UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................ to .................
Commission File No. 000-19495
Embrex, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1469825
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1040 Swabia Court, Durham, NC 27703
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (919) 941-5185
Indicate by checkmark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------
The number of shares of Common Stock, $0.01 par value, outstanding as of October
31, 2000 was 7,839,289.
<PAGE>
EMBREX, INC.
INDEX
Part I Page
----
Financial Information:
Item 1: Financial Statements
Consolidated Balance Sheets..............................3 of 14
Consolidated Statements of Operations....................4 of 14
Consolidated Statements of Cash Flows....................5 of 14
Notes to Consolidated Financial Statements...............6 of 14
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations............7 of 14
Item 3:
Quantitative and Qualitative Disclosures
About Market Risk.......................................11 of 14
Part II
Other Information:
Item 1: Legal Proceedings.....................................11 of 14
Item 2: Changes in Securities.................................11 of 14
Item 3: Defaults Upon Senior Securities.......................11 of 14
Item 4: Submission of Matters to a Vote of Security Holders...12 of 14
Item 5: Other Information.....................................12 of 14
Item 6: Exhibits and Reports on Form 8-K......................12 of 14
Signatures....................................................13 of 14
Exhibit Index.................................................14 of 14
2
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Embrex, Inc.
------------
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31
2000 1999
-----------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................................... $ 1,731 $ 4,799
Restricted cash............................................................. 275 275
Accounts receivable - trade................................................. 5,421 4,751
Inventories:
Materials and supplies.................................................... 1,455 1,562
Product................................................................... 596 827
Other current assets........................................................ 1,994 822
----------- -----------
Total Current Assets...................................................... 11,472 13,036
Inovoject(R)Systems Under Construction......................................... 1,321 978
Inovoject(R)Systems............................................................ 30,162 27,386
Less accumulated depreciation............................................... (21,742) (19,804)
----------- -----------
8,420 7,582
Equipment, Furniture and Fixtures ............................................. 8,559 7,195
Less accumulated depreciation and amortization ............................. (3,779) (2,906)
----------- -----------
4,780 4,289
Other Assets:
Patents and exclusive licenses of patentable technology .................. 368 348
----------- -----------
Total Assets................................................................... $ 26,361 $ 26,233
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable............................................................ $ 662 $ 538
Accrued expenses............................................................ 3,003 2,738
Deferred revenue............................................................ 28 584
Product warranty accrual.................................................... 410 394
Current portion of capital lease obligations 31 568
Line of credit ............................................................. 936 356
----------- -----------
Total Current Liabilities................................................. 5,070 5,178
Long-term Liabilities
Capital lease obligations, less current portion ............................ 20 20
Other long-term liabilities................................................. 35 0
----------- -----------
Total Long-Term Liabilities............................................... 55 20
Shareholders' Equity
Common Stock,$.01 par value:
Authorized - 30,000,000 shares
Issued and outstanding - 7,889,100 net of 974,000 treasury shares and
7,922,627 net of 499,600 treasury shares at September 30, 2000
and December 31, 1999, respectively.................................... 87 84
Additional paid-in capital.................................................. 57,141 55,231
Accumulated other comprehensive income...................................... 0 37
Accumulated deficit......................................................... (25,009) (30,328)
Treasury stock.............................................................. (10,983) (3,989)
----------- -----------
Total Shareholders' Equity................................................ 21,236 21,035
----------- -----------
Total Liabilities and Shareholders' Equity..................................... $ 26,361 $ 26,233
=========== ===========
</TABLE>
3
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Embrex, Inc.
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Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
September 30 September 30
--------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Inovoject(R)System revenue................................... $ 9,034 $ 7,969 $26,759 $23,746
Product sales................................................ 639 232 1,720 777
Other revenue................................................ 54 48 213 153
------- ------- ------- -------
Total Revenues............................................. 9,727 8,249 28,692 24,676
Cost of Product Sales and Inovoject(R)System Revenues .......... 4,222 3,243 12,281 9,682
------- ------- ------- -------
Gross Profit............................................... 5,505 5,006 16,411 14,994
Operating Expenses
General and administrative................................... 1,341 1,721 4,168 5,530
Sales and marketing.......................................... 443 176 1,296 498
Research and development..................................... 1,568 1,353 4,632 4,087
------- ------- ------- -------
Total Operating Expenses................................... 3,352 3,250 10,096 10,115
Operating Income................................................ 2,153 1,756 6,315 4,879
Other Income (Expense)
Interest income.............................................. 22 75 130 256
Interest expense............................................. (28) (77) (82) (283)
------- ------- ------- -------
Total Other Income (Expense) .............................. (6) (2) 48 (27)
------- ------- ------- -------
Income Before Taxes............................................. 2,147 1,754 6,363 4,852
Income Taxes.................................................... (185) (202) (641) (833)
------- ------- ------- -------
Net Income ................................................ $ 1,962 $ 1,552 $ 5,722 $ 4,019
======= ======= ======= =======
Net Income Per Share of Common Stock:
Basic ..................................................... $ 0.25 $ 0.19 $ 0.72 $ 0.49
Diluted ..................................................... $ 0.23 $ 0.18 $ 0.66 $ 0.47
Weighted Average Number of Shares Used in Per-Share Calculation:
Basic ..................................................... 7,910 8,135 7,909 8,226
Diluted ..................................................... 8,554 8,683 8,663 8,502
</TABLE>
4
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Embrex, Inc.
------------
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months Ended
September 30
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2000 1999
---- ----
<S> <C> <C>
Operating Activities
Net Income ................................................................. $ 5,722 $ 4,019
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................. 3,372 3,056
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets .............. (1,506) (706)
Accounts payable and accrued expenses. ................................. (124) 340
--------- ---------
Net Cash Provided By Operating Activities...................................... 7,464 6,709
Investing Activities
Purchases of Inovoject(R)systems, equipment, furniture and fixtures ......... (5,037) (4,513)
Decrease in patents and other noncurrent assets ............................. (26) (17)
--------- ---------
Net Cash Used in Investing Activities.......................................... (5,063) (4,530)
Financing Activities
Issuance of Common Stock.................................................... 1,913 252
Net proceeds from line of credit............................................ 580 2,100
Payments on long-term debt.................................................. 8 (1)
Payments on capital lease obligations....................................... (537) (2,202)
Repurchase of Common Stock.................................................. (6,993) (3,237)
--------- ---------
Net Cash Used In Financing Activities.......................................... (5,029) (3,088)
--------- ---------
(Decrease)/increase in Cash and Cash Equivalents .............................. (2,628) (909)
Currency Translation Adjustments............................................... (440) (10)
Cash and cash equivalents at beginning of period .............................. 4,799 7,167
--------- ---------
Cash And Cash Equivalents At End Of Period..................................... $ 1,731 $ 6,248
========= =========
</TABLE>
5
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EMBREX, INC.
FORM 10-Q
September 30, 2000
NOTES TO CONSOLIDATED INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements include the accounts of Embrex,
Inc. and its wholly owned subsidiaries, Embrex Europe Limited, Embrex BioTech
Trade (Shanghai) Co., Ltd. and Inovoject do Brasil Ltda. (collectively referred
to as the Company) and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these
do not include all of the information and notes required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
financial condition and results of operations have been included. Operating
results for the nine-month period ended September 30, 2000 are not necessarily
indicative of the results that may be attained for the entire year. For further
information, refer to the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1999.
Note 2 - Net Income Per Share
Basic net income per share was determined by dividing net income available for
common shareholders by the weighted average number of common shares outstanding
during each period presented. Diluted net income per share reflects the
potential dilution that could occur assuming conversion or exercise of all
issued and unexercised stock options and warrants.
Note 3 - Comprehensive Income
In September 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (SFAS 130). This statement establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
In accordance with SFAS 130, the Company has determined total comprehensive
income, net of tax, to be $5.7 million and $4.0 million for the nine months
ended September 30, 2000 and 1999, respectively. Embrex's total comprehensive
income represents net income plus the after-tax effect of foreign currency
translation adjustments for the periods presented.
Note 4 - Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Investments
and Hedging Activities," SFAS 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes several existing standards.
SFAS 133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The Company does not
expect that the adoption of SFAS 133 will have a material impact on its
financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements. SAB 101 explains how the SEC staff
applies by analogy the existing rules on revenue recognition to other
transactions not covered by such rules. In March 2000, the SEC issued SAB 101A
that delayed the original effective date of SAB 101 until the second
6
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quarter of 2000 for calendar year companies. In June 2000, the SEC issued SAB
101B that further delayed the effective date of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. The
Company does not expect that the adoption of SAB 101 will have a material impact
on its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations.
--------------
The following discussion and analysis should be read in conjunction with the
Company's financial statements and related notes appearing elsewhere in this
report.
RESULTS OF OPERATIONS
---------------------
Three Months Ended September 30, 2000 and 1999
----------------------------------------------
Consolidated revenues for the third quarter totaled $9.7 million, representing
an increase of 18% over 1999 third quarter revenues of $8.2 million.
Inovoject(R) system revenues amounted to $9.0 million for the 2000 third
quarter, an increase of 13% over 1999 third quarter revenues of $8.0 million.
Most of the 2000 and 1999 Inovoject(R) system revenues were generated from
Inovoject(R) system lease fees. The growth in Inovoject(R) system revenues was
primarily attributable to additional installations of Inovoject(R) systems and
increased injection activity in Europe, Asia and Latin America as well as
Inovoject(R) system sales in North America.
Sales of Bursaplex(R), the Company's proprietary vaccine for the treatment of
avian infectious bursal disease (IBD), to its customers, generated $639,000 of
product revenue in the 2000 third quarter, and $232,000 of product revenue in
the third quarter of 1999. Product sales increased 175% during the third quarter
of 2000 compared to product sales during the third quarter of 1999 primarily due
to sales in the Asian region.
The third quarter decrease in gross profit margin from 61% in 1999 to 57% in
2000 resulted from changing the classification of various international start-up
operating expenses to cost of revenue. This change reflects the increased
commercial installations of the Inovoject(R) system as well as sales of
Bursaplex(R) in ovo bursal disease vaccine in these markets. Operating income
was not affected.
Total operating expenses amounted to $3.4 million for the third quarter of 2000
versus $3.3 million for the third quarter of 1999. General and administrative
expenses were $0.4 million less during the third quarter of 2000 due to higher
expenditure levels for general corporate activities, information system
implementation and year 2000 issues during the third quarter of 1999 and also
due to the classification of international start-up expenses from general and
administrative expenses to both sales and marketing expenses and cost of
revenue. Sales and marketing expenses were $0.3 million more during the third
quarter of 2000 than the same period in 1999 due to increased new business
activity and the classification of international start-up expenses from general
and administrative expenses to sales and marketing expenses. Research and
development expenses were $0.2 million more during the third quarter of 2000
than the third quarter of 1999 due to activities primarily attributable to
programs focused on Inovoject(R) system improvements and enhancements, and
biological product development.
Net interest income changed from $2,000 of expense during the third quarter of
1999 to $6,000 of expense in the third quarter of 2000. This was attributable to
less interest income due to lower available
7
<PAGE>
cash balances as a result of capital expenditures and the repurchase of the
Company's Common Stock and reduced interest expense due to the principal
repayment of capital lease and debt obligations.
Inovoject(R) system revenue growth and improved operating income resulted in a
$411,000 increase in net income, to $2.0 million in the third quarter of 2000
compared to $1.6 million during the comparable period in 1999. Diluted net
income per common share was $0.23 for the 2000 third quarter based on 8.6
million average shares outstanding, compared to diluted net income of $0.18 per
share based on 8.7 million average shares outstanding in the third quarter of
1999.
Nine months Ended September 30, 2000 and 1999
---------------------------------------------
Consolidated revenues for the nine months ended September 30, 2000 totaled $28.7
million, representing an increase of 16% over 1999 revenue of $24.7 million for
the comparable period.
Inovoject(R) system revenues amounted to $26.8 million for the first nine months
of 2000, an increase of 13% over revenues of $23.8 million during the comparable
period in 1999. Most of the 2000 and 1999 Inovoject(R) system revenues were
generated from Inovoject(R) system lease fees. The growth in Inovoject(R) system
revenues was primarily attributable to increased pricing and system
installations in North American hatcheries as well as additional Inovoject(R)
systems operating in Europe, Asia and Latin America.
Sales of Bursaplex(R) to the Company's customers and VNF(R) to Ft. Dodge, a
division of American Home Products Corp., generated $1.7 million of product
revenue during the first nine months of 2000 while Bursaplex(R) sales were the
principal source of $777,000 of product revenue generated during the first nine
months of 1999. Bursaplex(R) sales alone increased 76% as continued demand in
the Asian and Latin American markets out paced 1999 and the North American
region began selling Bursaplex(R) to its Japanese distributor during the third
quarter.
Gross profit decreased from 61% of total revenues during the first nine months
of 1999, to 57% during the comparable 2000 period. This is due to the
reclassification of general and administrative expenses to cost of revenue and
to sales and marketing expenses beginning January of 2000.
Operating expenses of $10.1 million for the first three quarters of 2000
remained the same as the first three quarters of 1999. The operating expenses
were flat due primarily to the previously mentioned expenses which are now being
classified as cost of revenue.
Net interest expense amounted to $48,000 of income for the first nine months of
2000 compared to $27,000 of expense for the first nine months of 1999. The
$75,000 change is attributable to the principal repayment of capital lease and
debt obligations, which consequently reduced interest expense for 2000.
Revenue growth and operating margin improvements resulted in a $1.7 million
increase in net income, to $5.7 million in the first three quarters of 2000
compared to $4.0 million during the comparable period in 1999. Diluted net
income per common share was $0.66 for the first nine months of 2000 based on 8.7
million average shares outstanding, compared to diluted net income of $0.47 per
share based on 8.5 million average shares outstanding during the first nine
months of 1999.
Bursaplex(R), a product which uses the Company's Viral Neutralizing Factor
(VNF(R)) technology to form
8
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an antibody-vaccine virus complex when combined with an infectious bursal
disease (IBD) virus, was granted approval from the United States Department of
Agriculture (the "USDA") in 1997 for in ovo (in- the-egg) use, specifically for
administration via the Company's Inovoject(R) system. To date, regulatory
approval for Bursaplex(R) has been received in 15 countries besides the United
States and regulatory approval is pending in 8 countries.
Bursamune(R), which also utilizes the Company's VNF(R) technology, is an IBD
vaccine produced by Ft. Dodge, a division of American Home Products Corp., and
which is being marketed by Ft. Dodge in certain European countries and, upon
receipt of regulatory approvals, will be marketed in the rest of Europe, the
Middle East and Africa under Ft. Dodge's trade name Bursamune(R). On April 13,
2000 the Company announced that Ft. Dodge had received marketing authorization
from the Veterinary Products Committee in the United Kingdom for the in ovo
administration of Bursamune(R) to broiler chickens. To date, Bursamune(R) has
received regulatory approval in Italy, South Africa, Spain and the United
Kingdom. Bursamune's provisional approval in France is subject to renewal during
the fourth quarter of 2000. Although the Company is assisting Ft. Dodge with its
renewal application, there can be no assurances that French regulatory
authorities will grant a renewal. Although Embrex has received regulatory
approval for Bursaplex(R) and Bursamune(R) in some markets, there is no
assurance that the remaining approvals will be obtained.
The Company estimates that as of September 30, 2000, it was vaccinating in
excess of 80% of the broiler birds grown in the United States during the first
nine months of 2000. Given its market penetration in both the United States and
Canada, the Company expects that Inovoject(R) system revenue growth in these two
markets will be less than the Company's overall revenue growth targets.
Revenue growth in markets outside the United States and Canada is expected to
come primarily from new Inovoject(R) system operations in other countries, and
secondarily from sales of the Company's Bursaplex(R) product to poultry
producers outside the United States and Canada and sales of VNF(R) to Ft. Dodge
for the manufacture of Bursamune(R). The Company currently has Inovoject(R)
systems either installed or on trial in 30 countries, including the United
States and Canada.
For the rest of 2000, the expectations of management are to maintain growth in
revenue and profitability consistent with overall targets, to continue efforts
to achieve worldwide placements of the Inovoject(R) system, to obtain regulatory
approvals and initiate marketing of Bursaplex(R) in these markets, to continue
development of proprietary in ovo vaccines and to develop enhancements to the
Inovoject(R) system. Growth in Inovoject(R) systems and product revenues during
2000 will be dependent on the rate at which markets outside the United States
accept Inovoject(R) system technology, and the timing of regulatory approvals
for Bursaplex(R) and Bursamune(R) as well as regulatory approval and market
acceptance of other vaccines for in ovo delivery. In addition, normal
fluctuations in the market price of grain, domestic and international
consumption levels of chicken, the number of eggs set by poultry producers and
the supply of broiler chicken eggs, country-specific regulations and economic
conditions, and export opportunities for the Company's U.S. customers may impact
the timing and quantity of egg injections and the corresponding in ovo delivery
of vaccines.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
----------------------------------------------------------------
At September 30, 2000, the Company's cash and cash equivalents amounted to $1.7
million, a reduction of $3.1 million from $4.8 million on hand at year-end 1999.
Operating activities generated $7.5 million in cash during the first nine months
of 2000. Cash was provided by net income of $5.7 million less depreciation of
$3.4 million, and was reduced by decreases in accounts payable and accrued
expenses of $0.1 million and by increases in accounts receivable, inventories
and other current assets of $1.5 million.
9
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During the first nine months, investing activities used $5.1 million of cash,
principally for additional Inovoject(R) systems.
Financing activities used $5.0 million, of which $7.5 million was used for
Common Stock repurchases and repayment of capital lease obligations. This was
offset by $0.6 million of proceeds from the Company's line of credit and $1.9
million received from the issuance of Common Stock through stock option
exercises.
As of September 30, 2000, the Company had outstanding purchase commitments of
approximately $3.9 million related to the production of the Company's
Bursaplex(R) product, VNF(R) for the manufacture of Bursaplex(R) and
Bursamune(R) and materials and supplies for the construction and maintenance of
its Inovoject(R) systems.
In April 1999, the Company obtained a $6.0 million secured revolving line of
credit from its bank. This line of credit may be used for working capital
purposes and was extended in October 2000 for an additional 18 months and will
now expire in April 2001. At September 30, 2000 the unused amount of this line
of credit facility amounted to $5.1 million.
During the first three quarters of 2000 the Company acquired 474,400 shares of
its Common Stock for $7.0 million at an average price of $14.74 per share. The
initial share repurchase program which began in the fourth quarter of 1998 was
completed by the Company during the third quarter of 2000. During this program
the Company repurchased 830,000 shares of its Common Stock for $9.0 million at
an average price of $10.85 per share. During the second quarter of 2000,
Management was authorized by the Board of Directors to extend the stock
repurchase program. This extension allows for the purchase up to 6 percent of
outstanding shares, or up to approximately 500,000 shares over 18 months in open
market or privately negotiated transactions. Through September 30, 2000 the
Company has purchased 144,000 shares for $2.0 million at an average price of
$13.80 per share.
Based on current operations, management believes that available cash and cash
equivalents, together with cash flow from operations and its bank line of
credit, will be sufficient to meet its cash requirements as these currently
exist, but may continue to explore alternative funding opportunities with
respect to collaborative ventures and new product development.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, including statements with
respect to future products, services, markets and financial results. These
statements involve risks and uncertainties that could cause actual results to
differ materially. Risks include without limitation the Company's ability to
develop new products and technology, to penetrate new markets, the degree of
market acceptance of new products, the outcome of the Company's patent
litigation, the complete commercial development of potential future products or
the ability to obtain regulatory approval of products. Such approval is
dependent upon a number of factors, such as results of trials, the discretion of
regulatory officials, and potential changes in regulations. Additional
information on these risks and other factors, which could affect the Company's
financial results, is included in the Company's Form 10-K filed with the
Securities and Exchange Commission (SEC) and other filings with the SEC,
including the Company's Forms 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
------------------------------------------------------------------
A portion of the Company's operations are in jurisdictions outside North
America. The Company leases
10
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Inovoject(R) systems and sells products in Europe, Asia and Latin America. As a
result, the Company's financial results could be affected by factors such as
changes in foreign currency exchange rates or weak economic conditions in the
foreign markets in which the Company distributes its products. At September 30,
2000, the Company's operations outside North America were not material to the
Company's consolidated results as a whole, and a significant change in currency
exchange rates or economic conditions in the jurisdictions outside North America
in which the Company operates would not have a material effect on the Company's
consolidated financial results.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
------- -----------------
For a description of certain patent infringement proceedings
initiated by the registrant and related legal proceedings, see the
registrant's Form 10-K for the year ended December 31, 1999 filed
with the Securities and Exchange Commission on March 24, 2000.
In July 2000 the United States Court of Appeals for the Federal
Circuit affirmed that Service Engineering Corporation and Edward
Bounds (collectively "SEC") infringed upon Patent No. 4,458,630 (the
"'630" or the "Sharma" patent), which is exclusively licensed to
Embrex from the U.S. Department of Agriculture. SEC filed this
appeal after a patent infringement trial concluded in Embrex's favor
in July 1998.
In its decision, the appeals court affirmed the 1998 U.S. District
Court for the Eastern District of North Carolina decision to award
to Embrex litigation expenses plus interest valued at approximately
$1.5 million. In addition, the appeals court upheld the finding that
SEC had willfully infringed all asserted claims of the Sharma
patent. However, the appeals court vacated the award of direct
infringement damages finding that the district court erroneously
awarded direct damages without proper evidence to support the award.
Therefore, the appeals court remanded that award ($500,000 which was
trebled) to the district court for further proceedings for
determination of a reasonable royalty for SEC's infringement of the
patented method. These proceedings were opened on August 28, 2000.
Item 2. Changes in Securities
------- ---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
------- -------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
Not applicable.
11
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Item 5. Other Information
------- -----------------
Any proposal which a shareholder intends to present for a vote of
shareholders at the annual meeting of shareholders for the year 2001 and which
such shareholder wishes to have included in the Company's proxy statement and
form of proxy relating to that meeting must be sent to the Company's principal
executive offices, marked to the attention of the Secretary of the Company, and
received by the Company at such offices on or before December 15, 2000.
Proposals received after December 15, 2000 will not be considered for inclusion
in the Company's proxy materials for its 2001 annual meeting.
In addition, if a shareholder intends to present a proposal for a
vote at the annual meeting of shareholders for the year 2001, other than by
submitting a proposal for inclusion in the Company's proxy statement for that
meeting, the shareholder must give timely advance notice in accordance with the
Company's Bylaws. To be timely, a shareholder's notice must be received by the
Company not earlier than January 23, 2001 and not later than February 22, 2001.
The proxy solicited by the board of directors of the Company for the 2001 annual
meeting of shareholders will confer discretionary authority to vote on any
shareholder proposal presented at that meeting, unless the Company is given
notice within such time frame.
Any shareholder proposal or notice described above must be in writing
and sent to the Company by registered mail, return receipt requested, to the
Company's executive offices at Post Office Box 13989, Research Triangle Park,
North Carolina 27709, Attention: Corporate Secretary. Any such proposal or
notice also will be subject to the requirements contained in the Company's
Bylaws relating to shareholder proposals and any applicable requirements of the
Securities Exchange Act of 1934, as amended.
The foregoing information supercedes the information regarding
shareholder proposals set forth in the Company's proxy statement relating to its
2000 annual meeting, previously mailed to shareholders and filed with the
Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) Exhibits
3. Amended and Restated Bylaws
27. Financial Data Schedule
(b) Reports on Form 8-K.
Not applicable.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 9, 2000
EMBREX, INC.
By: /s/ Randall L. Marcuson
---------------------------
Randall L. Marcuson
President and Chief Executive Officer
By: /s/ Don T. Seaquist
---------------------------
Don T. Seaquist
Vice President, Finance and Administration
13
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EMBREX, INC.
File No. 000-19495
Form 10-Q
For the Quarterly Period
Ended September 30, 2000
EXHIBIT INDEX
Exhibits
--------
3. Amended and Restated Bylaws
27. Financial Data Schedule
14
