase 120 instruments over the three year initial term of the agreement. If the Company purchases less than 120 instruments over the period it will be allowed to continue purchasing the instrument on a non-exclusive basis for an additional two year period. Based on fiscal 2001 sales and purchases the Company presently believes it will maintain its exclusivity rights for the term of the agreement. On September 1, 1999, the Company entered into a manufacturing and development agreement with Stratec Biomedical AG ("Stratec") with headquarters in Germany. Under the terms of the agreement, Stratec will manufacture and develop a fully automated analyzer known as the Galileo which will be initially targeted to the European community utilizing the Company's Capture(R) technology. The instrument will be marketed exclusively by Immucor to hospital transfusion laboratories and blood donor centers for patient and donor blood typing and antibody screening and identification. In order to maintain exclusive European distribution rights the Company must purchase 250 instruments over the five-year initial term of the agreement. If the Company purchases less than 250 instruments over the period it will be allowed to negotiate a good faith extension. In fiscal 2001, 2000 and 1999, the Company incurred $677,118, $753,786 and $161,480, respectively, in instrument research and development costs principally under these contracts. 14. DOMESTIC AND FOREIGN OPERATIONS Information concerning the Company's domestic and foreign operations is summarized below (in 000s):
Year Ended May 31, 2001 --------------------------------------------------------------------------------------------------- Note 1 U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $43,965 $8,502 $5,600 $5,367 $6,004 - $69,438 Affiliates 7,036 384 - 85 206 $(7,711) - --------- ---------- ---------- ---------- --------- ------------ -------------- Total 51,001 8,886 5,600 5,452 6,210 (7,711) 69,438 (Loss) income from (2,528) 698 248 1,135 (4,812) (1,135) (4,124) operations Interest expense (3,163) (172) (44) (278) (90) - (3,747) Interest income 28 19 7 - 3 - 57 Income tax (benefit) expense (536) 267 210 426 116 (18) 465 Long-lived assets 60,916 3,181 2,427 7,236 2,692 (24,421) 52,031 Identifiable assets 91,462 9,332 10,259 9,819 7,861 (32,920) 95,813 Net assets 38,461 3,953 46 2,461 (2,013) (13,065) 29,843 Year Ended May 31, 2000 --------------------------------------------------------------------------------------------------- Note 1 U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $48,105 $9,302 $6,656 $5,195 $7,283 - $76,541 Affiliates 6,695 548 - 262 2,663 $(10,168) - --------- ---------- ---------- ---------- --------- ------------ -------------- Total 54,800 9,850 6,656 5,457 9,946 (10,168) 76,541 Income from operations 4,303 836 559 1,596 105 (40) 7,359 Interest expense (2,354) (32) (26) (345) (154) - (2,911) Interest income - 4 24 - 3 - 31 Income tax expense 640 470 147 580 78 (17) 1,898 Long-lived assets 63,477 3,340 2,415 7,551 4,826 (24,976) 56,633 Identifiable assets 94,406 7,526 10,386 10,052 12,683 (32,278) 102,775 Net assets 43,965 4,482 802 2,284 2,730 (13,344) 40,919 Year Ended May 31, 1999 --------------------------------------------------------------------------------------------------- Note 1 U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $34,842 $10,246 $6,804 $4,368 $3,265 - $59,525 Affiliates 5,100 381 15 160 647 $(6,303) - --------- ---------- ---------- ---------- --------- ------------ -------------- Total 39,942 10,627 6,819 4,528 3,912 (6,303) 59,525 Income from operations 2,912 1,537 774 1,167 (96) 15 6,309 Interest expense (909) (44) (2) (436) (25) - (1,416) Interest income 241 44 28 - - - 313 Income tax expense 740 750 (65) 388 33 1 1,847 Long-lived assets 53,259 3,917 2,409 7,965 4,263 (16,810) 55,003 Identifiable assets 85,366 8,180 10,064 9,616 9,334 (22,826) 99,734 Net assets 41,632 5,022 (1,286) 1,755 1,327 (8,397) 40,053 ---------------------------------------------------------------------------------------------------
Note 1: Included in "Other" are net sales, income from operations, interest expense, interest income, income tax expense, long-lived assets, identifiable assets and net assets of Spain, Portugal, France, Belgium, and the Netherlands. During the years ended May 31, 2001, 2000 and 1999, the Company's U.S. operations made net export sales to unaffiliated customers of approximately $5,782,000, $6,712,000, and $5,558,000, respectively. The Company's German operation made net export sales to unaffiliated customers of $1,093,000, $1,515,000 and $1,309,000 for the years ended May 31, 2001, 2000, and 1999, respectively. The Company's Canadian operation made net export sales to unaffiliated customers of $2,361,000, $2,224,000 and $2,542,000 for the years ending May 31, 2001, 2000, and 1999, respectively. Product sales to affiliates are valued at market prices. 15. RETIREMENT PLAN The Company maintains a 401(k) retirement plan covering its domestic employees who meet certain age and length of service requirements, as defined. The Company matches a portion of employee contributions to the plan. During the years ended May 31, 2001, 2000 and 1999, the Company's matching contributions to the plan were $284,000, $184,000 and $149,000, respectively. Vesting in the Company's matching contributions is based on years of continuous service. 16. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts) Basic Diluted Net Gross Operating Net (Loss) Earnings (Loss) Earnings Sales Margin (Loss) Income (Loss) Income Per Share Per Share --------------- -------------- ----------------- ----------------- ---------------- ------------------ FISCAL 2001 First Quarter $17,081 $ 8,513 $ 577 $ (215) $(0.03) $(0.03) Second Quarter 16,813 7,974 393 (612) $(0.08) $(0.08) Third Quarter 16,861 7,036 (5,570) (5,834) $(0.80) $(0.80) Fourth Quarter 18,683 7,829 476 (1,388) $(0.19) $(0.19) -------------- ------------- ----------------- ----------------- $69,438 $31,352 $ (4,124) $ (8,049) $(1.10) $(1.10) ============== ============= ================= ================= FISCAL 2000 First Quarter $18,930 $ 9,976 $ 2,233 $ 1,219 $0.16 $0.14 Second Quarter 20,250 10,981 2,935 1,440 0.19 0.17 Third Quarter 19,201 10,176 2,015 838 0.11 0.10 Fourth Quarter 18,160 9,000 176 (685) (0.09) (0.09) -------------- ------------- ----------------- ----------------- $76,541 $40,133 $ 7,359 $ 2,812 $0.36 $0.33 ============== ============= ================= =================
17. SUBSEQUENT EVENTS On December 28, 2000 the Company initiated arbitration against Becton, Dickinson and Company with the American Arbitration Association to take place in Santa Clara County, California. The Company's claims against Becton, Dickinson and Company related to a Distributor Agreement between the Company and Biometric Imaging, Inc., and Becton, Dickinson and Company became a party to this agreement when they acquired Biometric Imaging, Inc. in 1999. The Company alleged that Becton, Dickinson and Company either intentionally, recklessly or negligently failed to supply medical testing instruments and assay test kits and either intentionally, recklessly or negligently supplied defective assay test kits in violation of its obligations under this Distributor Agreement. On June 12, 2001, the Company announced that it had reached a settlement with Becton, Dickinson and Company. The settlement calls for Becton to pay Immucor, Inc. a total of $1.8 million, payable in two installments. The first payment of $1.2 million was made on June 11, 2001, with the second installment of $0.6 million payable not later than April 1, 2002. This settlement represents a reimbursement for asset impairment and lost profits. In return, Immucor, Inc. agrees to give up its right to distribute the IMAGN instrument and associated reagents in Italy and Portugal and to cooperate with Becton, Dickinson and Company in the transition of the Italian and Portuguese IMAGN customers. Assets related to IMAGN that will be written off approximate $1.0 million. As of May 31, 2001 the Company had paid all principal and interest payments under the Loan Agreement. But as a result of the nonrecurring charges to earnings, recent losses, and other factors, the Company was not in compliance with covenants in its agreement with its principal lender requiring the Company to maintain specified ratios of (i) fixed charge coverage, (ii) funded debt to EBITDA (earnings before interest, taxes, depreciation, and amortization), (iii) leverage, and (iv) interest coverage. The Company's non-compliance with the leverage ratio covenant was also affected by the Company's write-down of goodwill related to its Belgian and French operations--see Management's Discussion and Analysis--Operating Expenses. These covenant violations impacted all of the Company's outstanding term loan and lines-of-credit. On September 6, 2001 the Company successfully completed negotiations with its primary lender to issue a waiver of covenant defaults and to temporarily reset the loan covenants to the Loan Agreement dated February 23, 2001. A waiver fee of $750,000 will be paid in twelve equal monthly payments beginning September 30, 2001. Any remaining balance will be paid upon receipt of junior capital. The interest rate on the revolving lines of credit and Term Loan A will be prime plus .50% and the interest rate on Term Loan B will be prime plus 2.00%. The Company is required to meet quarterly and cumulative EBITDA covenants in addition to quarterly senior funded debt to EBITDA ratios. Once the Company's trailing twelve-month Senior Funded Debt to EBITDA reaches 2.50 to 1 or less the Company will revert back to the pricing matrix as stated in the Loan Agreement. An additional requirement of the waiver is that the Company successfully obtain a minimum of $5.0 million in junior capital by December 31, 2001. If the Company is not successful, the lender will earn an additional fee of $450,000 payable in twelve equal monthly installments beginning January 31, 2002. The lender will also fully earn warrants of 750,000 shares of Immucor, Inc. Common Stock issued at the then current market price of the stock. If the Company meets all of its quarterly EBITDA covenants and no other events of default are then occurring, the lender will return a portion of the warrants to the Company based on when the Company raises the junior capital after December 31, 2001. Specifically, 562,500 warrants would be returned if the $5.0 million of junior capital is raised by January 31, 2002, 375,000 warrants would be returned if the $5.0 million of junior capital is raised by February 28, 2002, and 187,500 warrants would be returned if the $5.0 million of junior capital is raised by March 31, 2002. If the junior capital is not received by December 31, 2001, then the revolving lines of credit and Term Note A would be re-priced at prime plus 2.0% and Term Note B would be repriced at prime plus 4.0% until the junior capital is received. If the junior capital is not received by April 30, 2002 all existing credit facilities would be reset to mature on February 28, 2003.
IMMUCOR, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED MAY 31, 2001, 2000 AND 1999 - ------------------------------------------------------------------------------------------------------------------------- Charged Balance at Charged to to Other Balance Beginning Costs and Accounts Deductions at End of Period Expense (Note 1) (Note 2) of Period --------------------------------------------------------------------------------- 2001: Allowance for doubtful accounts $1,164,582 $673,997 $ 0 $(594,091) $1,244,488 ========== ======== ======== ========== ========== Valuation reserve for deferred income tax assets $722,146 $1,224,751 $ 0 $ 0 $1,946,897 ======== ========== ======== ======== ========== 2000: Allowance for doubtful accounts $804,470 $452,983 $ 0 $(92,871) $1,164,582 ======== ======== ======== ========= ========== Valuation reserve for deferred income tax assets $589,623 $132,523 $ 0 $ 0 $722,146 ======== ======== ======== ======== ======== 1999: Allowance for doubtful accounts $502,372 $116,031 $236,902 $(50,835) $804,470 ======== ======== ======== ========= ======== Valuation reserve for deferred income tax assets $745,988 $ 0 $ 0 $(156,365) $589,623 ======== ======== ======== ========== ========
Note 1: "Charged to Other Accounts" represents allowance for doubtful accounts of acquired businesses at date of acquisition. Note 2: "Deductions" represent accounts written off during the period less recoveries of accounts previously written off and exchange differences generated. Item 9.--Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10.--Directors and Executive Officers of the Registrant.
Director Name Age Position with Company Since Edward L. Gallup 62 Chairman of the Board of Directors, President and 1982 Chief Executive Officer Didier L. Lanson 51 Director 1989 Dennis M. Smith, Jr., M.D. 49 Director 1998 Ralph A. Eatz 57 Director and Senior Vice President-- Operations 1982 G. Bruce Papesh 54 Director 1995 Joseph E. Rosen 57 Director 1998 Dr. Gioacchino De Chirico 48 Director, Director of European Operations and 1994 President of Immucor Italia S.r.l Daniel T. McKeithan 77 Director 1983
Edward L. Gallup has been Chairman of the Board of Directors, President and Chief Executive Officer of the Company since its founding. Mr. Gallup has worked in the blood banking business for over 35 years. Ralph A. Eatz, who has been working in the blood banking reagent field for over 30 years, has been a director and Vice President - Operations of the Company since its founding, and Senior Vice President - Operations since December 1988. Dr. Gioacchino De Chirico has been Director of European Operations since May 1998 and President of Immucor Italia S.r.l. since February 1994. From 1989 until 1994, he was employed in the United States by Ortho Diagnostic Systems, Inc., a Johnson and Johnson Company, as General Manager, Immunocytometry, with worldwide responsibility. From 1979 until 1989, he was with Ortho Diagnostic Systems, Inc., in Italy, where he began as a sales representative and held several management positions, including Product Manager and European Marketing Manager for Immunology and Infectious Disease products. Immucor Italia S.r.l. was acquired by the Company on September 30, 1991. Daniel T. McKeithan has been a director of the Company since February 1983. Since 1986, he has served as a consultant to health care companies. From April 1979 until March 1986 he was employed by Blood Systems, Inc., a supplier of blood and blood products, as a general manager and as Executive Vice President of Operations. Mr. McKeithan also has 30 years experience in pharmaceutical and diagnostic products with Johnson and Johnson, Inc., including Vice President - Manufacturing of the Ortho Diagnostic Systems Division. Didier L. Lanson has been a director of the Company since October 1989. Since April 1, 2000, he has served as CEO of a start up company GenOdyssee S.A. in Paris, France. GenOdyssee provides to the pharmaceutical, diagnostic and biotech industry a full range of post-genomics services: Single Nucleotide Polymorphism (SNP) discovery, high throughput SNP genotyping, and proteomic services dedicated to the characterization of chemical and physical modifications of mutant proteins active sites. From September 1992 until March 1999, he served as Vice President, Europe ('92-97) and Vice President Global Operations and International Affairs ('97-'99) of SyStemix Inc., a Novartis Company. He was a Director and the President and CEO of Diagnostics Transfusion ("DT"), a French corporation which develops, manufactures and distributes reagent products from 1987 until April 1991. G. Bruce Papesh has been a director of the Company since December 1995. He is a co-founder of Dart, Papesh & Co., an East Lansing, Michigan based company that provides investment consulting and other financial services. He has served as President of Dart, Papesh & Co. Inc., since 1987. Mr. Papesh has over 30 years of experience in investment services while serving in stockbroker, consulting and executive management positions. Mr. Papesh also serves as a Director and Stock Option Committee Member of Neogen Corporation, a maker of products dedicated to food and animal safety. Dennis M. Smith, Jr., M.D. has been a director of the Company since April 1998. He currently is, and for the last six years has been, the Chairman of the Section of Pathology and the Director of Laboratories at Columbia Memorial Hospital in Jacksonville, Florida. In addition to these duties, Dr. Smith is a member of the Board of Directors of Medical Equity Partners, Jacksonville, Florida; Vice President of Laboratory Physicians, St. Petersburg, Florida; and Senior Vice President and Medical Director of AmeriPath, Inc. Dr. Smith is a past president of the American Association of Blood Banks and is currently Chairman of the Board of Trustees of the National Blood Foundation. He has over 23 years of experience in the medical field. Joseph E. Rosen has been a director of the Company since April 1998. He has been employed by Sera-Tec Biologicals since its inception in 1969 and has served as its President for the past fifteen years. Mr. Rosen is currently serving as Chairman of the Board of the American Blood Resources Association, the plasma industry trade group, and has been a member of the Board of Directors of several public and private health care companies. He has over 30 years of experience in the blood banking industry. Executive Officers
Name Age Position with Company Since Edward L. Gallup 62 President and Chief Executive Officer 1982 Ralph A. Eatz 57 Senior Vice President-- Operations 1982 Dr. Gioacchino De Chirico 48 Director of European Operations and 1994 President of Immucor Italia S.r.l Steven C. Ramsey 52 Vice President-- Chief Financial Officer and Secretary 1998 Patrick Waddy 44 President of Dominion Biologicals Limited and 1996 European Finance Director
Steven C. Ramsey has been Vice President and Chief Financial Officer since March 1998. Prior to such time, Mr. Ramsey worked for six years at International Murex Technologies Corporation, the last three as Chief Financial Officer. He has more than 26 years of financial management experience. Patrick Waddy has been the European Finance Director since March 1999. Mr. Waddy has been with Dominion Biologicals Limited since March 1988 and has served as President for the past six years. The Company acquired Dominion Biologicals in December 1996. There are no family relationships among any of the directors or executive officers of the Company. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 and regulations of the Securities and Exchange Commission thereunder require the Company's executive officers and directors and persons who own more than ten percent of the Company's Common Stock, as well as certain affiliates of such persons, to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and persons owning more than ten percent of the Company's Common Stock are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such reports received by it and written representations that no other reports were required for those persons, the Company believes that, during the fiscal year ended May 31, 2001, all filing requirements applicable to its executive officers, directors and owners of more than ten percent of the Company's Common Stock were met. Item 11.--Executive Compensation. The following table sets forth the compensation earned by the Company's Chief Executive Officer and all of the Company's other executive officers for services rendered in all capacities to the Company for the last three fiscal years.
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards ----------------------------------------------- ---------------- Securities Name and Other Annual Underlying Principal Position Year Salary Bonus (1) Compensation (2) Options (3) - ------------------------------------ ------- ---------- ------------------- ------------------ ---------------- Edward L. Gallup 2001 $225,008 $ 0 $40,626 - Chairman of the Board, President 2000 218,743 4,875 44,053 - and Chief Executive Officer 1999 206,601 55,209 29,609 80,000 Ralph A. Eatz 2001 218,562 3,511 32,306 - Director and Senior Vice 2000 212,316 5,482 32,061 - President - Operations 1999 200,579 55,177 20,830 80,000 Dr. Gioacchino De Chirico (4) 2001 205,746 - 16,624 - President, Immucor Italia, S.r.l. and 2000 197,833 - 16,624 - Director of European Operations 1999 175,565 - 13,100 80,000 Steven C. Ramsey (5) 2001 181,712 3,449 2,500 - Vice President - Chief Financial 2000 179,649 4,342 2,000 - Officer and Secretary 1999 178,946 - - 30,500 Patrick Waddy (6) 2001 78,000 - - President of Dominion Biologicals 2000 81,505 4,075 2,500 - Limited and European Finance 1999 69,260 25,719 2,500 30,500 Director
(1) Represents amounts the Company contributed to the 401(k) retirement plan on behalf of the named executive officers, a bonus for Mr. Gallup and Eatz of $50,000 and Mr. Waddy of $22,256, in 1999. (2) Includes the value of life insurance premiums and an allowance for automobile expenditures for each of the above named executive officers as follows: For 2001 - for Mr. Gallup, Eatz, De Chirico, Ramsey and Waddy, life insurance premiums of $31,026, $22,706, $7,024, $2,500 and $0 respectively, and an allowance for automobile expenditures for Mr. Gallup, Eatz and Dr. De Chirico of $9,600 each. For 2000 - for Mr. Gallup, Eatz, De Chirico, Ramsey and Waddy, life insurance premiums of $34,453, $22,460, $7,024, $2,000 and $2,500 respectively, and an allowance for automobile expenditures for Mr. Gallup, Eatz and Dr. De Chirico of $9,600 each. For 1999 - for Mr. Gallup, Eatz, De Chirico and Waddy, life insurance premiums of $20,009, $11,230, $3,500 and $2,500 respectively, and an allowance for automobile expenditures for Mr. Gallup, Eatz and Dr. De Chirico of $9,600 each. (3) Includes stock options granted for each of the above named officers as follows: For 2001 and 2000 - No options were granted to executive officers during the fiscal year. For 1999 - for Mr. Gallup, Eatz, and Dr. De Chirico 25,000 shares each and 7,500 shares for Mr. Ramsey and Waddy under the 1995 Stock Option Plan to purchase shares of the Company's Common Stock at an exercise price of $9.6875. 50% of the options are exercisable beginning July 31, 2000, and 25% per year thereafter. For Mr. Gallup, Eatz, and Dr. De Chirico 55,000 shares each and 23,000 shares for Mr. Ramsey and Waddy under the 1998 Stock Option Plan to purchase shares of the Company's Common Stock at an exercise price of $9.375. 50% of the options are exercisable beginning April 9, 2001, and 25% per year thereafter. (4) For 1999 - includes a bonus of $50,000 for Dr. De Chirico, which is included in the Annual Compensation of Salary. (5) For 1999 - includes a bonus of $8,000 for Mr. Ramsey, which is included in the Annual Compensation of Salary. Mr. Ramsey assumed the position of Vice President and Chief Financial Officer in April 1998. (6) Mr. Waddy became an employee of the Company upon the acquisition of Dominion Biologicals Limited in December 1996. Option Holdings The table below presents information concerning option exercises during the past fiscal year and the value of unexercised options held as of the end of the fiscal year by each of the individuals listed in the Summary Compensation Table.
FISCAL YEAR-END OPTION VALUES Number of Securities Underlying Unexercised Value of Unexercised Options at In-the-Money Options at May 31, 2001 May 31, 2001 (1) ------------ ---------------- Exercisable Unexercisable Exercisable Unexercisable ------------------------------ ----------------------------- Edward L. Gallup 100,000 40,000 0 0 Ralph A. Eatz 100,000 40,000 0 0 Dr. Gioacchino De Chirico 115,000 40,000 0 0 Steven C. Ramsey 37,750 22,750 0 0 Patrick Waddy 266,389 15,250 0 0
(1) Based on the amount that the closing price exceeds the exercise price for the Common Stock on May 31, 2001. None of the stock option exercise prices exceeded the May 31, 2001 closing price of $2.55, as reported by NASDAQ. Consequently there was no value related to these stock options. Employment Contracts, Termination of Employment and Change of Control Arrangements The Company has in effect employment agreements (the "Agreements") with five of its executive officers. The Company entered into written employment agreements with Edward L. Gallup and Ralph A. Eatz on October 13, 1998. Each agreement is for a five-year term and automatically renews for a five-year term, unless sooner terminated. The agreements provide base salaries for Mr. Gallup and Mr. Eatz of $219,668 and $213,243, respectively. The agreements also contain covenants prohibiting Mr. Gallup and Mr. Eatz from disclosing confidential information and from competing with the Company, both during and for specified periods after the termination of their employment. The agreements with Mr. Gallup and Mr. Eatz obligate the Company to make certain payments to them in certain circumstances if their employment is terminated. If the Company terminates the employment of Mr. Gallup or Mr. Eatz "without cause", then Mr. Gallup or Mr. Eatz would continue to be compensated at a rate equal to their average annual compensation (that is, their base salary plus their average bonus over the last two years) for the remainder of the five year period as renewed, and such amounts would be paid over such period of time rather than in a lump sum. "Cause" is defined in the agreements generally to include dishonesty, embezzlement, continuing inability or refusal to perform reasonable duties assigned to him, and moral turpitude. If the Company terminates the employment of Mr. Gallup or Mr. Eatz within two years after a change of control, or if Mr. Gallup or Mr. Eatz terminate their own employment within 60 days after a change of control, then the Company instead must pay Mr. Gallup or Mr. Eatz a lump sum equal to five times their average annual compensation, plus certain additional amounts to compensate Mr. Gallup or Mr. Eatz if such payments subject Mr. Gallup or Mr. Eatz to a federal excise tax under Section 4999 of the Internal Revenue Code. The Company's agreement to compensate these executives in connection with a change of control is designed to secure for the Company such executives' full time and attention to negotiate the best deal for the Company and its shareholders in the event of a change of control without such executives being distracted by the effects of such change of control upon their own financial interest. The Company has in effect an employment agreement with Dr. Gioacchino De Chirico entered into on December 31, 1993. The Agreement renews for a period of five years from each anniversary date unless sooner terminated based upon sales performance of Immucor Italia, S.r.l. The Company may only terminate the employment agreement "for cause", as defined in the agreement. If the Company terminates the employment of the Employee "without cause", the Employee would receive his base annual salary for the remainder of the five year period as renewed upon such termination. On October 13, 1998 the Company entered into a Severance Agreement with Dr. De Chirico which clarifies the rights and obligations of the parties in the event of a change of control. If the Company terminates the employment of Dr. De Chirico within two years after a change of control, or if he terminates his own employment within 60 days after a change of control, then the Company instead must pay Dr. De Chirico a lump sum equal to five times his average annual compensation. Dr. De Chirico has agreed to refrain from competition with Immucor Italia, S.r.l. following the termination of the agreement for a period of two years if he is terminated without cause, and for a period of four years if he is terminated for cause or if he voluntarily terminates the agreement. The Company has in effect an employment agreement with Mr. Steven C. Ramsey entered into on October 13, 1998 which clarifies the rights and obligations of the parties in the event of a change of control. If the Company terminates the employment of Mr. Ramsey within two years after a change of control, or if he terminates his own employment within 60 days after a change of control, then the Company instead must pay Mr. Ramsey a lump sum equal to two times his average annual compensation. The Agreement renews for a period of twelve months from each anniversary date unless sooner terminated. Mr. Ramsey has agreed to refrain from competition with Immucor for a period of two years after his employment has terminated and for any additional period that he is compensated by the Company. The Company has in effect an employment agreement with Mr. Patrick Waddy entered into on October 13, 1998 which clarifies the rights and obligations of the parties in the event of a change of control. If the Company terminates the employment of Mr. Waddy within two years after a change of control, or if he terminates his own employment within 60 days after a change of control, then the Company instead must pay Mr. Waddy a lump sum equal to two times his average annual compensation. The Agreement renews for a period of twelve months from each anniversary date unless sooner terminated. Mr. Waddy has agreed to refrain from competition with Immucor for a period of two years after his employment has terminated and for any additional period that he is compensated by the Company. Compensation of Directors Members of the Board of Directors, who are not also executive officers of the Company, receive $500 per meeting and are reimbursed for all travel expenses to and from meetings of the Board. In addition, the Company provides each of the non-employee directors a grant of an option to purchase shares of the Company's Common Stock upon their election as a director at the stock's then current fair market value, and at the direction of the Board, they may receive additional options. The amount of shares subject to the option is determined at the time of the grant. There were no stock option grants to directors during the fiscal year ended May 31, 2001. Compensation Committee Interlocks and Insider Participation The Compensation Committee has responsibility for determining the types and amounts of executive compensation, including setting the number of stock options that can be granted to executive officers as a group. Messrs. McKeithan, Papesh and Lanson are members of the Compensation Committee. The Stock Option Committee determines the number of shares to be granted to individual executive officers. Messrs. Gallup, Eatz, Rosen and Smith are members of the Stock Option Committee. Mr. Ramsey attends the meetings of the Compensation Committee at the request of the Board of Directors. Neither Mr. McKeithan, Mr. Papesh, Mr. Lanson, Mr. Rosen nor Dr. Smith are, nor have they ever been, officers or employees of the Company. Edward L. Gallup and Ralph A. Eatz are the founders of the Company, have been directors and executive officers of the Company since its inception, and each of them participates in decisions on all stock options granted. Item 12.--Security Ownership of Certain Beneficial Owners and Management. The following table sets forth as of July 31, 2001, the number of shares of Common Stock of Immucor beneficially owned by each director and other reporting insiders of the Company, and by each person known to the Company to own more than 5% of the outstanding shares of Common Stock, and by all of the executive officers and directors of the Company as a group.
Name of Beneficial Owner Amount and Nature (and address for those of Beneficial Percent owning more than five percent) Ownership of (1) of Class(1) - ------------------------------ ---------------- ----------- Edward L. Gallup 216,357 (2) 3.0% Ralph A. Eatz 294,526 (2) 4.1% Dr. Gioacchino De Chirico 124,250 (3) 1.7% Steven C. Ramsey 44,625 (4) * Patrick D. Waddy 299,264 (5) 4.1% Didier L. Lanson 15,000 (6) * Daniel T. McKeithan 54,778 (7) * G. Bruce Papesh 15,100 (8) * Dennis M. Smith, Jr., M.D. 70,l00 (9) * Joseph E. Rosen 11,000 (9) * Kairos Partners LP 728,170 (10) 10.0% Kairos Partners GP, LLC Aim High Enterprises, Inc. Stone Gate Partners, LLC c/o Aim High Enterprises, Inc. 600 Longwater Dr., Suite 204 Norwell, MA 02061 Dimensional Fund Advisors, Inc. 715,562 (11) 9.8% 1299 Ocean Ave. 11th Floor Santa Monica, CA 90401-1038 All directors and executive officers 1,145,000 15.7% as a group (ten persons)
* less than 1%. (1) Pursuant to Rule 13-3(d)(1) of the Securities Exchange Act of 1934, the persons listed are deemed to beneficially own shares of the Company's Common Stock if they have a right to acquire such stock within the next sixty days, such as by the exercise of stock options, and any such common stock not presently outstanding shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class owned by any other person. (2) Includes for Messrs. Gallup and Eatz an option to acquire 60,000 shares at an exercise price of $6.00, an option to acquire 18,750 shares at an exercise price of $9.69, and an option to acquire 27,500 shares at an exercise price of $9.38. (3) Includes a currently exercisable option to acquire 15,000 shares of Common Stock at an exercise price of $6.00, an option to acquire 60,000 shares of Common Stock at an exercise price of $6.00, an option to acquire 18,750 shares of Common Stock at an exercise price of $9.69, and an option to acquire 27,500 shares at an exercise price of $9.38. (4) Includes a currently exercisable option to acquire 22,500 shares at $8.38 per share, a currently exercisable option to acquire 5,625 shares at $9.69 per share and an option to acquire 11,500 shares at an exercise price of $9.38. (5) Includes 201,139 5-year warrants at an exercise price of $12.00 and 50,000 10-year warrants at an exercise price of $11.98 issued in connection with the acquisition of Dominion Biologicals Limited, a currently exercisable option to acquire 5,625 shares at $9.69 per share, and an option to acquire 11,500 shares at an exercise price of $9.38. (6) Includes a currently exercisable option to acquire 10,000 shares at $6.00 per share and an option to acquire 5,000 shares at $12.38 per share. (7) Includes a currently exercisable option to acquire 5,000 shares at $12.38 per share. (8) Includes a currently exercisable option to acquire 10,000 shares at $8.00 per share and a currently exercisable option to acquire 5,000 shares at $12.38 per share. (9) Includes a currently exercisable option to acquire 7,500 shares at $8.88 per share and a currently exercisable option to acquire 1,500 shares at $12.38 per share. (10) A group consisting of Kairos Partners LP, Kairos Partners GP, LLC, Aim High Enterprises, Inc., and Stone Gate Partners, LLC reported in its Schedule 13D dated August 9, 2001 that it had sole power to vote and dispose of 728,170 shares, or 10.0% of outstanding shares. (11) Dimensional Fund Advisors, Inc ("DFA") reported in a Schedule 13G dated February 16, 2001, that in its capacity as an investment adviser may be deemed to beneficially own 715,562 shares or 9.8% of the Company, which are held of record by clients of DFA. DFA indicated that it had the sole power to vote or to dispose of 715,562 shares. Item 13.--Certain Relationships and Related Transactions. On June 6, 2000 Edward L. Gallup, President and CEO of Immucor, Inc., and a member of the board of directors, entered into a loan agreement with Immucor, Inc. to borrow up to $400,000 in order to meet margin calls related to loans made by brokerage companies. The Company believes that certain benefits would accrue to Immucor, Inc. and its shareholders if such margin calls were satisfied by some means other than having those shares sold by the broker. The interest rate on the loan is LIBOR plus 1%, which was the Company's current borrowing rate. The largest aggregate amount due during the fiscal year ended May 31, 2001 was $396,000. As of July 31, 2001 the amount owed to Immucor, Inc. is $396,000. PART IV Item 14.--Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Documents filed as part of this report: 1. Consolidated Financial Statements The Consolidated Financial Statements, Notes thereto, and Report of Independent Auditors thereon are included in Part II, Item 8 of this report. 2. Consolidated Financial Statement Schedule included in Part II, Item 8 of this report Schedule II -- Valuation and Qualifying Accounts Other financial statement schedules are omitted as they are not required or not applicable. 3. Exhibits 3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Immucor, Inc.'s quarterly report on Form 10-Q filed on January 16, 2001). 3.2 Amended and Restated Bylaws (amended and restated as of November 29, 2000) (incorporated by reference to Exhibit 3.2 to Immucor, Inc.'s quarterly report on Form 10-Q filed on January 16, 2001). 4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 16, 1999 (incorporated by reference to Exhibit 1 to Immucor, Inc.'s Current Report on Form 8-K dated April 16, 1999). 4.2 Amendment No. 1 dated as of November 29, 2000 to Shareholder Rights Agreement between Immucor, Inc. and EQUISERVE Trust Company, N.A. (incorporated by reference to Exhibit 4.2 to Immucor Inc.'s quarterly report on Form 10-Q filed on January 16, 2001. 10.1 Standard Industrial Lease, dated July 21, 1982, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.2 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1985). 10.1-1 Lease Amendment dated June 28, 1989, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1989). 10.1-2 Lease Amendment dated November 8, 1991, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10.1-3 Lease Agreement, dated February 2, 1996, between the Company and Connecticut General Life Insurance Company (incorporated by reference to Exhibit 10.1-3 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10.1-4 Lease Amendment, dated March 8, 1998, between the Company and Connecticut General Life Insurance Company (incorporated by reference to Exhibit 10.1-4 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1998). 10.1-5 Lease Amendment, dated August 11, 1999, between the Company and Connecticut General Life Insurance Company (incorporated by reference to Exhibit 10.1-5 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.2 Agreement, dated March 11, 1983, between the Company and The Kansas City Group, as amended through January 21, 1985 (incorporated by reference to Exhibit 10.2 to Registration Statement No. 33-16275 on Form S-1). 10.3 Agreement dated August 27, 1987, between the Company and the Kansas City Group amending Exhibit 10.2 (incorporated by reference to Exhibit 10.3 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1989). 10.4 United States Department of Health and Human Services Establishment License dated December 28, 1982, for the manufacture of biological products (incorporated by reference to Exhibit 10.12 to Registration Statement No. 33-966 on Form S-1). 10.5 United States Department of Health and Human Services Product License dated December 28, 1982, for the manufacture and sale of reagent red blood cells (incorporated by reference to Exhibit 10.13 to Registration Statement No. 33-966 on Form S-1). 10.6 United States Department of Health and Human Services Product License dated May 20, 1983, for the manufacture and sale of blood grouping s era (incorporated by reference to Exhibit 10.14 to Registration Statement No. 33-966 on Form S-1). 10.7 United States Department of Health and Human Services Product License date November 18, 1983, for the manufacture and sale of anti-human serum (incorporated by reference to Exhibit 10.15 to Registration Statement No. 33-966 on Form S-1). 10.8* Employment Agreement dated October 13, 1998, between the Company and Edward L. Gallup (incorporated by reference to Exhibit 10.8 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.9* Employment Agreement dated October 13, 1998, between the Company and Ralph A. Eatz (incorporated by reference to Exhibit 10.9 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.10* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.12 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.11* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.12* Severance Agreement dated October 13, 1998, between Immucor Inc. and Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.13* 1998 Stock Option Plan, including form of Stock Option Agreement used thereunder. 10.14* 1995 Stock Option Plan, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.14 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.15* 1990 Stock Option Plan, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.15 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). . 10.16* Description of 1983 Stock Option Plan (incorporated by reference to Exhibit 10.10 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ending May 31, 1985). 10.17* 1986 Incentive Stock Option Plan, amended July 29, 1987, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.9 to Registration Statement No. 33-16275 on Form S-1). 10.18* Employment Agreement dated October 13, 1998, between the Company and Steven C. Ramsey (incorporated by reference to Exhibit 10.20 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.19* Employment Agreement dated October 13, 1998, between the Company and Patrick Waddy (incorporated by reference to Exhibit 10.22 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.20 Loan Agreement among Immucor, Inc., Dominion Biologicals Limited, and Immucor Medizinische Diagnostik GmbH, as borrowers, and Wachovia Bank, National Association, as lender, dated as of February 23, 2001 (incorporated by reference to Exhibit 10.23 to Immucor, Inc.'s quarterly report on form 10-Q filed April 23, 2001). 21 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP. *Denotes a management contract or compensatory plan or arrangement. (b) Reports on Form 8-K On November 29, 2000, the Company filed a Form 8-K, relating to Item 9. Regulation FD Disclosure, the annual meeting of shareholders. (c) Exhibits The exhibits required to be filed with this Annual Report on Form 10-K pursuant to Item 601, of Regulation S-K are listed under "Exhibits" in Part IV, Item 14(a)(3) of this Annual Report on Form 10-K, and are incorporated herein by reference. (d) Financial Statement Schedule The Financial Statement Schedule required to be filed with this Annual Report on Form 10-K is listed under "Financial Statement Schedule" in Part IV, Item 14(a)(2) of this Annual Report on Form 10-K, and is incorporated herein by reference. 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. IMMUCOR, INC. By: /s/ EDWARD L. GALLUP -------------------------------------------------------------- Edward L. Gallup, Chairman of the Board of Directors, President and Chief Executive Officer September 13, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behal f of the registrant and in the capacities and on the dates indicated. /s/ EDWARD L. GALLUP - ----------------------------------------------------------------------- Edward L. Gallup, Director, Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) September 13, 2001 /s/ STEVEN C. RAMSEY - ----------------------------------------------------------------------- Steven C. Ramsey, Vice President - Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) September 13, 2001 /s/RALPH A. EATZ - ----------------------------------------------------------------------- Ralph A. Eatz, Director, Senior Vice President - Operations September 13, 2001 /s/ PATRICK WADDY - ----------------------------------------------------------------------- Patrick Waddy, European Finance Director and President of Dominion Biologicals Limited September 13, 2001 /s/DANIEL T. MCKEITHAN - ----------------------------------------------------------------------- Daniel T. McKeithan, Director September 13, 2001 /s/G. BRUCE PAPESH - ----------------------------------------------------------------------- G. Bruce Papesh, Director September 13, 2001 /s/ DIDIER L. LANSON - ----------------------------------------------------------------------- Didier L. Lanson, Director September 13, 2001 /s/ DR. GIOACCHINO DE CHIRICO - ----------------------------------------------------------------------- Dr. Gioacchino De Chirico, Director, Director of European Operations and President of Immucor Italia S.r.l. September 13, 2001 /s/ DENNIS M. SMITH - ----------------------------------------------------------------------- Dennis M. Smith, Jr., M.D., Director September 13, 2001 /s/JOSEPH E. ROSEN - ----------------------------------------------------------------------- Joseph E. Rosen, Director September 13, 2001 EXHIBIT INDEX Number Description 3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Immucor, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter filed on January 16, 2001). 3.2 Amended and Restated Bylaws (amended and restated as of November 29, 2000) (incorporated by reference to Exhibit 3.2 to Immucor, Inc.'s Quarterly Report on Form 10-Q filed on January 16, 2001). 4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 16, 1999 (incorporated by reference to Exhibit 1 to Immucor, Inc.'s Current Report on Form 8-K dated April 16, 1999). 4.2 Amendment No. 1 dated as of November 29, 2000 to Shareholder Rights Agreememt between Immucor, Inc. and EQUISERVE Trust Company, N.A. (incorporated by reference to Exhibit 4.2 to Immucor Inc.'s quarterly report on Form 10-Q filed on January 16, 2001. 10.1 Standard Industrial Lease, dated July 21, 1982, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.2 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1985). 10.1-1 Lease Amendment dated June 28, 1989, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1989). 10.1-2 Lease Amendment dated November 8, 1991, between the Company and Colony Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1992). 10.1-3 Lease Agreement dated February 2, 1996, between the Company and Connecticut General Life Insurance Company. (incorporated by reference to Exhibit 10.1-3 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1996). 10.1-4 Lease Amendment dated March 8, 1998, between the Company and Connecticut General Life Insurance Company (incorporated by reference to Exhibit 10.1-4 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1998). 10.1-5 Lease Amendment dated August 11, 1999, between the Company and Connecticut General Life Insurance Company (incorporated by reference to Exhibit 10.1-5 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.2 Agreement, dated March 11, 1983, between the Company and The Kansas City Group, as amended through January 21, 1985 (incorporated by reference to Exhibit 10.2 to Registration Statement No. 33-16275 on Form S-1). 10.3 Agreement dated August 27, 1987, between the Company and the Kansas City Group amending Exhibit 10.2 (incorporated by reference to Exhibit 10.3 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1989). 10.4 United States Department of Health and Human Services Establishment License dated December 28, 1982, for the manufacture of biological products (incorporated by reference to Exhibit 10.12 to Registration Statement No. 33-966 on Form S-1). 10.5 United States Department of Health and Human Services Product License dated December 28, 1982, for the manufacture and sale of reagent red blood cells (incorporated by reference to Exhibit 10.13 to Registration Statement No. 33-966 on Form S-1). 10.6 United States Department of Health and Human Services Product License dated May 20, 1983, for the manufacture and sale of blood grouping sera (incorporated by reference to Exhibit 10.14 to Registration Statement No. 33-966 on Form S-1). 10.7 United States Department of Health and Human Services Product License date November 18, 1983, for the manufacture and sale of anti-human serum (incorporated by reference to Exhibit 10.15 to Registration Statement No. 33-966 on Form S-1). 10.8* Employment Agreement dated October 13, 1998, between the Company and Edward L. Gallup. (incorporated by reference to Exhibit 10.8 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999. 10.9* Employment Agreement dated October 13, 1998, between the Company and Ralph A. Eatz. (incorporated by reference to Exhibit 10.9 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.10* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.12 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.11* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.12* Severance Agreement dated October 13, 1998, between Immucor, Inc. and Dr. Gioacchino De Chirico.(incorporated by reference to Exhibit 10.13 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.13* 1998 Stock Option Plan, including form of Stock Option Agreement used thereunder. 10.14* 1995 Stock Option Plan, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.15 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.15* 1990 Stock Option Plan, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.15 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1995). 10.16* Description of 1983 Stock Option Plan (incorporated by reference to Exhibit 10.10 to Immucor, Inc.'s Annual Repor t on Form 10-K for the fiscal year ending May 31, 1985). 10.17* 1986 Incentive Stock Option Plan, amended July 29, 1987, including form of Stock Option Agreement used thereunder (incorporated by reference to Exhibit 10.9 to Registration Statement No. 33-16275 on Form S-1). 10.18* Employment Agreement dated October 13, 1998, between the Company and Steven C. Ramsey. (incorporated by reference to Exhibit 10.20 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.19* Employment Agreement dated October 13, 1998, between the Company and Patrick Waddy. (incorporated by reference to Exhibit 10.22 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1999). 10.20 Loan Agreement among Immucor, Inc., Dominion Biologicals Limited, and Immucor Medizinische Diagnostik GmbH, as borrowers, and Wachovia Bank, National Association, as lender, dated as of February 23, 2001 (incorporated by reference to Exhibit 10.23 to Immucor, Inc.'s quarterly report on form 10-Q filed April 23, 2001). 21 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young LLP *Denotes a management contract or compensatory plan or arrangement. EX-10 3 exh1013.txt 1998 STOCK OPTION PLAN EXHIBIT A IMMUCOR, INC. 1998 STOCK OPTION PLAN 1. Purpose. This 1998 STOCK OPTION PLAN (the "Plan") has been established by Immucor, Inc., a Georgia corporation (the "Company"), to secure for the Company and its shareholders the benefits arising from capital stock ownership by those who will contribute to its future growth and continued success. The Plan will provide a means whereby such persons may purchase shares of the common stock, $0.10 par value, of the Company ("Common Stock") pursuant to options. 2. Administration. (a) The authority to manage and control the operation and administration of the Plan shall be vested in a committee (the "Committee") of at least three (3) members of the Board of Directors to be appointed at the pleasure of the Board of Directors of the Company. (b) The Committee shall be subject in all respects to the supervisory prerogative of the Board of Directors of the Company. To the extent permitted by applicable law, the powers of the Committee may be exercised by the Board of Directors, in which case the references to the Committee shall be construed to apply equally to the Board of Directors. (c) The Committee shall have the power to interpret and apply the Plan and to make regulations for carrying out its purpose. Any interpretation of the Plan by the Committee and any decision made by the Committee on any other matter relating to the Plan shall be final and binding on all persons. (d) No member of the Committee shall be liable for any action or determination made in good faith and permitted by the terms of the Plan. 3. Participation. Subject to the terms of the Plan, the Committee shall determine and designate, from time to time, employees and directors of the Company to whom options are to be granted (the "Participants"), the number of shares of Common Stock that shall be subject to options granted to each Participant, the terms and conditions of each option, and the voting and transfer restrictions, if any, to which the shares of Common Stock obtainable upon exercise of each option shall be subject. 4. Shares Subject to the Plan. The shares of stock that may be subject to options under the Plan shall be shares of Common Stock, and may consist of either unissued shares or shares held in the treasury of the Company. The aggregate number of shares of Common Stock for which options may be granted under the Plan shall not exceed One Million Shares (1,000,000) shares, subject to such adjustments as may take place in accordance with Section 12. If, as to any number of shares, any option granted pursuant to the Plan expires or terminates while the Plan remains in effect, such number of shares shall again be available for grant under the Plan. 5. Option Price. The price at which a share of Common Stock may be purchased pursuant to the exercise of an option under the Plan shall be fixed by the Committee on the date the option is granted. 6. Option Expiration Date. The "Expiration Date" with respect to an option granted to a Participant under the Plan means the date established by the Committee as the date after which the option is not exercisable. 7. Exercise of Option. (a) Each option shall be exercisable at such time or times as shall be established hereunder. The Committee may, in its discretion, accelerate the exercisability of any one or more options at any time and for any reason. A Participant may exercise an option by giving written notice (the "Exercise Notice") thereof prior to the option's Expiration Date to the Secretary of the Company at the Company's corporate headquarters. (b) The full purchase price of the shares purchased pursuant to the exercise of an option shall be paid in cash or check or by tender of stock certificates in proper from for transfer to the Company representing shares of Common Stock valued at the last sales price of the Common Stock on the preceding business day as reported on the National Association of Securities Dealers Automated Quotation System (NASDAQ) National Market System, or any successor system, or by any combination of the foregoing, contemporaneously with the giving of the Exercise Notice. The Committee also may accept in payment of all or part of the purchase price a promissory note of the Participant. In addition to payment of the full price, the Participant shall pay to the Company at the time of exercise, or shall otherwise make arrangements satisfactory to the Committee regarding payment of, any additional amount that the Committee deems necessary to satisfy the Company's liability to withhold federal, state or local income or other taxes incurred by reason of exercise of the option. 8. Termination of Employment. The Committee may specify, with respect to the options granted to any particular Optionee who is an employee of the Company, the effect upon such Optionee's right to exercise an option of the termination of such Optionee's employment under various circumstances, which effect may include immediate or deferred termination of such Optionee's rights under an option, or acceleration of the date at which an option may be exercised in full. 9. Compliance With Applicable Laws. Notwithstanding any other provision of the Plan, the Company shall not be obligated to issue any shares of Common Stock under the Plan unless such issuance is in compliance with all applicable laws and any applicable requirements of any securities exchange on which the Common Stock is traded. Prior to the issuance of any shares of Common Stock under the Plan, the Company may require a written statement from the recipient as evidence of such compliance, including, in some cases, an acknowledgment by the recipient that the recipient is acquiring the shares for investment and not for the purpose or with the intention of distributing the shares. 10. Transferability and Restrictions Upon Transfer and Voting. Options under the Plan are not transferable except by will or under the laws of descent and distribution. Options may be exercised during the lifetime of the Participant only by the Participant. Shares of Common Stock received upon exercise of options granted under the Plan may be subject to such voting and transfer restrictions as the Committee in its sole discretion shall establish at the time such options are granted. If the transfer or voting of shares obtained upon exercise of an option is restricted, certificates representing such shares may bear a legend referring to such restrictions. 11. Employment and Shareholder Status. This Plan, any document describing this Plan, the grant of any option hereunder, and any agreement evidencing the grant of such option shall not be construed to give any Participant or any other person a right to employment or continued employment by the Company or affect the right of the Company to terminate the employment of any such person with or without cause. The grant of an option under the Plan shall not confer upon the holder thereof any right as a shareholder of the Company. No person entitled to exercise any option granted under the Plan shall have any of the rights or privileges of a shareholder of record with respect to any shares of Common Stock issuable upon exercise of such option until such option is exercised and certificates representing such shares have been issued and delivered. 12. Adjustments and Ownership Changes. (a) In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend, stock split, or similar corporate change involving the Common Stock, the aggregate number and kind of shares subject to options outstanding or to be granted under the Plan shall be proportionately adjusted or modified, and the terms of any outstanding option shall be adjusted or modified accordingly. (b) Unless otherwise provided in the Option Agreement (as defined in Section 13 hereof), in the event of any merger, consolidation, reorganization, division or other corporate transaction in which the Common Stock is converted into another security or into the right to receive securities or property of the Company or of any other entity (an "Ownership Change"), the Company shall have the right, at its discretion, to provide for the assumption or substitution of comparable stock options in place of the options theretofore granted hereunder. (c) Unless otherwise provided in the Option Agreement (as defined in Section 13 hereof), in the event such an Ownership Change takes place and provision is not made for such assumption or substitution, or in the event that the Company sells all or substantially all of its assets, or engages in a liquidation of all or substantially all of its assets (a "Termination Event"), the Committee may, in its discretion, accelerate the exercisability of any one or more options in accordance with Section 7. It is the policy of the Company that the decision whether to accelerate the exercisability of outstanding options take into account such factors as the profitability of the transaction giving rise to the Termination Event to the shareholders of the Company, the likelihood that the business of the Company will substantially continue under the same, different or changed ownership following such transaction, the tenure and performance of individual Participants, the possibility that some or all of the Participants receive or are invited to participate in benefits or benefit plans if they continue as employees of the successor to the Company's business or other consideration in connection with such transaction, and any other factors that may be appropriate within the scope of their business judgment. Whether or not such an acceleration occurs, all outstanding exercisable and non-exercisable options shall be canceled to the extent they remain unexercised at the time such transaction is consummated. (d) In no event shall any fraction of a share of stock be issued upon the exercise of an option. 13. Agreement With Company. At the time of a grant of an option, the Committee shall require a Participant to enter into a written agreement with the Company in a form specified by the Committee (the "Option Agreement"). The Option Agreement shall reflect the Participant's agreement to the terms and conditions of the Plan and to such additional terms and conditions, not inconsistent with the Plan, as the Committee may, in its sole discretion, prescribe. No option purported to be granted pursuant to the Plan shall be valid or binding on the Company unless evidenced by an Option Agreement approved by the Committee. 14. Amendment and Termination of Plan. The Board of Directors of the Company may at any time amend, suspend or terminate the Plan. No amendment, suspension or termination of the Plan (other than in connection with such actions as are expressly authorized in the Plan) shall adversely affect or impair any option previously granted under the Plan without the consent of the holder thereof. EXHIBIT B IMMUCOR, INC. OPTION AGREEMENT - 1998 PLAN THIS OPTION AGREEMENT (this "Agreement"), dated as of Month, Day, 199X, is by and between IMMUCOR, INC., a Georgia corporation (the "Company"), and (the "Optionee"). WHEREAS, the Board of Directors of the Company has determined that the Optionee is to be granted under the Company's 1998 Stock Option Plan (the "Plan"), on the terms and conditions set forth herein, an option (the "Option") to purchase a specified number of shares of the common stock, par value $0.10 per share, of the Company (the "Common Stock"). NOW, THEREFORE, the Company and the Optionee hereby agree as follows: 1. Grant of Option: Number of Shares and Option Price. The Option is for up to ______ shares of Common Stock (the "Option Shares") at a price of $x.xx per share (the "Option Price"). The Option is granted pursuant to the Plan and is subject to the terms and conditions thereof, which are incorporated herein by this reference. To the extent any provision in this Agreement is inconsistent with the Plan, the provisions of the Plan shall govern. The Participant hereby acknowledges receipt of, or access to, a copy of the Plan. 2. Period of Option and Conditions of Exercise. (a) The Option shall be considered granted as of the date hereof (the "Option Date"). The Option shall expire on Month, Day, 200X (the "Expiration Date"). Upon the Expiration Date, the Optionee shall no longer be entitled to exercise the Option. (b) The Option may be exercised with respect to the number of Option Shares, at the times and under the conditions, if any, set forth on Exhibit A hereto. Once the Option is exercisable with respect to a number of Option Shares, the Optionee may exercise the Option at any time from time to time with respect to all or part of those Option Shares. If requested by the Company, the Optionee shall deliver this Agreement to the Secretary of the Company at the time of exercise of the Option so that a notation may be made in this Agreement as to such exercise. After such notation has been made, this Agreement shall then be returned to the Optionee. (c) To exercise the Option, the Participant must deliver to the Secretary of the Company at its corporate headquarters the Notice of Exercise attached as Exhibit B to this Agreement together with payment of the aggregate exercise price in the manner permitted by the Plan. (d) The Optionee shall not be deemed to be a holder of any Option Shares following the exercise of the Option until the full exercise price for such shares has been paid and a stock certificate has been issued and delivered for such shares. 3. Adjustment in Number of Shares. The number of Option Shares shall be subject to adjustment for stock dividends, stock splits, or similar corporate change involving the Common Stock to the extent set forth in Section 12 of the Plan. 4. Termination of Employment. (a) In the event of the termination of the Optionee's employment with the Company, other than a termination that is either (i) for Cause, (ii) voluntary on the part of the Optionee and without written consent of the Company, or (iii) for reasons of death or disability, the Optionee may exercise this Option at any time within three months after such termination to the extent of the number of shares which were exercisable hereunder at the date of such termination. (b) In the event of a termination of the Optionee's employment that is either (i) for Cause or (ii) voluntary on the part of the Optionee and without written consent of the Company, this Option, to the extent not previously exercised, shall terminate immediately and shall not thereafter be or become exercisable. For purposes of the Agreement, "Cause" shall mean that or destruction of property of the Company or a subsidiary, refusal or continuing inability to perform reasonably assigned duties, disregard of Company rules or policies, conduct evidencing willful or reckless disregard of the interests of the Company, or the breach of a material provision of this Agreement. Such determination shall be made by the Committee and shall be final and binding on all parties hereto. 5. Disabled Optionee. In the event of termination of employment because of the Optionee's mental or physical disability determined by a medical doctor satisfactory to the Company, the Optionee (or his or her personal representative) may exercise this Option, within a period ending on the earlier of (a) the last day of the one year period following the Optionee's termination or (b) the expiration date of this Option, to the extent of the number of shares which were exercisable hereunder at the date of such termination. 6. Death of Optionee. In the event of a termination of employment because of the Optionee's death, the Optionee's administrators, executors or personal representatives, may exercise this Option at any time within a period ending on the earlier of (a) the last day of the one year period following the Optionee's death or (b) the expiration date of this Option, to the extent of the number of shares that were exercisable hereunder at the date of termination. 7. Ownership Change. In the event of any merger, consolidation, reorganization, division or other corporate transaction in which the common stock of the Company is converted into another security or into the right to receive securities or property of the Company or of any other entity (an "Ownership Change"), the Company shall provide for the assumption or substitution of comparable stock options in place of the Option. 8. Option Not Transferable. The Option is not transferable other than by will or under the laws of descent and distribution. During the lifetime of the Optionee, the Option may be exercised only by the Optionee. 9. Investment Representations. (a) The Optionee acknowledges that, unless and until the Company notifies the Optionee otherwise, the Option and the Option Shares obtainable upon exercise of the Option have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under applicable state securities laws. (b) The Optionee acknowledges that, prior to the issuance of the Option Shares, the Company may delay the delivery of certificates for the Option Shares for such time as the Company deems necessary or desirable to enable the Company to comply with (i) the requirements of the Securities Act or the Securities Exchange Act or 1934, as amended, or any rules or regulations of the Securities and Exchange Commission or any stock exchange promulgated thereunder; or (ii) the requirements of applicable state laws relating to authorization, issuance or sale of such securities. The Optionee shall provide such information as the Company deems necessary or desirable to secure such compliance. 10. Legends. The share certificates evidencing the Option Shares may contain such legends as may be required in keeping with applicable state corporation and securities laws. 11. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when delivered by personal delivery, by facsimile transmission or by mail, to the following address: To Optionee: At the address shown under the Optionee's signature below. To the Company: Immucor, Inc. 3130 Gateway Drive PO Box 5625 Norcross, Georgia 30091-5625 FAX: (404) 242-8930 Attention: Chief Financial Officer or at such other address or facsimile number as the parties hereto shall have last designated by notice to the other party. Any notice given by personal delivery or mail shall be deemed to have been delivered on the date of receipt of such delivery at such address; and any notice given by facsimile transmission shall be deemed to have been delivered on the date of transmission if received during business hours on a business day, or the next business day after transmission if received after business hours on a business day or at any time on a on-business day. 12. Failure to Enforce Not a Waiver. The failure of the Company or the Optionee to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provisions or of any other provision hereof. 13. Amendments. This Agreement may be amended or modified only by an instrument in writing signed by the Optionee and an authorized representative of the Company. Except as provided in Section 13, no third party shall be entitled to claim the benefit of or enforce this Agreement. 14. Governing Law. This Agreement has been entered into, and shall be governed by and construed according to the laws of the State of Georgia, without regard to the conflicts of law rules thereof. 15. Successors and Assigns. This Agreement shall inure to the benefit of, and be binding on, the successors and assigns of the Company, and such persons as may be permitted to succeed to the rights of the Optionee hereunder with respect to the Option and the Option Shares. The parties shall take such steps as reasonably may be necessary, including but not limited to the execution and delivery of an agreement or replace this Agreement, to give effect to the provisions of this Section 13 in a way that the relative benefits and obligations of the parties (and their successors and assigns) under this Agreement are preserved as closely as possible. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. IMMUCOR, INC. By: ------------------------------------------------------ Steven C. Ramsey Chief Financial Officer Name Address: ------------------------------------------------------ EXHIBIT A To Option Agreement Dated As of Month, Day, 199X Number of Option Shares and Terms and Conditions of Exercise: ______ shares exercisable after Month, Day, 199X, provided employee is still employed by Immucor, Inc. on a full-time basis on this date. 50% of the total granted exercisable after 25% of the total granted exercisable after 25% of the total granted exercisable after Notwithstanding the foregoing schedule, all options shall be immediately exercisable on an accelerated basis in the event of an Ownership Change as defined in Section 5 of this Option Agreement, a Termination Event as defined in Section 12 of the 1998 Plan or a Termination of Employment under Sections 4(a)(1), 4(a)(2), 4(a)(3) or 4(a)(4) of this Option Agreement. EXHIBIT B NOTICE OF EXERCISE OF STOCK OPTIONS - 1998 PLAN To Immucor, Inc. I hereby elect to purchase _________________________ shares of common stock, par value $0.10 per share ("Common Stock"), of Immucor, Inc. (the "Company") in accordance with the option ("Option") granted tome on Month, Day, 199X, under the Option Agreement between the Company and me, dated as of that date (the "Option Agreement"). Enclosed is payment in full of the exercise price for such shares, calculated in accordance with the terms of the Company's 1998 Stock Option Plan, consisting of a check in the amount of $_______________. I hereby represent and warrant that my exercise of the Option is in compliance with the terms and conditions set forth in the Option Agreement. I further acknowledge and agree that the shares so purchased shall remain subject to the applicable terms and conditions set forth in the Option Agreement. Date: ---------------------------------------------- ---------------------------------------------- EX-21 4 may01exh21.txt SUBSIDIARIES OF IMMUCOR, INC. EXHIBIT 21 Subsidiaries of Registrant Subsidiary Jurisdiction of Organization Immucor Medizinische Diagnostik GmbH Federal Republic of Germany Immucor Italia S.r.l. Italy Immucor Portugal, Lda. Portugal Gamma Biologicals, Inc. United States (Texas) Gamma Biologicals International, Inc. United States Virgin Islands Gamma Biologicals B.V. Netherlands Dominion Biologicals Limited Canada Immucor, S.L. Spain Immucor Acquisitions Inc. S.A. Belgium Immucor Belgium S.A. Belgium Immucor France s.a.r.l. France Immucor Trading Company Barbados BCA Acquisition Company United States (Georgia) The Company owns 100% of the outstanding stock of each of the above. EX-23 5 exh231.txt AUDITORS CONSENT 5/31/01 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement Nos. 333-78893, 33-35863 and 33-42261 on Form S-3 of Immucor, Inc. and in the related Prospectuses and Registration Statement Nos. 33-4636, 33-24199, 33-36554, 33-41406, 33-49882 and 33-62097 on Form S-8 pertaining to the Key Employee Stock Incentive Plan, Salary Reduction Plan, 1983 Stock Incentive Plan and 1986 Incentive Stock Option Plan; 1987 Non-Incentive Stock Option Plan; 1989 Non-Incentive Stock Option Plan; 1990 Stock Option Plan and 1995 Stock Option Plan, respectively, of Immucor, Inc., of our report dated August 29, 2001 (except for paragraph 6 of Note 17, as to which the date is September 11, 2001) with respect to the consolidated financial statements and schedule of Immucor, Inc. included in the Annual Report (Form 10-K) for the year ended May 31, 2001. Ernst & Young LLP Atlanta, Georgia September 13, 2001 -----END PRIVACY-ENHANCED MESSAGE-----