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 June 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 July
31, 2000 was 7,920,830.
<PAGE>
EMBREX, INC.
INDEX
<TABLE>
<CAPTION>
Part I Page
----
Financial Information:
Item 1: Financial Statements
<S> <C>
Consolidated Balance Sheets........................................................3 of 15
Consolidated Statements of Operations..............................................4 of 15
Consolidated Statements of Cash Flows..............................................5 of 15
Notes to Consolidated Financial Statements.........................................6 of 15
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations......................................7 of 15
Item 3:
Quantitative and Qualitative Disclosures
About Market Risk.................................................................11 of 15
Part II
Other Information:
Item 1: Legal Proceedings.................................................................11 of 15
Item 2: Changes in Securities.............................................................11 of 15
Item 3: Defaults Upon Senior Securities...................................................11 of 15
Item 4: Submission of Matters to a Vote of Security Holders...............................12 of 15
Item 5: Other Information.................................................................13 of 15
Item 6: Exhibits and Reports on Form 8-K..................................................13 of 15
Signatures................................................................................14 of 15
Exhibit Index.............................................................................15 of 15
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Embrex, Inc.
------------
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30 December 31
2000 1999
------------ -----------
(unaudited)
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents............................................ $ 1,638 $ 4,799
Restricted cash...................................................... 275 275
Accounts receivable - trade.......................................... 5,021 4,751
Inventories:
Materials and supplies........................................... 1,471 1,562
Product ........................................................ 674 827
Other current assets................................................. 1,646 822
------------ ----------
Total Current Assets............................................. 10,724 13,036
Inovoject(R) Systems Under Construction.................................. 1,237 978
Inovoject(R) Systems..................................................... 29,131 27,386
Less accumulated depreciation........................................ (21,089) (19,804)
------------ ----------
8,042 7,582
Equipment, Furniture and Fixtures ....................................... 8,291 7,195
Less accumulated depreciation and amortization....................... (3,474) (2,906)
------------ ----------
4,817 4,289
Other Assets:
Patents and exclusive licenses of patentable technology.......... 216 348
Other long term assets........................................... 161 0
------------ ----------
Total Assets ......................................................... $ 25,198 $ 26,233
============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable..................................................... $ 624 $ 538
Accrued expenses..................................................... 3,308 2,738
Deferred revenue..................................................... 198 584
Product warranty accrual............................................. 404 394
Current portion of capital lease obligations......................... 117 568
Line of credit ...................................................... 209 356
------------ ----------
Total Current Liabilities........................................ 4,860 5,178
Capital Lease Obligations, less current portion.......................... 20 20
Shareholders' Equity
Common Stock,$.01 par value:
Authorized - 30,000,000 shares
Issued and outstanding - 7,885,835 net of 866,800 treasury shares
and 7,922,627 net of 499,600 treasury shares at June 30, 2000
and December 31, 1999, respectively.......................... 86 84
Additional paid-in capital........................................... 56,642 55,231
Accumulated other comprehensive income............................... 0 37
Accumulated deficit.................................................. (26,878) (30,328)
Treasury stock....................................................... (9,533) (3,989)
------------ ----------
Total Shareholders' Equity....................................... 20,318 21,035
------------ ----------
Total Liabilities and Shareholders' Equity............................... $ 25,198 $ 26,233
============ ==========
</TABLE>
3
<PAGE>
Embrex, Inc.
------------
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-----------------------------------------------
2000 1999 2000 1999
-----------------------------------------------
Revenues
<S> <C> <C> <C> <C>
Inovoject(R) System revenue............................... $ 8,912 $ 8,087 $17,726 $ 15,777
Product sales............................................. 710 299 1,082 545
Other revenue............................................. 52 25 158 105
------- ------- -------- --------
Total Revenues........................................ 9,674 8,411 18,965 16,427
Cost of Product Sales and Inovoject(R) System Revenues........ 4,160 3,213 8,058 6,439
------- ------- -------- --------
Gross Profit.......................................... 5,514 5,198 10,907 9,988
Operating Expenses
General and administrative................................ 1,420 1,985 2,828 3,809
Sales and marketing....................................... 412 156 853 322
Research and development.................................. 1,576 1,410 3,064 2,734
------- ------- -------- --------
Total Operating Expenses.............................. 3,408 3,551 6,745 6,865
Operating Income.............................................. 2,106 1,647 4,162 3,123
Other Income (Expense)
Interest income........................................... 46 101 108 181
Interest expense.......................................... (16) (71) (55) (206)
------- ------- -------- --------
Total Other Income (Expense).......................... 30 30 53 (25)
------- ------- -------- --------
Income Before Taxes........................................... 2,137 1,677 4,215 3,098
Income Taxes.................................................. (220) (347) (455) (631)
------- ------- -------- --------
Net Income ........................................... $ 1,917 $ 1,330 $ 3,760 $ 2,467
======= ======= ======== ========
Net Income Per Share of Common Stock:
Basic...................................................... $ 0.24 $ 0.16 $ 0.48 $ 0.30
Diluted.................................................... $ 0.22 $ 0.16 $ 0.43 $ 0.29
Weighted Average Number of Shares Used in Per-Share Calculation:
Basic...................................................... 7,870 8,250 7,908 8,272
Diluted.................................................... 8,701 8,456 8,717 8,412
</TABLE>
4
<PAGE>
Embrex, Inc.
------------
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------------
2000 1999
------------ ------------
Operating Activities
<S> <C> <C>
Net Income ............................................................ $ 3,760 $ 2,467
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization........................................ 2,296 1,940
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets....... (850) (182)
Accounts payable and accrued expenses............................ 307 650
------------ ------------
Net Cash Provided By Operating Activities.................................... 5,513 4,875
Investing Activities
Purchases of Inovoject(R) systems, equipment, furniture and fixtures...... (3,538) (2,703)
Decrease in patents and other noncurrent assets........................ (34) (17)
------------ ------------
Net Cash Used in Investing Activities........................................ (3,572) (2,720)
Financing Activities
Issuance of Common Stock................................................. 1,413 208
Net proceeds from line of credit......................................... (147) 0
Payments on long-term debt............................................... 5 (10)
Payments on capital lease obligations.................................... (483) (1,664)
Repurchase of Common Stock.................................................... (5,544) (522)
------------ ------------
Net Cash Used In Financing Activities........................................ (4,756) (1,988)
------------ ------------
(Decrease)/increase in Cash and Cash Equivalents ............................ (2,815) 167
Currency Translation Adjustments............................................. (346) (193)
Cash and cash equivalents at beginning of period............................. 4,799 7,167
------------ ------------
Cash And Cash Equivalents At End Of Period..................................... $ 1,638 $ 7,141
============ ============
</TABLE>
5
<PAGE>
EMBREX, INC.
FORM 10-Q
June 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 six-month period ended June 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 June 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 $3.8 million and $2.5 million for the six-months ended
June 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.
6
<PAGE>
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 June 30, 2000 and 1999
-----------------------------------------
Consolidated revenues for the second quarter totaled $9.7 million, representing
an increase of 15% over 1999 second quarter revenues of $8.4 million.
Inovoject(R) system revenues amounted to $8.9 million for the 2000 second
quarter, an increase of 10% over 1999 second quarter revenues of $8.1 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 increased injection activities in North American
hatcheries as well as additional Inovoject(R) systems and injection activity in
Europe, Asia and Latin America.
Sales of Bursaplex(R), the Company's proprietary vaccine for the treatment of
avian infectious bursal disease (IBD), to its customers and VNF(R) for the
manufacture of Bursamune(R) to Ft. Dodge, a division of American Home Products
Corp., generated $710,000 of product revenue in the 2000 second quarter, whereas
the $299,000 of product revenue in the second quarter of 1999 was primarily from
sales of Bursaplex(R). Product sales increased 137% during the second quarter of
2000 compared to product sales during the second quarter of 1999 primarily due
to VNF(R) sales to Ft. Dodge.
The second-quarter decrease in gross profit margin from 62% 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 second quarter of 2000
versus $3.6 million for the second quarter of 1999. General and administrative
expenses were $0.5 million less during the second quarter of 2000 due to
expenditure levels for general corporate activities relative to second quarter
of 1999 and 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 second
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 second quarter of 2000
than the second 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 was unchanged at $30,000 for both 2000 and 1999 second
quarters. This was attributable to less interest income due to lower available
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.
7
<PAGE>
Inovoject(R) system revenue growth and improved operating income resulted in a
$586,000 increase in net income, to $1.9 million in the second quarter of 2000
compared to $1.3 million during the comparable period in 1999. Diluted net
income per common share was $0.22 for the 2000 second quarter based on 8.7
million average shares outstanding, compared to diluted net income of $0.16 per
share based on 8.5 million average shares outstanding in the second quarter of
1999. The change in diluted average shares outstanding from 1999 to 2000 is due
to the increase in the number of in-the-money stock options included in the
diluted average shares calculation. This follows an appreciation in the price of
the Company's Common Stock during the second half of 1999 and the first quarter
of 2000, as well as Common Stock repurchases.
Six Months Ended June 30, 2000 and 1999
---------------------------------------
Consolidated revenues for the six months ended June 30, 2000 totaled $19.0
million, representing an increase of 15% over 1999 revenue of $16.4 million for
the comparable period.
Inovoject(R) system revenues amounted to $17.7 million for the first six months
of 2000, an increase of 12% over 1999 first half revenues of $15.8 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 increased injection activities 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
generated $1.1 million of product revenue during the first six months of 2000
while Bursaplex(R) sales were the principal source of $545,000 of product
revenue generated during the first six months of 1999. Bursaplex(R) sales alone
increased 34% as demand in the Asian and Latin American markets offset a decline
in the North American market that was attributable to lower levels of breeder
and broiler flock vaccination rates and fewer reported incidences of bursal
disease in the United States.
Gross profit decreased from 61% of total revenues during the first six months of
1999, to 58% 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 decreased from $6.9 million during the first half of 1999, to
$6.8 million during the first half of 2000. This decrease is primarily
attributable to the previously mentioned expenses which are now being classified
as cost of revenue.
Net interest expense amounted to $53,000 of income for the first six months of
2000 compared to $25,000 of expense for the first six months of 1999. The
$79,000 change is attributable to the principal repayment of capital lease and
debt obligations.
Revenue growth and operating margin improvements resulted in a $1.3 million
increase in net income, to $3.8 million in the first half of 2000 compared to
$2.5 million during the comparable period in 1999. Diluted net income per common
share was $0.43 for the first six months of 2000 based on 8.7 million average
shares outstanding, compared to diluted net income of $0.29 per share based on
8.4 million average shares outstanding during the first six months of 1999.
Bursaplex(R), a product which uses the Company's Viral Neutralizing Factor
(VNF(R)) technology to form
8
<PAGE>
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 13 countries besides the United
States and regulatory approval is pending in 10 countries.
Bursamune(R), which also utilizes the Company's VNF(R) technology, is an IBD
vaccine produced by Cyanamid Websters, a unit of 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 and has received temporary authorization in
France. 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 June 30, 2000, it was vaccinating in excess of
80% of the broiler birds grown in the United States during the first six 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 revenue growth 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 June 30, 2000, the Company's cash and cash equivalents amounted to $1.6
million, down $3.2 million from $4.8 million on hand at year-end 1999.
9
<PAGE>
Operating activities generated $5.5 million in cash during the first six months
of 2000. Cash was provided by net income of $3.8 million, depreciation of $2.3
million, and by increases in accounts payable and accrued expenses of $0.3
million, and was reduced by increases in accounts receivable, inventories and
other current assets of $0.9 million.
During the first six-months, investing activities used $3.6 million of cash,
principally for additional Inovoject(R) systems.
Financing activities used $4.8 million, of which $6.2 million was used for
Common Stock repurchases and repayment of capital lease obligations and the
Company's line of credit. This was offset by $1.4 million received from the
issuance of Common Stock through stock option exercises.
As of June 30, 2000, the Company had outstanding purchase commitments of
approximately $3.8 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 has a term of 18 months expiring in October 2000. The Company
intends to renew this facility. At June 30, 2000 the unused amount of this line
of credit facility amounted to $5.8 million.
During the first-half of 2000 the Company acquired 367,200 shares of its Common
Stock for $5.5 million at an average price of $15.10 per share. The initial
share repurchase program which began in the fourth quarter of 1998 was completed
by the Company during the second 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, 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 June 30, 2000 the Company has purchased 36,800
shares for $537,000 at an average price of $14.60 per share.
Based on its 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 foreseeable cash requirements in support
of its operations, including necessary capital investments, continued global
expansion, funding new product development and repurchase of its common stock.
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.
10
<PAGE>
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 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 June 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.
Item 2. Changes in Securities
------ ---------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
------ -------------------------------
Not applicable.
11
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
On May 18, 2000 the Annual Meeting of Shareholders was held and the
following matters were submitted to the shareholders for a vote. There
were 7,333,518 shares represented at the meeting in person or by proxy
and set forth below is a brief description of the matters voted on and
the number of votes cast for, against or withheld, as well as the number
of abstentions and broker non-votes. There were no broker non-votes
regarding the election of directors.
Election of Directors:
<TABLE>
<CAPTION>
Votes Votes Votes
Director Votes For Withheld Against Abstained Totals
-------- --------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
C. Daniel Blackshear 7,004,274 329,244 n/a n/a 7,333,518
Lester M. Crawford,
D.V.M., Ph.D. 7,003,449 330,069 n/a n/a 7,333,518
Peter J. Holzer 7,004,549 328,969 n/a n/a 7,333,518
Randall L. Marcuson 7,002,982 330,536 n/a n/a 7,333,518
Kenneth N. May, 7,002,399 331,119 n/a n/a 7,333,518
Ph.D.
Arthur M. Pappas 7,002,799 330,719 n/a n/a 7,333,518
Walter V. Smiley 7,002,649 330,869 n/a n/a 7,333,518
</TABLE>
Approve an amendment to the Company's Amended and Restated Incentive Stock
Option and Nonstatutory Stock Option Plan which increases the maximum number of
shares of Common Stock for issuance pursuant to such Plan:
Broker
For Against Abstain Non-Votes
--------- ------- ------- ---------
3,156,287 1,220,720 39,083 2,917,428
Approve an amendment to the Company's Amended and Restated Employee Stock
Purchase Plan which increases the maximum number of shares of Common Stock
available for purchase pursuant to such Plan.
Broker
For Against Abstain Non-Votes
--------- ------- ------- ---------
4,223,549 156,771 35,770 2,917,428
Ratify the action of the Board of Directors in appointing Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 2000:
Broker
For Against Abstain Non-Votes
--------- ------- ------- ---------
7,291,662 22,367 19,489 0
12
<PAGE>
Item 5. Other Information
------ -----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
------ --------------------------------
(a) Exhibits
10.1 Amended and Restated Incentive Stock Option and Nonstatutory Stock
Option Plan (1)
10.2 Amended and Restated Employee Stock Purchase Plan (1)
10.3 Amended and Restated Non-U.S. Employee Stock Purchase Plan (1)
27. Financial Data Schedule
(b) Reports on Form 8-K.
Not applicable.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on July 31, 2000.
13
<PAGE>
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: August 10, 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
14
<PAGE>
EMBREX, INC.
File No. 000-19495
Form 10-Q
For the Quarterly Period
Ended June 30, 2000
EXHIBIT INDEX
Exhibits
--------
10.1 Amended and Restated Incentive Stock Option and Nonstatutory Stock
Option Plan (1)
10.2 Amended and Restated Employee Stock Purchase Plan (1)
10.3 Amended and Restated Non-U.S. Employee Stock Purchase Plan (1)
27. Financial Data Schedule
(1) Incorporated by reference from the Company's Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on July 31, 2000.
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