-----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, EVfhcLiRXauUSXDxcLwHToOlQQlIOe3UhONJkqP7Jatcmts/e0eW842MBCYfe0XL HcOuN3aWWi4V3sacDiEE8A== 0000830736-96-000007.txt : 19960326 0000830736-96-000007.hdr.sgml : 19960326 ACCESSION NUMBER: 0000830736-96-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOPOOL INTERNATIONAL INC CENTRAL INDEX KEY: 0000830736 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 581729436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17714 FILM NUMBER: 96537756 BUSINESS ADDRESS: STREET 1: 6025 NICOLLE ST SUITE A CITY: VENTURA STATE: CA ZIP: 93003 BUSINESS PHONE: 8056540643 MAIL ADDRESS: STREET 1: 6025 NICOLLE STREET CITY: VENTURA STATE: CA ZIP: 93003 FORMER COMPANY: FORMER CONFORMED NAME: CYTRX BIOPOOL LTD DATE OF NAME CHANGE: 19890716 10-K 1 ____________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 COMMISSION FILE NUMBER 0-17714 BIOPOOL INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) DELAWARE 58-1729436 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6025 Nicolle Street Ventura, California 93003 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (805) 654-0643 Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.01 per share NASDAQ 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 proceeding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of Biopool International, Inc. Common Stock, $.01 par value, held by non affiliates, computed by reference to the average of the closing bid and asked prices as reported by NASDAQ on March 14, 1996, was $10,781,683. Number of shares of Common Stock of Biopool International, Inc., $.01 par value, issued and outstanding as of December 31, 1995: 7,935,751. Portions of Registrant's Proxy Statement relating to its 1996 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report. _______________________________________________________________________ INDEX TO ANNUAL REPORT ON FORM 10-K PART I Page ____ Item 1. Business. 3 Item 2. Properties. 12 Item 3. Legal Proceedings. 13 Item 4. Submission of Matters to a Vote of Security-Holders. 13 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. 14 Item 6. Selected Financial Data. 14 Item 7. Management's Discussion and Analysis of Results of Operations. 16 Item 8. Financial Statements and Supplementary Data. 19 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 19 PART III Item 10. Directors and Executive Officers of the Registrant. 20 Item 11. Executive Compensation. 20 Item 12. Security Ownership of Certain Beneficial Owners and Management. 20 Item 13. Certain Relationships and Related Trans- actions. 20 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 21 Signatures 2 PART I ITEM 1. BUSINESS Biopool International, Inc. (which, together with its subsi- diaries, is herein referred to as the "Company" or "Biopool") is engaged in the research, development, manufacture, and marketing of in vitro diagnostic products, which are sold on a worldwide basis to hospitals, clinical laboratories, and research institutions. Biopool, headquartered in Ventura, California, was incorporated in Delaware in 1987 and currently maintains three wholly-owned operating subsidiaries, each of which carries on research, manu- facturing, and sales and marketing activities: - Biopool AB ("Biopool Sweden") in Umea, Sweden, was acquired by Biopool in March 1988. - Biopool Canada Inc. ("Biopool Canada," formerly Inter-Haematol Inc.) in Burlington, Ontario, Canada, was acquired by Biopool in January 1990. - Medical Diagnostic Technologies, Inc. ("MeDiTech") in Ventura, California, was acquired by Biopool in January 1992. The Company markets its products through a network of independent distributors in over 35 countries around the world. Biopool's subsidiaries also market the combined product lines directly to hospitals and clinical laboratories in their own domestic markets. A substantial portion of the Company's revenue comes from private-label and OEM sales of its products to other companies who are selling to the same markets. Biopool also engages in customized development and production of its product range to meet the specific requirements of corporate clients. PRODUCTS The Company's products address three general areas of the market for in vitro diagnostic reagents and controls, namely: * Blood coagulation, fibrinolysis, and platelet and vascular function. Such products are used to: - diagnose patients who have suffered clot-related circulatory diseases such as myocardial infarction, stroke, embolism, or deep vein thrombosis - diagnose patients who are suffering from certain bleeding diseases - monitor patients undergoing therapy for such diseases - identify patients at high risk for such diseases 3 * Clinical chemistry reagents and controls for use in: - diagnosing patients for pathological organ dysfunction; i.e., heart, liver, pancreatic, etc., diseases - blood profile testing - providing daily quality control data substantiating the accuracy of test results - calibrating and controlling the functionality of laboratory analyzers * Toxicology controls, such as: - drugs of abuse controls to effectively monitor the analyzer and technician variables associated with identifying abused substances, such as cocaine, marijuana, amphetamines, etc., in patient samples A summary of certain key products is as follows: * Test Kits Used for the Measurement of Various Components of the Fibrinolytic System The fibrinolytic system consists of a number of enzymes and other proteins that participate in limiting the size of blood clots and in the dissolution of blood clots that form when the blood vessel wall is damaged. The clot forms around clumped or aggregated blood platelets forming a temporary "plug" to prevent blood loss. When the fibrinolytic system is improperly balanced (hypoactive), the blood clot can become oversized and disrupt blood flow, resulting in tissue damage. The principal enzyme involved in fibrinolysis is plasmin. Plasmin is formed from its inactive precursor, plasminogen, by the action of naturally occurring enzymes, tissue plasminogen activator (tPA), and urokinase plasminogen activator (uPA). A high plasma level of the principal inhibitor of plasminogen activators, PAI-1 (plasminogen activator inhibitor, type 1), has been described in the scientific literature as an important risk factor in developing venous and arterial thrombosis. Hyperactive fibrinolysis, including decreased levels of inhibitors, may result in bleeding problems. Some representative fibrinolytic product lines manufactured by Biopool include: TintElize-R- and Imulyse-TM- -- Biopool's ELISA (enzyme-linked immunosorbent assay) products used for measuring tPA, uPA, PAI-1, PAI-2, and Lp(a) antigen. Lp(a), a lipoprotein which contains a surface protein with structural similarity to plasminogen, has been described as an important new indicator for the risk of developing atherosclerotic disease. 4 Spectrolyse-R- -- kits that measure enzymatic activity by hydrolysis of a synthetic chromogenic substrate. Biopool makes these kits for the determination of alpha-2-antiplasmin, tPA, and PAI-1 activity in plasma. Minutex-R- -- kits that use the agglutination of latex beads to detect certain analytes. Biopool markets such a kit for the deter- mination of fibrin D-dimer, which is a rapid indicator of a clot present in the circulation. Stabilyte-TM- -- a unique patented blood collection device that stabilizes tPA activity and other serine proteases in blood after collection, greatly simplifying their measurement. Fibrinolysis Reference Plasma -- a unique reference plasma used as a clinical laboratory control for tPA and PAI-1 determination. * Test Kits for the Measurement of Various Components of the Blood Coagulation (Clotting) System The coagulation system consists of a number of clotting factor proteins that interact in a complex way to cause the polymerization of fibrinogen to fibrin, resulting in clot formation. The clotting factors, identified by Roman numerals (e.g., factor II, factor VIII, etc.) also have inhibitors present in the circulation which limit their activity. Congenital or acquired deficiencies of any of the clotting factors may result in bleeding, while deficiencies in the inhibitors are associated with thrombotic complications. Some representative product lines manufactured by Biopool include: Spectrolyse-R- -- as described above, are kits used to measure the activity of a given analyte through hydrolysis of a synthetic chromogenic substrate. Biopool makes kits for the determination of factor VIII, plasminogen, protein C, antithrombin III, and heparin. Bioclot-TM- -- kits that determine the plasma activity of a given analyte by clotting time assay. Biopool makes Bioclot-TM- kits for the determination of protein C and, in early 1996, received U.S. Food and Drug Administration (FDA) approval to market an additional Bioclot-TM- kit for the determination of protein S. Both of these proteins are highly important, naturally occurring anticoagulants, whose absence can result in severe thrombotic disorders. Electroimmunodiffusion (EID) -- kits for the determination of protein C, protein S, and von Willebrand factor. Factor Deficient Plasmas -- human plasmas synthetically depleted of individual clotting factors using specific monoclonal and polyclonal antibodies. These plasmas are used as substrate plasmas in the clinical laboratory in the determination of clotting factor deficiency in patients. 5 Hemostasis Reference Plasma -- a freeze-dried reference plasma that has been assayed against international plasma standards (obtained from the World Health Organization) for over 17 hemostasis analytes and marketed as a universal control plasma. * Products Used in the Routine Screening of the Coagulation System, Monitoring Patients on Oral Anticoagulant or Heparin Therapy, and Assessing Platelet Function Thromboplastin -- used for monitoring patients on oral anti- coagulant therapy, for routine coagulation system assessment, and in specific clotting factor assays. APTT Reagent -- used in the monitoring of patients on therapeutic heparin, presurgical screening, routine coagulation system screening, and in coagulation factor assays. Fibrinogen Kit -- used in the routine determination of fibrinogen when assessing bleeding disorders. There is an increasing interest in the performance of fibrinogen assays as an abnormally high level of plasma fibrinogen is considered a risk factor for thrombotic disease. Coagulation Control Plasmas -- freeze-dried, stabilized human plasma used in the day-to-day control of routine coagulation tests. FDP Collection Tube -- a specialized system of blood collection designed for use in fibrin degradation product (FDP) assays and compatible with a variety of commercially available FDP kits. Platelet Aggregation Reagents -- used in the determination of blood platelet abnormalities. Ristocetin Cofactor Assay -- used in the diagnosis of von Willebrand disease, one of the most common hereditary bleeding disorders in the population. * Newly Introduced Products for Clinical Chemistry and Toxicology Drugs of Abuse Controls -- a system of multi-level, multi- analyte, liquid-stable controls to be used as quality control checks when testing for drugs of abuse (e.g., barbiturates, opiates, amphetamines, etc.) in clinical laboratory and forensic lab settings. Clinical Chemistry Reagents -- used for the determination of blood constituents such as cholesterol, lipase, triglycerides, alkaline phosphatase, blood urea nitrogen, and others. MANUFACTURING AND QUALITY CONTROL The Company currently manufactures its reagents and assembles its test kits at its facilities in Ventura (California), Umea (Sweden), 6 and Burlington (Canada). Many of the raw materials used in the manufacture of its test kits, including polyclonal antibodies, monoclonal antibodies, and purified proteins, are prepared by the Company. In cases where raw materials are obtained from outside sources, the Company avoids dependence on any one source. Human plasma, an important starting material for many of the products, is sourced from licensed blood banks and plasmapheresis centers. The Company believes that the available sources of materials are adequate for its present and anticipated needs. All of the Company's products are manufactured in accordance with Good Manufacturing Practices (GMP's) for Medical Devices as promul- gated by the FDA. The Company is registered with the U.S. Drug Enforcement Administration to handle Schedules I-V controlled substances. Vial-filling, freeze-drying, microtiter plate-filling, and processing equipment are adequate for the Company's present needs. During 1995, the Company completed installation of additional manufacturing equipment at its Ventura facility and expanded its facility from 8,000 to 20,000 square feet with new state-of-the-art clean rooms and laboratories. Management believes that two- to three-fold volume increases can be accommodated with little addi- tional investment in facilities. SALES AND MARKETING Biopool's strategies for market growth are three-fold: * The Company currently has the broadest range of products of any competitor in the hemostasis/fibrinolysis market, estimated to be $600 million worldwide. At approximately 1% market share, Biopool intends to gain further market share by enhanced sales through its current distribution network and a continuing expansion of dealers into new geographical areas. * The worldwide in vitro diagnostics market is estimated to be $15- 18 billion, of which hemostasis is only a small part. The Company has introduced products into ever-expanding segments of that diag- nostics market, including toxicology controls (estimated at $50-100 million) and clinical chemistry reagents ($3-4 billion). The intro- duction of such products further supports the Company's distribution network to supply the end-user consumer with a broader range of quality diagnostics from a single source. * New product development is aimed at expanding the Company's presence in the important area of cardiovascular disease diagnostics. Many of the Company's products currently assess markers of cardio- vascular risk; new products which serve to assess platelet function are expanding Biopool's presence in this very important area. No customer accounted for in excess of 10% of sales in 1995. 7 RESEARCH AND DEVELOPMENT AND NEW PRODUCTS Research and development activities are carried out at each of the Company's three subsidiaries and continue to target new and interesting in vitro diagnostic reagents and controls, which broaden the Company's product offering to its marketing partners. Product development efforts seek to identify specific market niches where the Company may utilize its technology to develop unique, yet very "do- able," products. In 1995, Biopool obtained FDA approval for 7 new products: - ALANINE AMINOTRANSFERASE CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of liver dysfunction. - ALKALINE PHOSPHATASE CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of liver dysfunction. - ASPARTATE AMINOTRANSFERASE CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of liver dysfunction. - BLOOD UREA NITROGEN CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of kidney dysfunction. - CREATINE KINASE CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of heart, skeletal muscle, and brain dysfunctions. - LACTATE DEHYDROGENASE CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of tissue damage. - TRIGLYCERIDES CHEMISTRY REAGENT - a test system routinely used in the clinical diagnosis of atherosclerosis and coronary heart disease. In addition, two new products for platelet function testing have been developed for use in the research setting, hopefully a prelude to their future acceptance in routine clinical testing. At least six new diagnostic kits are slated for release in 1996. However, there is no assurance that any new test kits will receive regulatory marketing approval or that they will gain market acceptance. In fiscal 1995, 1994 and 1993, the Company expended approximately $199,000, $175,000 and $175,000, respectively, for research and development. Management expects to moderately increase research and development activities in 1996. 8 MARKETS AND COMPETITION The Company believes that the worldwide market for in vitro diagnostics is approximately $15-18 billion and that the existing market for blood coagulation, fibrinolysis, and thrombotic risk factors is approximately $600 million. The Company expects its new DOA control products to address a market that is currently estimated at $50-100 million. The market for clinical chemistry reagents, which the Company is just beginning to enter, is estimated at $3-4 billion worldwide. Biopool markets its products and competes on a worldwide basis against a number of companies, some of which are subsidiaries of large pharmaceutical, chemical, and biotechnology firms whose financial resources and research and development facilities are substantially greater than those of the Company. These companies include Dade International, Ortho Diagnostic Systems (a division of Johnson and Johnson), Organon Teknika (a division of Akzo), Behring Diagnostics (a division of Hoechst), Boehringer Mannheim, Sigma Diagnostics, and Instrumentation Laboratory. Also, a number of companies of a similar profile to Biopool are engaged in the research and development of diagnostic test kits relating to the Company's historical market niche of hemostasis/ fibrinolysis. Some of these include: Diagnostica Stago S.A. (France), Chromogenix AB (Sweden), and Agen, Inc. (Australia). Biopool is a recognized leader and innovator in its core busi- ness. The Company believes its test kits and reagents compete on the basis of price, relative ease of use, quality, accuracy, and preci- sion. A number of the Company's competitors, including several of those named above, are customers of Biopool through OEM and private- label relationships. CUSTOMERS The Company's customers are dispersed over wide geographic areas, and no customer exceeded 10% of sales in 1995. Sales in the United States and Western Europe accounted for 50% and 32%, respectively, of total sales during 1995. PATENTS, TRADEMARKS, AND PROPRIETARY INFORMATION The Company considers the protection of discoveries in connection with its research and development on test kits important to its business. The Company's research scientists seek patent protection for technology when deemed appropriate and, to date, have filed and assigned to the Company applications for United States and foreign patents covering several general product areas. The Company is also reliant on trade secrets, unpatented propri- etary know-how, and continuing technological innovation to develop 9 its competitive position. Many of the Company's key employees and consultants have entered into confidentiality agreements and have agreed to assign to the Company any inventions relating to the Company's business made by them while in the Company's employ, or in the course of services performed on the Company's behalf. However, there can be no assurance that others may not acquire or independ- ently develop similar or superior technology, or, if patents do not issue with respect to products arising from research, that the Company will be able to maintain information on such research as proprietary technology or trade secrets. The Company performs an ongoing assessment of the value of the costs capitalized in its intangible assets. The Company has established rights in the trademarks "Biopool," "MeDiTech," "Imulyse," "Spectrolyse," "Desafib," "Desafib X," "Chromolize," "TintElize," "Stabilyte," and "Minutex." The marks TintElize-R- and Minutex-R- have been registered by the Company with the United States Patent and Trademark Office. GOVERNMENT REGULATIONS The manufacture and sale of diagnostic products are subject to regulation by the FDA in the United States and by comparable regu- latory agencies in certain foreign countries in which the Company's diagnostic products are sold. The FDA has established guidelines and safety standards that are applicable to the preclinical evaluation and clinical investigation of diagnostic products and regulations that govern the manufacture and sale of such products. The FDA and similar agencies in foreign countries have substantial regulations that apply to the testing, marketing (including export), and manu- facturing of products to be used for the diagnosis of disease. In the United States, many diagnostic products may be accepted by the FDA pursuant to a 510(k) notification. Such application must contain information that establishes that the product in question is "sub- stantially equivalent" to similar diagnostic products already in general use. Over 50 of the Company's products have received marketing approval via the 510(k) process. The Company's manufacturing facilities in the U.S., Canada, and Sweden, as well as any additional manufacturing operations that may be established within or outside the United States, are subject to compliance with GMP Regulations (see "Manufacturing"). The Company is registered as a medical device manufacturer with the FDA and as a manufacturer with the U.S. Drug Enforcement Administration. The Company may also be subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substance Control Act, Export Control Act, and other present and future laws of general application. The Company's management believes that the manufacture and use of the Company's products have no adverse environmental impact. 10 RISK FACTORS MANUFACTURING; RAW MATERIALS. The Company's manufacturing process relies on the continued availability of high quality raw materials, many of which it currently receives from specific vendors. Although the Company believes that there are other sources of supply available to it, a change in vendors, or in the quality of the raw materials supplied to it, could have an adverse impact on its manu- facturing process, and ultimately, on its finished products. On one occasion recently, the Company experienced a disruption in the quality of certain key raw materials, which created minor delays in the ability of the Company to fill orders for its D-dimer test kits. No assurance can be given that such variations will not in the future cause more significant delays, or have a more detrimental impact on any of the Company's products. COMPETITION. The Company is engaged in a segment of the human health care products industry that is highly competitive. Competi- tors in the United States and elsewhere include major pharmaceutical, chemical, and biotechnology companies, many of which have substan- tially greater capital resources, marketing experience, research and development staffs, and facilities than Biopool. Any of these companies could succeed in developing products that are more effec- tive than any that have been, or may be, developed by Biopool and may also be more successful than Biopool in producing and marketing their products. However, to date, many of these companies have relied on Biopool as their source for certain key products. INTERNATIONAL SALES. International sales accounted for approx- imately 50% and 60% of Biopool's revenues in 1995 and 1994, respec- tively. International sales can be subject to certain inherent risks, including unexpected changes in regulatory requirements and tariffs, difficulties in staffing and managing foreign operations, longer payment cycles, problems in collecting accounts receivable, and potentially adverse tax consequences. Biopool depends on third- party distributors for a material portion of its international sales. The loss of, or other significant reduction in sales to, certain of these third-party distributors could have a material adverse effect on the Company's business and results of operations. Approximately 25% of the Company's sales are made in Swedish Krona. Gains and losses on the conversion of accounts receivable arising from inter- national operations have in the past contributed, and may continue to contribute, to fluctuations in the Company's results of operations. In addition, increases in the exchange rate of the dollar to foreign currencies could cause the Company's products to become relatively more expensive to customers in an affected country, leading to a reduction in sales or profitability in that country. DEPENDENCE ON KEY MANAGEMENT. The Company's success will continue to depend to a significant extent on the members of its management team and, in particular, on its Chief Executive Officer, 11 Michael D. Bick. The Company does not maintain any material insurance on the lives of Dr. Bick or its other senior management. There can be no assurance that the Company will be able to retain its executive officers and key personnel or attract additional qualified members to management in the future. The loss of services of Dr. Bick, or of any key employee, could have a material adverse effect upon the Company's business. VOLATILITY OF STOCK PRICE. The Company's common stock is quoted on the Nasdaq Small Cap Market, and there has been substantial volatility in the market price of such common stock. The trading price of the common stock has been, and is likely to continue to be, subject to significant fluctuations in response to variations in quarterly operating results, the gain or loss of significant con- tracts, changes in management, announcements of technological inno- vations or new products by the Company or its competitors, legis- lative or regulatory changes, general trends in the industry, recom- mendations by securities industry analysts, and other events or factors. In addition, the stock market has experienced extreme price and volume fluctuations which have affected the market price of the common stock of many technology companies, in particular, and which have, at times, been unrelated to operating performance of the specific companies whose stock is affected. EMPLOYEES The Company has 47 full-time employees: 20 in the U.S., 17 in Sweden, and 10 in Canada. Of these, many hold advanced degrees or certifications in medical technology (including three Ph.D. degrees in the biological sciences). The Company's ability to develop, manufacture, market, and sell products and to establish and maintain its competitive position in light of new technological developments will depend, in large part, on its ability to attract and retain qualified personnel. Certain of Biopool's employees are members of national unions. The Company believes its relations with its employees to be good. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The information is disclosed in Note 9 to the consolidated finan- cial statements included herein under Item 14. ITEM 2. PROPERTIES Biopool International (combined with its MeDiTech subsidiary) leases a 20,000 square foot facility in Ventura, California, pro- viding administrative, laboratory, manufacturing, and warehouse space, where Biopool's corporate offices are also located. Under the terms of the five-year lease agreement expiring in 1999, the base rent for this facility is approximately $108,000 per year with annual increments tied to the Consumer Price Index. 12 Biopool Sweden leases a 7,800 square foot facility in Umea, Sweden, providing administrative, laboratory, warehouse, and manu- facturing space for an annual rental of approximately $87,000 pursuant to the terms of a ten-year lease expiring in 2002. The lease provides for termination after four years without penalty at the tenant's option. Biopool Canada leases a 6,700 square foot facility in Burlington, Ontario, pursuant to the terms of a ten-year lease expiring in 2002, which provides for a yearly base rental of approximately $48,000 with annual increments limited to increases in the Consumer Price Index. This facility houses administrative, laboratory, warehouse, and manufacturing facilities. ITEM 3. LEGAL PROCEEDINGS In December 1995, the Company settled a lawsuit with another company. Under the terms of the settlement, the Company will pay royalties on certain products sold after December 20, 1995. In addition, the Company agreed to pay a total of $100,000, the total of which was paid by its insurance company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS There were no matters submitted during the fourth quarter of the fiscal year covered by this Report to a vote of stockholders, through the solicitation of proxies, or otherwise. 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded in the over-the-counter market under the NASDAQ symbol BIPL. The following sets forth the high and low bid prices for the common stock for the periods indicated as reported by the National Association of Securities Dealers Automated Quotation System. Such prices represent prices between dealers without adjustment for retail mark-ups, mark-downs, or commissions and may not necessarily represent actual transactions.
HIGH LOW COMMON STOCK: 1995:Fourth quarter 2-25/32 1-7/32 Third quarter 3 15/16 Second quarter 1-11/16 21/32 First quarter 1-1/4 13/16 1994:Fourth quarter 1-7/16 15/16 Third quarter 1-3/8 1-1/8 Second quarter 1-5/8 1 First quarter 1-11/16 1
(a) On March 14, 1996, the closing bid price of the Company's common stock, as reported by NASDAQ, was 1-11/16. (b) As of March 14, 1996, there were 257 holders of record. A large number of shares are held in nominee name. Based upon information provided by the Company's transfer agent, American Stock Transfer and Trust Company, the Company believes it had approximately 2,000 shareholders on the same date. (c) The Company has not paid any dividends since its inception and does not contemplate payment of dividends in the foreseeable future. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data has been derived from the consolidated financial statements of Biopool International, Inc., for the five years ended December 31, 1995. The selected financial data should be read in conjunction with the financial statements and notes thereto included elsewhere herein and with "Management's Discussion and Analysis of Financial Condition and Results of Operations." 14 YEAR ENDED DECEMBER 31 STATEMENT OF OPERATIONS DATA
1995 1994 1993(2) Sales $6,662,316 $ 5,527,139 $4,307,175 Research & development $ 199,334 $ 174,502 $ 174,540 Selling, general & administrative $2,748,158 $ 2,204,810 $1,439,547 Total operating income $6,477,328 $ 4,787,124 $3,861,305 Net income (loss) for the year $ 140,817 $ 705,331 $ 360,729 Net income (loss) per share $ .02 $ .09 $ .05 Weighted avg. shares outstanding 7,907,494 7,880,033 7,352,554 BALANCE SHEET DATA (End of period): Working capital $3,776,755 $ 3,664,981 $3,259,902 Total assets $7,435,741 $ 6,458,662 $5,839,628 Long-term debt $ 705,428 $ 262,222 $ 487,555 Total stockholders' equity(1) $5,933,944 $ 5,574,317 $4,768,764 1992(3) 1991 Sales $4,865,334 $ 2,662,087 Research & development $ 588,408 $ 532,760 Selling, general & administrative $1,506,100 $ 1,106,903 Total operating expenses $4,090,854 $ 3,077,500 Net Income (loss) for the year $ 626,670 $ (351,652) Net Income (loss) per share $ .09 $ (.07) Weighted avg. shares outstanding 6,705,866 5,503,874 BALANCE SHEET DATA (End of period): Working capital $1,298,328 $ 680,946 Total assets $4,094,906 $ 2,526,501 Long-term debt $ 527,795 $ 643,137 Total stockholders' equity(1) $2,556,585 $ 1,036,921 ___________________________________________________________________________ (1) See Consolidated Statements of Stockholders' Equity in the Consolidated Financial Statements of Biopool International, Inc. and Subsidiaries for an analysis of common stock transactions of Biopool International, Inc. (2) Sale of 1,166,334 shares of common stock (net proceeds amounted to $1,967,818) in June 1993. (3) MeDiTech purchased January 1, 1992.
15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1995 VERSUS 1994 Sales Sales for the year ended December 31, 1995, increased from the prior year approximately $1,135,000, or 21%, to $6,662,000 from $5,527,000. This was due primarily to the introduction of eighteen new products since 1992, increased expenditures in sales and marketing, and the Company's continued emphasis in marketing its product base under private label arrangements with larger companies. Foreign transaction gains and losses for the Company were minimal in 1995 and 1994. The impact of foreign currency translation differ- ences was considered insignificant in 1995. The Company's customers are dispersed over wide geographic areas, and no customer exceeded 10% of sales in 1995. Sales in the United States and Western Europe accounted for 50% and 32%, respectively, of total sales during 1995. The Company believes that its sales will continue to be influ- enced by many additional factors, including the introduction of new diagnostic test kits, success in marketing its test kits to the clinical market, increased awareness and demand for testing by physicians, expansion of the Company's products into new geographic areas through distributors and OEM relationships, and foreign currency fluctuations. Rapid changes in technologies, demands for chemistries, and the availability of high-quality raw materials may also have a material impact on the Company's short- and long-term sales. Costs and Expenses From 1994 to 1995, cost of sales increased by 9% to approximately 53% as a percentage of sales. The increase was primarily due to a higher volume of product sales with lower profit margins in its foreign subsidiaries in 1995. Research and development expenses showed a minor increase to $199,000 in 1995 versus $175,000 in 1994. The Company continues to invest in research and development aimed at improvements to the existing product line, new diagnostic reagents in hemostasis, and specialized clinical chemistry products. Research and development expenses are expected to increase slightly in 1996. Selling, general, and administrative expenses increased from $2,205,000 in 1994 to $2,748,000 in 1995, an increase of approx- imately 25%. This increase is, in large part, due to significant non-recurring professional fees (approximately $430,000) which were incurred in the defense of the Company's litigation with Medical Analysis Systems (MAS). The Company expects selling costs to increase slightly in 1996 due to the employment of a sales manager in 16 the eastern U.S. and the continuing development of its market strategy, which focuses on increasing market share. General and administrative expenses are expected to decrease significantly as a result of the settlement of the MAS litigation, a consequence of which will be that the Company will no longer bear the professional fees associated with this lawsuit. Non-Operating Income (Expenses) Interest income increased from $66,000 in 1994 to $98,000 in 1995, or 48%. This increase was due to investment into higher interest-bearing securities in 1995. The Company's cash and cash equivalent balances remained relatively constant through the third quarter in 1995. Cash expenditures for capital additions and professional fees occurred primarily in the fourth quarter. Interest expense increased from $46,000 in 1994 to $61,000 in 1995, or 33%, due to the Company's financing of leasehold improve- ments and equipment added to the U.S. facility. Income Taxes The Company's provision for income taxes represents primarily foreign government income taxes. The Company has net operating loss carryforwards of approximately $3.0 million in the United States available to offset future taxable income. 1994 VERSUS 1993 Sales Sales for the year ended December 31, 1994, increased from the prior year approximately $1,220,000, or 28%, to $5,527,139 from $4,307,175. This was due primarily to the introduction of eleven new products since 1992, increased expenditures in sales and marketing, and the Company's continued emphasis in marketing its product base under private label arrangements with larger companies. Foreign transaction gains and losses for the Company were minimal in 1994 and 1993. The impact of foreign currency translation differences was considered insignificant in 1994. During 1994, the Company had one customer, Cosmo Bio (Japan), which accounted for 11% of total sales. No other customer exceeded 10% of total sales in 1994. The Company's customers are dispersed over wide geographic areas. Sales in the United States, Western Europe, and the Asia/Pacific region accounted for 40%, 33%, and 14%, respectively, of total sales. Costs and Expenses From 1993 to 1994, cost of sales decreased by 7% to approximately 44% as a percentage of sales. The decrease in the percentage of cost 17 of sales was primarily due to a higher volume of product sales with higher profit margins in its foreign subsidiaries in 1994. Research and development expenses remained relatively constant at approx- imately $175,000 in 1994 and 1993. The Company continues to invest in research and development aimed at improvements to the existing product line, new diagnostic reagents in hemostasis, and specialized clinical chemistry products. Selling, general, and administrative expenses increased from $1,440,000 in 1993 to $2,205,000 in 1994, an increase of approx- imately 53%. This increase is in large part due to the hiring of additional personnel, including a Vice President of Sales and Marketing, to support the Company's increased sales. Non-Operating Income (Expenses) Interest income increased from $28,000 in 1993 to $66,000 in 1994, or 136%. This increase was due to the investment of a portion of the private placement proceeds (from June 1993) into short-term interest-bearing securities. Interest expense decreased from $95,000 in 1993 to $46,000 in 1994, or 52%, due to the Company's use of a portion of the proceeds of the private placement to pay down certain higher interest debts. Income Taxes The Company's provision for income taxes, after utilization of available net operating loss carryforwards, represents primarily California income taxes and Canadian government income taxes. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity and capital resources remained relatively strong in 1995. At December 31, 1995, the Company had a balance of cash and cash equivalents amounting to $1,283,000 and unused lines of credit of $698,000 available for its use. The Company may use a portion of its cash to acquire businesses, products, or technologies complementary to its business, although the Company has no such commitments and no such acquisitions are currently being negotiated or planned. Cash flows used in operating activities amounted to $39,000 in 1995. In 1994, the Company had positive cash flows from operations amounting to $811,000. The decrease relates to the significant professional fees incurred in 1995 in defense of the MAS lawsuit and the increased inventory levels necessary to meet current and projected demand. Cash flows from investing activities resulted in a decrease of $1,171,000 for 1995 representing additions to property and equipment in the U.S. facility to support increased production demands. 18 Cash flows from financing activities resulted in an increase of $492,000 for 1995 representing primarily long-term borrowings used to finance a portion of its capital additions. The Company believes that its current capital resources, including existing cash and access to available lines of credit, together with funds generated from operations, should be sufficient to meet the Company's operating requirements in 1996. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data have been included under Item 14. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or before April 30, 1996. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or before April 30, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or before April 30, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission on or before April 30, 1996. 20 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No. 3.1 Certificate of Incorporation (1) 3.2 Form of Amendment to Certificate of Incorporation (1) 3.3 By Laws (1) 4.1 Form of Five-Year Common Stock Purchase Warrant and list of holders (3) 10.2 1987 Stock Option Plan (1) 10.6 1993 Stock Incentive Plan (4) 11.1 Computation of Earnings Per Share 16.1 Letter Relating to Change in Certifying Accountant (2) 21.1 Subsidiaries of the Registrant _____________________________________________________________________ (1) Incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 33-20584). (2) Incorporated by reference to the Registrant's current report on Form 8-K filed with the Commission on October 20, 1989, as amended by Amendment Nos. 1 and 2 thereto on October 26, 1989, and November 8, 1989, respectively. (3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. (4) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 21 PART IV PAGE NO. (b) Financial Statements Report of Independent Auditors F-1 Consolidated balance sheets as of December 31, 1995 and 1994 F-2 Consolidated statements of income for the years ended December 31, 1995, 1994 and 1993 F-4 Consolidated statements of stock- holders' equity for the years ended December 31, 1995, 1994 and 1993 F-5 Consolidated statements of cash flows for the years ended December 31, 1995, 1994 and 1993 F-6 Notes to consolidated financial statements F-7 (c) Financial Statement Schedule Schedule II - Valuation and qualifying accounts SC-1 Signatures SC-2 (d) Report on Form 8-K Report on Form 8-K dated December 27, 1995. 22 ANNUAL REPORT ON FORM 10-K ITEM 14(a)(1) and (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 1995 BIOPOOL INTERNATIONAL, INC. VENTURA, CALIFORNIA REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders Biopool International, Inc. We have audited the accompanying consolidated balance sheets of Biopool International, Inc., as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14(c). 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Biopool International, Inc., at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Woodland Hills, California March 6, 1996 F-1 BIOPOOL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
December 31, 1995 1994 _________________________________________________________________ ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,282,527 $ 1,841,475 Accounts receivable, net of allowance for doubtful accounts of $2,856 and $10,445 in 1995 and 1994, respectively 1,153,608 875,978 Inventories 1,841,910 1,528,696 Prepaid expenses and other current assets 414,880 109,939 Refundable income taxes 61,820 -- _________________________________________________________________ TOTAL CURRENT ASSETS 4,754,745 4,356,088 _________________________________________________________________ PROPERTY AND EQUIPMENT 3,485,030 2,480,480 Less accumulated depreciation and amortization (1,713,952) (1,309,787) _________________________________________________________________ PROPERTY AND EQUIPMENT, NET 1,771,078 1,170,693 _________________________________________________________________ OTHER ASSETS Patent application costs, net 150,555 141,180 Excess of cost over net assets of acquired companies, net 670,586 725,646 Other assets 88,777 65,055 _________________________________________________________________ TOTAL OTHER ASSETS 909,918 931,881 _________________________________________________________________ TOTAL ASSETS $ 7,435,741 $ 6,458,662 ___________________________________________________________________
See accompanying notes to consolidated financial statements. F-2 BIOPOOL INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (continued)
December 31, 1995 1994 _________________________________________________________________ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank borrowings $ 22,331 -- Accounts payable 252,548 $ 218,056 Accrued wages and benefits 267,179 213,026 Accrued professional fees 136,444 78,070 Accrued interest 1,264 2,892 Accrued expenses 62,688 40,312 Income taxes payable 53,915 59,133 Current portion of long-term debt 181,621 68,984 Amount due to officer -- 10,634 _________________________________________________________________ TOTAL CURRENT LIABILITIES 977,990 691,107 __________________________________________________________________ LONG-TERM DEBT, NET 523,807 193,238 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $.01 par value, 50,000,000 shares authorized; 9,428,530 and 9,386,145 shares issued and outstanding at December 31, 1995 and 1994, respectively (less 1,492,779 shares held in treasury) 94,286 93,861 Additional paid-in capital 9,547,906 9,488,606 Accumulated deficit (3,813,162) (3,953,979) Cumulative foreign currency translation adjustment 104,914 (54,171) _________________________________________________________________ TOTAL STOCKHOLDERS' EQUITY 5,933,944 5,574,317 _________________________________________________________________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,435,741 $ 6,458,662 _________________________________________________________________
See accompanying notes to consolidated financial statements. F-3 BIOPOOL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 1995 1994 1993 _________________________________________________________________________ SALES $6,662,316 $5,527,139 $4,307,175 COSTS AND EXPENSES Cost of sales 3,529,836 2,407,812 2,204,372 Selling, general and administrative 2,748,158 2,204,810 1,439,547 Research and development 199,334 174,502 174,540 Patent and equipment writedown -- -- 42,846 _________________________________________________________________________ TOTAL COSTS AND EXPENSES 6,477,328 4,787,124 3,861,305 _________________________________________________________________________ OPERATING INCOME 184,988 740,015 445,870 _________________________________________________________________________ OTHER INCOME (EXPENSE) Interest income 97,923 65,928 28,110 Interest expense (60,751) (46,405) (94,749) Gain (loss) on disposal of assets (3,661) 26,323 -- Other 42,720 30,614 3,985 _________________________________________________________________________ Total other income (expense) 76,231 76,460 (62,654) _________________________________________________________________________ Income before taxes 261,219 816,475 383,216 Income taxes 120,402 111,144 22,487 _________________________________________________________________________ NET INCOME $ 140,817 $ 705,331 $ 360,729 _________________________________________________________________________ NET INCOME PER SHARE $ 0.02 $ 0.09 $ 0.05 _________________________________________________________________________
See accompanying notes to consolidated financial statements. F-4 BIOPOOL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Cumulative foreign Additional currency Common Stock paid-in Accumulated translation Shares Amount capital deficit adjustment Total ________________________________________________________________________________________________________ BALANCE AT JANUARY 1, 1993 8,159,811 $ 81,598 $ 7,521,651 $(5,020,039) $ (26,625) $ 2,556,585 Issuance of common stock 1,186,334 11,863 1,959,755 1,971,618 Net income 360,729 360,729 Foreign currency translation (120,168) (120,168) ________________________________________________________________________________________________________ BALANCE AT DECEMBER 31, 1993 9,346,145 93,461 9,481,406 (4,659,310) (146,793) 4,768,764 Issuance of common stock 40,000 400 7,200 7,600 Net income 705,331 705,331 Foreign currency translation 92,622 92,622 ________________________________________________________________________________________________________ BALANCE AT DECEMBER 31, 1994 9,386,145 93,861 9,488,606 (3,953,979) (54,171) 5,574,317 Issuance of common stock 42,385 425 59,300 59,725 Net income 140,817 140,817 Foreign currency translation 159,085 159,085 ________________________________________________________________________________________________________ BALANCE AT DECEMBER 31, 1995 9,428,530 $ 94,286 $ 9,547,906 $(3,813,162) $ 104,914 $5,933,944 ________________________________________________________________________________________________________ ________________________________________________________________________________________________________
See accompanying notes to consolidated financial statements. F-5 BIOPOOL INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 140,817 $ 705,331 $ 360,729 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 390,977 368,246 258,144 Patent and equipment writedowns -- -- 42,846 (Gain) loss on disposal of assets 3,661 (26,323) -- Forgiveness of Biopool Sweden debt (8,369) (7,052) (15,344) Compensation paid in stock 41,855 -- -- Changes in operating assets and liabilities: Accounts receivable (277,630) (124,301) 10,643 Inventories (313,214) (130,570) (42,818) Prepaid expenses and other current assets (107,071) (35,521) 40,345 Refundable income taxes (61,820) 22,859 (22,859) Accounts payable 34,492 16,891 (163,638) Accrued expenses 133,275 (31,778) 47,856 Income taxes payable (5,218) 53,410 (35,476) Amount due to officer (10,634) 291 (49,726) CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (38,879) 811,483 430,702 CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (929,694) (537,201) (437,731) Proceeds from disposal of assets 2,700 35,623 -- Patents and other assets (243,936) (57,512) (104,806) CASH USED IN INVESTING ACTIVITIES (1,170,930) (559,090) (542,537) CASH FLOWS FROM FINANCING ACTIVITIES Short-term borrowings (repayments) 22,331 -- (226,231) Repayment of long-term debt (97,985) (445,381) (98,339) Issuance of long-term debt 549,560 227,100 73,443 Issuance of common stock 17,870 7,600 1,971,618 CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 491,776 (210,681) 1,720,491 Effect of exchange rates 159,085 92,622 (29,731) NET INCREASE (DECREASE) IN CASH (558,948) 134,334 1,578,925 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,841,475 1,707,141 128,216 CASH AND CASH EQUIVALENTS, END OF YEAR $1,282,527 $1,841,475 $1,707,141 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 62,379 $ 94,100 $ 62,723 Income taxes $ 113,074 $ 42,794 $ 63,331
F-6 BIOPOOL INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Biopool International, Inc. ("Biopool") was incorporated in 1987 in the state of Delaware. Biopool and its wholly-owned subsidiaries, Biopool AB ("Biopool Sweden"), a Swedish corporation, Biopool Canada Inc. ("Biopool Canada"), a Canadian corporation, and Medical Diagnostic Technologies, Inc. ("MeDiTech"), a California corporation, are currently engaged in research, development, production, and sale of test kits used to assess and diagnose disorders of the vascular system. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company include the accounts of Biopool and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. PERVASIVENESS OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent highly liquid investments, generally with a remaining maturity of three months or less. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is generally provided on a straight-line basis over their estimated useful lives, which range from five to ten years. F-7 PATENT APPLICATION COSTS Legal fees and other direct costs incurred in obtaining patents are capitalized as incurred. Such costs are amortized over the shorter of the life of the patent (seventeen years) or the related product on a straight- line basis. Accumulated amortization at December 31, 1995 and 1994 totals $67,442 and $54,473, respectively. EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES The excess of cost over net assets of acquired companies is being amortized using the straight-line method over a period ranging from ten to twenty years. Accumulated amortization at December 31, 1995 and 1994 totals $221,116 and $166,056, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed when incurred and include both internal research and development costs and payments to third parties by the Company. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Income taxes are provided based on earnings reported for financial statement purposes. Deferred taxes are provided on the temporary differences between income for financial statement and tax purposes. FOREIGN CURRENCY TRANSLATION Biopool Sweden and Biopool Canada assets and liabilities are translated into U.S. dollars at the year-end exchange rate. The amounts in the consolidated statements of income are translated at the average exchange rate during the year. Cumulative translation adjustments are shown separately in stockholders' equity and, accordingly, do not impact the results of operations. Exchange adjustments resulting from the foreign currency transactions are generally recognized in net earnings. Net foreign transaction gains or losses are not material in any of the years presented. CONCENTRATIONS OF CREDIT RISK Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments in Corporate Commercial Paper ($900,000 at December 31, 1995) and with high-quality financial institutions. At December 31, 1995, substantially all cash and cash equivalents were on deposit with two financial institutions. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers F-8 comprising the Company's customer base and their dispersion across many different geographic areas. Accounts receivable from one customer amounted to 15% of the net balance due at December 31, 1995. Generally, the Company does not require collateral or other security to support customer receivables. NET INCOME PER SHARE The net income per common share is based on the average number of common shares outstanding during each year (1995 - 7,907,494; 1994 - 7,880,033; 1993 - - 7,352,554). The exercise of outstanding options would have an immaterial effect on earnings per share. FAIR VALUE OF FINANCIAL INSTRUMENTS Based on borrowing rates currently available to the Company for bank loans with similar terms and maturities, the fair value of the Company's long-term debt approximates the carrying value. Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash and cash equivalents, accounts receivable, bank borrowings, and accounts payable) also approximate fair value. ACCOUNTING FOR STOCK BASED COMPENSATION In October 1995, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123, "Accounting for Stock Based Compensation," which requires companies to either expense the fair value of the employee stock options or provide extensive new footnote disclosures of what net income would have been had the expense been recognized. The Company intends to elect the pro forma disclosure alternative in 1996. Adoption of FASB State- ment No. 123 is not required until 1996 for calendar year-end companies. Accordingly, the Company continues to report under the provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees." 2. INVENTORIES Inventories consist of the following:
1995 1994 Raw materials $ 616,637 $ 448,318 Work-in-process 706,520 643,813 Finished goods 518,753 436,565 ___________ ___________ $ 1,841,910 $ 1,528,696 ___________ ___________
F-9 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
1995 1994 Leasehold improvements $ 875,982 $ 344,225 Processing and laboratory equipment 2,200,525 1,900,486 Furniture and fixtures 408,523 235,769 ___________ ___________ 3,485,030 2,480,480 Less accumulated depreciation and amortization (1,713,952) (1,309,787) ___________ ___________ $ 1,771,078 $ 1,170,693 ___________ ___________
4. NOTES PAYABLE TO BANKS As of December 31, 1995, the Company's subsidiaries have unused lines of credit of approximately $698,000 available for their use. The interest rate on the lines of credit range from the bank's prime rate plus 1.25% to a fixed rate of 12.75% and is payable monthly (quarterly in Sweden). The weighted average interest rate on the balance outstanding at December 31, 1995, was approximately 10.2%. The lines expire at varying dates from March 1996 to December 1996. Substantially all assets of the Company's subsidiaries are pledged as collateral for the lines of credit. F-10 5. LONG-TERM DEBT
Long-term debt consists of the following: 1995 1994 ___________________________________________________________________________ BIOPOOL SWEDEN Notes payable, principally research grants, for which the debt is expected to be forgiven ratably through 1996 if sufficient related research activities continue. $ 10,465 $ 18,834 ___________________________________________________________________________ BIOPOOL CANADA Term loans payable to a bank, due in monthly installments of $1,665 and $2,572 plus interest at the bank's prime rate (8.75% at December 31, 1995) plus 1.75%, due February 1999 and December 2000. The loans are collateralized by certain machinery and equipment with a net book value approximating the related outstanding debt. 208,313 76,728 ___________________________________________________________________________ MEDITECH Term loans payable to a bank, due in monthly installments of $3,334 and $6,667 plus interest at the bank's prime rate (8.25% at December 31, 1995) plus 1.5%, due February 1999 and June 2000, collateralized by accounts receivable, invento- ries, and property and equipment of MeDiTech. 486,650 166,660 ___________________________________________________________________________ Total 705,428 262,222 Less portion due within one year 181,621 68,984 _________ _________ Long-term debt, net $ 523,807 $ 193,238
Scheduled aggregate principal reductions of long-term debt are due as follows: 1996 $ 181,621 1997 171,180 1998 168,734 1999 118,575 2000 65,318 _________ $ 705,428
The term loans payable from Biopool Canada and MeDiTech to a bank contain certain restrictions, including capital expenditures and payment of dividends. The agreements also require minimum tangible net worth and ratios of current assets to current liabilities, debt service coverage (as defined), and total debt to tangible net worth. F-11 6. COMMITMENTS AND CONTINGENCIES LEASES The Company leases certain equipment and facilities under operating leases. Lease expense for 1995, 1994 and 1993 was approximately $268,000, $196,000 and $195,000, respectively. At December 31, 1995, approximate minimum annual lease commitments were as follows: 1996 $ 258,000 1997 253,000 1998 252,000 1999 236,000 2000 137,000 Thereafter 223,000 ___________ $ 1,359,000 ___________
ROYALTIES The Company has joint research and development contracts under which royalties will be paid as products are introduced into the market. The royalties range from 3% to 15% of sales of the related products. Certain contracts require additional payouts of 25% of sales, as defined, if licenses are sold. The agreements expire over varying periods through 1997. Royalty expense amounted to $52,820, $49,861 and $45,699 in 1995, 1994 and 1993, respectively. COMPENSATION AGREEMENT The Company had an agreement with a former officer which provided quarterly installments of 5% of Biopool Canada's gross profit, as defined. The agreement, dated February 1990, expired December 31, 1994. The amounts for 1994 and 1993 totalled $25,618 and $22,337, respectively. LITIGATION In December 1995, the Company settled a lawsuit with another company. Under the terms of the settlement, the Company will pay royalties on certain products sold after December 20, 1995. In addition, the Company agreed to pay a total of $100,000, the total of which was paid by its insurance company. 7. SALE OF COMMON STOCK In June 1993, the Company issued 1,166,334 shares of its common stock for a total of $1,967,818, net of costs associated with the issuance amounting to $219,062. In connection with the sale of common stock, the Company has issued warrants to purchase up to 174,950 shares of common stock at a price of $1.875 and $3.50 per share. The warrants expire May 31, 1998. F-12 8. STOCK PLANS The Company has two stock option plans (the "Plans") for the benefit of certain key employees, officers, directors, and consultants of the Company. Under the Plans, a total of 1,820,148 shares of the Company's common stock are reserved for issuance. Options granted under the Plans are generally exercisable for a period of ten years from the date of grant at an exercise price that is not less than fair market value of the common stock on the date of grant. Options granted under the Plans generally vest over a one-year period from the date of the grant. Stock option activity for 1993 through 1995 is as follows:
OUTSTANDING OPTIONS Number Price ___________________________________________________________________________ BALANCE AT JANUARY 1, 1993 92,000 Cancelled (12,000) Exercised (20,000) $ 0.19 Granted 507,414 $ 1.25 to $ 2.75 BALANCE AT DECEMBER 31, 1993 567,414 Cancelled (79,839) Exercised (40,000) $ 0.19 Granted 362,758 $ 1.19 to $ 1.58 BALANCE AT DECEMBER 31, 1994 810,333 Cancelled (81,116) Exercised (42,385) $ 1.19 to $ 1.44 Granted 345,833 $ 0.94 to $ 1.63 ___________________________________________________________________________ BALANCE AT DECEMBER 31, 1995 1,032,665 $ 0.19 to $ 2.75 ___________________________________________________________________________
No amounts have been charged to expense relating to the Plans. At December 31, 1995, options to purchase 351,922 shares were exercisable and 787,483 shares were available for future grants under the Plans. F-13 9. SIGNIFICANT SALES INFORMATION AND FOREIGN OPERATIONS The Company currently operates in one industry, in vitro diagnostic medical products, and sells its products worldwide through its three wholly- owned subsidiaries. No customer accounted for more than 10% of total sales in 1995. During 1994 and 1993, one customer accounted for 10.5% and 10.3%, respectively, of total sales. Export sales by MeDiTech (the Company's domestic operation) to customers in foreign countries (excluding intercompany sales) accounted for approximately 15%, 22% and 24% of total sales in 1995, 1994 and 1993, respectively. The consolidated financial statements include the following informa-tion for Biopool Sweden, Biopool Canada, and MeDiTech in thousands of dollars.
Elimina- Biopool Biopool tions and Sweden Canada MeDiTech Corporate Consolidated ___________________________________________________________________________ 1995 Sales $ 2,373 $ 1,805 $ 3,320 $ (836) $ 6,662 Less intercompany (381) (333) (122) 836 -- _______ _______ _______ _______ _______ $ 1,992 $ 1,472 $ 3,198 $ -0- $ 6,662 Net income $ 274 $ 90 $ 368 $ (591) $ 141 Identifiable assets $ 2,217 $ 1,088 $ 3,066 $ 1,065 $ 7,436 ___________________________________________________________________________ 1994 Sales $ 2,219 $ 1,399 $ 2,358 $ (449) $ 5,527 Less intercompany (209) (150) (90) 449 -- _______ _______ _______ _______ _______ $ 2,010 $ 1,249 $ 2,268 $ -0- $ 5,527 Net income $ 613 $ 165 $ 250 $ (323) $ 705 Identifiable assets $ 1,917 $ 939 $ 2,338 $ 1,265 $ 6,459 ___________________________________________________________________________ 1993 Sales $ 1,737 $ 1,044 $ 1,916 $ (390) $ 4,307 Less intercompany (119) (166) (105) 390 -- _______ _______ _______ ________ _______ $ 1,618 $ 878 $ 1,811 $ -0- $ 4,307 Net income $ 225 $ 103 $ 266 $ (233) $ 361 Identifiable assets $ 1,569 $ 694 $ 1,923 $ 1,654 $ 5,840 ___________________________________________________________________________
Product sales to affiliates are generally priced at cost plus 30%. F-14 Information regarding the Company's sales by geographic locations is as follows:
1995 1994 ___________ ____________ United States $ 3,338,152 $ 2,190,401 Western Europe 2,143,604 1,851,026 Asia/Pacific Region 324,424 773,783 Canada 383,322 183,471 Other 472,814 528,458 ___________ ____________ Total $ 6,662,316 $ 5,527,139
10. INCOME TAXES The provision for income taxes is composed of the following:
1995 1994 1993 ________ ________ ________ Current: Federal $ -- $ -- $ -- State (12,063) 37,103 9,772 Foreign 132,465 74,041 12,715 ________ ________ ________ $ 120,402 $ 111,144 $ 22,487
The reconciliation of income tax computed at the U.S. Federal Statutory rates to the income tax provision is as follows:
1995 1994 ____________________ ____________________ Tax at U.S. statutory rate $ 88,814 34.0% $ 277,600 34.0% State income tax (12,063) (4.6) 37,103 4.5 Creation (utilization) of foreign and U.S. net operating loss carry- forwards 42,000 16.1 (288,000) (35.2) Other 1,651 .6 84,441 10.3 ____________________ ____________________ $ 120,402 46.1% $ 111,144 13.6% F-15 1993 ____________________ Tax at U.S. statutory rate $ 130,300 34.0% State income tax 9,772 2.5 Creation (utilization) of foreign and U.S. net operating loss carryforwards (130,800) (34.1) Other 13,215 3.5 ____________________ $ 22,487 5.9%
The components of the Company's deferred tax assets and liabilities at December 31, 1995, are as follows: Depreciation and amortization $ (57,000) Net operating loss carryforwards 1,226,000 Other 71,000 ____________ 1,240,000 Less valuation allowance (1,240,000) ____________ Deferred taxes, net $ -0-
The valuation allowance increased approximately $42,000 in 1995, representing primarily net operating losses incurred on the U.S. operations in the current year. Biopool Sweden and Biopool Canada file separate income tax returns in Sweden and Canada, respectively. At December 31, 1995, the Company has available net operating loss carryforwards of approximately $3,064,000 in the United States. The United States carryforwards expire in varying amounts through 2010. Under section 382 of the Internal Revenue Code, the utilization of the federal net operating loss carryforwards may be limited based on changes in the percentage of ownership in the Company. The pretax income of the Company's foreign subsidiaries was approx- imately $497,000, $852,000 and $341,000 at December 31, 1995, 1994 and 1993, respectively. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $489,000 at December 31, 1995. Those earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. F-16 BIOPOOL INTERNATIONAL, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to Balance beginning costs and at end Account of period expenses Deductions of period ___________________________________________________________________________ YEAR ENDED DECEMBER 31, 1995: Allowance for doubtful accounts $ 10,445 $ -- $ (7,589)(1) $ 2,856 YEAR ENDED DECEMBER 31, 1994: Allowance for doubtful accounts $ 6,689 $ 3,814 $ (58)(1) $ 10,445 YEAR ENDED DECEMBER 31, 1993: Allowance for doubtful accounts $ 1,759 $ 6,385 $ (1,455)(1) $ 6,689 (1) Represents trade accounts deemed uncollectable and written off.
SC-1 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Biopool International, Inc. Date: March 21, 1996 BY: /s/ Michael D. Bick _________________________ Michael D. Bick, Ph.D. Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Michael D. Bick ____________________________ Chairman and March 21, 1996 Michael D. Bick, Ph.D. Chief Executive Officer /s/ Andrew L. Cerskus ____________________________ Director March 21, 1996 Andrew L. Cerskus, Ph.D. /s/ Jeffrey C. Hass ____________________________ Secretary/Treasurer March 21, 1996 Jeffrey C. Hass /s/ Douglas L. Ayer ____________________________ Director March 21, 1996 Douglas L. Ayer /s/ Lewis J. Kaufman ____________________________ Director March 21, 1996 Lewis J. Kaufman SC-2 EX-11.1 2 EXHIBIT 11.1 BIOPOOL INTERNATIONAL, INC. COMPUTATION OF EARNINGS PER COMMON SHARE
1995 1994 1993 ___________ ___________ ___________ Net income for the year $ 140,817 $ 705,331 $ 360,729 Weighted avg. number of shares outstanding 7,907,494 7,880,033 7,352,554 Net income per share $ 0.02 $ 0.09 $ 0.05
EX-21.1 3 EXHIBIT 21.1 BIOPOOL INTERNATIONAL, INC. SUBSIDIARIES OF THE REGISTRANT Biopool AB ("Biopool Sweden") P. O. Box 7133 S-907 04 Umea, Sweden Biopool Canada Inc. ("Biopool Canada") 1016 Sutton Drive, Unit C8 Burlington, Ontario, Canada L7L 6B8 Medical Diagnostic Technologies, Inc. ("MeDiTech") 6025 Nicolle Street Ventura, California 93003 U.S.A. EX-27 4
9 YEAR DEC-31-1995 DEC-31-1995 319,698 962,829 0 0 0 0 0 204,536 0 7,435,741 0 203,952 774,038 523,807 0 0 94,286 5,839,658 5,933,944 0 0 0 0 97,923 60,751 0 0 0 0 261,219 0 0 0 140,817 .02 .02 0 0 0 0 0 0 0 0 0 0 0 0
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