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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______ to _______
COMMISSION FILE NUMBER 0-18338
I-FLOW CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0121984
- ---------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2532 WHITE ROAD, IRVINE, CA 92614
- ---------------------------------------- --------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 553-0888
------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
--------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
[COVER PAGE 1 OF 2 PAGES]
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The aggregate market value of the 11,446,097 shares of voting Common Stock of
the registrant held by non-affiliates of the registrant on February 28, 1997,
based on the last sale price of such stock on such date was $55,799,723.
Registrant's outstanding stock as of February 28, 1997 was 12,078,429 shares of
Common Stock and 656,250 shares of Series B Preferred Stock. The Series B
Preferred Stock is convertible by the holders thereof at any time into 700,000
shares of the Company's Common Stock and vote with the Common Stock as a single
class on all matters submitted to holders of Common Stock. All the Preferred
Stock is held by affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III is incorporated by reference to portions of
the registrant's Proxy Statement for the 1997 Annual Meeting of Shareholders,
which will be filed with the Securities and Exchange Commission within 120 days
after the close of the registrant's year ended December 31, 1996.
Certain Information required by Parts II and IV is incorporated by reference to
portions of the registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1996.
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PART I
ITEM 1. BUSINESS
THE COMPANY
I-Flow Corporation (the "Company" or "I-Flow") designs, develops,
manufactures and markets technically advanced, ambulatory infusion systems that
administer antibiotics, analgesics, chemotherapeutic agents, hormones,
nutrients, hydration therapies and other medical treatments to patients. The
Company's devices are designed for portability, convenience, reliability,
economy and technical sophistication such that cost effective healthcare may be
delivered at various sites, most frequently, the home, hospitals and physician
offices.
The Company was incorporated in the State of California in July 1985. The
Company's corporate offices are located at 2532 White Road, Irvine, California
92614. The telephone number is (714) 553-0888.
ACQUISITION OF BLOCK MEDICAL, INC.
On July 3, 1996, the Company entered into an agreement for the purchase
of substantially all of the assets of Block Medical, Inc. ("Block"), a
wholly-owned subsidiary of Hillenbrand Industries. Block was a San Diego
based manufacturer and marketer of ambulatory infusion devices. The
transactions contemplated by this agreement were consummated on July 22, 1996.
The assets were acquired for an aggregate purchase price of approximately $18
million (including costs). The purchase price has been allocated to the net
assets acquired, in-process research and development, goodwill and other
intangibles. The amount allocated to in-process research and development of
$4.9 million has been expensed as of the acquisition date. Consideration for
the purchase consisted of: $15,000,000 in cash, 433,018 shares of I-Flow
Corporation Common Stock with a value of $2,000,000 as of the date of closing,
and a warrant to purchase 250,000 shares of I-Flow Corporation Common Stock at
an exercise price of $4.62, expiring July 22, 2001, valued at $615,000 at the
date of closing.
THE PRODUCTS
I-Flow offers the health care professional a complete line of
cost-effective infusion therapy devices designed to meet the needs of today's
managed care environment both in the hospital and alternate site setting. The
I-Flow family of technically advanced infusion products are portable,
reliable, economical and versatile.
ELASTOMERICS
The patented HOMEPUMP Eclipse(R) and HOMEPUMP Eclipse "C" Series are
durable, portable and compact elastomeric infusion systems designed to deliver
medications such as antibiotics, pain medication, and chemotherapy drugs in a
wide range of volumes and delivery times needed to meet today's sometimes
complex protocols. The HOMEPUMP Eclipse is the
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market leader in elastomeric technology and provides the health care
professional with a device that is both safe and extremely easy to teach
patients to self-administer.
SYRINGE DELIVERY SYSTEMS
The Medi-SIS(TM) 20 and Medi-SIS 60 Syringe Infusion Systems are
designed to provide an accurate IV push delivery from a syringe. This
cost-effective syringe system delivers IV medications over a 15, 30 or 60
minute period. The Medi-SIS Syringe Infusion System provides the health care
professional with a reusable, mechanical delivery system that can replace
gravity based systems while providing a low cost, accurate delivery with less
teaching time required for patients.
The Band-It(TM) Syringe Delivery System, and the Band-It One Dose(TM)
System deliver a variety of medications such as antibiotics, diuretics, and
other low volume drugs. The Band-It utilizes a standard Becton-Dickinson 10 or
20 cc syringe to infuse over 15 to 30 minutes, providing the lowest cost per
dose while still providing a safe and accurate alternative to gravity or IV
push methods.
NON-ELECTRONIC IV BAG DELIVERY SYSTEMS
The Liberty(TM) 100 and Liberty 1000 IV Bag Infusion Systems deliver
medications from standard Abbott Laboratories or Baxter International IV bags.
The Liberty System provides a safe, easy to use means of providing a controlled
infusion, eliminating the need to teach patients to count drops, use a roller
clamp etc. The I-Flow Liberty system encourages improved patient compliance,
while providing a low cost means of infusion delivery.
The PARAGON(TM) ambulatory infusion pump provides accurate and cost
effective delivery of IV medications, including chemotherapy, heparin and
analgesics, which require precise and reliable delivery over extended periods
of time. The companion product SIDEKICK utilizes a patented spring technology
to deliver IV antibiotics over a shorter time period. These products are sold
internationally, outside of the United States.
The Rely-A-Flow(TM) Gravity Set eliminates roller clamps and reduces
the risk of over infusion using gravity. Flow control tubing precisely
controls the rate of infusion, providing a safe and cost-effective method for
delivering medications from standard IV fluid containers at a controlled rate
of flow.
ELECTRONIC PUMPS
VoiceLink(R) represents the "standard for tele-medicine". With
VoiceLink, the only piece of equipment a caregiver needs is a telephone. No
computer to carry and no special software to learn. Remote programming and
monitoring is as simple as dialing a telephone and following the verbal
instructions from a voice mail-like system. VoiceLink and a standard touch tone
telephone or cellular phone is all that is needed. The Company is currently
reviewing possibilities for licensing the VoiceLink technology for other
applications.
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Verifuse Plus is the only infusion device available today that can be
used with the VoiceLink. The Verifuse Plus is a multi-therapy ambulatory
infusion pump with features similar to pumps currently on market.
Vivus 4000(R) is the only ambulatory, multi-channel, multi-therapy
infusion pump available. It provides accurate and safe remote programming of
four individual protocols, including flushing, regardless of complexity.
THE MARKET
Alternate site health care has grown significantly in the past few years.
Ambulatory infusion devices are one of the fastest growing segments in the
alternate-site health care marketplace. An ambulatory pump allows patients to
leave the hospital earlier, making it very attractive to cost-conscious
hospitals and to patients who favor home treatment. Alternate site revenues
for infusion devices were estimated at $400 million in 1995 and are expected to
reach approximately $600 million by the year 2000. The field has been
identified by marketing research analysts as one of the fastest growing
segments in U.S. health care with revenues rising in excess of 20% annually.
COMPETITION
The intravenous ("IV") drug and nutrient infusion segment of the alternate
site health care industry is highly competitive. The Company competes in this
market based on price, service and product performance. Some of the
competitors have significantly greater resources than the Company for research
and development, manufacturing and marketing, and may be better able to compete
for a share of the market, even in areas in which the Company's products may be
superior. The industry is subject to technological changes and there can be no
assurance that the Company will be able to maintain any existing technological
lead long enough to establish its products and to sustain profitability.
The Company has focused its product development efforts on products in the
ambulatory infusion systems market. Amounts spent on Company-sponsored
product development activities are disclosed in the Financial Statements
included elsewhere herein.
SALES AND DISTRIBUTION
Distribution of the Company's products is currently managed directly
through its internal sales force as well as through a number of regional
medical product distributors. As of February 1997, the Company had 15 internal
sales representatives located throughout the United States. The Company is
actively pursuing additional distribution arrangements for its products.
In November 1994, the Company signed an exclusive national distribution
agreement with SoloPak Pharmaceuticals Inc. ("SoloPak") for the SIDEKICK,
PARAGON and elite product lines. During the year ended December 31, 1994, the
Company received a $500,000
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non-refundable fee in consideration for an option included in the agreement for
the purchase of the U.S. distribution rights for these products in June of
1996. In March 1996, this agreement was superseded with a new agreement in
which SoloPak purchased the exclusive right and license to manufacture and sell
the products in the U.S. and Puerto Rico. Pursuant to the new agreement,
SoloPak paid the Company $1.3 million in consideration of the license in March
1996 and guaranteed royalties of $1.0 million per quarter during each of the
three succeeding quarters in 1996. Additionally, SoloPak will pay I-Flow a
royalty equal to two percent of their net sales of the products for the 1997
and 1998 calendar years. Per the terms of the agreement, I-Flow has the right
of first refusal to supply SoloPak with services and assistance in assembling
the completed products until March 1998. The Company retained the rights to
sell the products outside the United States and Puerto Rico.
The Company sells several of its products into the international market
and has signed agreements with distributors in various countries. Currently,
the Company is selling its products through distributors in Canada, Brazil,
the Benelux Countries, Germany, England, Ireland, Italy, Mexico, Spain, Korea,
Australia, New Zealand and Israel. Aggregate sales to countries outside of the
United States represented approximately 30% and 21% of the Company's revenues
for the years ended December 31, 1996 and 1995, respectively. The Company does
not have any capital investments in overseas operations.
MANUFACTURING AND OPERATIONS
Electromechanical assembly, calibration, pre and post-assembly quality
assurance inspection and testing, and final packaging for all products have
historically been performed at I-Flow facilities by I-Flow employees using
parts and materials acquired from a variety of outside vendors. The Company
maintains a separate warehouse facility for its components and finished
products. Printed circuit board manufacture and component integration are
performed externally, with I-Flow obtaining custom circuit boards and then
providing the electronic materials and engineering specifications to an outside
assembler.
With the acquisition of substantially all the assets of Block Medical,
Inc. in July 1996, the Company acquired Block's wholly-owned subsidiary, a
manufacturing plant in Northern Mexico. This plant has been in operation since
1994 and has historically performed and is currently performing the manufacture
of all of Block's disposable IV infusion devices and tubing sets. The Company
intends to maintain the plant in Mexico and to manufacture a substantial
portion of its products there. The Company regularly reviews the use of
outside vendors for production versus internal manufacturing, analyzing factors
such as the quality of the products received from vendors, the costs of the
products, timely delivery and employee utilization.
In each of the years ended December 31, 1996, 1995 and 1994, the Company
incurred expenses of $1,139,000, $840,000 and $720,000, respectively, for
research and development.
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PATENTS AND TRADEMARKS
The Company has filed U.S. patent applications for substantially all of
its products. The Company received a patent for the Band-It Drug Delivery
System in 1995 and the Medi-SIS Syringe Delivery System in 1997.
In December 1996, the Company received a patent for the use of its newly
acquired VoiceLink technology for programming electronic infusion devices using
only a touch-tone telephone. Copyrights have been obtained for the Vivus 4000
programming software. The product names "HOMEPUMP Eclipse", "VoiceLink" and
"Vivus 4000" are registered trademarks and trademark applications are pending
for most of the Company's other products. There can be no assurance that
pending patent or trademark applications will be approved or that any patents
will provide competitive advantages for the Company's products or will not be
challenged or circumvented by competitors.
REGULATIONS GOVERNING THE COMPANY'S MANUFACTURING OPERATIONS
Development and manufacture of I-Flow products are regulated by the U.S.
Food, Drug and Cosmetic Act. The Food and Drug Administration ("FDA"), which
administers this Act, has issued a number of regulations that dictate the
method by which new products are allowed to enter the U.S. market, and the
documentation and control of the manufacturing processes. In August 1995, the
Company received its biannual inspection from the FDA at its corporate facility
in Irvine, California. In July 1996, the Company's newly acquired subsidiary,
Block Medical, Inc. received an inspection from the FDA for its facility in
San Diego, California. There were no reportable conditions found during either
inspection.
In addition to the FDA, the State of California has a set of similar
regulations and requires annual production-site inspections to maintain the
relevant manufacturing license. State regulations also address the storage and
handling of certain chemicals and disposal of their wastes.
Products intended for export shipment are also subject to additional
regulations, including compliance with ISO 9000. In May 1995, the Company
received ISO 9001 certification, which ensures that I-Flow's products meet
specified uniform standards of quality and testing. The Company was also
granted permission to use the CE mark on its products, which reflects approval
of the Company's products for export into 18 member countries of the European
Community. In December 1996, the operations of Block Medical were also added
to the Company's ISO certification and permission was granted to use the CE
mark on the Block products.
The Company has passed all regulatory inspections and believes that it is
currently in compliance with all relevant federal, state and international
requirements in all material respects.
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EMPLOYEES
As of February 28, 1997, the Company had a total of 96 full-time employees
in the United States and 140 employees in its wholly-owned subsidiary in
Mexico. No U.S. employees are covered by a collective bargaining agreement
with a union. The Company considers its relationship with its employees to be
very good. The Company also uses temporary employees as needed, mainly in
manufacturing.
ITEM 2. DESCRIPTION OF PROPERTY
The Company is currently negotiating a noncancelable operating lease for a
new 51,000 square foot building in Lake Forest, California, for its primary
facility. The lease agreement will contain certain scheduled rent increases
(which are accounted for on a straight-line basis) and will expire in June
2007. The Company also leases a facility for its manufacturing plant in
Northern Mexico.
ITEM 3. LEGAL PROCEEDINGS
As of February 28, 1997, the Company was involved in a legal proceeding in
the normal course of operations. Although the outcome of the litigation cannot
be determined as of February 28, 1997, in the opinion of management any
resulting future liability will not have an adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
three months ended December 31, 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of the Company as of February 28, 1997. There are no
family relationships between any of the executive officers or directors of the
Company. The executive officers are chosen annually at the first meeting of
the Board of Directors following the annual meeting of shareholders and serve
at the pleasure of the Board of Directors.
Name (Age) Position
---------- --------
Donald M. Earhart (52) President, Chief Executive Officer
and Chairman of the Board
Henry T. Tai, Ph.D., M.D. (53) Secretary and Director
John H. Abeles, M.D. (52) Director
Joel S. Kanter (40) Director
Jack H. Halperin (50) Director
Erik H. Loudon (58) Director
Charles C. McGettigan (52) Director
James J. Dal Porto (44) Executive Vice President,
Chief Operating Officer
Gayle L. Arnold (35) Vice President Finance,
Chief Financial Officer
and Treasurer
DONALD M. EARHART, former Corporate Officer and President of the Optical
Division of Allergan, Inc., (from 1986 to 1990) has been Chairman of the Board
since March 1991, and Chief Executive Officer since July 1990. Mr. Earhart
joined the Company as President and Chief Operating Officer in June 1990. Mr.
Earhart, who holds a Bachelor of Engineering from Ohio State University and a
Masters Degree in Business Administration from Roosevelt University, has over
23 years experience in the medical products industry. Prior to his employment
at Allergan, he was a Corporate Officer and Division President of Bausch and
Lomb, and was an operations manager of Abbott Laboratories. He has also served
as an engineering consultant at Peat, Marwick, Mitchell & Co., and as an
engineer with Eastman Kodak Company. Mr. Earhart currently serves on the
Boards of Directors of Abacus Investments, Ltd. and Oncometrics Imaging Corp.
HENRY T. TAI, PH.D., M.D. is the initial progenitor of the Company's
product and business concept in multiple-drug infusion systems. Dr. Tai was a
director from 1985 to 1988, and has been a director and Secretary of the
Company since 1990. Dr. Tai has been a practicing hematologist and cancer
specialist since 1977. Dr. Tai holds a Bachelor of Arts degree in Molecular
Biology from Harvard University, a Ph.D. in Molecular Biology and an M.D. from
the University of Southern California. He has done postdoctoral research in
the molecular biology of tumor virus DNA at the Weizman Institute of Science in
Israel and at the California Institute of Technology. He is a consultant in
hematology and medical oncology and has an academic appointment at the
University of Southern California School of Medicine, where he is conducting
research on cancer metastases.
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JOHN H. ABELES, M.D. has been a director since 1985 and served as
Chairman of the Board from 1988 to March 1991. Dr. Abeles has been President
of MedVest, Inc., a general consulting and venture capital firm in the medical
industry, since January 1980. Dr. Abeles is the general partner of Northlea
Partners, a family investment partnership which is a shareholder in the
Company. Dr. Abeles holds an M.D. from the University of Birmingham, England,
and he currently serves on the Boards of Directors of AccuMed International,
Inc., Dusa Pharmaceuticals, Inc., Healthcare Acquisition Corporation and Oryx
Technology, Inc.
JOEL S. KANTER was elected as a director in March 1991. Mr. Kanter has
been President of Windy City, Inc., an investment management firm since 1986.
In February 1995, he became President of Walnut Financial Services, Inc. Mr.
Kanter was the former managing director of Investor's Washington Service, a
Washington D.C. based service that provided information for corporations and
institutional money managers from 1985 to 1986. Mr. Kanter currently serves on
the Boards of Directors of GranCare, Inc., Healthcare Acquisition Corporation,
Medcross, Inc., Osteoimplant Technologies, Inc., Vitalink Pharmacy Services,
Inc. and Walnut Financial Services, Inc.
JACK H. HALPERIN, ESQ. is a corporate and securities attorney who has been
in private practice since 1988. Mr. Halperin was formerly a member of Bresler
and Bab, a New York law firm from 1987 to 1988. Prior to that Mr. Halperin was
a member of Solinger, Grosz & Goldwasser, P.C. from 1981 to 1987. Mr. Halperin
currently serves on the Boards of Directors of AccuMed International, Inc.,
Memry Corporation and Xytronics, Inc. Mr. Halperin holds an A.B. (summa cum
laude) from Columbia College and a J.D. degree from New York University School
of Law where he was Note and Comment Editor of the Law Review.
ERIK H. LOUDON is the Managing Director of EHL Investment Services Limited
in the Channel Islands. He was a Director of Sarasin Investment Management,
Ltd. in London from 1985 to 1989; and he currently serves on the Boards of
Directors of Emerge Capital, Luxembourg, Fotolabo, S.A., Switzerland, and Leaf
Asset Management, Luxembourg.
CHARLES C. MCGETTIGAN was elected as a director of the Company in October
1992. He was a founding partner in 1991 and is a general partner of Proactive
Investment Managers, L.P., which is the general partner of Proactive Partners,
L.P. Mr. McGettigan was a co-founder of McGettigan, Wick & Co., Inc., an
investment banking firm in 1988. From 1984 to 1988, he was a Principal,
Corporate Finance, of Hambrecht & Quist, Inc. Prior to that, Mr. McGettigan
was a Senior Vice President of Dillon, Read & Co., Inc. He currently serves on
the Boards of Directors of Digital Dictation, Inc., Modtech, Inc., NDE
Environmental, Inc., Onsite Energy, Inc., PMR Corporation, Phoenix Network,
Inc., Sonex Research, Inc. and Wray-Tech Instruments, Inc. Mr. McGettigan is a
graduate of Georgetown University, and received his MBA in Finance from the
Wharton School at the University of Pennsylvania.
JAMES J. DAL PORTO joined the Company in October 1989 to serve as
Controller. Mr. Dal Porto was promoted to Treasurer in October 1990, to Vice
President of Finance and Administration in March 1991, to Executive Vice
President, Chief Financial Officer in March 1993 and to Chief Operating Officer
in February 1994. Mr. Dal Porto served as Financial
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Planning Manager and Manager of Property Accounting and Local Taxation at
CalComp, a high technology manufacturing company, from 1984 to 1989. Mr. Dal
Porto holds a Bachelor of Science degree in Economics from the University of
California, Los Angeles, and a Masters in Business Administration from
California State University, Northridge.
GAYLE L. ARNOLD joined the Company in April 1991 to serve as Controller,
was promoted to Vice President, Finance in February 1994 and given the
additional office of Treasurer in May 1996. Prior to joining the Company, Ms.
Arnold served as Manager with the accounting firm, Deloitte & Touche LLP where
she was employed from 1984 to 1991. Ms. Arnold is a Certified Public
Accountant and holds a Bachelor of Business Administration degree from the
University of Texas, Austin.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on The Nasdaq Small-Cap Market under the
symbol "IFLO." The Company's Series B Preferred Stock is not publicly traded,
but is convertible by the holder at any time into shares of Common Stock. The
table below sets forth the high and low sales prices of the Company's Common
Stock as reported by The Nasdaq Small-Cap Market.
High Low
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1995
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1st Quarter $3.38 $1.75
2nd Quarter $3.13 $2.50
3rd Quarter $3.69 $2.56
4th Quarter $6.06 $2.44
1996
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1st Quarter $5.50 $3.81
2nd Quarter $5.94 $3.69
3rd Quarter $4.94 $3.81
4th Quarter $5.44 $4.06
American Stock Transfer & Trust Company is the Company's transfer agent
for its Common Stock. As of February 28, 1997, the Company had approximately
500 shareholders of record, and based upon information received from nominee
holders, the Company believes it has in excess of 9,000 total beneficial
holders.
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The Company has not paid, and does not currently expect to pay in the
foreseeable future, cash dividends on its Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
The table entitled "Selected Financial Data" shown on page 6 of the
Company's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" which appears on pages 7 to 9 of
the Company's 1996 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The financial statements, including the notes thereto, included on
pages 11 through 21 of the Company's 1996 Annual Report to Shareholders
together with the section entitled "Independent Auditors Report" included on
page 10 are included herein by reference.
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(b) Financial Statement Schedules
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO ADDITIONS BALANCE
BEGINNING COSTS AND FOR BUSINESS AT END
CLASSIFICATION OF PERIOD EXPENSES ACQUISITION DEDUCTIONS OF PERIOD
- -------------- ---------- ---------- ------------ ---------- ---------
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts $ 42,000 $ 205,000 $247,000
Reserve for obsolete
inventories 240,000 221,000 461,000
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful
accounts 247,000 262,000 509,000
Reserve for obsolete
inventories 461,000 $296,000 165,000
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts 509,000 $ 29,000 413,000 125,000
Reserve for obsolete
inventories 165,000 1,169,000 567,000 767,000
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
PART III
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information required by
this Item included in the Company's Proxy Statement for the 1997 Annual Meeting
of Shareholders which will be filed with the Securities and Exchange Commission
no later than 120 days after the close of the fiscal year ended December 31,
1996 and the information from the section entitled "Executive Officers of the
Registrant" following Part I, Item 4 of this Report.
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ITEM 11. EXECUTIVE COMPENSATION
There is incorporated herein by reference the information required by
this Item included in the Company's Proxy Statement for the 1997 Annual Meeting
of Shareholders under the caption "Executive Compensation" which will be filed
with the Securities and Exchange Commission no later than 120 days after the
close of the fiscal year ended December 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated herein by reference the information required by
this Item included in the Company's Proxy Statement for the 1997 Annual Meeting
of Shareholders under the caption "Principal Shareholders and Stock Ownership
of Management" which will be filed with the Securities and Exchange Commission
no later than 120 days after the close of the fiscal year ended December 31,
1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated herein by reference the information required by
this Item included in the Company's Proxy Statement for the 1997 Annual Meeting
of Shareholders under the caption "Certain Other Transactions" which will be
filed with the Securities and Exchange Commission no later than 120 days after
the close of the fiscal year ended December 31, 1996.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
(1) Financial Statements
The following financial statements of the Company and independent
auditors' report are included on pages 10 to 21 of the Company's 1996
Annual Report to Shareholders and are incorporated herein by
reference.
Annual Report
Page(s)
-------------
Independent Auditors' Report 10
Financial Statements
Consolidated Balance Sheets, December 31, 1996 and 1995 11
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 12
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994 13
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 14
Notes to Consolidated Financial Statements 15
The following are included herein:
Page in This
Report
------------
Independent Auditors' Report 17
The Financial Statements and Independent Auditors' Report listed in the
above index which are included in the Company's 1996 Annual Report to
Shareholders are hereby incorporated herein by reference. With exception
of the items referred to above and in Items 6, 7, and 8, the Company's
Annual Report to Shareholders for the fiscal year ended December 31, 1996
is not deemed filed as part of this Report.
Page in This
(2) Financial Statement Schedules included herein: Report
------------
Schedule II - "Valuation and Qualifying Accounts" 13
All other schedules are omitted as the required information is
inapplicable.
(3) Exhibits
The list of exhibits contained in the accompanying Index to Exhibits
is herein incorporated by reference.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1996
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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.
I-FLOW CORPORATION
By Donald M. Earhart /s/
----------------------------
Donald M. Earhart,
Chairman, President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities indicated on March 28, 1997:
Signature Title
--------- -----
Donald M. Earhart /s/ Chairman, President and Chief Executive Officer
- ---------------------------
Donald M. Earhart
James J. Dal Porto /s/ Executive Vice President and Chief Operating
- --------------------------- Officer
James J. Dal Porto
Gayle L. Arnold /s/ Vice President, Finance (Principal Financial and
- --------------------------- Accounting Officer)
Gayle L. Arnold
John H. Abeles /s/ Director
- ---------------------------
John H. Abeles, M.D.
Jack H. Halperin /s/ Director
- ---------------------------
Jack H. Halperin
Joel S. Kanter /s/ Director
- ---------------------------
Joel S. Kanter
Erik H. Loudon /s/ Director
- ---------------------------
Erik H. Loudon
Charles C. McGettigan /s/ Director
- ---------------------------
Charles C. McGettigan
Henry T. Tai /s/ Director and Secretary
- ---------------------------
Henry T. Tai, Ph.D., M.D.
16
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INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
I-Flow Corporation:
We have audited the financial statements of I-Flow Corporation as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996, and have issued our report thereon dated February 12, 1997. Such
financial statements and report are included in your Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of I-Flow Corporation listed in Item 8. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
DELOITTE & TOUCHE, LLP
Costa Mesa, California
February 12, 1997
17
18
INDEX TO EXHIBITS
Set forth below is a list of the exhibits included as part of this report:
Exhibit No. Exhibit
- ----------- -------
3.1 (2) Restated Articles of Incorporation of the Company
3.2 (3) Certificate of Amendment to Restated Articles of Incorporation dated
June 14, 1991
3.3 (5) Certificate of Amendment to Restated Articles of Incorporation dated
May 12, 1992
3.4 (5) Certificate of Determination covering Company's Series B Preferred
Stock filed with the Secretary of State on October 5, 1992
3.5 (3) Restated Bylaws as of July 22, 1991 of the Company
4.1 (5) Specimen Common Stock Certificate
4.2 (1) Warrant Agreement between the Company and American Stock Transfer
& Trust Company, as Warrant Agent, dated February 13, 1990
4.3 (6) Form of Warrant (Class F) dated October 5, 1992 included in units sold
in 1992 private placement of Preferred Stock
4.4 (7) Form of Warrant (Class H) dated June 3, 1994, issued in conjunction with
a consulting agreement
4.5 (10) Form of Warrant dated July 22, 1996, issued in conjunction with
the acquisition of Block Medical, Inc.
10.1 (2) (8) Employment Agreement with Donald M. Earhart dated May 16, 1990
10.2 (5) (8) 1987-1988 Incentive Stock Option Plan and Non-Statutory Stock Option
Plan Restated as of March 23, 1992
10.3 (4) (8) 1992 Non-Employee Director Stock Option Plan
10.4 (9) License and Transfer Agreement with SoloPak Pharmaceuticals Inc.,
dated March 6, 1996
10.5(8) (11) 1996 Stock Incentive Plan
10.6(10) Agreement for Purchase and Sale of Assets dated as of July 3, 1996 By and
Among I-Flow Corporation, Block Medical, Inc. and Hillenbrand Industries, Inc.
10.7 Employment Agreement with James J. Dal Porto dated September 6, 1996
13 1996 Annual Report to Shareholders (not deemed to be filed herein except
for certain portions which have been incorporated herein by reference)
21 List of Subsidiaries
23.1 Independent Auditors' Consent
27 Financial Data Schedule
18
19
(1) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-32263-LA) declared effective
February 1, 1990.
(2) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended September 30, 1990.
(3) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-41207-LA) declared effective
August 8, 1991.
(4) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended December 31, 1991.
(5) Incorporated by reference to exhibit with this title filed with the
Company's Post Effective Amendment to its Registration Statement
(#33-41207-LA) declared effective November 6, 1992.
(6) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended December 31, 1992.
(7) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended December 31, 1994.
(8) Management contract or compensatory plan or arrangement required to
be filed as an exhibit pursuant to applicable rules of the Securities
and Exchange Commission.
(9) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended December 31, 1995.
(10) Incorporated by reference to exhibit with this title filed with the
Company's Report on Form 8-K dated July 22, 1996.
(11) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#333-16547) declared effective
November 20, 1996.
19