SECURITIES AND EXCHANGE COMMISSION

                                 Washington, DC
                      -------------------------------------
                                    FORM 10-K

              (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended September 30, 1996

                                       or
             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission File No. 0-13143
                      -------------------------------------
                                  INNOVEX, INC.
             (Exact name of registrant as specified in its charter)
Minnesota                                                         41-1223933
(state or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)

             1313 Fifth Street South, Hopkins, Minnesota 55343-9904
               (Address of principal executive offices (Zip Code)

       Registrant's telephone number, including area code: (612) 938-4155
                     ---------------------------------------
           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                                (Title of Class)

                          Common Stock ($.04 par value)
                         ------------------------------

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, 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 (S229.405 of this chapter) 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. (X)

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $306,873,000 at December 9, 1996 when the closing
sale price of such stock, as reported in the NASDAQ National Market System, was
$47.50.

The number of shares outstanding of the Registrant's Common Stock, $.04 par
value, as of December 9, 1996 was 7,146,777 shares.

Documents Incorporated by Reference:

1. Portions of the Company's Proxy Statement to be filed with the Commission
within 120 days after the end of the Registrants fiscal year are incorporated by
reference into Part III of the Form 10-K.

This Form 10-K consists of 34 Pages (including exhibits). The index to exhibits
is set forth on page 25.

                                  INNOVEX, INC.
                                 1996 FORM 10-K

                                     PART I

ITEM 1.  BUSINESS

(a)  GENERAL DEVELOPMENT OF BUSINESS

Innovex, Inc. (the "Company"), through its largest division during fiscal 1996,
the Precision Products Division, develops and manufactures components, primarily
lead wire assemblies, for the disk drive industry. A new division purchased May
16, 1996, Litchfield Precision Components, develops and manufactures flexible
circuits and chemically etched parts for the medical, computer and
communications industries. The Company also develops and manufactures pacemaker
lead wires and other medical devices and software for document storage retrieval
and management.

The Company was founded in 1972 to acquire the assets of a manufacturer of
needle and wire assemblies used in computer core memories. With the introduction
of solid state memory devices, needle wire assemblies became obsolete and, in
late 1973, the Company moved into related areas of manufacturing utilizing and
expanding its micro-welding and miniature assembly expertise. This expertise is
currently used to manufacture small electromagnetic products which cannot be
economically produced by its customers. These products include fine wire lead
assemblies.

In 1984, the Company expanded its scope to the photo equipment market by
acquiring Lucht Engineering. This made Innovex the nation's largest supplier of
multi-image printers to the professional photo market. The Company discontinued
its photo business in two stages. Effective November 29, 1992, the operating
assets and liabilities, with the exception of the receivables, were sold to
Lucht Acquisition Corporation (LAC), an unrelated third party, for approximately
$4,000,000 cash and a 40 percent interest in LAC. On November 1, 1993, the
Company sold the remaining 40 percent interest in LAC to LAC's majority
shareholder for $2,850,000 in cash.

In 1986, the Company expanded its disk drive focus by purchasing Mar
Engineering, Inc. to acquire its high precision control technology for use on
grinders used by disk drive manufacturers. In September 1992, the Company sold
all the assets related to the head gimbal locating technology developed by Mar
Engineering to a former employee. The remaining assets have been sold or written
off.

The InnoMedica Division was formed in late fiscal 1993 to impart a greater
degree of strategic direction and business discipline to the Company's emerging
medical business. In line with this strategy, the Company acquired the
production equipment, patents, trademarks and related assets of Daig
Corporation's permanent pacemaker lead wire and adapter product lines in
September 1993 and Possis Medical, Inc.'s pacemaker lead wire product line in
March 1994.

To further promote the Company's long-term growth, the Iconovex Division was
formed in fiscal 1994 through the purchase of a technologically advanced
software product line in November 1993. This product prepares indexes and
abstracts of electronically stored documents. As the first software of its type,
this high speed system utilizes syntactical analysis to recognize meanings and
relationships among words and phrases in general business, legal, medical and
other documents. Syntactical analysis is more accurate than conventional Boolean
search systems that only recognize specific words. Initial releases of products
derived from this technology began generating revenue in fiscal 1994. Different
variations of the software are being developed for use by Internet World Wide
Web sites, personal computer users, electronic media publishers, and other
on-line system providers and users.

On May 16, 1996, the Company purchased substantially all of the assets of
Litchfield Precision Components, Inc., a designer and manufacturer of highly
complex and intricate flexible circuits and chemically machined electrical
components. This acquisition reduces the Company's reliance on the disk drive
industry while providing an entry into the large and rapidly growing flexible
circuit market. The acquisition also allows the Company to leverage its existing
manufacturing expertise and customer base and provides new markets for the
Company's existing technology.

Innovex, Inc. was incorporated under the laws of the State of Minnesota in 1972.
Its principal executive offices are located at 1313 Fifth Street South, Hopkins,
Minnesota 55343-9904 and its telephone number is (612) 938-4155. Products of the
Company's Precision Products Division are manufactured through the Company's
wholly owned subsidiary, Innovex Precision Products Corporation, a Minnesota
corporation formed in 1971.

(b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company and its subsidiaries operate through four divisions, Precision
Products, Litchfield Precision Components, InnoMedica and Iconovex. Each
division has its own administrative, engineering, manufacturing and marketing
organizations. Precision Products and Litchfield Precision Components are
considered core business segments with financial detail related to their
operations shown in the segment reporting footnote to the Company's financial
statements. Operations of the remaining two divisions, InnoMedica and Iconovex
are not considered core segments as they each comprise less than ten percent of
the Company's net sales, operating profit and identifiable assets. Financial
results for these divisions are included in the Corporate and Other segment in
the financial statements. Topics covered throughout this document are discussed
by divisions where helpful to the reader's understanding.


(c)  NARRATIVE DESCRIPTION OF BUSINESS

PRECISION PRODUCTS DIVISION

General
The Precision Products Division produces a variety of small lead wire assemblies
primarily for computer disk drives which cannot be economically produced by its
customers. Manufacture of these products often involves use of such specialized
tasks as miniature wire processing, insulation removal, precision miniature
welding, metal-to-metal bonding, chemical bonding, epoxy encapsulation and
high-resolution optical inspection. These products are manufactured pursuant to
individual customer orders and specifications.

Products
The principal product of the Precision Products Division is a fine wire lead
assembly. Lead assembly sales constituted over 80% of the consolidated revenues
from continuing operations during the past three fiscal years. No other product
constituted more than 10% of the Company's consolidated revenues.

Lead wire assemblies are fine twisted magnet wires that are attached to thin
film heads which read or write the information on the disk in a computer disk
drive assembly. In order to produce a lead assembly, a portion of the fine
magnet wire is stripped of its insulation. Precision Products developed
technology and processes which enables it to strip extremely fine magnet wire
without damaging the wire's gold plating. This process utilizes a laser to strip
the insulation. The Division is also shipping increasing levels of lead wire
assemblies for Magneto Resistive(MR) disk drive heads. These leads are similar
to inductive thin film head leads except for the smaller size and the use of
four wires instead of two. During fiscal 1996, the Company introduced a new
version of lead wire assembly for MR disk drive heads called the wire alignment
tab (WAT). The WAT is a lead wire assembly attached to a flexible circuit which
reduces the assembly time required by disk drive manufacturers.


LITCHFIELD PRECISION COMPONENTS

General
Litchfield Precision Components, Inc. is a designer and manufacturer of highly
complex and intricate flexible circuits and chemically machined electrical
components for the medical, computer and communications industries. The Division
focuses on the high end of its markets utilizing its leading edge imaging
technology. The products manufactured by the Division are made to individual
customer orders and specifications.

Products
The Division operates in three primary product areas:
Flexible circuitry - The Division is able to build highly precise flexible
circuits with copper traces as small as .001 inches over long lengths on
flexible base materials. The base materials can also be selectively removed to
expose the circuitry from the front and back to facilitate new assembly
techniques. These products include hard disk drive components and test circuits,
integrated circuit testing probes, paging system components and ultrasound
connections.

Chemical machining - Using metals such as stainless steel, titanium, tungsten
and copper, the Division can resolve down to .001 inch features using advanced
imaging techniques. These products include high precision surface mount fuses,
printer components and components for medical implantable devices.

Film and optical components - Through the application of high resolution images
to glass substrates, the Division can generate sub-micron features in chrome or
other deposited metals on a variety of glass and film substrates. 

INNOMEDICA

General
InnoMedica provides pacing/defibrillation leads and adapters for the implantable
bradycardia and tachacardia industry. The Division also manufactures other
customized medical products and customized development work for OEM
manufacturers. Manufacture of these products utilizes silicone rubber molding,
similar and dissimilar metal laser welding, product fabrication and miniature
product assembly. Products may be either proprietary or made to customer
specifications.

Products
The Division's primary products are proprietary leads and adapters for
implantable bradycardia pacing systems and catheters for OEM manufacturers.

ICONOVEX

General
Iconovex was established to market and further develop a technologically
advanced software product line which prepares indexes and abstracts of
electronically stored information. The core software utilizes syntactical
analysis to recognize meanings and relationships among words and phrases in
order to prepare indexes and abstracts of documents. Syntactical analysis is
more accurate than conventional Boolean search systems that only recognize
specific words. This core software may be adapted for use in a large number of
applications through the development of appropriate interfaces.

Products
EchoSearch, the Division's most recently introduced product, is an intelligent
desktop based search engine tool for browsers of the Internet World Wide Web
which improves the speed and accuracy of Web searches. EchoSearch enables users
to simultaneously query multiple search engines and index and summarize
documents that are gathered in response to the query. Another product,
AnchorPage, is a hypertext indexing and abstracting program for use on the
Internet World Wide Web. This product, prepares automatic abstracts from complex
electronic data and facilitates the user's ability to locate information through
the use of hypertext links. Another product, Indexicon, is an automated indexing
program for word-processing applications. Other variations of the software are
being developed for use by personal computer users, electronic media publishers,
and on-line system providers and users.

RESEARCH AND DEVELOPMENT

The Company continually engages in research, development and engineering
activities. The Company's goals are to utilize these activities to improve and
enhance existing products and to develop new products in order to expand its
market share. During fiscal years 1996, 1995 and 1994, the Company spent
approximately $813,000, $699,000 and $462,000, respectively, on research and
development. The engineering effort is being focused on further automating the
lead wire assembly manufacturing processes including the new wire alignment tab
process, increasing the long run flexible circuit manufacturing capabilities,
developing products and processes for medical device customers and developing
software products to utilize the purchased document storage retrieval and
management technology.

The Company expects to continue its past practice of acquiring new technology
from outside sources through the payment of cash, Company stock and royalties.

MARKETING AND CUSTOMERS

Precision Products markets a line of products directly to the magnetic head
industry worldwide. With the proliferation of high end personal computers and
the associated requirement for increased storage capacity, the market for disk
drive heads has grown dramatically in recent years. Innovex has benefited from
early entry into this market. This, coupled with the Division's reputation for
high standards of quality and innovative manufacturing processes, has
established Innovex Precision Products as the predominant supplier of lead wire
assemblies for the industry.

A significant percentage of the products offered by the Division are utilized as
components of thin film or magneto resistive (MR) disk drive heads. While thin
film heads continue to be a mainstay of magnetic head technology, the magneto
resistive segment of the disk drive market has grown rapidly. The growth of the
magneto resistive segment of the market is expected to increase dramatically
during 1997 while the thin film inductive segment of the market is also expected
to continue to grow during 1997. The Division has established sales with
virtually every manufacturer of disk drive heads in the world. The Division has
positioned itself for the emergence of MR technology and is supplying a large
portion of the lead wire assemblies for MR disk drive heads. The Division
continues to work closely with virtually all of the world wide disk drive head
manufacturers on new generations of disk drive products. The Division's
principal customers for lead wire assemblies, each accounting for over 10
percent of the Company's consolidated net sales in at least one of the last
three years are Applied Magnetics, Lafe/Quantum, Read-Rite, Seagate and Yamaha.
See Note J of Notes to Consolidated Financial Statements for additional
information.

Litchfield Precision Components markets its products to technology companies in
the medical, computer and communications industries through the use of an
internal sales staff. Because of the Division's focus on leading edge imaging
technology, its customers include a number of the leading technology companies
in the world including General Electric, Hewlett Packard, Littelfuse, Medtronic,
Seagate and Siemens.

BACKLOG

The backlog for the Company's continuing operations was $24,098,000, $10,950,000
and $5,302,000 at September 30, 1996, 1995 and 1994, respectively. The Company's
backlog fluctuates based on the timing of the receipt of orders from customers.

Backlog is defined by the Company as firm orders which are scheduled to be
delivered within 12 months from the date of the order. While the Company
currently believes substantially all of its September 30, 1996 backlog will be
delivered within 12 months, customers may determine not to release orders into
production, may extend requested delivery dates or cancel orders. In such cases,
the Company may not realize the revenue indicated by the backlog.

COMPETITION

Although there are a large number of companies engaged in the production of
components for the disk drive industry, the products offered by the Company are
relatively unique and currently are produced by a limited number of competitors.
The Company believes that it has the technical capability and the manufacturing
capacity to retain market leadership. In response to the expected growth in the
disk drive market, current manufacturers are expanding capacity and additional
manufacturers may enter the market. The purchasing decision for the components
produced by the Company are based on quality, on-time delivery and price.
Although the barriers to market entry by new competitors are not insurmountable,
the Company believes that it is well positioned to compete due to its efficient
production process, capital investment in automation equipment and access to low
cost labor.

There are over 200 flexible circuit manufacturers world wide competing for a
share of the flexible circuit market. Most of these companies do not focus on
the highly complex and intricate portions of the medical, computer and
communications segments of the market which are served by Litchfield Precision
Components. Some of the competitors remaining in this high end portion of the
business include IBM and 3M.

EMPLOYEES

At September 30, 1996, the Company had 834 employees as compared to 487 at
September 30, 1995. Precision Products had 524 versus 408 one year ago,
InnoMedica had 38 employees versus 44 one year ago, Iconovex had 22 versus 24
one year ago, Corporate had 10 employees versus 8 one year ago and the newly
acquired Litchfield Precision Components had 240 employees at September 30,
1996. The Company considers its employee relations to be good.

PATENTS

Certain equipment, processes, information and knowledge generated by the Company
and utilized in its products and their manufacturing processes, are regarded as
proprietary by the Company and are believed to be prosecutable by applicable
trade secret and unfair competition laws rather than through patents. However,
the Company believes it could derive a competitive advantage from patents which
may be granted on products currently under development. The Company also holds
several medical device patents acquired with the purchases of the Daig
Corporation and Possis Medical Inc. pacemaker lead wire product lines and has
applied for several patents on its Iconovex software products. The Company files
patent applications on its products as deemed necessary.

MANUFACTURING AND SOURCES OF SUPPLY

Although each of the Precision Product products are manufactured in a different
fashion, they all require several processes to ensure the high degree of
precision and process control necessary to meet customer tolerance and other
requirements. The Company has devoted a significant amount of time and expense
to the development of certain sophisticated manufacturing processes and
controls, and related equipment, which are essential to the precision and
reliability of its products. To further enhance its capabilities, the Company
has developed and is continuing to improve an automated lead-wire forming
laser-based process for the production of lead-wire assemblies. This process,
which produces a superior product and has reduced manufacturing costs over
traditional processes, is also utilized to manufacture the newer MR lead wire
assemblies. A complete quality control program has been established for
production procedures to ensure product specifications are met. As part of this
program, the Company has implemented computerized statistical process control
("SPC") which enables machine operators to continually monitor and control
production processes.

Although the Litchfield Precision Components three main product types have
dissimilar final forms, they have a common manufacturing process based on the
Division's leading edge imaging technology. Images are applied to either glass,
metal or flexible base substrate materials with unwanted material etched away
using chemicals to produce the actual products.

Raw material used by the Company is generally available from several suppliers.
Although the Company does not anticipate any supply shortages or interruptions,
it is seeking to lessen its dependence on existing suppliers by expanding
alternative supply sources. The Company has not experienced any significant
problem in obtaining its required supplies.

The Company's manufacturing operations are conducted at plants in Hopkins,
Montevideo, Litchfield and Bloomington, Minnesota. See "Properties." The Company
also utilizes subcontractors in Thailand for fine wire assembly and in October
1996 began using a subcontractor in China.

ITEM 2.  PROPERTIES

The Company's executive offices and certain of the Precision Products Division
production facilities and laboratories are located in a 30,000 square foot
facility in Hopkins, Minnesota. The building was purchased in 1993 and
collateralizes a note used to finance the building. The note has a remaining
principal balance of $599,000 at September 30, 1996.

The Company also owns adjacent 30,000 and 20,000 square foot manufacturing
facilities in Montevideo, Minnesota which are utilized by the Precision Products
Division. A portion of the costs to construct and expand these facilities was
financed through bank financing and public development funds. The financing
notes, which are collateralized by the buildings and manufacturing equipment,
have a remaining principal balance of $545,000 at September 30, 1996.

The Company acquired an 88,000 square foot building in Litchfield , Minnesota as
part of the Litchfield Precision Components acquisition in May 1996. The
building is used for the operation of the Litchfield Precision Components
Division.

Effective December 1993, the Company leased a 10,500 square foot office and
manufacturing facility in Bloomington, Minnesota utilized by the Company's
InnoMedica operation. The Company pays annual rent of approximately $72,000
under the lease which expires in December 1996.

In March 1995, the Company leased a 7,300 square foot office in Bloomington,
Minnesota for its Iconovex operation. The Company pays $92,000 annually under
the lease which expires on April 7, 1997.

ITEM 3.  LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries is a party to, and none of its
property is the subject of, any material pending legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Registrant did not submit any matter to a vote of its security holders
during the fourth quarter of the fiscal year covered by this Report.

ITEM 4A.  EXECUTIVE OFFICERS OF REGISTRANT

Name                     Age     Position

Thomas W. Haley          60      Chairman, Chief Executive Officer and Director
                                 of the Company

Allan J. Chan            46      Vice President and General Manager of Precision
                                 Products Division

Mary E. Curtin           49      Vice President, General Counsel, Secretary and
                                 Director of the Company

Douglas W. Keller        38      Vice President of Finance

William P. Murnane       34      Vice President


Mr. Haley served as President of the Company from 1972 to 1988. Since October
1988, Mr. Haley has held the position of Chief Executive Officer. He has been a
Director and Chairman of the Company since its inception in 1972.

Mr. Chan joined the Company in June 1988 as Director of Sales and Marketing for
the Precision Products Division. In October 1990 Mr. Chan was promoted to Vice
President of Sales and Marketing of the Precision Products Division. In 1991 his
responsibilities were expanded to include manufacturing. In May 1995, he was
promoted to Vice President and General Manager of Precision Products Division.
Prior to joining Innovex, Mr. Chan was the Director of Sales and Marketing for
Braemar Computer Corporation a division of Carlysle Corporation.

Ms. Curtin was named Vice President, General Counsel and Secretary in January
1996 and has been a director of the Company since December 1995. Prior to
joining the Company, Ms. Curtin practiced law for 23 years as an attorney with
the United States Department of Justice, the Board of Governors of the Federal
Reserve System, as a partner at Lindquist & Vennum, and for the last eight years
as a partner at Curtin and Barnes.

Mr. Keller joined the Company in January 1990 as Corporate Controller. In May
1992, Mr. Keller was made an officer of the corporation and in October 1996 he
was promoted to Vice President of Finance. From July 1988 to January 1990, Mr.
Keller was Manager of Financial Accounting and Tax for UFE, Inc., a manufacturer
of injection molded plastic components. From 1983 to 1988, Mr. Keller was a
Senior Auditor for the Pillsbury Company. From 1980 to 1983, he was a Senior
Accountant with Deloitte Haskins & Sells, a CPA firm.

Mr. Murnane joined the Company in July 1995 as Vice President. From June 1993 to
June 1995, Mr. Murnane was Chief Operating Officer of Boutwell, Owens & Co., a
private manufacturer of packaging, in Fitchburg, Massachusetts. From June 1992
to June 1993, Mr. Murnane was Director of Operations for Uniform Printing &
Supply, Inc. in Acton, Massachusetts. Prior to that, he held various operating
and corporate planning positions during a ten year career at United Parcel
Service.

Mr. Haley and Ms. Curtin are spouses and Ms. Curtin and Mr. Murnane are first
cousins.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

COMMON STOCK INFORMATION

The Company's common stock is traded in the over-the-counter market under the
symbol "INVX". The table below sets forth the high and low closing sale prices
as reported by NASDAQ. As of October 24, 1996, the Company had 474 shareholders
of record. The Company paid an initial dividend of $.033 per share in February
1993 and has paid quarterly dividends since that time. Dividends of $.045 have
been paid for the most recent four quarters. The Company's intention is to
continue this policy.

Price Range of Common Stock                  1996                      1995
Fiscal Years                             High     Low              High     Low
--------------------------------------------------------------------------------
First Quarter                          $22-5/8  $15-1/4          $11-1/8  $6
Second Quarter                          16-5/8   11-3/4           12-7/8   9-5/8
Third Quarter                           24-1/4   13-1/8           19-3/8  11-1/2
Fourth Quarter                          19-3/8   13-1/2           24-3/4  13-1/2

On November 23, 1996, the Company declared a two-for-one stock split, payable in
the form of a 100 percent stock dividend to shareholders of record on December
16, 1996 payable on December 23, 1996.


ITEM 6.  SELECTED FINANCIAL DATA

The following selected consolidated financial data has been derived from the
consolidated financial statements of the Company for each of the years in the
five year period ended September 30, 1996. The following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company and related notes thereto included elsewhere in this report.

<TABLE>
<CAPTION>

Years Ended September 30,                       1996             1995           1994           1993           1992
------------------------------------------ ---------------- --------------- -------------- -------------- --------------
<S>                                            <C>             <C>            <C>            <C>            <C>        
Net sales                                      $69,570,222     $50,193,952    $30,564,009    $26,596,997    $17,717,556
Income from continuing operations               13,121,006      10,029,387      3,515,283      3,657,066      1,108,187
Net income                                      13,121,006      10,029,387      3,515,283      3,668,114
                                                                                                                112,963
Income per share from continuing operations:
  Primary                                            $1.81           $1.40          $0.52          $0.55          $0.17
  Assuming full dilution                             $1.81           $1.39          $0.52          $0.55          $0.17
Net income per share:
  Primary                                            $1.81           $1.40          $0.52          $0.55          $0.02
  Assuming full dilution                             $1.81           $1.39          $0.52          $0.55          $0.02
Cash dividends per share                            $0.175          $0.157         $0.143          $0.10              -
Total assets                                    58,244,346      41,283,483     29,934,424     26,585,276     22,602,307
Long-term debt, less current maturities          1,063,253       1,172,798      1,532,140      1,882,817        890,646
Stockholders' equity                            48,400,116      36,029,173     24,716,307     22,247,931     18,722,208
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

EARNINGS SUMMARY 
The Company reported net income of $13,121,000, or $1.81 primary and fully
diluted net income per share for the fiscal year ended September 30, 1996. This
compares to net income of $10,029,000, primary net income per share of $1.40 and
fully diluted net income per share of $1.39 in fiscal 1995 and $3,515,000, or
$.52 primary and fully diluted net income per share in 1994. Fiscal 1996 results
benefited from an increase in net sales due to strong demand for disk drive lead
wire assemblies as compared to both fiscal 1995 and 1994 and from better than
expected operating results related to Litchfield Precision Components (LPC)
which was acquired in May 1996. The fiscal 1996 increased sales volume as
compared to 1995 more than offset the reduction of the gross margin percent for
the same period. The fiscal 1996 gross margins were effected by volume related
selling price reductions and initial costs related to the production ramp up of
the new Wire Alignment Tab (WAT) product within the Precision Products Division.
The gross margin percent was also effected by the inclusion of sales from the
newly acquired Litchfield Precision Components, which currently generate a lower
gross margin than the Company's overall gross margin percent.

The increase in sales for fiscal 1996 also more than offset increases in
operating expenses for the year as operating expenses were 12% of sales in
fiscal 1996 as compared to 14% and 17% of sales in fiscal years 1995 and 1994,
respectively. Revenue generated by the Iconovex and InnoMedica Divisions
continue to make up less than 5% of the Company's total revenue. Although these
two divisions continued to operate at a loss during fiscal 1996, alternatives
are being reviewed to improve their performance during fiscal 1997 with the
intent of maximizing their long term contribution to the Company.


RESULTS OF OPERATIONS/NET SALES. 

NET SALES. for fiscal 1996 were $69,570,000, an increase of 39% from $50,194,000
in 1995 and up substantially from sales of $30,564,000 in 1994. Sales growth in
1996 was generated primarily by increased shipments of lead wire assemblies for
the disk drive industry as has been the trend for the past six years. The
rapidly increasing shipments of lead wire assemblies for magneto resistive (MR)
disk drives, which include the new wire alignment tab (WAT) product introduced
late in the third quarter, also contributed to the increased sales revenue. Disk
drive industry projections indicate that lead wire assembly demand will remain
strong in fiscal 1997 and the Company expects to post record fiscal 1997 sales
based on these projections. The Company should benefit from its ability to
manufacture the smaller and more technically precise four wire lead assemblies
required by the new generation MR disk drives. MR disk drives are the fastest
growing segment of the disk drive industry while demand for the previous
generation inductive disk drives remains strong. 

A significant portion of the sales increase in fiscal 1996 is due to sales of
high end flexible circuits and chemically etched parts generated by the newly
acquired Litchfield Precision Components. These products were sold primarily to
the medical, computer and communication industries. Fiscal 1997 should benefit
from a full year of Litchfield Precision Component sales. Sales from Iconovex
and InnoMedica made up less than 5% of the Company's total revenue in fiscal
1996. These sales are expected to grow in fiscal 1997 as their products and
markets continue to develop.

Export sales accounted for 74% of the Company's revenue in fiscal 1996 as
compared to 79% for 1995 and 78% for 1994, reflecting the high level of lead
wire assembly shipments to disk drive manufacturers in Japan and other pacific
rim countries. A significant portion of the remaining domestic sales are
subsequently shipped internationally by the Company's customers.

GROSS MARGIN. The Company's gross profit margin decreased to 38.8% of sales in
fiscal 1996 from 43.0% in 1995 but was up from 33.0% in 1994. The fiscal 1996
gross margin dollars increased 25% over 1995 and 167% over 1994 due to the
increase in sales volume which more than offset the reduction of the gross
margin percent for the same period.

The Precision Products Division fiscal 1996 gross margin percent was effected by
volume related selling price reductions and initial costs related to the
production ramp up of the new Wire Alignment Tab (WAT) product. The fiscal 1996
and 1995 gross margin percentages benefited from volume related efficiencies
which resulted in more efficient use of the Company's investment in equipment
and manufacturing automation technology and the increased utilization of
Thailand subcontractors for labor intensive processes. The high sales volume and
increased efficiency of the manufacturing process allowed the Company to
maintain strong margins even while responding to pricing pressures in the
market. Although there will be continued pricing pressure, gross margins are
expected to remain strong due to increases in volume and continued cost
reductions resulting from manufacturing efficiencies and engineering innovation.
The Company also intends to begin using a subcontractor in China to expand its
practice of outsourcing labor intensive processes.

While Litchfield Precision Components' sales made a significant contribution to
the Company's gross margin, the Division's gross margin percent caused a slight
reduction in the Company's overall gross margin percent. In addition, the 2%
reduction of the fiscal 1996 gross margin percent generated by the Iconovex and
InnoMedica Divisions improved slightly from the 3% reduction in fiscal 1995.

OPERATING EXPENSES. Selling, general and administrative expenses decreased to
8.7% of net sales in 1996 as compared to 9.4% in 1995 and 12.1% in 1994. The
decrease in 1996 is primarily due to the increased Precision Product Division
lead wire assembly sales which more than offset the increase in operating
expenses from other divisions. Total selling, general and administrative
expenses for fiscal 1996 increased over 1995 primarily due to the addition of
the newly acquired Litchfield Precision Components and to an increase in
corporate level expenses. The increase in fiscal 1995 expenses over 1994,
related to costs of growing InnoMedica and Iconovex, the two divisions which
were started in fiscal 1994. 

Engineering expense decreased to 3.6% of net sales in fiscal 1996 from 4.9% in
1995 and 4.7% in 1994. The decrease in 1996 is primarily due to the increased
level of lead wire assembly sales. The actual spending was virtually unchanged
in 1996 from 1995. Similar to 1995, the spending at Precision Products continued
to relate to efforts to develop new products, further automate the manufacturing
process and develop material alternatives. Iconovex and InnoMedica continued to
concentrate on new product development. The increase in engineering spending in
fiscal 1995 over 1994 corresponded to the increase in sales over 1994. Increases
in fiscal 1997 engineering spending are expected primarily at Precision Products
to further automate their manufacturing processes including the new Wire
Alignment Tab process and at Litchfield Precision Components to increase their
long run capabilities. 

Interest income increased to $936,000 in fiscal 1996 from $789,000 and $453,000
in 1995 and 1994, respectively. These increases in the last two years correspond
to the increases in average cash and short-term investments. Interest expense
decreased to $113,000 in 1996, from $125,000 in 1995 and from $139,000 in 1994.
Other expense increased in 1996 over 1995 due to the $500,000 write off of
intangible assets at InnoMedica. These intangible assets related to purchased
proprietary technology which is not expected to be supported by revenue from the
associated products.

INCOME BEFORE PROVISION FOR INCOME TAXES. Income before provision for income
taxes was $18,742,000 for fiscal 1996 as compared to $14,818,000 for 1995 and
$5,157,000 for 1994. As a percent of net sales, income before provision for
income taxes was 26.9% for 1996 as compared to 29.5% and 16.9% for 1995 and
1994, respectively. The dollar increase in 1996 over both 1995 and 1994 was due
to the large increase in Precision Product lead wire sales and the inclusion of
Litchfield Precision Components' operating results. The reduction in income
before provision for income taxes as a percent of sales in 1996 is the result of
the lower gross margin percent on the increased level of sales. Operating income
from all divisions should improve in fiscal 1997. Precision Products is expected
to have increased revenues due to projected increases in disk drive industry
demand particularly in the rapidly growing magneto resistive segment of the
market. Litchfield Precision Components should benefit from an increase in sales
and improvements in their cost structure. Iconovex and InnoMedica should show
improvements as their products become more established.

PROVISION FOR INCOME TAXES The Company's effective tax rate of 30.0% in fiscal
1996 decreased from 32.3% in 1995 and from 31.8% in 1994. The decrease in tax
rates in 1996 from 1995 is due in part to an increase in the Company's Foreign
Sales Corporation tax benefit as a result of the increased level of foreign
sales. 

LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments decreased by $739,000 to $21,776,000 at
September 30, 1996. Net cash provided by operating activities increased in 1996
to $13,108,000 from $12,425,000 in 1995 and $6,027,000 in 1994. The decrease in
the Company's September 30, 1996 cash and short-term investments was primarily
due to the acquisition of Litchfield Precision Components and capital equipment
for the Precision Products Division. The increase in fiscal 1996 cash provided
by operating activities over 1995 and 1994 was primarily due to improved
operating results related to the increase in demand for lead wire assemblies.
This increase was reduced by the large increase in operating assets required to
support the higher level of sales. 

Accounts receivable at September 30, 1996 increased by $6,247,000 from the prior
year due to the increased level of sales in 1996 as compared to 1995 and to the
acquisition of Litchfield Precision Components. 

Working capital rose by $5,180,000 to $33,542,000 at September 30, 1996. The
Company's current ratio was 4.95 to 1 at fiscal 1996 year-end, compared to 8.33
to 1 at the end of fiscal 1995.

Excluding assets from the Litchfield Precision Components acquisition, net
property, plant and equipment increased by $891,000 to $12,732,000 at September
30,1996 as fixed asset purchases were primarily offset by depreciation expenses
for the year. Excluding intangible assets recorded as a result of the Litchfield
Precision Components acquisition, intangible assets decreased $994,000 to
$2,309,000 at September 30, 1996. The decrease was primarily due to the
amortization and write off of InnoMedica intangibles.

Long-term debt, net of current maturities, decreased by $146,000 to $1,063,000
at September 30, 1996. The ratio of long-term debt to stockholders' equity was
 .02 at September 30, 1996, compared to .03 at the end of fiscal 1995.

Management believes that internally generated funds will provide adequate
sources of funds to support projected working capital, capital expenditures and
dividends in fiscal 1997.

FORWORD LOOKING STATEMENTS
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, in the letter to shareholders, elsewhere in
the Annual Report and in the Company's Form 10-K and in future filings by the
Company with the SEC, except for the historical information contained herein and
therein, are "forword-looking statements" that involve risks and uncertainties,
including the timely availability and acceptance of new products, the impact of
competitive products and pricing and a general downturn in the Company's
principal market. The Company disclaims any obligation subsequently to revise
any forward-looking statements to reflect subsequent events or circumstances or
the occurrence of unanticipated events.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL DATA
                                                                           Page
Report of Independent Certified Public Accountants                         12

Consolidated Balance Sheets at September 30, 1996 and 1995                 13

Consolidated Statements of Operations for each of the three 
years in the period ended September 30, 1996                               14

Consolidated Statements of Stockholders' Equity for each of 
the three years in the period ended September 30, 1996                     15

Consolidated Statements of Cash Flows for each of the three 
years in the period ended September 30, 1996                               16

Notes to Consolidated Financial Statements                                 17-22

Quarterly Financial Data (unaudited)                                       23

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Innovex, Inc.


We have audited the accompanying consolidated balance sheets of Innovex, Inc.
and Subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended September 30, 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 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 Innovex, Inc. and
Subsidiaries as of September 30, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles.

                                                          \s\ Grant Thornton LLP
Minneapolis, Minnesota
October 31, 1996


CONSOLIDATED BALANCE SHEETS
INNOVEX, INC. AND SUBSIDIARIES

                                                             September 30,
Assets                                                    1996          1995
--------------------------------------------------------------------------------
Current assets:
  Cash and cash equivalents                           $ 5,635,534    $ 7,384,298
  Short-term investments                               16,140,000     15,130,000
  Accounts receivable, less allowance for doubtful
    accounts of $317,000 (1995 - $265,000)             12,034,349      5,787,282
  Inventories                                           5,570,582      2,191,345
  Other                                                 2,648,112      1,738,438
                                                      -----------    -----------
    Total current assets                               42,028,577     32,231,363

Property, plant and equipment - at cost:
  Land and land improvements                              556,851        456,851
  Buildings and leasehold improvements                  6,556,840      3,144,669
  Machinery and equipment                              12,614,217      8,484,536
  Office furniture and fixtures                         1,746,811      1,338,727
                                                      -----------    -----------
                                                       21,474,719     13,424,783
  Less accumulated depreciation and amortization        8,742,739      6,356,907
                                                      -----------    -----------
    Net property, plant and equipment                  12,731,980      7,067,876

Intangible assets, net of accumulated amortization
  of $2,317,000 (1995 - $1,008,000)                     2,308,737      1,979,244
Other assets                                            1,175,052          5,000
                                                      -----------    -----------
                                                      $58,244,346    $41,283,483
                                                      ===========    ===========

Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------
Current liabilities:
  Current maturities of long-term debt                $    96,000    $   358,000
  Accounts payable                                      3,581,628      1,486,154
  Accrued compensation                                  2,158,834      1,570,983
  Income taxes payable                                  1,809,038         60,360
  Other accrued liabilities                               841,150        393,870
                                                      -----------    -----------
    Total current liabilities                           8,486,650      3,869,367

Long-term debt, less current maturities                 1,063,253      1,172,798
Other long-term liabilities                               294,327        212,145

Stockholders' equity:
  Common stock, $.04 par value; 15,000,000 shares
    authorized, 7,110,627 shares issued and 
    outstanding (1995 - 7,062,127)                        284,425        282,485
  Capital in excess of par value                        9,418,376      8,930,301
  Retained earnings                                    38,697,315     26,816,387
                                                      -----------    -----------
    Total stockholders' equity                         48,400,116     36,029,173
                                                      -----------    -----------
                                                      $58,244,346    $41,283,483
                                                      ===========    ===========

The accompanying notes are an integral part of these statements.

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS
INNOVEX, INC. AND SUBSIDIARIES

                                                            For the years ended September 30,
                                                         1996              1995            1994
---------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>              <C>         
Net Sales                                           $ 69,570,222     $ 50,193,952     $ 30,564,009

Costs and Expenses:
  Cost of sales                                       42,592,404       28,630,985       20,472,507
  Selling, general and administrative                  6,066,278        4,726,920        3,695,091
  Engineering                                          2,508,277        2,464,242        1,428,442
  Interest expense                                       112,531          124,673          138,874
  Interest income                                       (935,809)        (789,392)        (453,152)
  Other expense                                          484,535          218,137          124,964
                                                    ------------     ------------     ------------
                                                      50,828,216       35,375,565       25,406,726
                                                    ------------     ------------     ------------

Income Before Provision For Income Taxes              18,742,006       14,818,387        5,157,283
Provision For Income Taxes                            (5,621,000)      (4,789,000)      (1,642,000)
                                                    ============     ============     ============
Net Income                                          $ 13,121,006     $ 10,029,387     $  3,515,283
                                                    ============     ============     ============

Net Income Per Share:
  Primary                                           $       1.81     $       1.40     $       0.52
                                                    ============     ============     ============
  Assuming full dilution                            $       1.81     $       1.39     $       0.52
                                                    ============     ============     ============

Common and Common Equivalent Shares Outstanding:
  Primary                                              7,237,890        7,160,753        6,779,394
  Assuming full dilution                               7,263,268        7,227,684        6,779,394

The accompanying notes are an integral part of these statements.
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
INNOVEX, INC. AND SUBSIDIARIES

                                                                        Capital in                         Total
                                                           Common       Excess of        Retained        Stockholders'
For the years ended September 30, 1996, 1995, and 1994     Stock        Par Value        Earnings          Equity
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>              <C>              <C>         
Balance at October 1, 1993                           $    180,203     $  6,741,276     $ 15,326,452     $ 22,247,931

Shares issued through exercise of stock options               736           80,298                            81,034
Tax benefits derived from stock option plans                                44,000                            44,000
Dividends paid ($0.143 per share)                                                          (971,941)        (971,941)
Unrealized loss on available-for-sale securities                                           (200,000)        (200,000)
Net income                                                                                3,515,283        3,515,283
                                                     ------------     ------------     ------------     ------------
Balance at September 30, 1994                             180,939        6,865,574       17,669,794       24,716,307

Shares issued through exercise of stock options             8,460        1,082,351                         1,090,811
Tax benefits derived from stock option plans                             1,076,000                         1,076,000
Dividends paid ($0.157 per share)                                                        (1,082,794)      (1,082,794)
Change in unrealized loss on available-for-sale
  securities                                                                                200,000          200,000
Three-for-two stock split including $538 paid for
  fractional shares                                        93,086          (93,624)                             (538)
Net income                                                                               10,029,387       10,029,387
                                                     ------------     ------------     ------------     ------------
Balance at September 30, 1995                             282,485        8,930,301       26,816,387       36,029,173

Shares issued through exercise of stock options             1,940          283,075                           285,015
Tax benefits derived from stock option plans                               205,000                           205,000
Dividends paid ($0.175 per share)                                                        (1,240,078)      (1,240,078)
Net income                                                                               13,121,006       13,121,006
                                                     ------------     ------------     ------------     ------------
Balance at September 30, 1996                        $    284,425     $  9,418,376     $ 38,697,315     $ 48,400,116
                                                     ============     ============     ============     ============

The accompanying notes are an integral part of these statements.
</TABLE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
INNOVEX, INC. AND SUBSIDIARIES

                                                               For the years ended September 30,
                                                             1996            1995              1994
-------------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                            $ 13,121,006     $ 10,029,387     $  3,515,283
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                          3,636,327        3,077,366        1,962,057
    Deferred income taxes                                   (557,816)        (190,050)         (67,447)
     Other non-cash items                                    676,784         (188,547)         248,834
    Changes in operating assets and liabilities, net of
        business acquisition:
          Accounts receivable                             (4,595,197)      (1,065,191)      (1,271,206)
          Inventories                                     (2,030,030)        (409,189)         614,604
          Other current assets                              (617,547)        (527,940)          77,302
          Accounts payable                                 1,089,475          466,258          483,048
          Other current liabilities                          431,229          203,937          467,348
          Income taxes payable                             1,953,678        1,029,173           (3,255)
                                                        ------------     ------------     ------------
Net cash provided by operating activities                 13,107,909       12,425,204        6,026,568

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                    (4,226,053)      (2,964,212)      (1,838,469)
  Business or product line acquisitions                   (7,389,990)        (310,698)      (1,985,703)
  Proceeds from sale of assets                                16,183            2,875        2,850,850
  Purchase of held-to-maturity securities                (15,360,000)     (16,700,000)      (6,513,661)
  Purchase of available-for-sale securities                     --               --         (2,783,125)
  Maturities of held-to-maturity securities               14,350,000        7,820,000        4,755,000
  Sale of available-for-sale securities                         --          5,735,705             --
  Other assets                                              (884,000)            --               --
                                                        ------------     ------------     ------------
Net cash used in investing activities                    (13,493,860)      (6,416,330)      (5,515,108)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on long-term debt                      (407,750)        (351,642)        (193,577)
  Proceeds from exercise of stock options                    285,015        1,090,811           81,034
  Dividends and stock split fractional shares paid        (1,240,078)      (1,083,332)        (971,941)
                                                        ------------     ------------     ------------
Net cash used in financing activities                     (1,362,813)        (344,163)      (1,084,484)
                                                        ------------     ------------     ------------

Increase (decrease) in cash and cash equivalents          (1,748,764)       5,664,711         (573,024)
Cash and cash equivalents at beginning of year             7,384,298        1,719,587        2,292,611
                                                        ------------     ------------     ------------
Cash and cash equivalents at end of year                $  5,635,534     $  7,384,298     $  1,719,587
                                                        ============     ============     ============

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest was $125,000, $118,000 and $139,000 in 1996, 1995 and
1994, respectively.

Income tax payments were $4,225,000, $3,947,000 and $1,719,000 in 1996, 1995 and
1994, respectively.

Tax benefits derived from stock option plans totaling $205,000, $1,076,000 and
$44,000 in 1996, 1995 and 1994, respectively, were recorded as a reduction of
current income taxes payable and an increase in capital in excess of par value.

During 1994, the Company reduced the carrying value of short-term investments,
of which $315,000, less $115,000 of deferred income taxes, was reflected as a
reduction of stockholders' equity. This reduction was reversed in 1995.

Liabilities of $1,814,000 were assumed as part of the May 1996 acquisition of
Litchfield Precision Components.

The accompanying notes are an integral part of these statements.
</TABLE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INNOVEX, INC. AND SUBSIDIARIES
September 30, 1996, 1995 and 1994

NOTE A. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company, through its Innovex Precision Products subsidiary, manufactures
lead wire assemblies for disk drive heads. Its Litchfield Precision Components
subsidiary manufactures flex circuits and chemically etched components for the
medical, computer and communications industries. The Company also manufactures
medical device components and software for document storage retrieval and
management. Company customers are located throughout the United States and the
pacific rim. The Company has manufacturing facilities in Bloomington, Hopkins,
Litchfield and Montevideo, Minnesota.

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - The Company considers all highly
liquid temporary investments with an original maturity of three months or less
to be cash equivalents. Cash equivalents totaled $4,124,000 and $2,984,000 at
September 30, 1996 and 1995 and are recorded at cost which approximates market
value. Debt and equity securities are classified as available-for-sale
securities and held-to-maturity securities. The Company uses the specific
identification method in determining realized gains and losses.

ACCOUNTS RECEIVABLE - The Company grants credit to customers in the normal
course of business, but generally does not require collateral or any other
security to support amounts due. Management performs ongoing credit evaluations
of customers. The Company maintains allowances for potential credit
losses.

INVENTORIES - Inventories are stated at the lower of cost or market, with cost
determined by the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided using the straight-line
method over the estimated useful lives of the assets for financial reporting and
accelerated methods for tax purposes. Estimated service lives range from 2 to 30
years for buildings and leasehold improvements, from 2 to 7 years for machinery
and equipment and from 3 to 7 years for office furniture and fixtures.

INTANGIBLE AND OTHER ASSETS - Intangible assets include goodwill, patents,
licenses, technology and trademarks, which are capitalized at cost and amortized
on the straight-line basis over their estimated useful lives which range from
three to fifteen years. Management reviews the valuation and amortization of
goodwill on an ongoing basis. As part of this review, management estimates the
value and future benefits of the net income to be generated by the product lines
acquired to determine whether an impairment of goodwill has occurred.

Computer software development costs are capitalized, when applicable, to the
extent they are incurred after the technological feasibility of the software has
been determined and until the software is available for general release to
customers. These costs are then amortized on a per unit sold basis or the
straight-line method over the remaining estimated economic life of the product,
whichever amount is greater. Unamortized capitalized software costs were
$1,005,000 and $1,089,000 as of September 30, 1996 and 1995, respectively.
Capitalized software costs of $398,000 and $314,000 were amortized during the
fiscal years ending September 30, 1996 and 1995, respectively.

INCOME TAXES - Deferred tax assets and liabilities represent the tax effects,
based on current tax law, of future deductible or taxable amounts attributable
to events that have been recognized in the financial statements. The deferred
income tax expense or benefit results from a change in the deferred tax assets
and liabilities recorded. 

NET INCOME PER SHARE - Net income per share is computed based on the weighted
average number of shares of common stock and common stock equivalents, when
dilutive, outstanding during the year. 

RECLASSIFICATIONS - Certain 1995 and 1994 amounts have been reclassified to
conform with the 1996 presentation.

REVENUE RECOGNITION - Sales are recorded at the time of shipment and provision
for anticipated returns, net of exchanges, is recorded based on historical
experience.

USE OF ESTIMATES - Preparation of the Company's consolidated financial
statements requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and related revenues and expenses.
Actual results could differ from these estimates.

RECENTLY ISSUED ACCOUNTING STANDARDS - The Company is required to adopt two new
accounting standards as of October 1, 1996. The first standard establishes
guidance on when and how to measure impairment of long-lived assets and how to
value long-lived assets to be disposed of. The second establishes accounting and
reporting for stock-based compensation plans. The Company intends to continue to
use the intrinsic value method, as permitted by the standard, while adding
additional disclosures concerning its stock-based compensation plans. Management
believes the adoption of these new standards will not have a material effect on
the Company's financial statements. 

NOTE B. - BUSINESS AND PRODUCT LINE ACQUISITIONS
On May 16, 1996, the Company purchased substantially all of the assets of
Litchfield Precision Components, Inc. The purchase price of approximately
$9,178,000 was in the form of $3,500,000 in cash and the assumption of specified
liabilities amounting to $5,678,000. Approximately $4,000,000 of the assumed
debt was paid off at the time of close. The acquisition has been accounted for
as a purchase and, accordingly, the results of operations since acquisition are
included in the accompanying financial statements. The purchase price and fair
value of the assets acquired were as follows (in thousands of dollars):

         Current assets                              $3,081
         Property, plant and equipment                4,773
         Intangible assets                            1,324
                                                     ------
                                                     $9,178

The following unaudited pro forma results of operations for the years ended
September 30, 1996 and 1995, assume the acquisition occurred as of October 1 of
each year. The pro forma information includes adjustments for depreciation based
on the fair market value of the property, plant and equipment acquired,
amortization of intangibles arising from the transaction, the elimination of
interest expense on debt paid off at the transaction close, the reduction of
interest income on cash used to complete the acquisition and related changes in
the provision for income tax expense (in thousands of dollars except per share
amounts):

                                                 1996              1995
-------------------------------------------------------------------------
Net sales                                      $77,617           $61,706
Net income                                      13,190            10,292
Net income per share:
  Primary                                         1.82              1.44
  Assuming full dilution                          1.82              1.42

The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition been consummated
on the assumed dates, nor are they necessarily indicative of future operating
results.

During 1994, the Company purchased a software product line for $835,600 which
prepares indexes and abstracts of documents stored in computer hard drives and
CD/ROM systems. The purchase agreement also requires the Company to pay a 15%
royalty on product receipts up to a maximum of $4,500,000 and 7.5% of product
receipts thereafter for a period of 5 years, subject to certain minimum royalty
payment requirements necessary to maintain the exclusive rights to sell the
product. Guaranteed minimum royalty payments of $715,000 are payable for each of
the calendar years ended December 31, 1996 through 1998.

During 1994, the Company purchased a pacemaker lead wire product line consisting
of inventory, equipment and certain technology for $1,100,000. The purchase
agreement also required the Company to pay 75% of the product line gross
revenues for one year. The Company capitalized these payments, totaling
$586,000, as goodwill when the amounts became payable.


NOTE C. -SHORT TERM INVESTMENTS
The amortized cost, unrealized gains and losses and fair values of the Company's
short term investments at September 30, 1996 and 1995 are summarized as follows
(thousands of dollars): 

                                  Amortized   Unrealized   Unrealized   Fair 
                                  Cost        Gains        Losses       Value
                                  ---------   ----------   ----------   -------
September 30, 1996                                                     
Held-to-maturity securities:                                           
Municipal obligation bonds        $16,140      $    63           --     $16,203
                                  =======      =======      =======     =======
September 30, 1995                                                     
Held-to-maturity securities:                                           
Municipal obligation bonds        $15,130           --      $    11     $15,119
                                  =======      =======      =======     =======
                                                                      
As of September 30, 1996 and 1995, substantially all of the short term
investments had maturities within one year. Sales of available-for-sale
securities during fiscal 1995 of $5,736,000 resulted in the realization of a
$278,000 loss. Of this loss, $218,000 was recognized in fiscal 1995 while the
remaining $60,000 was recorded as a loss in fiscal 1994.

NOTE D. - INVENTORIES
Inventories are comprised of the following at September 30:    
                                               1996              1995

Raw materials and purchased parts           $2,607,488        $  938,741
Work-in-process and finished goods           2,963,094         1,252,604
                                            ----------        ----------
                                            $5,570,582        $2,191,345
                                            ==========        ==========

NOTE E. - LONG-TERM DEBT
Long-term debt consists of the following at September 30:

                                                   1996             1995
-------------------------------------------------------------------------
Mortgage obligation (a)                       $  153,413       $  172,195
Installment promissory notes (b)                 146,949          162,872
Industrial development revenue note (c)          244,701          265,945
Mortgage obligation (d)                          598,534          629,984
Other                                             15,656          299,802
                                              ----------       ----------
                                               1,159,253        1,530,798
Less current maturities                           96,000          358,000
                                              ----------       ----------
                                              $1,063,253       $1,172,798

Long-term debt obligations (a) through (d) were used to finance expansions of
the Montevideo manufacturing facilities and the purchase of the Hopkins facility
and are collateralized by those facilities and certain assets at those
facilities.

a. The note, due January 2003, is payable in monthly installments
with interest at a fixed rate of 7% until January 1998 when the outstanding
balance will be renewed at a rate of 1% over the prime rate.

b. The notes, due October 2003 and May 2004, are payable over fifteen years in
monthly installments, with interest at a fixed rate of 5%.

c. The note is payable in monthly installments and matures in January 2005. The
interest rate is currently fixed at 6.75% and will be adjusted to 1.75% below
the reference interest rate in December 1999.

d. The note is payable in monthly installments and matures in March 2008. The
interest rate is currently fixed at 7.5% and will be adjusted to 1.5% over the
prime rate in February 1998 and 2003.

Aggregate maturities of long-term debt for the next five years are as follows:
1997 - $96,000; 1998 - $118,000; 1999 - $108,300; 2000 - $117,200; 2001 -
$125,600; thereafter - $594,153. The recorded value of long-term debt
approximates fair market value.

NOTE F. - STOCKHOLDERS' EQUITY
Stock Split - 
On May 3, 1995, the Company's Board of Directors declared a three-for-two split
of the Company's common stock and increased the authorized shares from
10,000,000 to 15,000,000. The additional shares were distributed on May 31, 1995
to stockholders of record on May 16, 1995. All share and per share information
throughout the financial statements has been restated to reflect this
split.

Stock Option Plans -
The Company's 1983 Incentive Stock Option Plan provided for the issuance of
540,000 shares of common stock. As of September 30, 1995, no more options may be
granted under this plan. Exercise of options granted under this plan is
conditioned upon the grantee's continued employment by the Company. The
Company's 1987 Employee Stock Option Plan provides for the issuance of 375,000
shares of common stock. Options granted under this plan may be qualified
incentive or non-qualified stock options. The shareholders approved the
Company's 1994 Stock Option Plan on March 7, 1995 providing for the issuance of
300,000 shares of common stock. On January 23, 1996, the shareholders approved
an amendment to the plan providing for the issuance of an additional 300,000
shares of common stock. Options granted under this plan may be qualified
incentive or non-qualified stock options. On April 18, 1996, the Board of
Directors approved the 1996 Non-qualified Stock Option Plan which provides for
the issuance of 135,000 shares of common stock. Options under this plan were
issued to key employees of Litchfield Precision Components to ensure their
continued employment after the acquisition of Litchfield Precision Components
was completed.

The exercise price of the incentive stock options must be equal to the stock's
fair market value on the date of grant. The exercise price of the non-qualified
stock options may be less than the fair market value on the date of grant at the
discretion of the plan's administrative committee. No significant amount of
compensation expense has been recorded in 1996, 1995 or 1994 under the above
noted plans.

<TABLE>
<CAPTION>

A summary of stock option transactions is as follows:

                                                        Option Price                         Options
                                                           Range              Options       Available
                                                         Per Share          Outstanding     For Grant
------------------------------------------------------------------------------------------------------
<S>                                                   <C>                     <C>           <C>      
Balance at October 1, 1993                                                     347,805        359,562
Granted                                               $0.667 - $6.917          176,139       (176,139)
Exercised                                              2.08  -  4.5            (27,600)          --
Expiration of the 1983 Incentive Stock Option Plan                               --           (60,750)
                                                      ----------------     -------------    ----------
Balance at September 30, 1994                                                  496,344        122,673

Approval of 1994 Stock Option Plan                                               --           300,000
Granted                                                0.667 - 17.4375         306,871       (306,871)
Forfeited                                              2.417 -  6.917          (79,800)        19,800
Exercised                                              0.667 -  6.917         (276,960)           --
                                                      ----------------     --------------    ---------
Balance at September 30, 1995                                                  446,455        135,602

Amendment of 1994 Stock Option Plan                                              --           300,000
Approval of 1996 Non-qualified Stock Option Plan                                 --           135,000
Granted                                               13.625 - 17.625          174,000       (174,000)
Forfeited                                              4.5   - 17.4375         (38,200)        35,800
Exercised                                              2.5   - 17.4375         (48,500)          --
                                                      ----------------     --------------    ---------
Balance at September 30, 1996                                                  533,755        432,402
                                                                           ===========================

Options exercisable at September 30, 1996             $0.667 -$17.4375        123,655
                                                                           ==============
</TABLE>

NOTE G. - INCOME TAXES
The effective income tax rates differed from the federal statutory income tax 
rate as follows for the years ended September 30,
                                           1996        1995          1994
--------------------------------------------------------------------------

Federal statutory rate                     34.0%        34.0%        34.0%
State income taxes, net of federal
 income tax benefit                         2.4          2.3          2.4
FSC benefit                                (6.0)        (5.6)        (6.8)
Other                                      (0.4)         1.6          2.2
                                           -----        -----        -----
                                           30.0%        32.3%        31.8%
                                           =====        =====        =====

Components of the provision for income taxes are as follows for the years ended
September 30 (thousands of dollars):
                                           1996        1995          1994
---------------------------------------------------------------------------
Current:
Federal                                 $ 5,509      $ 4,451      $  1,523
State                                       670          528           186
                                        -------      -------      --------
                                          6,179        4,979         1,709
Deferred                                   (558)        (190)          (67)
                                        -------      -------      --------
                                        $ 5,621      $ 4,789      $  1,642
                                        =======      =======      ========

Deferred tax assets (liabilities) are comprised of the following at September 30
(thousands of dollars):
                                           1996        1995
---------------------------------------------------------------------------
Current deferred tax assets:
Inventories                             $   272      $   153
Receivables                                 129          126
Compensation and benefits                   164          100
                                        -------      --------
                                        $   565      $   379
                                        =======      ========

Long term deferred tax assets
(liabilities) - net:
 Accelerated depreciation               $  (136)     $  (172)
 Intangibles                                315           40
 Compensation                               107           46
                                        -------      --------
                                        $   286      $   (86)
                                        =======      ========

No valuation allowance was considered necessary for deferred tax assets at
September 30, 1996 or 1995.


NOTE H. - RETIREMENT AND PROFIT-SHARING PLANS
The Company sponsors a 401K retirement plan for all of its employees meeting
minimum eligibility requirements. The plan provides Company matching
contributions of 50% of the first 6% of employee contributions to the plan.
Company contributions were approximately $286,000, $198,000 and $167,000 for the
years ended September 30, 1996, 1995 and 1994, respectively.

NOTE I. - RESEARCH AND DEVELOPMENT COSTS
The Company incurred research and development costs of $813,000, $699,000 and
$462,000 for the years ended September 30, 1996, 1995 and 1994, respectively.

NOTE J. - BUSINESS SEGMENT INFORMATION
The Company currently classifies its manufactured products into two core
business segments: (i) Precision Products manufactures and markets lead wire
assemblies and other related products primarily for the computer disk drive
market and (ii) Litchfield Precision Components manufactures and markets flex
circuits and chemically etched parts for the medical, computer and
communications industries. The remainder of the Company's business includes the
operations of its InnoMedica Division which manufactures medical device
components and its Iconovex Division which develops and markets software for
document storage retrieval and management. The identification of the Company's
segments was determined principally by the nature of the products produced and
technology utilized.

Net sales represent sales to unaffiliated customers and intersegment sales.
Operating profit is total revenue less operating expenses. Non-operating income
includes interest income and expense and miscellaneous income and expense.
Identifiable assets are those that are used in the Company's operations in each
segment, net of intercompany balances. Capital expenditures include additions to
property, plant, and equipment and capitalized software.

<TABLE>
<CAPTION>

For the years ended September 30,                    1996             1995            1994
----------------------------------------------------------------------------------------------
<S>                                             <C>              <C>              <C>         
Net Sales:
  Precision Products                            $ 62,028,814     $ 48,201,301     $ 29,944,818
  Litchfield Precision Components                  5,903,704             --               --   
  Corporate and Other                              2,053,669        1,992,651          619,191
  less intersegment sales elimination               (415,965)            --               --
                                                ------------     ------------     ------------
Total net sales                                 $ 69,570,222     $ 50,193,952     $ 30,564,009
                                                ============     ============     ============

Operating Profit and Income Before Provision
  For Income Taxes:
    Precision Products                          $ 22,876,426     $ 19,043,182     $  7,515,129
    Litchfield Precision Components                1,185,858             --               --
    Corporate and Other                           (5,652,021)      (4,671,377)      (2,547,160)
    less intersegment elimination                     (7,000)            --               --
                                                ------------     ------------     ------------
Operating profit                                  18,403,263       14,371,805        4,967,969
  Non-operating income, net                          338,743          446,582          189,314
                                                ------------     ------------     ------------
Total income before provision for income
taxes                                           $ 18,742,006     $ 14,818,387     $  5,157,283
                                                ============     ============     ============

Identifiable Assets:                            
  Precision Products                            $ 21,011,764     $ 13,085,777     $ 11,657,401
  Litchfield Precision Components                  9,405,888             --               --
  Corporate and Other                             27,826,694       28,197,706       18,277,023
                                                ------------     ------------     ------------
Total identifiable assets                       $ 58,244,346     $ 41,283,483     $ 29,934,424
                                                ============     ============     ============

Capital Expenditures:
  Precision Products                            $  3,515,282     $  2,366,196     $    757,136
  Litchfield Precision Components                    214,730             --               --   
  Corporate and Other                                496,041          598,016        1,081,333
                                                ------------     ------------     ------------
Total capital expenditures                      $  4,226,053     $  2,964,212     $  1,838,469
                                                ============     ============     ============

Depreciation and Amortization:
  Precision Products                            $  2,181,315     $  1,835,671     $  1,551,211
  Litchfield Precision Components                    237,802             --               --
  Corporate and Other                              1,217,210        1,241,695          410,846
                                                ------------     ------------     ------------
Total depreciation and amortization             $  3,636,327     $  3,077,366     $  1,962,057
                                                ============     ============     ============
</TABLE>

The Company has no foreign-based operations; however, the Company utilizes
subcontractors in Thailand and China for a portion of the fine wire assembly.
The Company had aggregate export sales of $51,467,000, $39,718,000 and
$23,766,000 for the years ending September 30, 1996, 1995 and 1994,
respectively, principally to pacific rim customers.

Revenues from five customers made up a significant portion of the Company's
total net sales during the years ending September 30:

                                 1996   1995   1994
----------------------------------------------------
                    Customer A    31%    29%    31%
                    Customer B    18     21     24
                    Customer C    16     11      8
                    Customer D     9     11      9
                    Customer E     8     10     10

Accounts receivable from the above five customers also make up a significant
portion of the Company's accounts receivable at September 30, 1996 and 1995.

<TABLE>
<CAPTION>

QUARTERLY FINANCIAL DATA
(Unaudited)

1996                                    1st Quarter    2nd Quarter     3rd Quarter     4th Quarter          Year
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>            <C>             <C>             <C>               <C>        
Net sales                               $13,111,707    $14,674,457     $19,254,632     $22,529,426       $69,570,222
Gross profit                              5,516,232      6,014,066       7,294,617       8,152,903        26,977,818
Net income                                2,751,191      2,956,264       3,562,134       3,851,417        13,121,006
Net income per share:
  Primary                                     $0.38          $0.41           $0.49           $0.53             $1.81
  Assuming full dilution                      $0.38          $0.41           $0.49           $0.53             $1.81

1995                                     1st Quarter   2nd Quarter     3rd Quarter     4th Quarter          Year
--------------------------------------------------------------------------------------------------------------------
Net sales                                $9,975,859    $11,692,830     $14,025,617     $14,499,646       $50,193,952
Gross profit                              3,886,818      4,903,343       6,265,596       6,507,210        21,562,967
Net income                                1,556,513      2,182,826       2,954,692       3,335,356        10,029,387
Net income per share:*
  Primary                                     $0.23          $0.31           $0.41           $0.46             $1.40
  Assuming full dilution                      $0.22          $0.31           $0.41           $0.46             $1.39


* Net income per share amounts have been restated to reflect a three-for-two
stock split distributed May 31, 1995.
</TABLE>


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. 
Not applicable.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the section entitled "Election of Directors" in the
Registrant's definitive proxy statement to be mailed to shareholders on or about
December 17, 1996, and filed with the Securities and Exchange Commission.
Information on executive officers is set forth in Part I, Item 4A hereto.


ITEM 11.  EXECUTIVE COMPENSATION
Reference is made to the section entitled "Executive Compensation" and "Election
of Directors" in the Registrant's definitive proxy statement to be mailed to the
Shareholders on or about December 17, 1996, and filed with the Securities and
Exchange Commission.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the section entitled "Security Ownership of Certain
Beneficial Owners and Management" and "Election of Directors" in the
Registrant's definitive proxy statement to be mailed to Shareholders on or about
December 17, 1996, and filed with the Securities and Exchange Commission.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the section entitled "Certain Transactions" in the
Registrant's definitive proxy statement to be mailed to Shareholders on or about
December 17, 1996, and filed with the Securities and Exchange Commission.

<TABLE>
<CAPTION>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

         (1)      Financial Statements                                                                             Page Numbers
                  --------------------                                                                             ------------
         <S>                                                                                                            <C>
                  The following Consolidated Financial Statements of the Registrant, Innovex Inc. and subsidiaries,
                  are included in Item 8.

                  Consolidated Balance Sheets at September 30, 1996 and 1995                                            13
                  Consolidated Statements of Operations for each of the three years in the period ended
                            September 30, 1996                                                                          14
                  Consolidated Statements of Stockholders' Equity for each of the three years in the period ended
                            September 30, 1996                                                                          15
                  Consolidated Statements of Cash Flows for each of the three years in the period ended
                            September 30, 1996                                                                          16
                  Notes to Consolidated Financial Statements                                                            17-22

         (2)      Financial Statement Schedules
                  -----------------------------

                  All schedules for which provision is made in the applicable
         accounting regulation of the Securities and Exchange Commission have
         been omitted because they are not required, are inapplicable or the
         information is included in the Consolidated Financial Statements or
         Notes thereto.

         (3)      Exhibits                                                                                         Page Numbers
                  --------                                                                                         ------------

          3(a)    Articles of Incorporation, as amended are incorporated by reference to Exhibit 3 of the 
                   Registrant's Form 10Q for the Quarter Ended March 31, 1988.
          3(b)    Bylaws, as amended are incorporated by reference to Exhibit 3(b) of the Registrant's Form S-1 
                   Registration Statement dated June 19, 1986, (Commission File No. 33-6594).
         10(a)    1983 Employee Incentive Stock Option Plan is incorporated by reference to Exhibit 4(a) of the 
                    Registrant's Form S-8 dated June 3, 1987 (Commission File No. 33-14776).
         10(b)    1987 Employee Stock Option Plan, as amended, is incorporated by reference to Exhibit 4(a) of the 
                   Registrant's Form S-8 dated March 17, 1989 (Commission File No. 33-27530).
         10(c)    Innovex, Inc. & Subsidiaries Employees' Retirement Plan is incorporated by reference to Exhibit 
                   10(i) of the Registrant's Form 10-K for the Year Ended September 30, 1992.
         10(d)    Office/Warehouse Lease dated November 2, 1993 for Bloomington building between the 
                   Northwestern Mutual Life Insurance Company as lessor and Innovex, Inc. is incorporated by 
                   reference to Exhibit 10(g) of the Registrant's Form 10-K for the Year Ended September 30, 1993.
         10(e)    1994 Stock Option Plan is incorporated by reference to Exhibit 10.1 of the Registrant's Form 10-Q
                   for the Quarter Ended March 31, 1995.
         10(f)    Sublease dated March 29, 1995 for Bloomington office space between John Alden Life Insurance 
                   Company and Innovex, Inc. is incorporated by reference to Exhibit 10(f) of the Registrant's Form 10-K 
                   for the Year Ended September 30, 1995.
         10(g)    Form of Employment Agreement between certain executive officers and the Company.                      28-30
         11       Computation of per share income.                                                                      31
         22       Subsidiaries of Registrant.                                                                           32
         23       Consent of Grant Thornton LLP.                                                                        33
         27       Financial Data Schedule.                                                                              34

</TABLE>

(b)  REPORTS ON FORM 8-K
         None

(c)  EXHIBITS
         Reference is made to Item 14 (a) 3.

(d)  SCHEDULES
         Reference is made to Item 14 (a) 2.

                                   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.

                                       INNOVEX, INC.


                                       By  \s\ Thomas W. Haley
                                            ------------------------------------
                                            Thomas W. Haley
                                            Chairman and Chief Executive Officer

Date December 13, 1996                 By  \s\ Douglas W. Keller
                                            ------------------------------------
                                            Douglas W. Keller
                                            Vice President, Finance


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 13th day of December, 1996.


\s\ Thomas W. Haley      Chairman and Chief Executive Officer
Thomas W. Haley          and Director
                         (principal executive officer)

\s\ Douglas W. Keller    Vice President, Finance
Douglas W. Keller        (principal financial officer)

_________________        Director
Gerald M. Bestler

\s\ Mary E. Curtin       Vice President, General Counsel, Secretary and Director
Mary E. Curtin

\s\ Willis K. Drake      Director
Willis K. Drake

_________________        Director
William J. Miller

_________________        Director
Michael C. Slagle

\s\ Bernt M. Tessem      Director
Bernt M. Tessem