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____________________________________________________________________
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 December 31, 1996
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-KSB or any amendment to this Form 10-KSB. [ ]
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 18, 1997, was $21,624,000.
Number of shares of Common Stock of Biopool International, Inc., $.01
par value, issued and outstanding as of December 31, 1996:
8,570,380. Portions of Registrant's Proxy Statement relating to its
1997 Annual Meeting of Stockholders are incorporated by reference in
Part III of this Annual Report.
_______________________________________________________________________
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INDEX TO ANNUAL REPORT
ON FORM 10-KSB
PART I Page
____
Item 1. Business. 3
Item 2. Properties. 16
Item 3. Legal Proceedings. 17
Item 4. Submission of Matters to a Vote
of Security-Holders. 17
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters. 18
Item 6. Management's Discussion and Analysis of
Results of Operations. 18
Item 7. Financial Statements and Supplementary Data. 21
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 21
PART III
Item 9. Directors and Executive Officers of the
Registrant. 21
Item 10. Executive Compensation. 21
Item 11. Security Ownership of Certain Beneficial
Owners and Management. 21
Item 12. Certain Relationships and Related Trans-
actions. 22
Item 13. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 22
Signatures 24
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PART I
ITEM 1. BUSINESS
Biopool International, Inc. (together with its BCA Division and
subsidiaries, the "Company" or "Biopool") is engaged in the research,
development, manufacture, and marketing of in vitro diagnostic
products. Such products now number over 150 and are sold on a
worldwide basis to hospitals, clinical laboratories, commercial
reference laboratories, blood centers, and research institutions.
Biopool, headquartered in Ventura, California, was incorporated
in Delaware in 1987 and through 1996 maintained three wholly-owned
operating subsidiaries, each of which carries on research,
manufacturing, and sales and marketing activities:
- Biopool AB ("Biopool Sweden") in Umea, Sweden, acquired by
Biopool in March 1988.
- Biopool Canada Inc. ("Biopool Canada," formerly Inter-Haematol
Inc.) in Burlington, Ontario, Canada, acquired by Biopool in
January 1990.
- Medical Diagnostic Technologies, Inc. ("MeDiTech") in Ventura,
California, acquired by Biopool in January 1992.
Effective December 31, 1996, the Company merged the operations of
the MeDiTech subsidiary into Biopool. There was no net change in
personnel, operations, or facilities as a result of this
consolidation.
Effective January 1, 1997, the Company completed the acquisition
of certain assets of the Blood Group Serology ("BGS") business of
Organon Teknika Corporation ("OTC"), a division of the Dutch company,
Akzo Nobel. The acquired business unit, located in West Chester,
Pennsylvania, is being operated as an unincorporated division of the
Company under the name "BCA, Division of Biopool International."
INDUSTRY
Biopool's products are sold to specific market segments within the
worldwide in vitro diagnostics market, estimated to be worth $18-20
billion annually. Such diagnostic products are used, in general, to
diagnose disease, identify individuals at risk for developing certain
diseases, monitor patients undergoing therapy, and evaluate blood
components prior to transfusion. These products are typically
referred to as reagents or test kits and are used by highly trained
laboratory technologists utilizing a wide range of testing devices,
which perform the ultimate analysis. In a typical example, patient
samples (blood, plasma, urine, or other body fluids) are mixed with
manufactured reagent(s), such as those produced by Biopool, and a
reaction is then measured by specific instrumentation. The test
result obtained thus provides certain diagnostic information to the
clinician.
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In vitro diagnostic products are utilized by health care
professionals worldwide. Diagnostic testing is most often performed
in:
- hospital-based laboratories
- commercial reference laboratories
- blood centers
- plasma fractionation centers.
Biopool's products address three key segments of the total in
vitro diagnostics market:
1. Hemostasis/Fibrinolysis
The market for these reagents and test kits is approximately $600
million worldwide. 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.
2. Toxicology
Toxicology products include 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. The market
for these controls is estimated at $30-50 million worldwide.
3. Blood Group Serology
Worldwide, the market for blood group serology products is
estimated at approximately $300 million. Generally, such
products are used for:
- blood grouping and compatibility tests prior to transfusion
- typing for Rh and other blood group factors
- detection and identification of blood group antibodies.
Biopool's products are sold to over 4,000 such facilities
worldwide. The U.S. typically accounts for some 35% of the total
worldwide diagnostics market, Europe approximately 35%, Japan 10%,
and 20% for the rest of the world ("ROW").
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PRODUCTS
* Test Kits Used for Measuring 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 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 the
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 products 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.
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
determination 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 Measuring 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
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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 (clot-forming)
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.
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
anticoagulant 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.
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Coagulation Control Plasmas - freeze-dried, stabilized human
plasmas 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 human population.
* Blood Group Serology Products
The products manufactured by the Company's BCA Division are
primarily used to detect the absence or presence of antigens and
antibodies in blood components. Antigens are present on the surface
of red cells, one of the primary cellular blood components.
Antibodies are present in the serum or plasma and are produced as a
result of contact with foreign substances (antigens). The four major
blood groups are A, B, AB, and O and are measured by the presence or
absence of antigens on red blood cells. Many other blood group
systems have been identified, and twenty antigens within these
systems are routinely included in blood bank testing. It is
imperative that the blood bank technologist correctly match the donor
blood to the patient's blood type, thus requiring the use of products
such as those manufactured by BCA.
The BCA product line consists of over 75 products used to
determine the presence or absence of antigens and antibodies in
blood. The BCA products are categorized into several major areas.
The following list encompasses the products and applications for use.
Monoclonal ABO Antisera - used to detect and identify ABO
antigens on the surface of red blood cells. Test results determine
the A, B, AB, or O blood type of the specimen.
Rh Typing Antisera - used to detect Rh antigens on the surface of
red blood cells. Primary use is to classify the specimen as Rh
positive or Rh negative.
Anti-Human Globulin Reagents - allow for the antigen and antibody
to link together so the reaction is detected. Primarily used in
crossmatching and in antibody screening and identification
procedures.
Potentiators - increase the sensitivity of antibody detection
tests while decreasing the time needed to perform such tests. Used
in crossmatching and in antibody screening and identification
procedures.
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Reagent Red Blood Cells - used to detect and identify antibodies
in patient or donor blood, confirm ABO blood grouping results, and
verify the addition and performance of the anti-human globulin
reagent.
Rare Antisera - used to detect the presence or absence of other
clinically significant rare blood group antigens.
Quality Control Kits - used to check and confirm the consistent
performance of routine blood bank reagents.
Specialty Reagents - adsorb unwanted antibodies from the test
system so that clinically significant antibodies can be detected.
Used for special serological cases.
Proficiency Testing Kits - used to check the proficiency of the
medical technologist to insure the accuracy of blood banking
techniques.
Antigen Plus Software - manages commercial red blood cells and
rare frozen cells in a custom database. Eliminates manual red blood
cell searches. Used in conjunction with antibody identification
procedures.
Rho(D) Immune Globulin - an injectable for the prevention of
hemolytic disease of the newborn. Administered to Rh negative women
antenatally and postpartum, if necessary. This product, also known
as RHIG, is distributed by Biopool and manufactured by Bayer.
* Miscellaneous Products
Drugs-of-Abuse Controls - a system of multi-level, multi-analyte,
liquid-stable controls 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. While the Company has
developed a range of clinical chemistry reagents, it has put very
little effort into selling such reagents in a highly competitive
market, resulting in only minimal sales of such products.
* Products under Development and R&D
Biopool carries out product development activities at each of its
four worldwide facilities. Most product development is aimed at
broadening the product offering in the market niches already served
by the Company, introducing updated versions (quicker, more user-
friendly, more accurate, etc.) of current products, and conducting
research aimed at evaluating technology applicable to new methods of
diagnostic testing.
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Biopool received FDA 510(k) approval to market eight new products
in 1996, all of which represented product improvements or product
line extensions in the Company's existing business.
For the fiscal years ended December 31, 1996, 1995, and 1994, the
Company spent $263,000, $199,000, and $174,000, respectively, for
research and development. Management expects to increase such
expenditures by at least 50% in 1997, largely due to additional R&D
activities at the newly acquired BCA Division.
Current product development activities include:
Hemostasis
- - Development of a new generation D-dimer kit that can be used on
automated clinical chemistry analyzers. D-dimer is currently the
Company's largest selling hemostasis product, and the Company
believes the market for D-dimer testing will continue to grow.
Its current format is a latex-agglutination slide test that is
manually performed and read by a technologist. The version under
development is expected to be lower cost and amenable to high-
volume testing.
- - To further augment Biopool's position in D-dimer testing, the
Company is developing a rapid, point-of-care device to
quantitatively measure D-dimer in patient blood.
- - In 1995, the Company acquired certain technology from the
University of Alberta to be used in developing a test kit for the
diagnosis of Heparin-Induced Thrombocytopenia ("HIT"). Pilot lots
to be used in clinical evaluation are expected to be produced in
the second quarter of 1997; and, thereafter, a determination will
be made as to whether or not to proceed to a commercial test kit.
- - In January 1997, the Company entered into an Option Agreement
with the Research Foundation of the State University of New York
("SUNY") to evaluate certain inventions and know-how relating to
the "Method for Assaying Components in an Enzyme-Protein Substrate
System." Although not yet issued, notice of allowance for the
original patent application has been received by the Foundation.
The Option Agreement allows Biopool to receive know-how from the
inventors, Dr. Scott Diamond and associates, at SUNY-Buffalo, and
evaluate the technology for six months. At the election of
Biopool, the parties will then negotiate a Definitive License
Agreement. The original patent application is for "Rapid Assays
of Activators and Inhibitors of Clotting," and utilizes
fluorescent-labeled proteins as a means of detecting such
biological reactions. The Company believes the application of
this technology could fit well with Biopool's wide range of assays
in the field of hemostasis. It is our intent to evaluate this
technology for key hemostasis proteins to make these assays more
sensitive, easier, quicker, and more broadly available to the
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clinical laboratory. Furthermore, if the Company is successful
in applications for hemostasis tests, the technology may have
broad applications to many other enzymes and related proteins
that are commonly tested in the clinical laboratory.
Blood Group Serology
The development of hybridoma technology has led to a widespread
availability of monoclonal antibodies for use in blood group serology
reagents. The Company recognizes the potential for the application
of monoclonal antibodies to several of its blood bank products and is
pursuing a program to introduce monoclonal-based products wherever
the technology proves to be advantageous.
The Company currently markets six FDA approved monoclonal-based
reagents. Three of the antiglobulin reagents contain monoclonal
anti-C3, prepared from clones owned by the Company. Raw material for
the remaining products are currently purchased from a single
supplier. Should the supply of these materials from this source be
interrupted, the Company anticipates alternate sources could be
located.
Biopool is pursuing the development of the following reagents
using purchased monoclonal antibodies: anti-D (IgM), anti-D
(IgM/IgG), anti-C, anti-c, anti-E, and anti-e. FDA submission for
the two anti-D reagents is planned by year-end, and for the remaining
reagents by the second quarter of 1998. A new product for detecting
fetal red cells in maternal circulation is also under development,
with 510(k) filing to the FDA anticipated by year-end.
MANUFACTURING AND QUALITY CONTROL
The Company currently manufactures its reagents and assembles its
test kits at its facilities in Ventura, California; West Chester,
Pennsylvania (as of January 1, 1997); Umea, Sweden; 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. Red cell products are prepared
from whole blood collected and sold by licensed blood banks. 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
promulgated by the FDA. All Company facilities are registered as
Device Manufacturing Establishments with the FDA. The West Chester
("BCA") facility is further licensed by the FDA for the manufacture
of biological products. Three U.S. FDA product licenses are in
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effect allowing for the manufacture and distribution of blood group
serum, reagent red blood cells, and anti-human globulin products.
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. Management
believes that two- to three-fold volume increases can be accommodated
with little additional investment in facilities. Furthermore, the
BCA facility in West Chester has been certified to meet the
requirements of ISO 9001 standards of quality. The Company's other
three locations are currently undergoing preparations to become ISO
certified, which is expected to be completed no later than 1998.
MARKETING AND DISTRIBUTION
The Company markets and sells its products through regional and
national distributors and, effective January 1, 1997, through ten
outside sales representatives. The Company's sales personnel are
highly experienced in the technical aspects of the product line and
include blood bank specialists and others with advanced degrees in
medical technology.
Biopool's products are sold outside of the U.S. through an
extensive network of independent distributors in over 50 countries
worldwide. With the acquisition of the BGS business from OTC, the
Company entered into a distribution agreement with Organon Teknika
B.V. ("OTI") allowing for the continuance of blood group serology
product distribution through OTI foreign affiliates on a non-
exclusive worldwide (non-U.S.) basis. To date, the Company has
received and filled orders from over twenty OTI foreign affiliates
and ten new third-party distributors.
The Company's sales and marketing activities are supported by two
directors of marketing, one for hemostasis products and one for blood
group serology products; three dedicated technical service personnel;
and one telesales employee. The technical service personnel provide
continuing education to customers through sponsored workshops and
consultation services and also prepare and provide numerous examples
of technical support documentation. Gulf Coast Regional Blood Center
in Houston, Texas, is retained by the Company as an outside
consultation laboratory to further service customer needs.
The Company's customer base is now over 4,000 end-users in the
U.S., with non-U.S. distribution utilizing over 50 independent
dealers in more than 50 countries. The Company augments its direct
sales activities through active participation in a number of key
regional, national, and international industry trade shows, including
the American Association of Clinical Chemistry, the American
Association of Blood Banking, the American Society of Hematology, and
Medica (Dusseldorf, Germany). In addition, the Company maintains a
visable market presence by exhibiting at over 20 regional blood bank
meetings annually.
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In addition to product sales to end-user customers through
Company sales personnel or distributors, Biopool also has significant
sales derived from private label ("PL") and Original Equipment
Manufacturer ("OEM") business with other companies in the hemostasis
and drugs-of-abuse testing markets. Such PL/OEM accounts include
Biosite Diagnostics, Dade International, Instrumentation Laboratory,
Organon Teknika (a division of Akzo Nobel), Ortho Diagnostic Systems
(a division of Johnson & Johnson), Pacific Hemostasis (a division of
Fisher Scientific), and Sigma Diagnostics (Sigma/Aldrich).
No customer accounted for over 10% of sales during 1996.
PL/OEM products accounted for 47% of sales in 1996.
Sales by geographic region for 1996 were: U.S. and Canada
$4,432,000, Europe $2,518,000, Asia-Pacific $438,000, Mexico and
South America $263,000, and ROW $369,000. With the inclusion of the
BCA business, management expects a somewhat similar breakdown of
sales by geographic area for 1997.
MARKETS AND COMPETITION
The Company believes that the worldwide market for in vitro
diagnostics is approximately $18-20 billion and that the existing
market for blood coagulation, fibrinolysis, and thrombotic risk
factors is approximately $600 million. The total worldwide blood
group serology market is approximately $300 million.
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. In the hemostasis
area, these companies include Behring Diagnostics (a division of
Hoechst), Boehringer Mannheim, Dade International, Instrumentation
Laboratory, Organon Teknika (a division of Akzo Nobel), Ortho
Diagnostic Systems (a division of Johnson and Johnson), and Sigma
Diagnostics (Sigma/Aldrich).
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 currently has approximately a 1% worldwide market share in
hemostasis products.
In the blood group serology business, major competitors include
Ortho, Immucor, and Gamma Biologicals, with approximately 45%, 27%,
and 15% U.S. market share, respectively. The BCA products enjoy an
approximate 5% U.S. market share. In addition to these same
competitors worldwide, other competitors include Diamed
(Switzerland), Biotest (Germany), and Diagast (France). BCA products
have a non-U.S. market share of approximately 3%.
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Competition is based upon a number of factors, including product
quality, customer service, price, continuous availability of product,
breadth of product range, and the strength and effectiveness of the
sales and marketing organization. Biopool is a recognized leader and
innovator in its core business. The Company believes its test kits
and reagents compete on the basis of price, relative ease of use,
quality, accuracy, and precision.
SUPPLIERS
The Company obtains raw materials from numerous outside vendors.
Key raw materials include whole blood, plasma, anti-sera, platelets,
and monoclonal antibodies. The Company generally has more than one
source for its raw materials, except for certain monoclonal
antibodies utilized in its blood group serology products. The
Company is currently evaluating additional suppliers to reduce its
dependence on any single vendor.
Certain of the Company's hemostasis products are derived from
plasma obtained from individuals with rare genetic deficiencies of
certain clotting factors (such as factor VIII, Hemophilia A). In
order to reduce reliance on this diminishing resource, the Company
has in recent years developed methodologies in-house to prepare
"immuno-depleted" plasmas that mimic these congenital disorders.
Within the blood group serology product line, certain products
are derived from the blood of individuals with rare combinations of
antigens and/or antibodies. Such donor individuals are rare, and the
Company has from time to time experienced delays or disruptions in
supplies.
PATENT, 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
proprietary know-how, and continuing technological innovation to
develop 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 independently 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.
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The Company has established rights in the trademarks "MeDiTech,"
"Imulyse," "Spectrolyse," "Desafib," "Desafib X," "Chromolize,"
"TintElize," "Stabilyte," "Accucell-16," "Re CAP," "Quik Chek,"
"W.A.R.M.," "RESt," "HPC," "Acculiss," EM-V," "EM-X," and "Self-Check."
The marks Biopool-R-, BCA-R-, TintElize-R-, Minutex-R-, Tencell-R-,
Spectrogen-Duo-R-, Spectrogen Trio-R-, Confirmcells-R-, and
Coatagen-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
regulatory 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 manufacturing 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 "substantially equivalent" to similar
diagnostic products already in general use. Over 80 of the Company's
products have received marketing approval via the 510(k) process.
The manufacture and distribution of products intended for use in
blood banks is a highly regulated business. The Company is subject
to ongoing compliance with various federal, local and international
laws, regulations and rules regarding establishment and product
licensing, as well as product labeling and other manufacturing and
testing activities. BCA is currently manufacturing and distributing
blood bank reagents under establishment license number 956-004
granted to Organon Teknika, Inc., from which the business was
purchased. The Company has filed an establishment license
application and three product license applications which are required
to formally transfer the manufacture and distribution of the blood
group serology product line to Biopool International. FDA licensure
is expected during the second quarter of 1997, at which time Biopool
International, Inc., can market the affected products under the BCA
label and proceed with registration activities in those export
locales requiring such.
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
14
<PAGE>
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.
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
manufacturing process and, ultimately, on its finished products. The
Company has from time to time experienced a disruption in the quality
or availability of certain key raw materials, which has created minor
delays in the ability of the Company to fill orders for certain 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.
Competitors in the United States and elsewhere include major
pharmaceutical, chemical, and biotechnology companies, many of which
have substantially 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
effective 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
approximately 48% and 50% of Biopool's revenues in 1996 and 1995,
respectively. 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
30% of the Company's sales are made in Swedish Krona. Gains and
losses on the conversion of accounts receivable arising from
international 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.
15
<PAGE>
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,
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
contracts, changes in management, announcements of technological
innovations or new products by the Company or its competitors,
legislative or regulatory changes, general trends in the industry,
recommendations 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
At the end of 1996, the Company had 54 full-time employees: 26
in the U.S., 15 in Sweden, and 13 in Canada. With the acquisition of
the BCA Division from OTC, the Company acquired 60 additional
employees in the U.S. for a total of 114 employees. Many employees
hold advanced degrees or certifications in medical technology. Four
individuals hold 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 8 to the consolidated
financial statements included herein under Item 13.
ITEM 2. PROPERTIES
Biopool International leases a 20,000 square-foot facility in
Ventura, California, providing administrative, laboratory,
manufacturing, and warehouse space, where Biopool's corporate offices
16
<PAGE>
are also located. Key manufacturing facilities include clean rooms,
high-speed vial filling and capping capabilities, and a freeze-drying
capacity of up to 40,000 vials per lot. 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.
The BCA facility purchased January 1, 1997, consists of 36,000
square feet on a seven and one-half acre lot in a suburban office
park. Special features within the facility include three class 1000
clean rooms, each containing a class 100 horizontal laminar flow
hood. Associated with the clean rooms are a changing room, entry
corridor, exit room, and pass-through dry heat and steam sterilizers.
Two additional clean rooms are designated as class 10,000. Each
contains one or more class 100 horizontal laminar flow hoods. Two
manufacturing rooms contain high-efficiency exhaust systems and class
1 respirator connections. There is batch size capacity for bulk
manufacture and sterile filtration for up to 600 liters. Laboratory
capabilities include serological assay, defibrination, delipidation,
adsorption, centrifugation, and determinations for pH, protein, and
chloride. Additional testing capabilities include sterility testing
and verification of cell concentration, fill volume, and applied
torque.
Biopool Sweden leases a 7,800 square-foot facility in Umea,
Sweden, providing administrative, laboratory, warehouse, and
manufacturing space. The laboratories are particularly suited for
the preparation of high-quality biochemicals for use in the Company's
test kits. Annual rent is 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
The business of the Company may give rise to routine litigation.
In management's opinion there are no actions or claims pending or
threatened which are not adequately covered by insurance.
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.
17
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
<TABLE>
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 trade prices for the common stock for the periods
indicated as reported by NASDAQ. The Company has not paid any
dividends since its inception and does not contemplate payment of
dividends in the foreseeable future.
<CAPTION>
1996 1995
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
Fourth quarter $3- 9/16 $2- 1/16 $2- 1/2 $1- 7/32
Third quarter 2- 7/16 1-11/16 3 15/16
Second quarter 2- 9/16 1- 5/8 1-11/16 21/32
First quarter 2-11/16 1- 1/16 1- 1/4 13/16
</TABLE>
(a) On March 18, 1997, the closing trade price of the Company's
common stock, as reported by NASDAQ, was $3-1/16.
(b) As of March 18, 1997, there were 252 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ACQUISITION OF BLOOD GROUP SEROLOGY
On January 1, 1997, the Company purchased certain assets of the
BGS Division of OTC. Management believes that the acquisition
expands and broadens its product line and provides an expanded direct
sales force for its products. Management also believes that the
acquisition provides the Company with a number of strategic
advantages that will enhance its existing business. Assuming the
acquisition had occurred on January 1, 1996, pro forma combined
results of the Company and BGS for the year ended December 31, 1996,
reflect revenue of $16.0 million and net income of $1.5 million,
equal to $0.17 per share. Such pro forma information may not be
indicative of the results that actually would have occurred if the
combination had been in effect on the date indicated or which may be
obtained in the future. However, management believes that in 1997
the number of employees; revenues; cost of sales; and sales, general
and administrative expenses will approximately double from 1996
levels.
18
<PAGE>
1996 VERSUS 1995
Sales
Sales for the year ended December 31, 1996, increased from the
prior year approximately $1,358,000, or 20%, to $8,020,000. Sales
growth continued across nearly the complete line of 75 products as
the Company continued to expand its direct sales presence in the U.S.
The Company also experienced sales growth from certain of its
international distributors. The Company continued to expand its
private label/OEM business to key corporate clients, representing 47%
and 44% of total revenues in 1996 and 1995, respectively.
The Company's customers are dispersed over wide geographic
areas, and no customer exceeded 10% of sales in 1996. Sales in the
United States and Western Europe accounted for 52% and 31%,
respectively, of total sales during 1996.
Foreign transaction gains and losses for the Company were
minimal in 1996 and 1995. The impact of foreign currency translation
differences was considered insignificant in 1996.
The Company believes that its sales will continue to be
influenced 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, demand level
for certain diagnostic tests, price competition, continued efforts
worldwide to reduce health care costs (including diagnostic testing),
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 1995 to 1996, cost of sales increased $561,000, or 16%, to
$4,091,000. This represents 51% as a percentage of sales, compared
with 53% for 1995. The decrease was largely due to a concerted
program to improve efficiencies in manufacturing, seek better pricing
from vendors on raw materials, and improve inventory management.
Research and development expenses showed an increase to $263,000 in
1996 versus $199,000 in 1995. The Company continues to invest in
research and development aimed at improvements to the existing
product line, new diagnostic reagents in hemostasis, and evaluation
of newer technologies which may be applicable to current and future
diagnostic test kits. Research and development expenses are expected
to increase approximately 50% in 1997.
Selling, general and administrative expenses decreased by
$239,000 to $2,509,000 in 1996 from $2,748,000 in 1995. This
decrease is due primarily to significant non-recurring legal fees
(approximately $430,000) incurred by the Company in 1995. Selling
19
<PAGE>
costs, however, increased in 1996 over 1995 primarily as a result of
considerably enhanced sales and marketing activities which include
the addition of two national sales managers, greater travel to
support their activities, and enhanced presence at national and
international trade shows. The Company expects selling costs to
increase further in 1997 as it continues to build its market presence
in the U.S. and abroad. Another factor contributing to increased
selling, general and administrative expenses in 1996 was the creation
of two new positions, chief financial officer and vice
president/general manager. The Company expects to incur additional
transitional costs associated with the integration of the BGS
operations.
Income Taxes
The Company's income tax benefit primarily represents state
franchise and foreign government income taxes, which were offset by a
$400,000 reduction of the NOL valuation allowance. The Company has
remaining net operating loss carryforwards of approximately $250,000
in the United states available to offset future taxable income.
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.
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.
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.
Selling, general and administrative expenses increased from
$2,205,000 in 1994 to $2,748,000 in 1995, an increase of
approximately 25%. This increase was, in large part, due to
significant non-recurring professional fees.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources remained strong
throughout 1996. In anticipation of the BGS acquisition that was
consummated on January 1, 1997, the Company sold 500,000 shares of
its common stock in December 1996, netting $1,094,000, and drew down
$3,500,000 on a new term note. $4,500,000 of these proceeds were
recorded as other long-term assets at December 31, 1996. Working
capital was $3,935,000 and the ratio of current assets to current
liabilities was 3.0 as of December 31, 1996. The comparable figures
for 1995 were $3,777,000 and 4.9.
Cash flows from 1996 operations were $1,190,000. It is
anticipated that existing cash and ongoing cash flows from operations
will provide sufficient working capital needs for the Company for the
foreseeable future. Approximately $150,000 of additional acquisition
costs will be capitalized in the first quarter of 1997.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data have been
included under Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
Incorporated by reference to the Company's definitive Proxy
Statement to be filed with the Securities and Exchange Commission on
or before April 30, 1997.
ITEM 10. 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, 1997.
ITEM 11. 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, 1997.
21
<PAGE>
ITEM 12. 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, 1997.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) (1) and (2) The following consolidated financial statements
of Biopool International, Inc., and subsidiaries are hereby included
by reference to Item 7:
PAGE NO.
Report of Independent Auditors 26
Consolidated balance sheets as of December 31,
1996 and 1995 27
Consolidated statements of income for the years
ended December 31, 1996, 1995 and 1994 29
Consolidated statements of stockholders' equity
for the years ended December 31, 1996, 1995
and 1994 30
Consolidated statements of cash flows for the years
ended December 31, 1996, 1995 and 1994 31
Notes to consolidated financial statements 32
(3) Listing of Exhibits
EXHIBIT NO.
3.1 Certificate of Incorporation (1)
3.2 By Laws (1)
4.1 Form of Five-Year Common Stock Purchase
Warrant and list of holders (2)
10.2 1987 Stock Option Plan (1)
10.2 1993 Stock Incentive Plan (3)
11 Computation of Earnings Per Share
21 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 Annual
Report on Form 10-K for the fiscal year ended December
31, 1993.
22
<PAGE>
(3) Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994.
(b) Reports on Form 8-K filed during the fourth quarter of 1996:
Form 8-K dated November 4, 1996.
Item 2. Acquisition or Disposition of Asset -
Announcement of signing definitive Sales and Purchase
Agreement to acquire assets of the Blood Group Serology
business from Organon Teknika.
23
<PAGE>
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 27, 1997 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 27, 1997
Michael D. Bick, Ph.D. Chief Executive Officer
/s/ Robert K. Foote
_______________________ Chief Financial Officer March 27, 1997
Robert K. Foote
/s/ Andrew L. Cerskus
_______________________ Director March 27, 1997
Andrew L. Cerskus, Ph.D.
/s/ Douglas L. Ayer
_______________________ Director March 27, 1997
Douglas L. Ayer
/s/ Lewis J. Kaufman
_______________________ Director March 27, 1997
Lewis J. Kaufman
24
<PAGE>
ANNUAL REPORT ON FORM 10-KSB
ITEM 13(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
YEAR ENDED DECEMBER 31, 1996
BIOPOOL INTERNATIONAL, INC.
VENTURA, CALIFORNIA
25
<PAGE>
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, 1996 and 1995,
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Biopool International, Inc., at December
31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Woodland Hills, California
March 11, 1997
26
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1996 1995
_________________________________________________________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,019,000 $ 1,282,000
Accounts receivable, net
of allowance for doubtful
accounts of $11,000 and $3,000
in 1996 and 1995, respectively 1,560,000 1,154,000
Inventories 2,027,000 1,842,000
Prepaid expenses and other
current assets 289,000 415,000
Refundable income taxes -- 62,000
_________________________________________________________________
TOTAL CURRENT ASSETS 5,895,000 4,755,000
PROPERTY AND EQUIPMENT 3,661,000 3,485,000
Less accumulated depreciation
and amortization (2,018,000) (1,714,000)
_________________________________________________________________
PROPERTY AND EQUIPMENT, NET 1,643,000 1,771,000
OTHER ASSETS
Deposit on acquisition 4,500,000 --
Deferred tax benefits 307,000 --
Patent application costs, net 159,000 150,000
Excess of cost over net assets
of acquired companies, net 616,000 671,000
Other assets 3,000 89,000
_________________________________________________________________
TOTAL OTHER ASSETS 5,585,000 910,000
_________________________________________________________________
TOTAL ASSETS $13,123,000 $ 7,436,000
_________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(continued)
<CAPTION>
December 31,
1996 1995
_________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 214,000 $ 253,000
Accrued expenses 589,000 467,000
Income taxes payable 185,000 54,000
Bank borrowings 120,000 22,000
Current portion of long-term debt 852,000 182,000
_________________________________________________________________
TOTAL CURRENT LIABILITIES 1,960,000 978,000
LONG-TERM DEBT, NET 2,811,000 524,000
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
50,000,000 shares authorized;
8,570,380 and 7,935,751
shares issued and outstanding
at December 31, 1996 and 1995,
respectively 86,000 79,000
Additional paid-in capital 10,737,000 9,563,000
Accumulated deficit (2,518,000) (3,813,000)
Cumulative foreign currency
translation adjustment 47,000 105,000
_________________________________________________________________
TOTAL STOCKHOLDERS' EQUITY 8,352,000 5,934,000
_________________________________________________________________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $13,123,000 $ 7,436,000
_________________________________________________________________
_________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31,
1996 1995 1994
________________________________________________________________________
<S> <C> <C> <C>
SALES $ 8,020,000 $ 6,662,000 $ 5,527,000
COSTS AND EXPENSES
Cost of sales 4,091,000 3,530,000 2,408,000
Selling, general and
administrative 2,509,000 2,748,000 2,205,000
Research and development 263,000 199,000 174,000
________________________________________________________________________
TOTAL COSTS AND EXPENSES 6,863,000 6,477,000 4,787,000
________________________________________________________________________
OPERATING INCOME 1,157,000 185,000 740,000
OTHER INCOME (EXPENSE)
Interest income 84,000 98,000 66,000
Interest expense (68,000) (61,000) (46,000)
Gain (loss) on disposal of
assets -- (4,000) 26,000
Other 7,000 43,000 30,000
________________________________________________________________________
Total other income 23,000 76,000 76,000
________________________________________________________________________
Income before income taxes 1,180,000 261,000 816,000
Income tax benefit (expense) 115,000 (120,000) (111,000)
________________________________________________________________________
NET INCOME $ 1,295,000 $ 141,000 $ 705,000
________________________________________________________________________
________________________________________________________________________
EARNINGS PER SHARE
Primary $ 0.16 $ 0.02 $ 0.09
Fully diluted $ 0.15 $ 0.02 $ 0.09
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Cumulative
foreign
Additional currency
Common Stock paid-in Accumulated translation
Shares Amount capital deficit adjustment Total
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 7,853,366 $ 79,000 $ 9,496,000 $(4,659,000) $ (147,000) $4,769,000
Issuance of common stock 40,000 -- 7,000 7,000
Net income 705,000 705,000
Foreign currency translation 93,000 93,000
________________________________________________________________________________________________________
BALANCE AT DECEMBER 31, 1994 7,893,366 79,000 9,503,000 (3,954,000) (54,000) 5,574,000
Issuance of common stock 42,385 -- 60,000 60,000
Net income 141,000 141,000
Foreign currency translation 159,000 159,000
________________________________________________________________________________________________________
BALANCE AT DECEMBER 31, 1995 7,935,751 79,000 9,563,000 (3,813,000) 105,000 5,934,000
Issuance of common stock 634,629 7,000 1,174,000 1,181,000
Net income 1,295,000 1,295,000
Foreign currency translation (58,000) (58,000)
________________________________________________________________________________________________________
BALANCE AT DECEMBER 31, 1996 8,570,380 $ 86,000 $10,737,000 $(2,518,000) $ 47,000 $8,352,000
________________________________________________________________________________________________________
________________________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1996 1995 1994
______________________________________________________________________________
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,295,000 $ 141,000 $ 705,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 401,000 391,000 368,000
Deferred taxes (307,000) -- --
Other 170,000 38,000 (33,000)
Changes in operating assets and
liabilities:
Accounts receivable (406,000) (278,000) (124,000)
Inventories (185,000) (313,000) (131,000)
Prepaid expenses and other current
assets (54,000) (107,000) (35,000)
Refundable income taxes 62,000 (62,000) 23,000
Accounts payable and accrued
expenses 83,000 156,000 (15,000)
Income taxes payable 131,000 (5,000) 53,000
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,190,000 (39,000) 811,000
INVESTING ACTIVITIES
Deposit on acquisition (4,500,000) -- --
Additions to property and equipment (176,000) (930,000) (537,000)
Proceeds from disposal of assets -- 3,000 36,000
Patents and other assets 35,000 (244,000) (58,000)
NET CASH USED IN INVESTING ACTIVITIES (4,641,000) (1,171,000) (559,000)
FINANCING ACTIVITIES
Short-term borrowings 98,000 22,000 --
Repayment of long-term debt (539,000) (98,000) (446,000)
Issuance of long-term debt 3,506,000 550,000 227,000
Issuance of common stock 1,181,000 18,000 8,000
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 4,246,000 492,000 (211,000)
Effect of exchange rates (58,000) 159,000 93,000
NET INCREASE (DECREASE) IN CASH 737,000 (559,000) 134,000
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 1,282,000 1,841,000 1,707,000
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,019,000 $ 1,282,000 $ 1,841,000
______________________________________________________________________________
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 71,000 $ 62,000 $ 94,000
Income taxes $ 56,000 $ 113,000 $ 43,000
</TABLE>
31
<PAGE>
BIOPOOL INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
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 the research, development, production, and
sale of test kits used to assess and diagnose disorders of the
vascular system. On December 31, 1996, the Company merged its
wholly-owned subsidiary, MeDiTech, into Biopool. Certain products
will continue to carry the MeDiTech trademark.
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.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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. Leasehold
improvements are generally amortized over their estimated useful
lives or over the period of the lease, whichever is shorter.
32
<PAGE>
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, 1996 and 1995 totaled $62,000 and $67,000, respectively.
Reclassification
Certain data in the prior years' consolidated financial statements
have been reclassified to conform to the 1996 presentation.
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, 1996
and 1995 totaled $276,000 and $221,000, 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."
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.
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 in Certificates of Deposit ($900,000 at December 31,
1996) and with high-quality financial institutions. At December 31,
33
<PAGE>
1996, 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 comprising the Company's customer base and their dispersion
across many different geographic areas. Accounts receivable from one
customer amounted to 13% and 15% of the net balance due at December
31, 1996 and 1995, respectively. 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. The treasury stock
method was used to calculate the number of stock options and warrants
to be added to the average number of common shares outstanding.
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 approximates fair value.
Accounting for stock based compensation
Stock option grants are set at the closing price of the Company's
common stock on the day prior to the date of grant. Therefore, under
the principles of APB Opinion No. 25, the Company does not recognize
compensation expense associated with the grant of stock options.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use
of option valuation models to provide supplemental information
regarding options granted after 1994. Pro forma information
regarding net income and earnings per share shown below was
determined as if the Company had accounted for its employee stock
options under the fair value method of that statement.
The fair value of the options was estimated at the date of grant
using a Black-Scholes option pricing model with the following
weighted average assumptions, risk-free interest rates of 5.2% to
6.2%; dividend yields of 0% for 1995 and 1996; volatility factors of
the expected market price of the Company's common stock of 51% for
1995 and 1996; and expected life of the options of one to five years
as grouped by specific employee classifications. These assumptions
resulted in weighted average fair values of $0.90 and $0.42 per share
for stock options granted in 1996 and 1995, respectively.
34
<PAGE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options. The Company's employee
stock options have characteristics significantly different from those
of traded options such as vesting restrictions and extremely limited
transferability.
<TABLE>
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized over the option vesting periods. The pro
forma effect on net income for 1996 and 1995 is not representative of
the pro forma effect on net income in future years because it does
not take into consideration pro forma compensation expense related to
grants made prior to 1995. Pro forma information in future years
will reflect the amortization of a larger number of stock options
granted in several succeeding years. The Company's pro forma
information is as follows:
<CAPTION>
Years ended December 31,
1996 1995
----------- ---------
<S> <C> <C>
Pro forma net income (loss) $ 1,119,000 $ 26,000
Pro forma earnings (loss) per share
Primary 0.14 --
Fully diluted 0.13 --
</TABLE>
<TABLE>
Information regarding stock options outstanding as of December
31, 1996, is as follows:
<CAPTION>
Options Outstanding
------------------------------------------
Weighted
Weighted Average
Average Remaining
Price Range Shares Exercise Price Contractual Life
----------------------------------------------------------------
<S> <C> <C> <C>
$0.9375 - $3.125 1,285,111 $1.62 7.4 years
<CAPTION>
Options Exercisable
-----------------------
Weighted
Average
Price Range Shares Exercise Price
---------------------------------------------
<S> <C> <C>
$0.9375 - $3.125 611,600 $1.32
</TABLE>
35
<PAGE>
2. INVENTORIES
<TABLE>
Inventories consist of the following:
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials $ 448,000 $ 617,000
Work-in-process 700,000 706,000
Finished goods 879,000 519,000
---------- ----------
$2,027,000 $1,842,000
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
Property and equipment consist of the following:
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Leasehold improvements $ 878,000 $ 876,000
Processing and laboratory equipment 2,351,000 2,201,000
Furniture and fixtures 432,000 408,000
---------- ----------
$3,661,000 $3,485,000
</TABLE>
36
<PAGE>
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following: 1996 1995
______________________________________________________________________
<S> <C> <C>
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 (4.75% at December 31, 1996) 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. $ 162,000 $ 208,000
BIOPOOL SWEDEN
Notes payable, were forgiven in
return for research provided by the
Company. -- 10,000
BIOPOOL INTERNATIONAL
Term loan payable to a bank, due in
monthly installments of $72,795 plus
interest at a fixed rate of 8.77%, due
January 2001, collateralized by accounts
receivable, inventories, and property
and equipment of Biopool International. 3,500,000 487,000
__________ __________
Total 3,662,000 705,000
Less portion due within one year (852,000) (182,000)
__________ __________
Long-term debt, net $2,810,000 $ 524,000
</TABLE>
The term loans payable contain certain restrictions, including
capital expenditures and payment of dividends. The agreements also
require the Company to maintain certain financial ratios.
Maturities of long-term debt for the five years succeeding
December 31, 1996, are $852,000 in 1997, $922,000 in 1998, $905,000
in 1999, $904,000 in 2000, and $79,000 in 2001.
As of December 31, 1996, $26,000 of a $146,000 revolving line of
credit was unused and available to Biopool Canada. Biopool Sweden
had a line of credit for $226,000, all of which was unused and
available.
37
<PAGE>
5. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain equipment and facilities under
operating leases. Lease expense for 1996, 1995 and 1994 was
approximately $274,000, $268,000 and $196,000, respectively. At
December 31, 1996, approximate minimum annual lease commitments were
$268,000 in 1997, $267,000 in 1998, $254,000 in 1999, $149,000 in
2000, $147,000 in 2001, and $69,000 thereafter.
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. Royalty expense amounted to
$132,000, $53,000 and $50,000 in 1996, 1995 and 1994, respectively.
Litigation
The business of the Company gives rise to routine litigation.
In management's opinion, there are no known actions or claims pending
or threatened at this time.
6. SALE OF COMMON STOCK
In December 1996, the Company issued 500,000 shares of its
common stock, netting $1,094,000.
7. STOCK PLANS
The Company has two stock option plans (the "Plans") for the
benefit of employees, officers, directors, and consultants of the
Company. Under the Plans, a total of 2,282,549 shares of the
Company's common stock were 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 the
last trade value of the common stock on the day preceding the date of
grant. Options granted under the Plans generally vest over a one- to
four-year period from the date of the grant.
38
<PAGE>
<TABLE>
Stock option activity for 1994 through 1996 was as follows:
<CAPTION>
Weighted
Average
Shares Exercise
Outstanding Exercisable Price Range Price
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1994 818,744 60,000 $0.19 - 2.75 $ 1.29
Granted 127,758 1.38 - 1.58 1.45
Exercised (40,000) 0.19 0.19
Cancelled (51,169) 1.38 - 1.44 1.38
---------
BALANCE AT
DECEMBER 31, 1994 855,333 304,771 0.19 - 2.75 1.36
Granted 323,333 0.94 - 1.69 0.99
Exercised (42,385) 1.19 - 1.44 1.29
Cancelled (74,499) 0.94 - 1.44 1.16
---------
BALANCE AT
DECEMBER 31, 1995 1,061,782 443,888 0.19 - 2.75 1.26
Granted 594,657 1.44 - 3.13 1.99
Exercised (134,628) 0.19 - 1.44 1.13
Cancelled (236,700) 0.94 - 1.44 1.25
---------
BALANCE AT
DECEMBER 31, 1996 1,285,111 611,600 0.94 - 3.13 1.62
</TABLE>
Compensation expense relating to the Plans has been
insignificant. At December 31, 1996, 760,425 shares were available
for future grants under the Plans.
In connection with a private placement for 1,166,334 shares of
common stock in 1993, the Company issued five-year common stock
purchase warrants for 174,951 shares of common stock to various
consultants at $1.875 to $2.25 per share. In June of 1996, the
Company issued five-year common stock purchase warrants for 40,000
and 10,000 shares of common stock at $1.94 and $3.00 per share,
respectively, to two outside consultants for services related to the
search for potential acquisitions.
39
<PAGE>
8. 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 1996 and 1995. During 1994, one customer accounted for 10.5% of total
sales. Export sales by MeDiTech (the Company's domestic operation) to
customers in foreign countries (excluding intercompany sales) accounted for
approximately 14%, 15% and 22% of total sales in 1996, 1995 and 1994,
respectively.
<TABLE>
The consolidated financial statements include the following information
for Biopool Sweden, Biopool Canada, and MeDiTech in thousands of dollars.
<CAPTION>
Elimina-
Biopool Biopool tions and
Sweden Canada MeDiTech Corporate Consolidated
___________________________________________________________________________
<S> <C> <C> <C> <C> <C>
1996
Sales $ 3,071 $ 1,488 $ 4,651 $(1,190) $ 8,020
Less intercompany (544) (497) (149) 1,190 --
_______ _______ _______ _______ _______
$ 2,527 $ 991 $ 4,502 $ -0- $ 8,020
Net income $ 435 $ 93 $ 483 $ 284 $ 1,295
Identifiable assets $ 2,298 $ 1,160 $ 3,306 $ 6,359 $13,123
___________________________________________________________________________
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
___________________________________________________________________________
</TABLE>
Product sales to affiliates are generally priced at cost plus 30%.
40
<PAGE>
<TABLE>
Information regarding the Company's sales by geographic locations is as
follows:
<CAPTION>
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
United States $ 4,192,000 $ 3,338,000 $ 2,190,000
Western Europe 2,518,000 2,144,000 1,851,000
Asia/Pacific Region 438,000 324,000 774,000
Canada 240,000 383,000 183,000
Other 632,000 473,000 529,000
___________ ___________ ___________
Total $ 8,020,000 $ 6,662,000 $ 5,527,000
</TABLE>
9. INCOME TAXES
<TABLE>
The provision for income taxes is composed of the following:
<CAPTION>
1996 1995 1994
_________ _________ _________
<S> <C> <C> <C>
Current:
Federal - AMT $ 21,000 $ -- $ --
State 43,000 (12,000) 37,000
Foreign 221,000 132,000 74,000
_________ _________ _________
285,000 120,000 111,000
Deferred:
Reduction of
valuation
allowance (400,000) -- --
_________ _________ _________
$(115,000) $ 120,000 $ 111,000
</TABLE>
41
<PAGE>
<TABLE>
The reconciliation of income tax computed at the U.S. Federal Statutory
rates to the income tax provision is as follows:
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
Tax at U.S. statutory rate $ 401,000 34.0% $ 89,000 34.0%
State income tax 43,000 3.6 (12,000) (4.6)
Creation (utilization) of
foreign and U.S. net
operating loss carry-
forwards (342,000) (28.9) 42,000 16.1
Reduction of valuation
allowance (400,000) (33.9) -- --
Foreign taxes 221,000 18.6 -- --
Other (38,000) (3.1) 1,000 .6
____________________ ___________________
$(115,000) (9.7)% $ 120,000 46.1%
<CAPTION>
1994
<S> <C> <C>
Tax at U.S. statutory rate $ 278,000 34.0%
State income tax 37,000 4.5
Creation (utilization) of
foreign and U.S. net
operating loss carry-
forwards (288,000) (35.2)
Reduction of valuation
allowance -- --
Foreign taxes -- --
Other 84,000 10.3
____________________
$ 111,000 13.6%
</TABLE>
<TABLE>
The components of the Company's deferred tax assets and liabilities at
December 31, 1996, were as follows:
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 662,000 $ 1,226,000
Other 59,000 71,000
___________ ___________
721,000 1,297,000
Deferred tax liabilities:
Depreciation and amortization (57,000) (57,000)
Foreign (93,000) (54,000)
___________ ___________
(150,000) (111,000)
Valuation allowance (264,000) (1,240,000)
___________ ___________
Deferred taxes, net benefit
(liability) $ 307,000 $ (54,000)
</TABLE>
42
<PAGE>
The valuation allowance decreased approximately $976,000 in 1996,
representing primarily the utilization of net operating loss carryforwards in
1996 and an adjustment to reflect the estimated future benefit of the net
deferred tax assets remaining at year-end.
Biopool Sweden and Biopool Canada file separate income tax returns in
Sweden and Canada, respectively. At December 31, 1996, the Company had
available net operating loss carryforwards of approximately $1,900,000 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
approximately $748,000, $497,000 and $852,000 at December 31, 1996, 1995 and
1994, respectively.
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $1,017,000 at December 31, 1996. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. federal
and state income taxes has been provided thereon.
10. MERGERS AND ACQUISITIONS
On January 1, 1997, the Company acquired certain assets of the Blood
Group Serology ("BGS") Division of Organon Teknika Corporation ("OTC"),
located in West Chester, Pennsylvania. There was no prior relationship
between OTC or any of its officers, directors or affiliates, and the Company
and any of its officers, directors or affiliates. The acquired assets
consist of two adjacent parcels of real property, each located in West
Chester, Pennsylvania, certain blood serology product lines, including
certain proprietary blood cell lines, customer accounts, laboratory
facilities and an existing employee base, all of which are used in the BGS
business. Estimated 1996 revenues were $7,961,000, with estimated net income
of $153,000. The purchase price for BGS was $4.5 million, payable in cash.
The Company funded the purchase price in part from the privately placed sale
of 500,000 shares of its common stock to a group of accredited investors, and
in part from proceeds of a $3.5 million credit facility extended to the
Company by Sanwa Bank.
The Company believes that the acquisition of BGS expands and broadens
its product line and provides an expanded direct sales force for its
products. The Company also believes that the acquisition of the BGS business
provides the Company with a number of strategic advantages that will enhance
its existing business. The acquisition will be accounted for as a purchase.
The Company intends to continue to operate the BGS business as an
unincorporated division of the Company, from its existing location in West
Chester, Pennsylvania. All acquired assets, including plant and equipment,
will remain intact and continue to be utilized in essentially the same manner
as such assets were used by OTC.
43
<PAGE>
EXHIBIT 11
<TABLE>
BIOPOOL INTERNATIONAL, INC.
Statement Regarding Computation of Per Share Earnings
Year Ended December 31
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Primary
Average shares outstanding 8,027,720 7,907,494 7,880,033
Net effect of dilutive stock
options and warrants based
on the treasury stock method
using average market price 314,247 84,831 56,386
Total shares 8,341,967 7,992,325 7,936,419
Net income $1,295,000 $ 141,000 $ 705,000
Per share amount $ 0.16 $ 0.02 $ 0.09
Fully diluted
Average shares outstanding 8,027,720 7,907,494 7,880,033
Net effect of dilutive stock
options and warrants based
on the treasury stock method
using the higher of average
or year-end market price 478,344 124,358 56,839
Total shares 8,506,064 8,031,852 7,936,872
Net income $1,295,000 $ 141,000 $ 705,000
Per share amount $ 0.15 $ 0.02 $ 0.09
</TABLE>
<PAGE>
EXHIBIT 21
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.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,019,000
<SECURITIES> 0
<RECEIVABLES> 1,571,000
<ALLOWANCES> 11,000
<INVENTORY> 2,027,000
<CURRENT-ASSETS> 10,395,000
<PP&E> 3,661,000
<DEPRECIATION> 2,018,000
<TOTAL-ASSETS> 13,123,000
<CURRENT-LIABILITIES> 1,960,000
<BONDS> 0
0
0
<COMMON> 86,000
<OTHER-SE> 8,266,000
<TOTAL-LIABILITY-AND-EQUITY> 13,123,000
<SALES> 8,020,000
<TOTAL-REVENUES> 0
<CGS> 4,091,000
<TOTAL-COSTS> 6,863,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,000
<INCOME-PRETAX> 1,180,000
<INCOME-TAX> (115,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,295,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .15
</TABLE>
