<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended June 30, 1995
__ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File No. 0-10005
BIOCHEM INTERNATIONAL INC.
A Delaware Corporation I.R.S. Employer Identification
No. 39-1272816
Address Telephone Number
- ------- ----------------
W238 N1650 Rockwood Drive (414) 542-3100
Waukesha, Wisconsin 53188-1199
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.02 par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
Revenues for the fiscal year ending June 30, 1995 are $25,055,637
The aggregate market value of the Common Stock of the Company held by
non-affiliates on August 31, 1995 was approximately $7,957,894, computed by
reference to the average ($3.50) of the bid and ask prices of the Common Stock
as reported by the National Quotation Bureau. For purposes of this calculation,
officers and directors of the registrant were considered affiliates of the
registrant.
The number of shares outstanding of the Company's Common Stock, par value $.02
per share, on August 31, 1995 was 13,083,284.
Exhibit Index on Page 36
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
The Registrant, Biochem International Inc. (the "Company" or "BCI" or "BCI
International"), was incorporated in April, 1976 to acquire from the Medical
Systems Business Division of General Electric Company certain assets, patents
and technology associated with its blood gas chemistry business. This
acquisition was completed in January, 1978.
D.S. Medical Products Company
In July, 1984, BCI International entered into a loan agreement which was
formally closed in September, 1984, with D.S. Medical Products Company ("DS
Medical"), an Illinois corporation, under which DS Medical loaned BCI
$2,000,000 in exchange for two convertible debentures, and a warrant granting
DS Medical the right to purchase up to 8,000,000 shares of BCI common stock,
$.02 par value, at a price of $.25 per share. DS Medical exercised the warrant
in December, 1992.
DS Medical was formed for the exclusive purpose of acquiring an 80% or greater
interest in BCI for investment purposes. At this time, its assets consist of
its investment in BCI's securities. Ken M. Davee and David H. Sanders, the
sole shareholders of DS Medical, are also directors and executive officers of
the Company (see ITEM 9. Directors and Executive Officers of the Registrant).
Sale and Leaseback of Land and Building
On August 7, 1987, BCI International sold to Ken M. Davee real estate and
improvements occupied by the Company and utilized as its executive offices and
production facilities. Prior to the sale of said property, the Company owned
the real estate and improvements subject to a mortgage given in connection with
their acquisition, which was financed by means of Industrial Development
Revenue Bonds (the "IDRB").
The selling price of $670,000 was determined based upon an appraisal obtained
by the Company. Consideration received on the sale was utilized to satisfy the
IDRB indebtedness, and other short-term debt obligations outstanding.
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Upon consummation of the sales transaction, the Company and Mr. Davee entered
into Lease (the "Lease") and Option to Purchase (the "Option") agreements
relating to the property sold. Under the terms of the Option, BCI had the
right to purchase the leased property at any time after the initial term of the
Lease for $670,000 plus increases in the consumer price index as defined in the
agreement. BCI International purchased the building from Mr. Davee on June 30,
1995 based on the terms of the aforementioned Option to Purchase. The purchase
price plus filing fee costs was $812,899, as calculated per the terms of the
agreement.
NARRATIVE DESCRIPTION OF BUSINESS
The Company's Products
BCI International is a designer and manufacturer of primarily non-invasive real
time patient monitoring equipment. BCI's products are used to monitor
respiration, blood gases, exhaled gases, anesthetic agent gases, blood pressure
and related cardiovascular/pulmonary functions. Non-invasive monitoring is
vital to patient care in operating and emergency rooms, intensive care units,
critical care units and neonatal facilities. Additionally, these monitoring
techniques have proven invaluable for recovery rooms, radiology, respiratory
therapy, out-patient care and ambulatory, as well as home, applications.
Today, BCI's product line includes monitoring devices for oxygen saturation,
anesthetic agents, ECG, both invasive and non-invasive blood pressure,
temperature, respiration, carbon dioxide and nitrous oxide. BCI engineers and
technicians continue to expand the Company's technology base by developing new
products and combining existing ones in new ways to meet the medical
community's fast-growing and changing needs.
In fiscal 1995, BCI introduced a combination temperature/oximeter monitor,
using the popular handheld oximeter released in 1993 as the base oximeter unit,
and adding a tympanic temperature feature to it. Additionally, a new Vital
Signs Monitor was released in 1995 that offers a wide variety of monitoring
options, including Pulse Oximetry, ECG, non-invasive and invasive blood
pressures and temperature. In fiscal 1995 the company also developed a
disposable sensor cover, called an OxiLink(TM), to be used with reusable patient
sensors. This will allow for a low cost alternative to disposable
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<PAGE> 4
sensors while providing the same benefits. In fiscal 1994, several new products
were introduced, which include a new handheld pulse oximeter, based on the one
released in 1993, but having the additional capabilities of alarms and a
charging base. Additionally, in 1994 BCI introduced a handheld version of its
capnometer, which allows for the measurement of exhaled carbon dioxide. This
unit, due to its reduced size, allows for portability and spot check use, which
are not as practical in the larger capnometers available. Lastly, desflurane, a
new anesthetic agent gas was added to the capabilities of BCI's Anesthetic
Agent Monitor, giving the unit the capacity to measure this gas. Fiscal 1993
new product introductions included a hand-held pulse oximeter, invasive blood
pressure and temperature, which was added as an option to the Company's
Multigas Monitor, and a new cost effective Capnograph/Oximeter which is being
offered solely to BCI's international customers.
BCI's mission is to continue to provide comprehensive monitoring systems for
reliable and cost-effective patient care, and, consequently, management
contemplates that new products will continue to be added to its product lines.
Marketing and Distribution
Domestically, BCI International monitoring systems are marketed in the United
States directly through Company sales representatives. Health care facilities,
principally hospitals, are typically the purchasers of the Company's systems.
With the addition of the hand-held pulse oximeter to the BCI product line, we
are now entering alternate care markets also, such as emergency medical
services and home health care. International sales, promoted through medical
distributors worldwide, account for approximately 47% of revenues.
Additionally, BCI technologies are marketed to original equipment manufacturers
(OEM) as individual components or as finished, private label products, and are
in turn then sold to end users.
Competition
The Company is in an industry characterized by rapid technological change.
Equipment performance, reliability, ease of use and price are important
competitive considerations. The Company has a number of competitors in each of
its product areas, many of which are larger and financially stronger than BCI.
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<PAGE> 5
Competition continues to cause price reductions in the industry. The Company
is continually seeking manufacturing cost reductions, but there can be no
assurance that these cost reductions will offset the impact of potential price
declines.
Manufacturing
The Company's products are manufactured and assembled in its Waukesha,
Wisconsin facility. The manufacture of the Company's products involves certain
techniques which, in the opinion of management, are proprietary.
Raw Materials
Raw materials utilized by the Company in its manufacturing process are
generally available from a number of domestic commercial sources. Since the
Company has experienced delivery delays and lead times as long as 22 to 24
weeks in acquiring certain electronic components, which is common in the
industry, it closely monitors and maintains higher inventory levels for such
components than for other raw materials.
Inventory
The Company maintains inventories of previously described materials and
finished goods at levels believed to be consistent with anticipated sales and
at levels required to respond quickly to customers needs. Inventories of
demonstration equipment are also maintained for use by BCI's salespeople. BCI
also maintains an inventory of finished goods to loan to customers at their
request when the Company is servicing their units. See "Service and Warranty"
below in this ITEM 1.
The Company will, in general, not accept returns except consistent with the
terms of its warranties.
To the best of the Company's knowledge, the foregoing practices are consistent
with the practices of the industry.
Service and Warranty
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A two year warranty is extended on all BCI International monitoring equipment.
During this time, the Company warrants to the purchaser that the equipment is
free from defects in material and workmanship. Any repairs needed during this
time period will be made free of charge to the customer unless the repairs
required are due to intentional damage. Service in foreign countries is
provided primarily by the Company's foreign distributors.
In the event a monitor requires service, the Company's policy during the
warranty period is to provide a free replacement on loan at the customer's
request, which dictates the Company to maintain an inventory of monitors for
this purpose. BCI services monitors principally in its Waukesha, Wisconsin
facility. The Company also employs a field service representative in the state
of Maryland. The Company believes that this approach generally permits the
customer to promptly have a replacement system when needed and provides quality
repair service.
Backlog
The Company had approximately $6,340,000 in backlog orders believed to be firm
at August 31, 1995, as compared to approximately $5,551,000 at August 31, 1994.
The increase in backorders is due primarily to BCI's overall increase in
business. The Company's order activity is not seasonal in nature. The Company
usually manufactures and ships equipment ordered within 2 to 15 days following
receipt of an order, unless the customer requests later release dates.
Research and Development
The Company's research and development activities are dedicated to both product
enhancement and new product development. At the date of this report, the
Company employs fifteen trained technicians and engineers, and utilizes outside
experts. For the two years ended June 30, 1995, the Company incurred research
and development expenses of $1,872,215, all of which were Company sponsored.
Of this amount, $882,278 was attributable to fiscal 1995 and $989,937 to fiscal
1994.
Patents
The Company owns numerous domestic patents related to its products.
The electronic medical instruments industry is permeated with patented products
and processes and new patents are being issued
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regularly. Therefore, the Company cannot be certain that its existing
products, or those it expects to produce, do not infringe on valid patents
owned by others, or will not be subject to technological obsolescence.
Government Regulation
The medical devices manufactured and marketed by BCI are subject to regulation
by the federal Food and Drug Administration ("FDA"), and, in many cases, by
foreign governments. Under the Federal Food, Drug and Cosmetics Act ("FDC
Act"), as amended, manufacturers of medical devices must comply with certain
provisions and regulations promulgated by the FDA governing the testing,
manufacturing, packaging and marketing of medical devices. Under the FDC Act,
medical devices are subject to different levels of review, the most
comprehensive of which requires that a device receive pre-market approval by
the FDA for commercial distribution in the United States.
As a manufacturer of medical devices, the Company is also subject to certain
other FDA regulations, such as general controls provisions which include
manufacturing process requirements. The Company's manufacturing processes and
facility are subject to a biannual inspection by the FDA. The FDA has the
power to order a limited detention of products and to exercise other remedies
where it finds the devices to be in violation of the FDC Act. BCI believes it
is generally in compliance with the FDA regulations. Federal and foreign
regulations regarding the manufacture and sale of medical devices are subject
to change. The Company cannot predict what impact, if any, such changes might
have on its business. The Company also seeks, where appropriate, to comply
with safety standards of Underwriters Laboratories, the Canadian Standards
Association, the European Community standards and the standards of other
countries in which it markets its products.
Environmental Matters
The Company is engaged in only light manufacturing and its capital
expenditures, earnings or competitive position have not been, and are not
expected to be, materially affected by compliance with federal, state, or local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment.
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<PAGE> 8
Employees
As of August 31, 1995, the Company employed 105 persons, consisting of 28 in
production and 77 in sales, administration, engineering and research.
Financial Information About Export Sales
Export sales, which were principally in Western Europe, South America and the
Far East were approximately $11,736,000 and $9,744,000 in fiscal 1995 and 1994
respectively. The increase in sales is a result of many factors. BCI
continues to expand its international dealer network and regions covered, and
is also expanding its OEM export business. The Company's international OEM
business increased by approximately $1.7 million in fiscal 1995 when compared
to fiscal 1994. Growth in these sales is attributed to a mix of products, with
the biggest increase experienced in the handheld oximeter products. The
international sales of the BCI-labeled products increased by approximately $0.3
million. BCI continues to improve its international dealers' performance by
providing more technical and training support, traveling to their offices and
their accounts more often and holding them more responsible for their
performance. All foreign sales are denominated in U.S. Dollars, so the Company
is not exposed to foreign currency risk.
ITEM 2. PROPERTIES
The Company's executive offices and production facilities are located at W238
N1650 Rockwood Drive, Waukesha, Wisconsin. The building contains approximately
14,200 square feet, of which approximately 6,000 square feet constitutes
administrative office space, with the balance used for production and storage.
As described in ITEM 1., BCI purchased this facility on June 30, 1995. It was
previously leased from a related party. Additionally, the Company leases
approximately 5,500 square feet of office space which is used for engineering,
research and development in a building adjacent to the production facility.
The Company also leases space at an outside location for file storage purposes
only. The Company believes these facilities are adequate to meet its needs.
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The Company owns all of its machinery and manufacturing equipment, and leases
certain office equipment. The Company does not anticipate the need to purchase
any material amounts of capital equipment in the coming fiscal year.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended June 30, 1995, no matters
were submitted to a vote of security holders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock ($.02 par value) is traded in the over-the-counter
market. Price quotations are recorded on the Bulletin Board.
The following table sets forth the bid and asked quotations for the Company's
common stock for the quarterly periods indicated, as provided by the National
Quotation Bureau. These quotations reflect interdealer prices, without retail
markup, markdown or commissions, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Bid Asked
--- -----
High Low High Low
--- ---- --- ---
<S> <C> <C> <C> <C>
Fiscal year ended
June 30, 1994
1st Quarter 1 1/2 1 1/2 1
2nd Quarter 1/4 5/8 1 3/4 1 3/8
3rd Quarter 3 1 4 1/4 1 1/2
4th Quarter 3 1 3/4 4 1/4 3 1/4
Fiscal year ended
June 30, 1995
1st Quarter 3 1/2 2 1/2 5 3 1/2
2nd Quarter 3 1/2 2 1/2 5 3 1/2
3rd Quarter 3 1/8 2 1/2 4 1/8 3 1/2
4th Quarter 5 1 3/4 7 3 1/2
</TABLE>
The approximate number of record holders of the Company's common stock on
August 31, 1995 was 800. BCI International has not paid dividends on its
common stock. The Company does not anticipate paying any such dividends, and
further, is restricted from declaring or paying dividends without the prior
written consent of the banking institution with which it currently has a
lending facility.
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<PAGE> 11
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company realized net income before income tax expense and cumulative effect
of accounting change of $6,734,618 in 1995, as compared to net income of
$3,503,609 in 1994. Based upon the weighted average number of common and
common equivalent shares outstanding, these translate into net income per share
of $.52 and $.27, respectively, in 1995 and 1994. Net income realized in
fiscal 1995 and 1994 after income tax expense and cumulative effect of
accounting change is $4,259,843 and $7,391,404. The difference between these
two amounts is primarily due to the cumulative effect of accounting change
discussed in more depth below. It is the opinion of management that these
amounts may be compared, and are attributable to the factors discussed below.
Net sales in fiscal 1995 increased by $7,194,492, or by 40.3% when compared to
fiscal 1994. Sales of BCI's low cost, high quality hand-held pulse oximeter
and its componentry continue to grow, accounting for much of the sales increase
in fiscal 1995. Sales of the hand-held oximeter during this fiscal year were
approximately $7.2 million versus $4.9 million world-wide in fiscal 1994.
Continued expansion of the Company's products into international OEM markets
and sales to domestic OEM accounts who sell into markets we do not sell into
were the other reasons for the substantial increase in the sales of BCI
International. International OEM sales increased from $4,266,000 in 1994 to
$5,970,000 in fiscal 1995. The sales increase in the international OEM arena
is due to many factors which include increased sales of its low cost hand-held
pulse oximeter and sales of the next generation handheld oximeter released in
fiscal 1994. Domestic OEM sales increased $1.6 million from fiscal 1994 to
fiscal 1995. Selling prices have not fluctuated significantly during these
time periods.
Cost of goods sold as a percentage of net sales decreased slightly in fiscal
1995, going from 46.0% in fiscal 1994 to 45.1% in fiscal 1995. The decrease is
primarily due to decreased raw material costs.
Selling, general and administrative expenses increased by approximately
$1,000,000 when comparing 1995 to 1994. The increase is primarily attributable
to an increased investment in the domestic sales departments to support and
improve on the sales increase discussed above. During fiscal 1995, BCI
realized a full year's effect of adding several new domestic sales territories,
which
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totaled 21 at the end of fiscal 1995, and increased the amount spent to support
those territories. Additionally, marketing expenditures increased, primarily in
the areas of journal advertising and trade shows. BCI feels these increases
were needed to strengthen the domestic sales efforts and position the Company
for the future. Additional investments were also made in BCI's international
sales efforts, which included adding several new sales territories. BCI now
employs 4 international sales representatives, who manage sales in
approximately 65 countries. Increases were also incurred in general
administrative and payroll expenses. It should be noted, however, that
selling, general and administrative expenses decreased as a percent of sales in
fiscal 1995 when compared to fiscal 1994, going from 27.5% in fiscal 1994 to
23.6% in fiscal 1995.
Research and development expenses increased only slightly when comparing fiscal
1995 to 1994.
Interest expense decreased in fiscal 1995 due to the long-term debt and related
accrued interest being paid off in full during the third quarter of fiscal
1995.
The Company adopted Statement of Financial Accounting Standards Board (SFAS)
No. 109, "Accounting for Income Taxes" in the first quarter of fiscal 1994.
Under this method, a deferred tax asset of $5,196,600 was recognized in fiscal
1994, based on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. BCI recognized income related to the
deferred tax asset in the amount of $5,196,600 in fiscal 1994, which recorded
the effect of the accounting change. Due to the taxable income earned in
fiscal 1994, deferred income tax expense of $1,209,600 was recognized. In
fiscal 1995, BCI recognized $2,337,000 of deferred income tax expense. It is
expected that the deferred tax assets resulting from net operating loss
carryforwards and various credit carryforwards will be utilized prior to their
expiration based on BCI's expectation of future profitable operations; probably
in fiscal year 1996.
Current income tax expense recognized in fiscal 1995 and 1994 is related to the
federal alternative minimum tax. The Company has net operating loss
carryforwards at June 30, 1995 in the amount of $1.965 million for federal
income tax purposes.
It is management's opinion that the Company's future success is primarily a
function of its sales level. Management believes that it is not only necessary
to improve the sales of the Company's products
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<PAGE> 13
which were available for sale this year, but also to introduce other products
to provide increased revenue. Plans are in progress to achieve these results.
The impact of inflation on Biochem's operations for the two years ended June
30, 1995 was nominal. All export sales are denominated in U.S. currency and
therefore, the Company is not exposed to foreign currency risk.
Liquidity and Capital Resources
The increase in net income recorded in the current year helped to improve the
Company's working capital position. The additional working capital provided by
the income helped to finance the growth discussed above and to pay off the $4.3
million of debt and related accrued interest during fiscal 1995. Additionally,
the Company was able to purchase the building it occupies during fiscal 1995
and had approximately $2.6 million in cash and equivalents at June 30, 1995.
The Company intends to use these funds and funds generated in fiscal 1996 to
continue its growth into fiscal 1996 and beyond.
As a result of sales increases experienced in fiscal 1995 versus 1994, the
accounts receivable balance grew by approximately $1,000,000, or 37%, whereas
sales grew by 40%. The Company continues to place emphasis on tight credit and
collection procedures. It is anticipated that this collection experience will
continue into fiscal 1996.
Inventory levels decreased in fiscal 1995 versus fiscal 1994 primarily due to
decreased inventories of demonstration equipment used by the sales force and
decreased raw material and work-in-process balances. Additionally, inventory
related to new products recently released or soon to be released on hand at the
end of fiscal 1994 was sold in early 1995. It is expected that inventory
balances will increase slightly to meet increased demand during fiscal 1996.
The increase in property, plant and equipment in fiscal 1995 over 1994 is
principally due to the purchase of the building which BCI occupies in Waukesha,
WI. The balance of the increase is due to miscellaneous asset purchases.
Trade accounts payable and accrued liabilities decreased by 21% when comparing
fiscal 1995 to 1994. This decrease is directly related to the decreased
inventory levels discussed above.
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Related party debt and related deferred interest were paid off in fiscal 1995.
Based on current cash balances and anticipated growth rates, BCI does not
expect to need additional debt to fund current operations.
The Company has experienced improved liquidity over the past fiscal year.
Operating activities of the Company have been the main source of this
liquidity. It is the belief of management that if operations continue at the
same level, funds generated from operations will be adequate to fund working
capital requirements, both in the short and long term. The cash flows and bank
line of credit could provide additional funds if deemed necessary.
The Company currently has in place a bank loan and security agreement that
provides due on demand borrowings under a line of credit not to exceed the
lesser of the borrowing base or $2,000,000. The borrowing base, as defined in
the agreement is the sum of 80% of eligible accounts receivable and 25% of
eligible inventory. Interest is calculated based on the LIBOR rate. The
borrowing base exceeds $2.0 million, and there was no balance outstanding at
June 30, 1995, so the available credit is $2,000,000.
It is the belief of management that if continued success in the achievement of
the above-noted goals is experienced, funds generated from future operations
and borrowing potential under the bank line of credit will be adequate to fund
the Company's working capital requirements during 1996.
BCI does not anticipate paying dividends on its common stock.
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<PAGE> 15
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Stockholders
and Directors of
Biochem International Inc.
We have audited the accompanying balance sheets of Biochem
International Inc. as of June 30, 1995 and 1994, and the related
statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended June 30,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Biochem International Inc. as of June 30, 1995 and 1994, and
the results of its operations and its cash flows for each of the
three years in the period ended June 30, 1995, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
September 1, 1995
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<PAGE> 16
BIOCHEM INTERNATIONAL INC.
BALANCE SHEETS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,628,445 $ 1,756,578
Accounts receivable, net of allowance for
doubtful accounts of $100,000 and $75,000,
respectively 3,751,377 2,722,177
Inventories 2,686,501 3,712,518
Deferred income taxes (Note 8) 1,470,000 1,820,900
Prepaid expenses 43,538 50,317
------------ ------------
Total current assets 10,579,861 10,062,490
Related party receivable 101,828 101,828
Deferred income taxes (Note 8) 180,000 2,166,100
Property and equipment, net 1,437,690 431,165
Other 5,483 5,483
------------ ------------
Total assets $ 12,304,862 $ 12,767,066
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,463,067 $ 2,084,890
Accrued liabilities:
Salaries, wages and commissions 502,055 483,960
Other 226,413 190,923
Related party debt - 4,156,309
------------ ------------
Total current liabilities 2,191,535 6,916,082
Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 1,000,000 shares; none issued - -
Common stock, $.02 par value,
authorized 14,000,000 shares; 13,083,284
and 13,073,284 shares issued and outstanding,
respectively 261,666 261,466
Additional paid-in capital 11,698,173 11,695,873
Accumulated deficit (Note 8) (1,846,512) (6,106,355)
------------ ------------
10,113,327 5,850,984
------------ ------------
Total liabilities and stockholders' equity $ 12,304,862 $ 12,767,066
============ ============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 17
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993 .
------------- ----------- -----------
<S> <C> <C> <C>
Net sales $25,055,637 $17,861,145 $12,856,844
Cost of goods sold 11,310,236 8,214,569 5,897,207
----------- ----------- -----------
Gross profit 13,745,401 9,646,576 6,959,637
Selling, general and
administrative expenses 5,917,249 4,915,728 3,720,310
Research and development expenses 1,139,792 1,122,293 1,046,450
----------- ----------- -----------
Income from operations 6,688,360 3,608,555 2,192,877
Interest expense (105,379) (215,794) (377,382)
Other income, net 151,637 110,848 39,091
----------- ----------- -----------
Income before income tax expense
and cumulative effect of
accounting change 6,734,618 3,503,609 1,854,586
Income tax expense (Note 8):
Current 137,775 99,205 46,157
Deferred 2,337,000 1,209,600 - .
----------- ----------- -----------
2,474,775 1,308,805 46,157
Income before cumulative effect of
accounting change 4,259,843 2,194,804 1,808,429
Cumulative effect of
accounting change (Note 8) - 5,196,600 - .
----------- ----------- -----------
Net income $ 4,259,843 $ 7,391,404 $ 1,808,429
=========== =========== ===========
Income per common and common equivalent share:
Before cumulative effect of accounting change $ 0.32 $ 0.17 $ 0.14
Cumulative effect of accounting change - 0.39 - .
----------- ----------- -----------
Net income $ 0.32 $ 0.56 $ 0.14
=========== =========== ===========
Weighted average common stock
shares outstanding 13,158,861 13,129,166 13,090,141
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE> 18
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balances, July 1, 1992 5,070,084 $ 101,402 $ 9,847,937 $(15,306,188) $ (5,356,849)
Net income - - - 1,808,429 1,808,429
Exercise of common stock warrants
at $.25 per share 8,000,000 160,000 1,840,000 - 2,000,000
---------- ---------- ------------ ------------- --------------
Balances, June 30, 1993 13,070,084 261,402 11,687,937 (13,497,759) (1,548,420)
Net income - - - 7,391,404 7,391,404
Exercise of common stock options
at $.25 per share 3,200 64 7,936 - 8,000
---------- ---------- ------------ ------------- --------------
Balances, June 30, 1994 13,073,284 261,466 11,695,873 (6,106,355) 5,850,984
Net income - - - 4,259,843 4,259,843
Exercise of common stock options
at $.25 per share 10,000 200 2,300 - 2,500
---------- ---------- ------------ ------------- --------------
Balances, June 30, 1995 13,083,284 $ 261,666 $ 11,698,173 $ (1,846,512) $ 10,113,327
========== ========== ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial
statements.
Page 18 of 47
<PAGE> 19
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,259,843 $ 7,391,404 $ 1,808,429
Adjustments to reconcile to net cash provided
by operating activities:
Cumulative effect of change in
accounting for income taxes (Note 8) - (5,196,600) -
Deferred income taxes (Note 8) 2,337,000 1,209,600 -
Deferred interest and amortization of
debt discount and issuance costs - 203,483 313,493
Depreciation 198,380 129,600 80,380
Change in assets and liabilities:
Accounts receivable (1,029,200) (378,016) (1,441,201)
Inventories 1,026,017 (1,395,271) (70,816)
Prepaid expenses and other 6,779 (8,750) (19,032)
Accounts payable and accrued liabilities (568,238) 898,257 396,702
------------- ------------ ----------
Net cash provided by operating activities 6,230,581 2,853,707 1,067,955
------------- ------------ ----------
Cash flows from investing activities:
Property and equipment additions (1,204,905) (215,755) (139,972)
------------- ------------ ----------
Cash flows from financing activities:
Payments on long-term debt (4,156,309) (117,835) (2,524,000)
Net payments under bank line of credit - (710,000) (390,000)
Exercise of common stock warrants - - 2,000,000
Loan to shareholder - (101,828) -
Proceeds from exercise of stock options 2,500 8,000 -
------------- ----------- ----------
Net cash used for financing activities (4,153,809) (921,663) (914,000)
------------- ----------- ----------
Net increase in cash and cash equivalents 871,867 1,716,289 13,983
Cash and cash equivalents:
Beginning of year 1,756,578 40,289 26,306
------------- ------------ -----------
End of year $ 2,628,445 $ 1,756,578 $ 40,289
============ =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,182,348 $ 12,312 $ 646,457
Cash paid for income taxes $ 146,025 $ 99,205 $ 34,321
</TABLE>
The accompanying notes are an integral part of these financial
statements.
Page 19 of 47
<PAGE> 20
BIOCHEM INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Biochem International Inc. (the Company) designs and manufactures medical
equipment used in the monitoring of respiration, blood gases, exhaled gases,
anesthetic agent gases and related cardiovascular functions. The following is
a summary of significant accounting policies of the Company:
a. REVENUE RECOGNITION: The Company recognizes revenue from product sales
upon shipment to the customer.
b. CONCENTRATION 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 with a high credit quality financial institution.
The Company's trade receivables subject it to credit risk as its customers are
primarily health care providers, both domestically and internationally. The
Company's international receivables are generally supported by letters of
credit denominated in U.S. dollars. The domestic receivables are generally
not collateralized.
c. CASH EQUIVALENTS: All highly liquid investments purchased with a maturity
of three months or less are considered cash equivalents.
d. INVENTORIES: Inventories are valued at the lower of cost (determined on a
first-in, first-out basis) or market. Loaner and demonstration equipment is
recorded at cost and included in inventory until sold.
e. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of these assets. The estimated useful lives are principally 3 to 10
years for machinery and equipment. Leasehold improvements are amortized over
the life of the lease. Upon sale or retirement of depreciable assets, the
related cost and accumulated depreciation are removed from the accounts and any
resultant gain or loss is reflected in operations.
f. INCOME TAXES: Deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
g. NET INCOME PER SHARE: Net income per common and common equivalent share is
computed based on the weighted average common shares outstanding, including
common stock equivalents.
h. RECLASSIFICATIONS: Certain items in the prior year's financial statements
have been reclassified to conform with the 1995 presentation.
Page 20 of 47
<PAGE> 21
2. INVENTORIES:
Inventories are comprised of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Finished goods $ 311,751 $ 151,278
Loaner and demonstration 804,708 1,009,255
Work-in-process 644,977 1,544,694
Purchased material 925,065 1,007,291
----------- -----------
$ 2,686,501 $ 3,712,518
=========== ===========
</TABLE>
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of:
<TABLE>
<CAPTION>
1995 1994
---- -----
<S> <C> <C>
Land $ 88,200 $ -
Building 724,699 -
Leasehold improvements 126,841 85,090
Machinery and equipment 1,110,868 802,206
Office furniture and equipment 207,993 166,400
----------- -----------
2,258,601 1,053,696
Less accumulated depreciation 820,911 622,531
----------- ------------
$ 1,437,690 $ 431,165
=========== ===========
</TABLE>
In April 1995, the Company purchased land and building for $812,899 from a
shareholder of DS Medical Products Co. (DS) who is also an officer and a
director of the Company. DS owns approximately 79% of the Company's common
stock. The Company had leased the land and building from the same party prior
to its purchase. The Company incurred lease expense of $84,500, $74,000 and
$60,000 in 1995, 1994 and 1993, respectively.
4. NOTE PAYABLE:
The Company has a bank loan and security agreement which, as amended December
1, 1994, provides for borrowings that are due on demand under a line of credit
not to exceed the lesser of the Borrowing Base or $2,000,000. The Borrowing
Base is the sum of 80% of eligible accounts receivable and 25% of eligible
inventories, as defined. Interest is at the London Interbank Offered Rate
(LIBOR) plus 1.85%. The bank has a first priority security interest in the
Company's accounts receivable and inventories. The terms of the agreement
restrict the Company from paying dividends without prior written consent of the
bank. No borrowings were outstanding at June 30, 1995.
Page 21 of 47
<PAGE> 22
5. LONG-TERM DEBT - RELATED PARTIES:
Long-term debt at June 30, 1994 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
1983 debenture payable $ 2,079,340
Deferred interest 2,076,969
------------
4,156,309
Less current portion 4,156,309
------------
$ -
============
</TABLE>
The 1983 debenture payable and deferred interest were paid in full during
January, 1995.
6. COMMON STOCK AND STOCK OPTIONS:
Effective October 1, 1992, the Company adopted the 1992 Stock Program which
includes a Stock Option Plan and a Restricted Stock Rights Plan. This program
provides for the issuance of common stock options to officers, employees and
independent consultants. An aggregate of 250,000 shares were originally
reserved for issuance under the program. All options available for grant at
June 30, 1995 relate to the 1992 stock program.
At June 30, 1995, the Company also has outstanding options to purchase 13,000
shares of common stock under a Stock Option Plan which was terminated in 1991.
Options granted under the Stock Option Plans are exercisable for a period of 10
years at a price equal to market value, as defined, on the date of grant (for
10% or more shareholders, certain of these options are exercisable for a period
of five years at a price equal to 110% of market value on the date of grant).
Stock purchase rights granted under the Restricted Stock Rights Plan are
exercisable for a period of 30 days at a price equal to 10% of the stock's fair
market value at the date of grant. No rights had been granted at June 30, 1995
under this plan.
A summary of activity involving the stock option plans is as follows:
<TABLE>
<CAPTION>
Option Shares
------------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Outstanding, beginning of year 96,000 61,200
Granted ($3.313 to $3.375 per share) 47,500 40,500
Exercised (10,000) (3,200)
Forfeited - (2,500)
---------- -----------
Outstanding, end of year
($.25 to $3.375 per share) 133,500 96,000
========== ==========
Available for grant, end of year 129,500 177,000
========== ==========
</TABLE>
Page 22 of 47
<PAGE> 23
6. COMMON STOCK AND STOCK OPTIONS, CONTINUED:
The former president of the Company had an interest in the common stock of the
Company which is held by DS Medical Products Co. On August 1, 1993, the
Company paid $101,828 to the former president on behalf of DS Medical Products
Co. in exchange for those securities. As a result, the Company has a
receivable due from DS Medical Products Co. in the same amount at June 30, 1995
and 1994.
7. NET INCOME PER SHARE:
The computation of net income per common and common equivalent share assumes
that stock options are exercised and are reflected in weighted average common
shares outstanding net of treasury shares assumed to be purchased with the
exercise proceeds. The computation for 1993 assumes that the warrants, while
outstanding, were exercised causing the weighted average common shares
outstanding to increase and that payment for the common shares issued is made
through discharge of deferred interest. There is no significant difference
between primary and fully diluted net income per share. The number of shares
used for computing primary net income per share was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ----- ----
<S> <C> <C> <C>
Beginning shares outstanding 13,073,284 13,070,084 5,070,084
Equivalent shares:
Dilutive stock options based on
Treasury stock method using
average market price 85,577 59,082 20,057
Dilutive warrants based on if-converted
method - - 8,000,000
---------- ---------- ----------
13,158,861 13,129,166 13,090,141
========== ========== ==========
</TABLE>
8. INCOME TAXES:
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes", effective July 1,
1993. The cumulative effect of this adoption on 1994 was an increase in net
income of $5,196,600 ($.39 per share). Financial statements for prior years
were not restated for the accounting change. In prior years, the Company
utilized the provisions of SFAS No. 96, "Accounting for Income Taxes".
Page 23 of 47
<PAGE> 24
8. INCOME TAXES, CONTINUED:
Income tax expense recorded in 1995 and 1994 varies from income tax computed
using the federal statutory rate because of the effect of state income taxes of
$203,000 and $82,000, respectively. Income tax expense recorded in 1993
represents primarily income taxes which are currently payable under the federal
alternative minimum tax system for corporations. The regular current income
tax computed for the Company, which was $725,000 in 1993, has been eliminated
as a result of the utilization of net operating loss carryforwards.
At June 30, 1995, the Company has remaining operating loss carryforwards
available for state and federal regular income tax purposes of approximately
$4,739,500 and $1,965,600, respectively, expiring in varying amounts during the
years 2002 through 2004. The Company has operating loss carryforwards for
alternative minimum tax purposes of approximately $3,247,000. The Company also
has general business credit carryforwards of $197,300 which expire in varying
amounts through 2005, alternative minimum tax credits of $256,000, and state
credit carryforwards of $107,000.
Deferred income taxes reflected in the balance sheet at June 30, 1995 and 1994
relate to the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Current:
Federal and state net operating loss
carryforwards $ 695,900 $ 1,406,900
Tax credit carryforwards 560,300 -
Inventories and receivables 100,600 110,300
Accrued employee benefits 50,800 50,900
Other 62,400 53,800
Related party interest - 199,000
------------ ------------
Current deferred tax assets 1,470,000 1,820,900
------------ ------------
Noncurrent:
Federal and state net operating loss
carryforwards 211,000 1,775,500
Tax credit carryforwards - 423,800
------------ ------------
211,000 2,199,300
Deferred tax liabilities - property
and equipment, noncurrent (31,000) (33,200)
------------ ------------
Net noncurrent deferred tax assets 180,000 2,166,100
------------ ------------
Total net deferred tax assets $ 1,650,000 $ 3,987,000
============ ============
</TABLE>
The Company believes that it is more likely than not that the net operating
loss carryforwards and various credit carryforwards, described above, will be
utilized prior to their expiration based on the Company's expectation of future
profitable operations and the periods available to realize these future tax
benefits. Therefore, no valuation allowance for total net deferred tax assets
has been recorded.
Page 24 of 47
<PAGE> 25
9. EXPORT SALES:
Export sales, principally to the Far East, Central and South America and
Western Europe, were $11,736,000, $9,744,000 and $7,609,000 in 1995, 1994 and
1993, respectively. The Company's export sales are denominated in U.S.
currency.
10. EMPLOYEE BENEFIT PLAN:
The Company sponsors a defined contribution plan for all eligible employees of
the Company. Employees may contribute up to 12% of their compensation and the
Company provides a matching contribution of 50% of the employees' contributions
up to 6% of the employees' compensation. The Company's contributions to the
Plan were $117,270, $87,074 and $39,960 in 1995, 1994 and 1993, respectively.
The Company is not obligated to provide any postretirement medical or life
insurance benefits to employees.
Page 25 of 47
<PAGE> 26
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and principal executive officers of the Company and their offices
are:
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
Ken M. Davee (1) 87 Director - Class I, Vice Chairman of the Board of
Directors and Secretary
David H. Sanders (1) 64 Director - Class I, Chairman of the Board of
Directors, Chief Executive Officer, Treasurer and
Assistant Secretary
Lee J. Knirko 72 Director - Class II
Frank A. Katarow 36 President and Chief
Operating Officer
Keith R. Harper 46 Senior Vice President,
Sales
Ann M. Johnson 33 Vice President, Finance and Operations
Robert H. Wesel 36 Vice President, International Sales
Mark S. Geisler 43 Vice President, Engineering
Donald Alexander 40 Vice President, Regulatory Affairs
Richard E. Zimmerman 56 Vice President, National Accounts
</TABLE>
(1) Member of the Executive Committee
Page 26 of 47
<PAGE> 27
All directors are elected for two (2) year terms and serve until their
respective successors are duly elected and qualified. The terms for Classes I
and II expire as of the date set for the annual stockholders' meeting for
fiscal years ending June 30, 1996 and June 30, 1995, respectively. Officers
are appointed for a one (1) year term unless sooner replaced. Each of the
above individuals has served in the capacities indicated since September 14,
1984, except as stated below.
MR. DAVEE holds a degree from Northwestern University Business School. Prior
to 1936, he was employed in various market research capacities. In 1936, he
founded Davee, Kohnlein and Keating Company, a marketing research and
consulting firm, of which company he was a principal until its sale in 1969.
Thereafter, he has been self-employed as a private investor. In 1973, he,
along with Mr. Sanders, purchased an approximately 94% interest in Medical
Engineering Corporation ("MEC"), a manufacturer of silicone rubber implants and
other medical products located in Racine, Wisconsin, which they operated from
1973 until its sale at the end of 1982 to Bristol-Myers Company.
MR. SANDERS received an undergraduate degree and, in 1956, a Masters in
Business Administration from the University of Wisconsin. Prior to his
employment in 1973 by MEC, Mr. Sanders was with Pfizer International for four
(4) years, and Sandoz, Inc., for fifteen (15) years, at which companies he was
involved in marketing and general management. In 1973, he became President and
Chief Executive Officer of MEC, a position he held through December of 1984.
Mr. Sanders served as President of the Company from September 4, 1984 to
October 4, 1984 at which time he commenced serving as Chairman and Assistant
Secretary.
MR. KNIRKO, a certified public accountant, is presently treasurer of the Dr.
Scholl Foundation, a non-profit organization. He is a former audit manager of
Peat, Marwick, Main & Co. (now KPMG Peat Marwick), an accounting firm.
MR. KATAROW has been employed by the Company since October, 1980 serving in
various capacities including Mechanical Designer, Manager of Product Design,
Manufacturing Manager, Director of Operations and
Page 27 of 47
<PAGE> 28
was then promoted to Vice President of Operations in June, 1990.
Responsibility for OEM Sales was added in January, 1991. He was promoted to
Senior Vice President and General Manager on March 1, 1992 and further promoted
to Executive Vice President effective January 1, 1993. On November 1, 1993 he
became President and Chief Operating Officer of the Company.
MR. HARPER has been employed by the Company since October, 1981, serving in
various capacities including National Service Manager, General Manager-Quality
Assurance and Service, Director of Regulatory Affairs, Director of Operations,
and Vice President of Operations since December, 1986. In 1990 he became Vice
President of International Sales. On November 1, 1993 he commenced serving as
Senior Vice President, Sales.
MS. JOHNSON, a certified public accountant, received a Bachelor of Business
Administration degree in Accounting and in Risk Management and Insurance from
the University of Wisconsin in Madison in 1984. Prior to her employment at
BCI, she worked on the audit staff at Deloitte, Haskins & Sells (now Deloitte &
Touche) from 1984 to 1987 and at Coopers & Lybrand from 1987 to 1990. She
joined BCI in April, 1990 and has been Vice President of Finance and Personnel
since December, 1991. On November 1, 1993 she was promoted to Vice President
of Finance and Operations.
MR. WESEL worked in the health care field for over ten years before starting at
BCI in January, 1991. He received an associates degree from MATC in Business
Management and is also a certified cardiopulmonary technologist and a pulmonary
functions technologist. His most recent clinical position was as Technical
Director/Business Manager of Anesthesia at a 400 bed hospital. Since coming to
BCI, he has held several positions, including Manager of Clinical Applications,
Territory Sales Manager and Director of Marketing Services. After a brief
hiatus from the company in fiscal 1994, he was became Vice President of
International Sales effective January 4, 1994.
MR. GEISLER came to BCI in November, 1994 as Vice President of Engineering from
Marquette Electronics. He worked at Marquette for 14 years at various
positions in the areas of Research and Development, most recently as Director
of Research and Development. He received his undergraduate degree in
Electrical Engineering from the University of Wisconsin in Madison and his
masters degree in
Page 28 of 47
<PAGE> 29
Electrical Engineering from Marquette University. He is currently attending
Marquette University in pursuit of a Doctorate Degree in Electrical
Engineering.
MR. ALEXANDER started at BCI in August, 1992 as Engineering Manager. In
August, 1994 he transferred to the regulatory affairs department, becoming
Regulatory Affairs Manager, and was promoted to Vice President, Regulatory
Affairs in May, 1995. Before coming to BCI, Mr. Alexander was a project leader
at Life Fitness Corp., an equipment manufacturer in Illinois. He has a
Bachelors Degree in Electrical Engineering from the University of Maine.
MR. ZIMMERMAN earned a degree in Business Administration from the University of
Wisconsin - Eau Claire. His experience includes over 20 years in sales and
sales management positions in the medical products industry, with both
wholesale distributors and manufacturers. Prior to joining BCI, he served as
Vice President of Sales and Marketing for the E.F. Brewer Company. He joined
BCI in January, 1993 as Director of Sales for the domestic sales group and was
appointed to the position of Vice President of National Accounts in November,
1993.
Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors and persons holding ten percent or
more of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. All forms
were filed as required under Section 16(a).
Page 29 of 47
<PAGE> 30
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and
cash-equivalent forms of remuneration for services to the Company during fiscal
1995 of all executive officers of the Company who were paid in excess of
$100,000 during fiscal 1995:
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
---------------------------------- ------------
Stock
Name and Capacity Year Salary($) Bonus($) Options(#)
- ----------------- ---- --------- -------- ----------
<S> <C> <C> <C> <C>
David H. Sanders
Chairman and CEO 1995 $180,000 -0- -0-
1994 64,615 -0- -0-
1993 58,385 -0- -0-
Frank A. Katarow
President and COO 1995 $129,000 $30,100 10,000
1994 114,519 26,500 12,500
1993 96,923 18,250 10,000
Keith R. Harper
Senior Vice President 1995 $117,500 -0- 6,000
1994 107,308 -0- 8,000
1993 80,000 1,500 5,000
Robert H. Wesel
Vice President 1995 $105,462 -0- 6,000
1994* 51,101 -0- 2,000
1993 61,904 -0- -0-
</TABLE>
* Mr. Wesel was not employed by BCI for all of 1994.
No other executive officer's compensation exceeds $100,000.
Directors receive no fees or expense reimbursement allowances.
Page 30 of 47
<PAGE> 31
STOCK OPTIONS
The following table shows, for the year ended June 30, 1995, individual grants
of stock options made during the year, to each of the executive officers:
<TABLE>
<CAPTION>
% of Total
Options
Options Granted to Exercise Expiration
Granted Employees Price Date
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
D.H. Sanders -0- N/A N/A N/A
K.M. Davee -0- N/A N/A N/A
L.J. Knirko -0- N/A N/A N/A
F.A. Katarow 5,000 10.53% $3.313 07/02/04
F.A. Katarow 5,000 10.53% $3.313 04/19/05
K.R. Harper 3,000 6.32% $3.313 07/02/04
K.R. Harper 3,000 6.32% $3.313 04/19/05
A.M. Johnson 3,000 6.32% $3.313 07/02/04
A.M. Johnson 3,000 6.32% $3.313 04/19/05
R.H. Wesel 3,000 6.32% $3.313 07/02/04
R.H. Wesel 3,000 6.32% $3.313 04/19/05
M.S. Geisler 5,000 10.53% $3.313 12/01/04
M.S. Geisler 3,000 6.32% $3.313 04/19/05
D.J. Alexander 500 1.05% $3.313 04/19/05
</TABLE>
The following table shows the number and value of options exercised during
fiscal 1995 and the value of unexercised options on an aggregated basis at June
30, 1995 for each of the executive officers:
<TABLE>
<CAPTION>
Shares Number of Value of
Acquired on Value Unexercised Unexercised
Exercise Realized Options at Options at
Fiscal 1995 Fiscal 1995 6/30/95 6/30/95 (1)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
D.H. Sanders -0- -0- -0- N/A
K.M. Davee -0- -0- -0- N/A
L.J. Knirko -0- -0- -0- N/A
F.A. Katarow -0- -0- 40,500 $90,743
K.R. Harper 10,000 $30,625 19,000 37,692
A.M. Johnson -0- -0- 24,500 55,326
R.H. Wesel -0- -0- 8,000 5,407
M.S. Geisler -0- -0- 8,000 1,500
D.J. Alexander -0- -0- 500 94
R.E. Zimmerman -0- -0- 500 1,437
</TABLE>
(1) Value of unexercised options is calculated by determining the difference
between the fair market value of the securities underlying the options and the
exercise price of the options at fiscal year end.
Page 31 of 47
<PAGE> 32
The Company has entered into employment contracts with four of its officers.
The agreements, entered into in April, 1995, have a three year term, and are
renewable for one year periods thereafter with agreement by both parties. In
the event employment is terminated without cause, the employee shall be
entitled to: severance pay for the greater of 12 months or one month for each
year of service, and continuation of employee benefits for the severance
period. The severance period terminates when the employee has found other work
if that occurs sooner than the predefined end of the severance period. No long
term incentive plans or change-in-control arrangements are currently in force
at the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table shows the beneficial ownership of common stock, $.02 par
value, of the Company by each person who is known by the Company to be the
beneficial owner of five (5) percent or more of such stock as of August 31,
1994:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (2)
- ------------------- -------------------- ----------
<S> <C> <C>
DS Medical Products Co. 10,335,000 shares, 78.20%
180 East Pearson owned of record
Chicago, Illinois 60611 and beneficially
Ken M. Davee (1) (1)
180 East Pearson
Chicago, Illinois 60611
David H. Sanders (1) (1)
BCI International
W238 N1650 Rockwood Drive
Waukesha, Wisconsin 53188
</TABLE>
Page 32 of 47
<PAGE> 33
(1) Ken M. Davee and David H. Sanders own all of the stock of DS Medical
and, therefore, for the purposes of Rule 13d-3 of the Securities and
Exchange Commission, may be deemed to beneficially own the BCI stock
and rights owned by DS Medical. Such beneficial ownership is
disclaimed. The amounts of such stock ownership and rights are not
repeated in this table to avoid duplication.
(2) The percent of class calculations above are based on a total class of
13,216,784 shares consisting of 13,083,284 shares issued and
outstanding, and 133,500 shares issuable upon exercise of options
granted under the Company's Incentive Stock Option Plans. See ITEM 7.
Financial Statements and Supplementary Data, Note 6, Common Stock and
Stock Options.
Page 33 of 47
<PAGE> 34
The following table shows the ownership of common stock of the Company held
beneficially by each director and officer holding shares, and by all directors
and officers of the Company as a group, as of August 31, 1995:
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class (3)
- ---------------- -------------------- ----------
<S> <C> <C>
Ken M. Davee 125,000 shares-125,000 of .95%
record and beneficially (1)
David H. Sanders 331,900 shares-96,900 of 2.51%
record and beneficially and
235,000 beneficially (1)(2)
Frank A. Katarow 43,200 shares-2,700 of .32%
record and beneficially,
and 40,500 beneficially as
options
Keith R. Harper 30,000 shares-11,000 of .23%
record and beneficially,
and 19,000 beneficially
as options
Ann M. Johnson 24,500 shares-24,500 .19%
beneficially as options
Robert H. Wesel 12,000 shares-4,000 of .10%
record and beneficially,
and 8,000 beneficially
as options
Mark S. Geisler 8,000 shares-8,000 .06%
beneficially as options
Donald Alexander 500 shares-500 .01%
beneficially as options
Richard E. Zimmerman 500 shares-500 .01%
beneficially as options
All directors and 10,910,600 shares-10,574,600 82.55%
officers as a group of record and beneficially,
(8 persons) 235,000 beneficially, and
101,000 as rights to
acquire (1)(3)
</TABLE>
Page 34 of 47
<PAGE> 35
(1) See footnote 1 to the preceding table.
(2) Held of record by the Sanders Family Benefit Trust.
(3) See footnote 2 to the preceding table.
The above beneficial ownership information is based on the information
furnished by the specified persons and has been determined in accordance with
Rule 13d-3. It is not intended to be an admission of beneficial ownership for
any other purpose and includes shares as to which beneficial ownership has been
disclaimed. BCI has not received any Schedule 13D or Schedule 13G statements
indicating that any person is a beneficial owner of more than 5% of its common
stock except as disclosed above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As previously discussed, DS Medical, owner of approximately 78.2% of the
Company's outstanding common stock, is equally owned by Ken M. Davee and David
H. Sanders. Mr. Davee is Vice Chairman of the Board of Directors and Secretary
of the Company. Mr. Sanders serves as Chairman of the Board of Directors,
Chief Executive Officer, Treasurer, and Assistant Secretary of the Company.
As discussed in ITEM 1., up until June 30, 1995, Mr. Davee owned the building
which the company occupies. BCI purchased the building from Mr. Davee on that
date.
Pge 35 of 47
<PAGE> 36
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
(a) FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Included in Part II of this report:
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Balance Sheets at June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Statements of Income for the years
ended June 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Statements of Changes in Stockholders' Equity for the
years ended June 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2. Included in Part IV of this report:
Independent Accountants' Report on Financial Statement
Schedule for the years ended June 30, 1995, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
Other schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in ITEM 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, or in ITEM 7. Financial Statements and Supplementary Data.
Page 36 of 47
<PAGE> 37
(b) REPORTS ON FORM 8-K
The following Forms 8-K were filed with the Commission during the quarter ended
June 30, 1995 and the period following up to the date of this report:
(1) Form 8-K dated May 23, 1995:
Item 5. Other Events: The Company announced the execution of a Letter of
Intent pursuant to which the Company's issued and outstanding capital stock
would be acquired by another company in a cash transaction valued at $5.00 per
share.
(2) Form 8-K dated July 25, 1995:
Item 5. Other Events: The Company announced termination of negotiations for
the proposed acquisition.
Page 37 of 47
<PAGE> 38
<TABLE>
<CAPTION>
(C) EXHIBITS FILED WITH THIS FORM 10-KSB: Page
------------------------------------ ----
<S> <C>
3(i)(a) Certificate of Incorporation of registrant
filed April 27, 1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
3(i)(b) Amendment to Certificate of Incorporation
filed June 8, 1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
3(i)(c) Amendment to Certificate of Incorporation
filed June 30, 1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
3(i)(d) Amendment to Certificate of Incorporation
filed July 31, 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
3(i)(e) Amendment to Certificate of Incorporation
filed October 22, 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2)
3(i)(f) Amendment to Certificate of Incorporation
filed September 13, 1984 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3)
3(ii) By-Laws of Registrant as amended through
December 19, 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12)
4.1 BCI Stock Purchase Warrant to purchase
8,000,000 shares of common stock exercisable
after 5:00 p.m., Chicago Time, December 31, 1986,
through December 31, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)
10.1 Mortgage Loan and Security Agreement dated as
of December 1, 1980, between Registrant and
Town of Pewaukee, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)
10.2 1981 Stock Program as amended through June 30,
1989 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13)
10.3 Loan Agreement dated July 18, 1984, by and
between Biochem International Inc. and
DS Medical Products Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6)
10.4 Amended 10% Debenture due April 1, 1990 . . . . . . . . . . . . . . . . . . . . . . . . (3)
10.5 Biochem 10% Debenture, face amount $1,500,000
dated September 14, 1984, and due December 31,
1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)
</TABLE>
Page 38 of 47
<PAGE> 39
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.6 Security Agreement by and between DS Medical and
Biochem dated September 14, 1984, assigning
DS Medical a security interest in Biochem's
accounts, chattel paper, contracts, contract
rights, documents, equipment, fixtures, general
intangibles, goods, instruments, inventory,
trademarks, trade names, trade secrets and good-
will products thereof and certain other assets
described therein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)
10.7 Second Mortgage to BCI's principal offices and
manufacturing facility commonly known as W238
N1650 Rockwood Drive, Waukesha, Wisconsin . . . . . . . . . . . . . . . . . . . . . . . (4)
10.8 Assignment of Rents to BCI's principal offices and
manufacturing facility commonly known as W238 N1650
Rockwood Drive, Waukesha, Wisconsin, 53188-1199 . . . . . . . . . . . . . . . . . . . . (4)
10.9 Patent Collateral Assignment dated September 18, 1984
between BCI and DS Medical with respect to all of BCI's
patent applications and patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4)
10.10 Trademark Collateral Assignment dated September 14, 1984
between BCI and DS Medical with respect to all of BCI's
trademark applications and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . (4)
10.11 First Amendment to Mortgage, Loan and Security
Agreement, Biochem International Inc. and Town of
Pewaukee (or Pewaukee City), Wisconsin, dated as of
March 1, 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
10.12 First Supplemental Indenture of Trust, Town of Pewaukee
(or Pewaukee City), Wisconsin, and The Marine Trust
Company N.A., as Trustee, dated as of March 1, 1985 . . . . . . . . . . . . . . . . . . (7)
10.13 Confirmation of Real Estate Mortgage Subordination
by DS Medical Products Company dated as of
March 1, 1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
10.14 BCI 10% Debenture, Face Amount $500,000, dated
September 13, 1985, and due December 31, 1992 . . . . . . . . . . . . . . . . . . . . . (8)
</TABLE>
Page 39 of 47
<PAGE> 40
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.15 Waiver of Defaults by IDRB Bondholder . . . . . . . . . . . . . . . . . . . . . . . . . (8)
10.16 January 1986 Waiver of Default by IDRB Bondholder . . . . . . . . . . . . . . . . . . . (9)
10.17 Promissory Notes, dated July 17, 1986, between
Ken M. Davee and David H. Sanders, and BCI . . . . . . . . . . . . . . . . . . . . . . . (10)
10.18 Commercial Offer to Purchase, dated July 21, 1987 . . . . . . . . . . . . . . . . . . . (11)
10.19 Lease, dated August 7, 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)
10.20 Option to Purchase, dated August 7, 1987 . . . . . . . . . . . . . . . . . . . . . . . . (11)
10.22 1992 Stock Option Program, dated October 1, 1992 . . . . . . . . . . . . . . . . . . . . (14)
24.0 Consent of Independent Accountants with
respect to Company's Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
Page 40 of 47
<PAGE> 41
Footnotes to ITEM 14
(1) Previously filed as Exhibits 3(a) through 3(d) respectively to
Registrant's Registration Statement on Form S-1 No. 2-65273,
and incorporated herein by reference.
(2) Previously filed as Exhibit 20(a) to Registrant's Form 10-Q
for the quarter ended September 30, 1980, and incorporated
herein by reference.
(3) Previously filed as Exhibits 3(f) and 10.34 respectively to
Registrant's Form 10-K for the period ended June 30, 1984,
and incorporated herein by reference.
(4) Previously filed as Exhibits 28.2, 28.1, 28.3, 28.4, 28.5,
28.7 and 28.8 respectively to Registrant's Form 8-K dated
September 13, 1984, and incorporated herein by reference.
(5) Previously filed as Exhibit 10(g) to Registrant's Registration
Statement on Form S-1 No. 2-70811, and incorporated herein by
reference.
(6) Previously filed as Exhibit 28.1 to Registrant's Form 8-K dated July
18, 1984, and incorporated herein by reference.
(7) Previously filed as Exhibits 10.51, 10.52 and 10.53
respectively to Registrant's Form 10-Q for the quarter ended
March 31, 1985, and incorporated herein by reference.
(8) Previously filed as Exhibits 10.45 and 10.47 respectively to
Registrant's Form 10-K for the period ended June 30, 1985, and
incorporated herein by reference.
(9) Previously filed as Exhibit 10.48 to Registrant's Form 10-Q
for the quarter ended December 31, 1985, and incorporated
herein by reference.
(10) Previously filed as Exhibit 10.50 to Registrant's Form 10-K
for the period ended June 30, 1986, and incorporated herein by
reference.
(11) Previously filed as Exhibits 10.1, 10.2 and 10.3 respectively
to Registrant's Form 8-K dated August 7, 1987, and
incorporated herein by reference.
Page 41 of 47
<PAGE> 42
(12) Previously filed as Exhibit 3(g) to Registrant's Form 10-Q for
the period ended December 31, 1988, and incorporated herein
by reference.
(13) Previously filed as Exhibit 10.2 to Registrant's Form 10-K for
the period ended June 30, 1989, and incorporated herein by
reference.
(14) Previously filed as Exhibit 10.22 to Registrant's Form 10-KSB
for the period ended June 30, 1993, and incorporated herein
by reference.
Page 42 of 47
<PAGE> 43
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.
BIOCHEM INTERNATIONAL INC.
Dated: September 22, 1995 By /s/ David H. Sanders
---------------------------
David H. Sanders, Chairman
of the Board of Directors,
Chief Executive Officer and
Principal Financial 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 indicated on the 22nd day of September, 1995.
By /s/ David H. Sanders By /s/ Ken M. Davee
---------------------- -----------------------
David H. Sanders, Chairman Ken M. Davee, Vice
of the Board of Directors, Chairman, Director and
Chief Executive Officer and Secretary
Principal Financial Officer
By /s/ Lee J. Knirko By /s/ Frank A. Katarow
----------------------- --------------------
Lee J. Knirko, Director Frank A. Katarow,
President and Chief
Operating Officer
By /s/ Ann M. Johnson
--------------------
Ann M. Johnson, Vice
President of Finance
and Operations
Page 43 of 47
<PAGE> 44
Independent Accountant's Report on Financial Statement Schedules
To the Stockholders
and Directors of
Biochem International Inc.
Our report on the financial statements of Biochem International Inc. is
included on page 15 of this Form 10-KSB. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules listed in the index on page 36 of this Form 10-KSB.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
September 1, 1995
Page 44 of 47
<PAGE> 45
SELECTED FINANCIAL DATA (FOR THE YEARS ENDED JUNE 30)
(in thousands of dollars, except for per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating results:
Net sales $25,055 $17,861 $12,856 $10,003 $9,730
Net income before
cumulative effect of
change in accounting 4,259 2,195 1,808 1,062 364
Net income 4,259 7,391 1,808 1,062 364
Per share data:
Net income before
cumulative effect of
change in accounting 0.32 0.17 0.14 0.08 0.04
Net income 0.32 0.56 0.14 0.08 0.04
Other data:
Weighted average
shares outstanding 13,158,861 13,129,166 13,090,141 13,075,506 9,070,084
Shareholder's equity
(deficit) $10,113 $5,851 ($ 1,548) ($ 5,357) ($ 6,418)
Capital expenditures 1,205 216 140 205 112
Dividends per share --- --- --- --- ---
Working capital 8,490 3,248 2,053 254 345
Total assets 12,305 12,767 5,094 3,489 2,721
Long-term debt --- --- 3,948 5,897 6,919
Employees 105 92 84 69 59
</TABLE>
Page 45 of 47
<PAGE> 46
Biochem International Inc.
Schedule II - Valuation and Qualifying Accounts
for the years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ----------------------------------- ---------- ---------- ---------- ---------
Additions
Balance at Charged to Balance
Beginning Costs and (a) at End
Description of Period Expenses Deductions of Period
- ----------------------------------- ---------- ---------- ---------- ----------
1993
----
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 70,000 $ 39,699 $ 49,699 $ 60,000
Allowance for inventory obsolescence 150,000 64,789 64,789 150,000
---------- --------- ---------- ---------
Total $ 220,000 $ 104,488 $ 114,488 $ 210,000
========== ========= ========== =========
1994
----
Allowance for doubtful accounts $ 60,000 $ 37,664 $ 22,664 $ 75,000
Allowance for inventory obsolescence 150,000 99,720 49,720 200,000
---------- --------- ---------- ---------
Total $ 210,000 $ 137,384 $ 72,384 $ 275,000
========== ========= ========== =========
1995
----
Allowance for doubtful accounts $ 75,000 $ 55,481 $ 30,481 $ 100,000
Allowance for inventory obsolescence 200,000 70,002 120,002 150,000
---------- --------- ---------- ---------
Total $ 275,000 $ 125,483 $ 114,488 $ 250,000
========== ========= ========== =========
</TABLE>
__________
(a) Deductions consist solely of doubtful accounts and inventory written
off.
Page 46 of 47
<PAGE> 1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Biochem International Inc. on Form S-8 (File No. O-10005) of our report dated
September 1, 1995 on our audits of the financial statements and financial
statement schedule of Biochem International Inc. as of June 30, 1995 and 1994,
and for each of the three years in the period ended June 30, 1995, which report
is included in this Annual Report on Form 10-KSB.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
September 21, 1995
Page 47 of 47
