EXHIBIT 99 ISCO, INC. RETIREMENT PLU$ PLAN Financial Statements As Of And For The Years Ended July 31, 2000 And 1999 And Supplemental Schedule As Of July 31, 2000 And Independent Auditors' Report 34 ISCO, INC. RETIREMENT PLU$ PLAN FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE AND INDEPENDENT AUDITORS' REPORT TABLE OF CONTENTS Page FINANCIAL STATEMENTS: Independent Auditors' Report 36 Statements of Net Assets Available for Benefits 37 Statements of Changes in Net Assets Available for Benefits 38 Notes to Financial Statements 39 SUPPLEMENTAL SCHEDULE: Form 5500 Schedule H Part IV, Line 4 (i) - Schedule of Assets Held for Investment Purposes - July 31, 2000 44 Schedules not filed herein are omitted because of the absence of the conditions under which they are required. 35 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, 2000 and 1999 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, 2000 and 1999, 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, 2000 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, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole. Deloitte & Touche LLP Lincoln, Nebraska October 16, 2000 36 ISCO, INC. RETIREMENT PLU$ PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (Amounts in thousands) July 31, 2000 July 31, 1999 ------------- ------------- Investments, at fair value as determined by quoted market prices (Note C): Money market funds $ 1,667 $ 2,695 Mutual funds 28,871 24,201 Isco, Inc. common stock 345 464 Investments, at estimated fair value (Note C): Other investments -- 13 ------- ------- Total investments at fair value 30,883 27,373 Participant loans 436 450 ------- ------- Total investments 31,319 27,823 ------- ------- Employer contribution receivable 345 -- ------- ------- Net assets available for benefits $31,664 $27,823 ======= ======= The accompanying notes are an integral part of the financial statements. 37 ISCO, INC. RETIREMENT PLU$ PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (Amounts in thousands) Year Ended Year Ended July 31, 2000 July 31, 1999 ------------- ------------- Investment income (Note C): Dividends, interest and other income $ 2,145 $ 2,885 Net realized and unrealized appreciation in fair value of investments 2,433 581 -------- -------- Net investment income 4,578 3,466 -------- -------- Contributions: Employer annual profit sharing 345 -- Employer 401(k) matching 161 163 Participant 847 857 -------- -------- 1,353 1,020 -------- -------- Total additions 5,931 4,486 Benefits paid (2,090) (984) -------- -------- Increase in net assets available for benefits 3,841 3,502 Net assets available for benefits: Beginning of year 27,823 24,321 -------- -------- End of year $ 31,664 $ 27,823 ======== ======== The accompanying notes are an integral part of the financial statements. 38 ISCO, INC. RETIREMENT PLU$ PLAN NOTES TO FINANCIAL STATEMENTS Years ended July 31, 2000 and 1999 (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. Effective August 1, 1987, a 401(k) salary reduction option was incorporated into the Plan. 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 at American Century Investments under the direction of the plan participants. CONTRIBUTIONS. Contributions to the Plan are provided from the following sources: EMPLOYER ANNUAL PROFIT SHARING CONTRIBUTION. The Employer is required to contribute an amount equal to the lesser of 7% of the current net profit of the Company or the maximum amount allowed by the Internal Revenue Code. The contributed amount received by each participant is based on their percentage of total eligible compensation. PARTICIPANT CONTRIBUTIONS. Plan participants may elect to reduce their compensation by a maximum of 12%, subject to IRS limitations. 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 20% of the contribution made on behalf of each participant electing salary reductions up to a maximum of 10% 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 three years of credited service, increasing 20% per year until fully vested upon completion of seven years of credited service. PAYMENT OF BENEFITS. On termination of service due to death, disability or retirement, a participant with a vested balance greater than $5,000 may elect to receive either a lump sum equal to the participant's vested interest in his or her account, or monthly installments. A participant with a vested balance less than $5,000 will receive a lump sum payment equal to the participant's vested account balance. 39 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 are not reflected in the Plan's financial statements. EMPLOYER DIRECTED. As of July 31, 2000, there are no employer directed funds invested in the Restricted Fund. Prior to July 31, 2000, investments in the Restricted Fund were transferred into the Unrestricted Fund, as directed by the Plan Committee. Employer directed funds were previously invested in the Restricted Fund, which was managed by the Employer. Assets in the Restricted Fund at July 31, 1999 include: Balcor Pension Investors II and III, Benham Stable Value Government Fund, and Scout Prime Pooled Investment. PARTY IN INTEREST TRANSACTIONS. Certain investments are in funds managed by the trustee of the Plan and therefore, qualify as party in interest. INVESTMENT OPTIONS: PARTICIPANT DIRECTED. Participants may select to invest in one or more of the following thirteen funds. A brief summary description of each investment option follows: BENHAM STABLE VALUE GOVERNMENT FUND. A fund that seeks to provide current income while maintaining a stable share price. It is managed by SEI Trust Co. BENHAM PREMIUM BOND FUND. A fund that seeks a high level of income from a portfolio of longer-term bonds and other debt obligations. AMERICAN CENTURY BALANCED FUND. A fund that seeks capital growth and current income by investing in equity securities with prospects for growth and in investment grade bonds and other fixed income securities. AMERICAN CENTURY SELECT FUND. A fund comprised primarily of income-producing equity securities of larger companies with the potential for appreciation. AMERICAN CENTURY ULTRA FUND. A fund comprised primarily of equity securities of medium and smaller companies with the potential for appreciation. AMERICAN CENTURY INTERNATIONAL GROWTH FUND. A fund that seeks capital growth by investing primarily in an internationally diversified portfolio of common stocks. AMERICAN CENTURY EQUITY INDEX FUND. A fund that seeks long-term capital growth by investing in stocks that comprise of the S&P 500 Index. AMERICAN CENTURY STRATEGIC ALLOCATION: CONSERVATIVE. A fund seeking to provide regular income through emphasizing investment in bonds and money market securities combined with the potential for moderate long-term return as the result of its stake in equity securities. AMERICAN CENTURY STRATEGIC ALLOCATION: MODERATE. A fund emphasizing investment in equity securities but maintaining a sizable stake in bonds and money market securities. 40 AMERICAN CENTURY STRATEGIC ALLOCATION: AGGRESSIVE. A fund emphasizing investment in equity securities, but maintaining a smaller portion of its assets in bonds and money market securities. AMERICAN CENTURY VALUE FUND. A fund investing primarily in equity securities of well established companies with intermediate to large market capitalizations that are believed by fund management to be undervalued at the time of purchase. AMERICAN CENTURY VISTA FUND. A fund investing primarily in medium sized and smaller companies with above average prospects for appreciation. ISCO, INC. COMMON STOCK. Assets invested primarily in Isco, Inc. common stock. Isco, Inc. is a party-in-interest and sponsor of the Plan. NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING. The financial statements of the Plan are prepared under the accrual method of accounting. USE OF ESTIMATES. The preparation of the financial statements in accordance 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates. 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. The amounts shown in Note C for securities that do not have a quoted market price represent fair value estimated by an independent third party. 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 $56,508 and $303,388 at July 31, 2000 and 1999, 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, but 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. RECLASSIFICATIONS. Certain reclassifications have been made to the prior years' financial statements to conform to the current years' presentation. 41 NOTE C. INVESTMENTS The following schedule presents the fair values of investments that represent 5 percent or more of the Plan's net assets. - --------------------------------------------------------------------------------------------------------------------- 2000 1999 Fair Value Fair Value ---------- ---------- Investments at fair value as determined by quoted market price: Money Market: Benham Stable Value Government Fund $ 1,667 $ 2,660 Mutual Funds: American Century International Growth Fund 2,891 1,625 American Century Ultra Fund 9,256 7,006 American Century Select Fund 10,157 9,539 American Century Balanced Fund 3,140 3,179 Other Investments 3,772 3,364 --------- ------- Total Investments at Fair Value $30,883 $27,373 ========= ======= - --------------------------------------------------------------------------------------------------------------------- The net appreciation (depreciation) in fair value of investments for the years ended July 31, 2000 and 1999 are summarized as follows: 2000 1999 ------- ------- Mutual Funds $ 2,569 $ 558 Bank Collective Funds -- 57 Isco, Inc. Common Stock (136) (34) ------- ------ $ 2,433 $ 581 ======= ======= NOTE D. EMPLOYER DIRECTED INVESTMENTS Information about the net assets and the significant components of the changes in net assets relating to the employer directed investments is as follows: 2000 1999 ------- ------ Net Assets Money Market Funds $ -- $ 132 Investments At Estimated Fair Value -- 13 ------- ------ $ -- $ 145 ======= ====== During the year ended July 31, 2000, the Plan Committee transferred all of the net assets in the employer directed investments to the participant directed investments. Changes in net assets for the years ended July 31, 2000 and 1999 are summarized as follows: Year Ended Year Ended Changes In Net Assets July 31, 2000 July 31, 1999 ------------- ------------- Dividends $ 9 $ 11 Benefits Paid (7) (16) Transfers (147) (101) ----- ----- Decrease In Net Assets $(145) $ (96) ===== ===== - ------------------------------------------------------------------------------------------- 42 NOTE E. 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 F. 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 17, 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. 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. 43 ISCO, INC. RETIREMENT PLU$ PLAN PN 001 EIN #47-0461807 (Amounts in thousands, except per share/unit data) Form 5500 Schedule H Part IV, Line 4(i) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES July 31, 2000 - ---------------------------------------------------------------------------------------------------------------------- Column B Column C Column E - ---------------------------------------------------- -------------------------- --------------- Description of investment including collateral, rate of interest, maturity date, Current Identity of Issue, Borrower, Lessor or Similar Party Par or Maturity Value Value - ---------------------------------------------------- -------------------------- --------------- MONEY MARKET: *Benham Stable Value Government Fund 1,666,906 Shares $ 1,667 MUTUAL FUNDS: *American Century Select Fund 191,355 Shares 10,157 *American Century Balanced Fund 183,866 Shares 3,140 *Benham Premium Bond Fund 75,452 Shares 725 *American Century Ultra Fund 210,609 Shares 9,256 *American Century International Growth Fund 207,721 Shares 2,891 *American Century Vista Fund 46,603 Shares 1,072 *American Century Equity Index Fund 92,996 Shares 532 *American Century Value Fund 99,466 Shares 521 *American Century Strategic Allocation: Conservative 12,322 Shares 70 *American Century Strategic Allocation: Moderate 36,352 Shares 262 *American Century Strategic Allocation: Aggressive 28,763 Shares 245 OTHER INVESTMENTS: *Isco, Inc. Common Stock 80,670 Shares 345 *Participant loans Interest rates ranging from 9.00% to 10.87% maturing August 2000 through June 2005 436 ------- $31,319 ======= *Party-in-interest 44