EXHIBIT 99.1
ISCO, INC. RETIREMENT PLU$ PLAN
Financial Statements As Of
And For The Years Ended
July 31, 2003 And 2002
And Supplemental Schedule
As Of
July 31, 2003
And Independent Auditors’ Report
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ISCO, INC. RETIREMENT PLU$ PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
AND INDEPENDENT AUDITORS’ REPORT
TABLE OF CONTENTS
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INDEPENDENT AUDITORS’ REPORT
Plan Committee
Isco, Inc. Retirement Plu$ Plan
Lincoln, Nebraska
We have audited the accompanying statements of net assets available for benefits of the Isco, Inc. Retirement Plu$ Plan as of July 31, 2003 and 2002 and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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, such financial statements present fairly, in all material respects, the net assets available for benefits of the Isco, Inc. Retirement Plu$ Plan as of July 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes as of July 31, 2003 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. Such supplemental schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.
/s/ Deloitte & Touche LLP | |
|
|
Lincoln, Nebraska |
November 3, 2003 |
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ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(Amounts in thousands)
| | July 31, 2003 | | July 31, 2002 | |
| | | | | |
Investments, at fair value (Note C) | | $ | 25,515 | | $ | 22,549 | |
| | | | | |
Contributions receivable | | 50 | | 70 | |
| | | | | |
Net assets available for benefits | | $ | 25,565 | | $ | 22,619 | |
The accompanying notes are an integral part of the financial statements.
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ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(Amounts in thousands)
| | Year Ended
July 31, 2003 | | Year Ended
July 31, 2002 | |
| | | | | |
Investment income (loss) (Note C): | | | | | |
Dividends, interest and other income | | $ | 377 | | $ | 354 | |
Net realized and unrealized appreciation (depreciation) in fair value of investments | | 1,744 | | (4,568 | ) |
Net investment income (loss) | | 2,121 | | (4,214 | ) |
| | | | | |
Contributions: | | | | | |
Employer annual profit sharing | | — | | 70 | |
Employer 401(k) matching | | 333 | | 304 | |
Participant | | 1,147 | | 990 | |
| | 1,480 | | 1,364 | |
Total additions (reductions) | | 3,601 | | (2,850 | ) |
| | | | | |
Benefits paid | | (655 | ) | (1,089 | ) |
Increase (decrease) in net assets available for benefits | | 2,946 | | (3,939 | ) |
| | | | | |
Net assets available for benefits: | | | | | |
Beginning of year | | 22,619 | | 26,558 | |
| | | | | |
End of year | | $ | 25,565 | | $ | 22,619 | |
The accompanying notes are an integral part of the financial statements.
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ISCO, INC. RETIREMENT PLU$ PLAN
NOTES TO FINANCIAL STATEMENTS
Years ended July 31, 2003 and 2002
(Columnar amounts in thousands, except share/unit data)
Note A. Description of Plan
General. The following brief description of the Isco, Inc. Retirement Plu$ Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for more complete information. The Plan was established, effective August 1, 1972, to provide retirement benefits for the employees of Isco, Inc. The Plan was last amended effective August 1, 1995. Employees are eligible for participation after they have completed one year of service and are at least 21 years of age. A year of service is defined as the accumulation of 1,000 hours of credited service during a one-year period beginning on the employment date.
Participant contributions, Employer 401(k) matching contributions, and Employer profit sharing contributions, are invested by JP Morgan Retirement Plan Services at the direction of the plan participants.
Employer Annual Profit Sharing Contribution. The Employer makes annual discretionary contributions to the Plan, subject to IRS limitations. The contributed amount received by each participant is based on his or her percentage of total eligible compensation.
Participant Contributions. Plan participants may elect to reduce their compensation by any percentage, up to the annual IRS contribution limit. The Employer then contributes the amount of reduction in compensation to the Plan on behalf of each participant.
Employer 401(k) Matching Contribution. The Employer is required to match 50% of the contribution made on behalf of each participant electing salary reductions up to a maximum of 5% of the participant’s eligible compensation.
Participant Accounts. Each participant’s account is credited with the participant’s contribution, the Employer’s matching contribution and the allocated portion of the Employer’s annual profit sharing contribution and the forfeited portion of terminated participants’ non-vested account balances. Any 401(k) forfeitures are allocated, based on a participant’s contributions to the 401(k) plan during the plan year. The Employer’s annual profit sharing contribution and related forfeitures are allocated to each participant’s account based on the percentage of the participant’s eligible compensation for the plan year to the total compensation of all eligible participants for the plan year. Earnings are credited directly to each investment option in which the participant had an investment on the record date of the dividend or interest distribution.
Vesting. Participant contributions (i.e. employee salary reduction amounts) are immediately fully vested and nonforfeitable. Employer profit sharing contributions and the Employer 401(k) matching contributions vest 20% upon completion of one year of credited service, increasing 20% per year until fully vested upon completion of five years of credited service.
Payment of Benefits. On termination of service due to death, disability or retirement, a participant with a vested balance may elect to receive a lump sum equal to the participant’s vested interest in his or her account.
Plan participants are eligible for normal retirement at age 65 but may elect to retire at a later date. Upon attainment of 65 years of age, death, or determination of disability, a participant becomes 100% vested regardless of the number of credited years of service completed.
Plan Expenses. The Employer pays for all costs to administer the plan with the exception of loan origination and loan maintenance fees. This provides an additional benefit to the participant. The administration costs paid by the Employer are not reflected in the Plan’s financial statements.
Participant Loans. Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance. The loans are secured by the participant’s account balance and bear interest at rates that range from 5.25% to 10.75%, which are equivalent to prevailing local rates as determined by the Plan Administrator. Principal and interest are paid ratably through payroll deductions.
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Subsequent Event. Effective August 1, 2003, the Employer adopted a new prototype plan document to incorporate required tax law changes and other administrative changes. The most significant change as a result of the new plan document adoption was a change in the Plan’s year end from July 31 to December 31.
Note B. Summary of Significant Accounting Policies
Basis of Accounting. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Use of Estimates. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates. The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for plan benefits.
Investment Valuation and Income Recognition. Investments are stated at fair value. Fair value of marketable securities is determined by reference to the closing quoted price by the exchange on which the security is listed or the closing net asset value as reported by the mutual fund. Participant loans are stated at their outstanding principal balance, which approximates fair value.
Investment transactions are recognized on a settlement date basis. The net realized and unrealized appreciation (depreciation) of investments is recognized in the statements of changes in net assets available for benefits. The fair value at the beginning of the plan year, or the purchased cost if acquired during the year, is used in determining realized and unrealized gains and losses on the sale of each investment.
Payment of Benefits. The Plan’s policy is to record benefit payments upon distribution to the participants. Benefits payable to retired and terminated participants were $0 and $0 at July 31, 2003 and 2002, respectively.
Contributions. The Employer profit sharing contribution is computed as of the end of the Employer’s fiscal year and is recorded by the Plan in the corresponding period. The profit sharing contribution is allocated to participants’ accounts in the plan quarter in which the profit sharing contribution is made to the Plan. Participant contributions are recorded in the period in which the bi-weekly payroll deductions are made. The Employer 401(k) matching contributions are also recorded in the period that the payroll deductions are made.
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Note C. Investments
The following schedule presents the fair values of investments that represent five percent or more of the Plan’s net assets.
| | July 31
2003 | | July 31
2002 | |
American Century Stable Asset Fund | | $ | 2,830 | | $ | 2,282 | |
American Century International Growth Fund | | 1,284 | | 1,497 | |
American Century Ultra Fund | | 5,013 | | 4,704 | |
American Century Select Fund | | 5,981 | | 5,760 | |
American Century Balanced Fund | | — | | 2,117 | |
American Century Strategic Allocation-Moderate | | 2,517 | | 423 | |
American Century Diversified Bond Fund | | 1,534 | | 1,088 | |
American Century Equity Index Fund | | 1,823 | | 869 | |
| | | | | | | |
The net appreciation (depreciation) in fair value of investments for the years ended July 31, 2003 and 2002 is summarized as follows:
| | 2003 | | 2002 | |
| | | | | |
Mutual Funds | | $ | 1,811 | | $ | (4,698 | ) |
Isco, Inc. Common Stock | | (67 | ) | 130 | |
| | $ | 1,744 | | $ | (4,568 | ) |
Note D. Plan Termination
Although Isco, Inc. has not expressed any intent to terminate the Plan, it may do so at any time by giving 30 days notice to the Plan Committee, the Plan Administrator, and the Trustee. In the event of such termination, Plan assets would be valued and participants’ accounts would be adjusted to reflect the allocation of net gains and losses of the underlying investments. At that time, participants’ accounts would become fully vested and nonforfeitable.
Note E. Federal Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated September 7, 1995, which states that the Plan, as amended June 11, 1994, meets the requirements of Section 401(a) of the Internal Revenue Code and is, therefore, exempt from Federal income tax under Section 501(a) of the Code. However, the plan has been amended since the determination letter was received. The Plan administrator believes that the Plan is in compliance with current regulations. Therefore, no provision for income taxes is provided in the financial statements of the Plan.
Note F. Related Party Transactions
Plan investments include 76,285 and 74,908 shares of Isco, Inc. common stock with a fair value of $626,000 and $674,000 at July 31, 2003 and 2002, respectively. Isco, Inc. is the plan sponsor and, therefore, these transactions qualify as party-in-interest transactions.
All JP Morgan investments are managed by the trustee of the plan and, therefore, these transactions qualify as party-in-interest transactions. JP Morgan is the owner of JP Morgan/American Century Retirement Plan Services.
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ISCO, INC. RETIREMENT PLU$ PLAN
PN 001
(Amounts in dollars, except per share/unit data)
Supplemental Schedule
Form 5500 Schedule H Part IV, Line 4(i) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
July 31, 2003 | |
Column B | | Column C | | Column E | |
Identity of issue, borrower, lessor or similar party | | Description of investment
including collateral, rate
of interest, maturity date,
par or maturity value | | Current Value | |
Money Market: | | | | | | | |
*American Century Stable Asset Fund | | 2,829,595 | | Shares | | $ | 2,830,000 | |
| | | | | | | |
Mutual Funds: | | | | | | | |
| | | | | | | |
*American Century Select Fund | | 183,469 | | Shares | | 5,981,000 | |
*American Century Diversified Bond Fund | | 149,549 | | Shares | | 1,534,000 | |
*American Century Ultra Fund | | 203,945 | | Shares | | 5,013,000 | |
*American Century International Growth Fund | | 186,686 | | Shares | | 1,284,000 | |
*American Century Equity Index Fund | | 460,292 | | Shares | | 1,823,000 | |
*American Century Value Fund | | 155,108 | | Shares | | 1,022,000 | |
*American Century Lord Abbett Growth Opportunities | | 41,978 | | Shares | | 686,000 | |
*American Century Strategic Allocation: Moderate | | 437,776 | | Shares | | 2,517,000 | |
*American Century Strategic Allocation: Aggressive | | 85,083 | | Shares | | 529,000 | |
T. Rowe Price Small Cap Stock Fund | | 33,567 | | Shares | | 837,000 | |
Van Kampen Growth & Income Fund | | 27,203 | | Shares | | 434,000 | |
| | | | | | | |
Other Investments: | | | | | | | |
*Isco, Inc. Common Stock | | 76,285 | | Shares | | 626,000 | |
*Participant Loans | | Interest rates ranging from 5.25% to 10.75% maturing August 2003 through March 2008 | | 399,000 | |
| | | | | | $ | 25,515,000 | |
| | | | | | | | | |
*Party-in-interest
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