U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended August 31, 1998
or
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ to ________.
Commission File No. 0-21354
ENDOGEN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2789249
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30 Commerce Way
Woburn, Massachusetts 01801-1059
(Address of Principal Executive Offices)
(781) 937-0890
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title Shares Outstanding as of October 7, 1998
----- ----------------------------------------
Common Stock, $0.01 par value 3,454,502
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
Exhibit index located on page 15
Page 1 of 15
<PAGE>
ENDOGEN, INC.
FORM 10-QSB
QUARTER ENDED AUGUST 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
<S> <C>
Item 1 - Financial Statements (Unaudited)
Balance Sheet
August 31, 1998 and May 31, 1998.................................... 3
Statement of Income
for the three months ended August 31, 1998 and August 31, 1997...... 4
Statement of Cash Flows
for the three months ended August 31, 1998 and August 31, 1997...... 5
Notes to Unaudited Financial Statements............................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K................................. 13
Signatures................................................................ 14
Index To Exhibits......................................................... 15
</TABLE>
Page 2 of 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENDOGEN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
August 31, May 31,
1998 1998
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,177,754 $ 1,175,490
Accounts receivable, net of allowance for
doubtful accounts and returns of $50,000 at
August 31, 1998 and May 31, 1998 1,359,770 1,374,431
Inventories 2,003,069 1,841,135
Prepaid expenses and other current assets 435,735 449,633
Deferred income taxes 151,000 151,000
------------- -------------
Total current assets 5,127,328 4,991,689
Fixed assets, net 1,889,186 2,020,063
Intangible assets, net 269,815 299,907
Deferred income taxes 445,000 445,000
Other assets 155,343 163,662
------------- -------------
$ 7,886,672 $ 7,920,321
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of term notes payable - bank $ 200,322 $ 200,322
Current portion of capital lease obligations 7,316 6,917
Accounts payable and accrued expenses 1,052,444 1,088,840
------------- -------------
Total current liabilities 1,260,082 1,296,079
------------- -------------
Term notes payable - bank 144,981 195,061
Capital lease obligations 5,873 7,858
------------- -------------
150,854 202,919
------------- -------------
Stockholders' equity:
Common stock, $.01 par value; 10,000,000
shares authorized; 3,448,802 and 3,442,802
shares issued and outstanding at August 31,
1998 and May 31, 1998, respectively 34,488 34,428
Additional paid-in capital 6,354,342 6,342,402
Deferred compensation (89,668) (100,876)
Retained earnings 176,574 145,369
------------- -------------
Total stockholders' equity 6,475,736 6,421,323
------------- -------------
$ 7,886,672 $ 7,920,321
============= =============
</TABLE>
See notes to unaudited financial statements
Page 3 of 15
<PAGE>
ENDOGEN, INC.
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
1998 1997
---------- ----------
<S> <C> <C>
REVENUES: $2,516,580 $2,324,013
---------- ----------
COSTS AND EXPENSES:
Cost of revenues 985,324 893,064
Selling, general and administrative 1,000,917 959,211
Research and development 479,441 333,338
---------- ----------
2,465,682 2,185,613
---------- ----------
Income from operations 50,898 138,400
Interest expense, net 1,693 3,219
---------- ----------
Income before income taxes 49,205 135,181
Income tax provision 18,000 41,000
---------- ----------
Net income $ 31,205 $ 94,181
========== ==========
Basic earnings per share $ 0.01 $ 0.03
========== ==========
Diluted earnings per share $ 0.01 $ 0.03
========== ==========
Shares used in computing:
Basic earnings per share 3,445,085 3,420,036
========== ==========
Diluted earnings per share 3,578,400 3,584,625
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 4 of 15
<PAGE>
ENDOGEN, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
1998 1997
---------- ----------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,205 $ 94,181
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 240,202 200,394
Decrease in accounts receivable 14,661 169,087
Increase in inventories (161,934) (113,170)
Decrease (increase) in prepaid expenses and
other assets 13,898 (17,322)
Decrease in accounts payable and accrued
expenses (36,396) (123,143)
----------- ----------
Net cash provided by operating activities 101,636 210,027
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (59,706) (98,876)
----------- ----------
Net cash used for investing activities (59,706) (98,876)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations and term
notes payable - bank (51,666) (37,872)
Proceeds from issuance of common stock 12,000 12,761
----------- ----------
Net cash used for financing activities (39,666) (25,111)
----------- ----------
Net increase in cash and cash equivalents 2,264 86,040
Cash and cash equivalents, beginning of period 1,175,490 334,050
----------- ----------
Cash and cash equivalents, end of period $1,177,754 $ 420,090
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 10,328 $ 8,799
=========== ==========
Cash paid for income taxes $ 162,956 $ 25,465
=========== ==========
</TABLE>
See notes to unaudited financial statements
Page 5 of 15
<PAGE>
ENDOGEN, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements of Endogen, Inc. (the "Company" or
"Endogen") include, in the opinion of management, all adjustments
(consisting of normal and recurring adjustments) necessary for a fair
presentation of the Company's financial position as of August 31, 1998 and
the results of operations for the three month periods ended August 31, 1998
and August 31, 1997. The results of operations are not necessarily
indicative of results for a full year.
These financial statements should be read in conjunction with the
financial statements contained in the Company's Form 10-KSB filed with the
Securities and Exchange Commission (the "SEC") on August 28, 1998 pursuant
to the Securities Exchange Act of 1934, as amended. Certain information and
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC rules and regulations.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
--------------- ------------
<S> <C> <C>
Raw materials and supplies $ 815,860 $ 793,872
Work-in-process 206,492 165,771
Finished goods 980,717 881,492
----------- -----------
$ 2,003,069 $ 1,841,135
=========== ===========
</TABLE>
3. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
--------------- ------------
<S> <C> <C>
Laboratory equipment $ 1,161,117 $ 1,142,160
Computer and office equipment 1,015,782 975,033
Leasehold improvements 1,715,745 1,715,745
----------- -----------
3,892,644 3,832,938
Accumulated depreciation and
amortization (2,003,458) (1,812,875)
----------- -----------
$ 1,889,186 $ 2,020,063
=========== ===========
</TABLE>
Page 6 of 15
<PAGE>
ENDOGEN, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
4. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
--------------- ------------
<S> <C> <C>
Acquired technology $ 305,290 $ 305,290
Patent costs 68,240 68,240
License costs 421,778 421,778
----------- -----------
795,308 795,308
Accumulated amortization (525,493) (495,401)
----------- -----------
$ 269,815 $ 299,907
=========== ===========
</TABLE>
5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
--------------- ------------
<S> <C> <C>
Accounts payable $ 433,717 $ 439,215
Accrued wages 264,065 219,026
Accrued royalties 84,340 123,287
Accrued professional fees 266,462 175,620
Accrued income taxes 3,860 131,692
----------- -----------
$ 1,052,444 $ 1,088,840
=========== ===========
</TABLE>
6. Borrowings
In August 1998, the Company's existing $850,000 revolving line of
credit agreement with a bank was amended to extend the maturity date to
August 1999 and to reduce the interest rate to the prime rate plus 0.5%. At
August 31, 1998, the Company had $850,000 available under this revolving
line of credit.
Page 7 of 15
<PAGE>
ENDOGEN, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion includes forward-looking statements, including, but
not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives. Actual results may differ
materially from those currently anticipated depending upon a variety of factors.
Endogen is principally engaged in the development, manufacture and sale of
specialty reagents, immuno-assay test kits and molecular research products for
pharmaceutical, biotechnology and biomedical research. Endogen's major product
lines include over 360 specialty reagents and 66 immuno-assay test kits that
measure immune system function in human, mouse, rat, or porcine samples. In
August 1998, the Company began to ship Xplore(TM) messenger RNA ("mRNA")
quantification assay kits to life science customers, the first mRNA assay kits
to provide rapid, sensitive and accurate measurement of gene expression.
Products marketed under Endogen's name are sold directly in the United States
and through distributors in over 40 foreign countries. The Company also sells
products on a private label basis to customers who market these products under
their own brand names.
Results of Operations
As an aid to understanding Endogen's operating results, the following table
shows each item from the statement of income expressed as a percentage of
revenues.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES Three months ended August 31,
1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Revenues.................................. 100.0% 100.0%
Costs and expenses:
Cost of revenues......................... 39.1% 38.4%
Selling, general and administrative...... 39.8% 41.3%
Research and development................. 19.1% 14.3%
Income from operations.................... 2.0% 6.0%
Interest expense, net.................... 0.1% 0.2%
Net income before income taxes............ 1.9% 5.8%
Provision for income taxes............... 0.7% 1.7%
Net income................................ 1.2% 4.1%
</TABLE>
Three Month Period Ended August 31, 1998 As Compared
with the Three Month Period Ended August 31, 1997
-------------------------------------------------
Revenues
For the three months ended August 31, 1998, total revenues increased to
$2,516,580 from $2,324,013 during the same period last year, an increase of
$192,567, or 8.3%. Domestic and international sales of Endogen branded products
increased 5.5% during the first quarter of fiscal 1999 compared to the first
quarter of fiscal 1998. This growth was due primarily to increased sales volume
from existing Endogen product lines and new product introductions. Private label
sales increased 15.3% in the first quarter of fiscal 1999 compared with the
first quarter of fiscal 1998 due primarily to an increase in sales to one major
private label customer. In August 1998, the Company launched an entirely new
line of products, the Xplore mRNA quantification assay kits, which
quantitatively measure levels of mRNA.
Page 8 of 15
<PAGE>
ENDOGEN, INC.
Cost of Revenues
Cost of revenues was $985,324 for the three months ended August 31, 1998
compared with $893,064 for the same period last year, an increase of $92,260, or
10%. As a percentage of revenues, cost of revenues was 39% and 38% during the
three month periods ended August 31, 1998 and 1997, respectively. This increase
in cost of revenues as a percentage of revenues was due in part to additional
expenses associated with product launch activities related to the Xplore mRNA
kits, changes in the mix of products sold and higher fixed overhead costs.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $1,000,917 for the three
months ended August 31, 1998 compared with $959,211 for the same period last
year, an increase of $41,706, or 4%. This increase was due primarily to
increases in expenditures for marketing activities associated with the launch of
the Xplore mRNA product line and increases in professional fees and consulting
expenses. As a percentage of revenues, selling, general and administrative
expense decreased to 40% of revenues for the three months ended August 31, 1998
compared with 41% for the same period last year.
Research and Development Expenses
Research and development expense was $479,441 for the three months ended
August 31, 1998 compared with $333,338 for the same period last year, an
increase of $146,103, or 44%. A significant portion of the increase in research
and development expenditures relates to investment in the mRNA program. Research
and development expense increased as a percentage of revenues to 19% for the
three months ended August 31, 1998 from 14% for the same period last year.
Endogen plans to continue to spend heavily on product development for new
products and to upgrade existing products.
Interest Expense
Net interest expense was $1,693 for the three months ended August 31, 1998
compared with net interest expense of $3,219 for the same period last year. This
decrease was the result of the reduction in the average outstanding borrowings
under term notes payable and capital lease obligations.
Income Taxes
For the three months ended August 31, 1998 and 1997, the Company recorded
provisions for income taxes of $18,000 and $41,000, respectively, based on
estimated effective tax rates at August 31, 1998 and 1997, respectively.
Liquidity and Capital Resources
The growth of Endogen's business has led to increased liquidity
requirements to fund working capital needs and capital expenditures. This
includes financing inventories and accounts receivable to support the Company's
growing operations, as well as purchases of new laboratory equipment and
leasehold improvements to support new product development. In addition, in
connection with its Product Development and Marketing Agreement with Third Wave
Technologies, Inc. ("Third Wave"), the Company is obligated to make funding
payments not to exceed $1,050,000 in total, to Third Wave in quarterly
installments over a three year period beginning December 1, 1997.
At August 31, 1998, Endogen's cash and cash equivalent position was
$1,177,754, an increase of $2,264 from May 31, 1998. Endogen has financed its
liquidity needs primarily through cash from operations, a working capital line
of credit with a bank and term notes payable with a bank. At August 31, 1998,
the Company had $850,000 available under a working capital line of credit with a
bank. The interest rate on the line of credit is 0.5% above the bank's prime
rate.
Cash Flows from Operating Activities
Net cash provided by operating activities during the three month period
ended August 31, 1998 was $101,636 as compared to $210,027 during the same
period last year. For the first quarter of fiscal 1999, net cash provided by
operating activities consisted primarily of a decrease in accounts receivable of
$14,661, a decrease in prepaid expenses and other assets of $13,898,
depreciation and amortization of $240,202 and net income of $31,205. This was
offset in part by an increase in inventories of $161,934 and a decrease in
accounts payable and accrued expenses of
Page 9 of 15
<PAGE>
ENDOGEN, INC.
$36,396. For the first quarter of fiscal 1998, net cash provided by operating
activities consisted primarily of net income of $94,181, depreciation and
amortization of $200,394 and a decrease in accounts receivable of $169,087. This
was partially offset by an increase in inventories of $113,170, an increase in
prepaid expenses and other assets of $17,322 and a decrease in accounts payable
and accrued expenses of $123,143.
Cash Flows from Investing Activities
Net cash used for investing activities during the three month periods ended
August 31, 1998 and 1997 was $59,706 and $98,876, respectively, and consisted of
investments in capital equipment.
Cash Flows from Financing Activities
During the three month period ended August 31, 1998, net cash used for
financing activities was $39,666 and consisted of repayments of capital lease
obligations and term notes payable of $51,666, offset in part by proceeds from
the issuance of common stock of $12,000. In the first quarter of fiscal 1998,
net cash used for financing activities was $25,111 and consisted of repayments
of capital lease obligations and term notes payable of $37,872, offset in part
by proceeds from the issuance of common stock of $12,761.
The Company expects to continue expanding operations through internal
growth and strategic acquisitions which offer products similar or complementary
to those offered by the Company. Although the Company has no material current
acquisition agreements or arrangements, there may be opportunities which require
additional external financing, and the Company may from time to time seek to
obtain additional funds from public or private issuance of equity or debt
securities. There can be no assurance that such financing will be available at
all or on terms acceptable to the Company.
Based on management's current projections, Endogen believes that its
financial resources and cash flows from operations, together with the revolving
line of credit currently available, will be sufficient to finance its current
and planned operations for at least the next twelve months. There can be no
assurance, however, that the Company will not require additional working capital
and, if it does require such capital, that such capital will be available to the
Company on acceptable terms, if at all.
The foregoing statements contain forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above.
Year 2000 Compliance
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four digits to define the applicable year. The
Company's computer equipment and software and devices with embedded technology
that are time sensitive may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or otherwise engage in normal
business activities. The Company is at risk for both its own Year 2000 Issues
and for the Year 2000 Issues of those with whom it does business, particularly
suppliers of materials and services as well as customers placing orders and
making payments on invoices.
The Company has established a team to study and address its Year 2000
Issues. This team, lead by the Company's Controller, consists of members of each
department within the Company and reports to the Company's Vice President,
Operations and Finance. The following is a summary of the Company's Year 2000
state of readiness as set forth by category.
o Information Technology Systems
- Accounting / Business System. The Company has upgraded the system
software to a version which is Year 2000 compliant, but testing has
not yet been performed. The Company anticipates completing this
testing by June 1999.
- Production System. The Company has upgraded the system software to a
version which is Year 2000 compliant, but testing has not yet been
performed. The Company anticipates completing this testing by June
1999.
Page 10 of 15
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ENDOGEN, INC.
- Sales Reporting System. The Company has upgraded the system software
to a version which is Year 2000 compliant, but testing has not yet
been performed. The Company anticipates completing this testing by
June 1999.
- Contact Management System. The system is currently being assessed for
Year 2000 compliance. The Company anticipates completing this
assessment by December 1998.
o Non-Information Technology System
The Company has not yet made a review of the Year 2000 compliance of its
non-information technology systems (i.e., embedded technology such as
micro-controllers and processors). These systems include manufacturing, research
and development, telecommunications and office equipment which may contain
embedded technology. The Company intends to initiate such a review beginning in
December 1998 and anticipates completing this review no later than June 1999.
o Third Party Compliance
Management believes that the most significant risk to the Company of Year
2000 Issues is the effect such issues may have on its suppliers and customers.
In addition, news reports have indicated that various agencies within the
federal, state and local governments may have difficulty becoming Year 2000
compliant before the year 2000. The Company has not yet undertaken an assessment
of such third party compliance or undertaken to quantify the effect of such
non-compliance or to determine whether such quantification is even possible. The
Company intends to initiate an assessment of the Year 2000 compliance of the
various third parties with which it maintains a material business relationship.
The Company intends to begin such an assessment in December 1998 and anticipates
completing this review no later than June 1999.
The Company is in the process of quantifying the historical costs incurred
and creating an estimate of future costs associated with becoming Year 2000
compliant. The Company plans to have an initial estimate of costs completed by
June 1999.
The Company has not yet begun a comprehensive analysis of the operational
problems and costs (including loss of revenues) that would be reasonably likely
to result from the failure of the Company and certain third parties to complete
efforts necessary to achieve Year 2000 compliance on a timely basis. A
contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario and such scenario has not yet been clearly
identified. The Company intends to begin such an analysis in December 1998 and
anticipates completing this analysis no later than June 1999.
The Company presently believes that the Year 2000 Issue will not pose
significant operational problems for the Company. However, if all Year 2000
Issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 Issue will not materially adversely
impact the Company's results of operations or materially adversely affect the
Company's relationships with customers, suppliers or others.
Additionally, there can be no assurance that the Year 2000 Issues of other
entities will not have a material adverse impact on the Company's systems or
results of operations.
The costs of the Company's Year 2000 identification, assessment,
remediation and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events and actual
results could differ materially from those currently anticipated. Specific
factors that could cause such material differences include, but are not limited
to, the availability and cost of personnel trained in Year 2000 Issues, the
ability to identify, assess, remediate and test all relevant computer codes and
embedded technology, and similar uncertainties.
Certain Factors That May Affect Future Results
The Company does not provide forecasts of the future financial performance
of the Company. However, from time to time, information provided by the Company
or statements made by its employees may contain "forward-looking" information
that involve risks and uncertainties. In particular, statements contained in
this Form 10-QSB that are not historical facts constitute forward-looking
statements and are made under the safe harbor provisions of
Page 11 of 15
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ENDOGEN, INC.
the Private Securities Litigation Reform Act of 1995. The Company's actual
results of operations and financial condition have varied and may in the future
vary significantly from those stated in any forward-looking statements. The
Company's future operating results are subject to risks and uncertainties and
are dependent upon many factors, including, without limitation, the Company's
ability to (i) meet its working capital and future liquidity needs, (ii)
successfully implement its strategic growth strategies, (iii) understand,
anticipate and respond to rapidly changing technologies, market trends and
customer needs, (iv) develop, manufacture and deliver high quality,
technologically advanced products on a timely basis to withstand competition
from competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary for the Company's technology and product
development and on terms favorable to the Company, (vi) recruit and retain
highly talented professionals in a competitive job market, and (vii)
successfully address its Year 2000 Issues as more fully described above. The
Company's ability to market and sell its products could also be adversely
affected by the emergence of new competitors in the market place and by changes
resulting in increased government regulation of the manufacture and sale of its
products. In addition, a significant portion of the Company's revenues are
attributable to international customers, which may be adversely affected by
factors including fluctuations in exchange rates, adverse political and economic
conditions, tariff regulation, and difficulties in obtaining export licenses.
Each of these factors, and others, are discussed from time to time in the
filings made by the Company with the Securities and Exchange Commission,
including, but not limited to, the Company's Annual Report on Form 10-KSB filed
on August 28, 1998.
Page 12 of 15
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ENDOGEN, INC.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) - EXHIBITS
3.1 By-laws, as amended on July 30, 1998
10.1 Third Loan Modification Agreement dated as of August 27, 1998 between
Endogen, Inc. and Silicon Valley Bank.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for the three months ending August
31, 1997
27.3 Restated Financial Data Schedule for the six months ending November
30, 1997
(b) - REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
Page 13 of 15
<PAGE>
ENDOGEN, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENDOGEN, INC.
BY:
Date: October 2, 1998 /s/ Owen A. Dempsey
---------------------------------------
Owen A. Dempsey
Director, President and
Chief Executive Officer
(Principal Executive Officer)
Date: October 2, 1998 /s/ Avery W. Catlin
---------------------------------------
Avery W. Catlin
Vice President, Operations and Finance,
Treasurer and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 14 of 15
<PAGE>
ENDOGEN, INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
3.1 By-laws, as amended on July 30, 1998.
10.1 Third Loan Modification Agreement dated as of August 27, 1998
between Endogen, Inc. and Silicon Valley Bank.
11.1 Statement Re: Computation of Earnings per Share.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule for the three months ending
August 31, 1997.
27.3 Restated Financial Data Schedule for the six months ending
November 30, 1997.
Page 15 of 15
ENDOGEN, INC.
****************
BY-LAWS
****************
ARTICLE I
Stockholders
1. Annual Meeting. The annual meeting of stockholders shall be held on the
first Thursday of November in each year (or if that be a legal holiday in the
place where the meeting is to be held, on the next succeeding full business day)
at 10:00 A.M., or at such other date and time as shall be designated from time
to time by the Board of Directors or President. The purposes for which the
annual meeting is to be held, in addition to those prescribed by law, by the
Articles of Organization or by these By-laws, may be specified by the Directors
or the President. In the event an annual meeting has not been held on the date
fixed in these By-laws, a special meeting in lieu of the annual meeting may be
held with all the force and effect of an annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by the
President or by the Directors. Upon written application of one or more
stockholders who hold at least 10% of the capital stock entitled to vote at a
meeting, a special meeting shall be called by the Clerk, or in case of the
death, absence, incapacity or refusal of the Clerk, by any other officer.
3. Place of Meetings. All meetings of stockholders shall be held at the
principal office of the corporation unless a different place (within or without
Massachusetts, but within the United States) is fixed by the Directors or the
President and stated in the notice of the meeting.
<PAGE>
-2-
4. Notice of Meetings. A written notice of the place, date and hour of all
meetings of stockholders stating the purpose of the meeting shall be given by
the Clerk or an Assistant Clerk or by the person calling the meeting at least
seven days before the meeting or such longer period as is required by law to
each stockholder entitled to vote thereat and to each stockholder who under the
law, under the Articles of Organization or under these By-laws, is entitled to
such notice, by leaving such notice with him or at his residence or usual place
of business, or by mailing it, postage prepaid, and addressed to such
stockholder at his address as it appears in the records of the corporation.
Whenever notice of a meeting is required to be given a stockholder under any
provision of the Massachusetts Business Corporation Law or of the Articles of
Organization or these By-laws, a written waiver thereof, executed before or
after the meeting by such stockholder or his attorney thereunto authorized and
filed with the records of the meeting, shall be deemed equivalent to such
notice.
5. Quorum. The holders of a majority in interest of all stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum, but a
lesser number may adjourn any meeting from time to time without further notice;
except that, if two or more classes of stock are outstanding and entitled to
vote as separate classes, then in the case of each such class, a quorum shall
consist of the holders of a majority in interest of the stock of that class
issued, outstanding and entitled to vote.
6. Voting and Proxies. Each stockholder shall have one vote for each share
of stock entitled to vote owned by him and a proportionate vote for a fractional
share, unless otherwise provided by the Articles of Organization in the case
that the corporation has two or more classes or series of stock. Capital stock
shall not be voted if any installment of the subscription therefor has been duly
demanded in accordance with the law of the Commonwealth of Massachusetts and is
overdue and unpaid. Stockholders may vote either in person or by written proxy.
Proxies shall be filed with the clerk of the meeting, or of any adjournment
thereof, before being voted. No proxy dated more than six months before the date
named therein shall be valid and no proxy shall be valid after the final
adjournment of such meeting. Notwithstanding the provisions of the
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preceding sentence, a proxy coupled with an interest sufficient in law to
support an irrevocable power, including, without limitation, an interest in
shares or in the corporation generally, may be made irrevocable if it so
provides, need not specify the meeting to which it relates, and shall be valid
and enforceable until the interest terminates, or for such shorter period as may
be specified in the proxy. Except as otherwise limited therein, proxies shall
entitle the persons named therein to vote at any adjournment of such meeting but
shall not be valid after final adjournment of such meeting. A proxy with respect
to stock held in the name of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy the corporation
receives a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed valid
unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.
7. Action at Meeting. When a quorum is present, the holders of a majority
of the stock present or represented and voting on a matter (or if there are two
or more classes of stock entitled to vote as separate classes, then in the case
of each such class, the holders of a majority of the stock of that class present
or represented and voting on a matter), except where a larger vote is required
by law, the Articles of Organization or these By-laws, shall decide any matter
to be voted on by the stockholders. Any election of directors or officers by the
stockholders shall be determined by a plurality of the votes cast by
stockholders entitled to vote at the election. Any such elections shall be by
ballot if so requested by any stockholder entitled to vote thereon. The
corporation shall not directly or indirectly vote any share of its own stock.
8. Action without Meeting. Any action required or permitted to be taken at
any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consent shall be treated for all purposes as a vote at a meeting.
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ARTICLE II
Directors
1. Powers. The business of the corporation shall be managed by a Board of
Directors who may exercise all the powers of the corporation except as otherwise
provided by law, by the Articles of Organization or by these By-laws. In the
event of vacancy in the Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the full Board until the
vacancy is filled.
2. Election. A Board of Directors shall be elected by the stockholders at
the annual meeting. The number of directors shall be fixed by the stockholders
(except as that number may be enlarged by the Board of Directors acting pursuant
to Section 4 of this Article), but shall be not less than three, except that
whenever there shall be only two stockholders the number of directors shall be
not less than two and whenever there shall be only one stockholder or prior to
the issuance of any stock, there shall be at least one director, and shall be
not more than nine. Unless changed by the stockholders or directors in
accordance with this Article, the number of directors that constitutes the
entire Board of Directors shall be seven.
3. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from the enlargement of the Board, may be filled
by the stockholders or, in the absence of stockholder action, by the Directors.
4. Enlargement of the Board. The Board of Directors may be enlarged by the
stockholders at any meeting or by vote of a majority of the Directors then in
office.
5. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-laws, Directors shall hold office until the next
annual meeting of stockholders and until their successors are chosen and
qualified. Any Director may resign by delivering his written resignation to the
corporation at its principal office or to the President, Clerk or Secretary.
Such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
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6. Removal. A Director may be removed from office (a) with or without
cause by the vote of the holders of a majority of the shares entitled to vote in
the election of Directors, provided that the Directors of a class elected by a
particular class of stockholders may be removed only by the vote of the holders
of a majority of the shares of the particular class of stockholders entitled to
vote for the election of such Directors; or (b) for cause by vote of a majority
of the Directors then in office. A Director may be removed for cause only after
a reasonable notice and opportunity to be heard before the body proposing to
remove him.
7. Meetings. The directors shall meet at least once during each fiscal
quarter of the corporation. Regular meetings of the Directors may be held
without call or notice at such places and at such times as the Directors may
from time to time determine, provided that any Director who is absent when such
determination is made shall be given notice of the determination. A regular
meeting of the Directors may be held without a call or notice at the same place
as the annual meeting of stockholders.
Special meetings of the Directors may be held at any time and place
designated in a call by the President, by two or more Directors, or by the
holder or holders of at least 25% of the outstanding shares of Series A
Convertible Preferred Stock.
8. Telephone Conference Meetings. Members of the Board of Directors may
participate in a meeting of the board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
9. Notice of Meetings. Notice of all special meetings of the Directors
shall be given to each Director by the Secretary, or Assistant Secretary, or if
there be no Secretary or Assistant Secretary, by the Clerk, or Assistant Clerk,
or in case of the death, absence, incapacity or refusal of such persons, by the
officer or one of the Directors calling the meeting. Notice shall be given to
each Director in person or by telephone, by facsimile transmission or by
telegram sent to his business or home address at least twenty-four hours in
advance of the meeting, or (with respect
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to Directors whose principal residence is within the continental United States
only) by written notice mailed to his business or home address at least
forty-eight hours in advance of the meeting. Notice of a meeting need not be
given to any Director if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice of a Directors' meeting
need not specify the purposes of the meeting.
10. Quorum. At any meeting of the Directors, a majority of the Directors
then in office shall constitute a quorum. Less than a quorum may adjourn any
meeting from time to time without further notice.
11. Action at Meeting. At any meeting of the Directors at which a quorum
is present, a majority of the Directors present may take any action on behalf of
the Board except to the extent that a larger number is required by law or the
Articles of Organization or these By-laws.
12. Action by Consent. Any action required or permitted to be taken at any
meeting of the Directors may be taken without a meeting, if all the Directors
consent to the action in writing and the written consents are filed with the
records of the meetings of Directors. Such consents shall be treated for all
purposes as a vote at a meeting.
13. Committees. The Directors may, by vote of a majority of the Directors
then in office, elect from their number an executive or other committees and may
by like vote delegate thereto some or all of their powers except those which by
law, the Articles of Organization or these By-laws they are prohibited from
delegating to such committee. Except as the Directors may otherwise determine,
any such committee may make rules for the conduct of its business, but unless
otherwise provided by the Directors or in such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these By-laws
for the Directors.
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ARTICLE III
Officers
1. Enumeration. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers, including a Chairman
of the Board of Directors, one or more Vice-Presidents, Assistant Treasurers,
Assistant Clerks, Secretary and Assistant Secretaries as the Directors may
determine.
2. Election. The President, Treasurer and Clerk shall be elected annually
by the Directors at their first meeting following the annual meeting of
stockholders. Other officers may be chosen by the Directors at such meeting or
at any other meeting.
3. Qualification. The President may, but need not be, a Director. No
officer need be a stockholder. Any two or more offices may be held by the same
person, provided that the President and Clerk shall not be the same person. The
Clerk shall be a resident of Massachusetts unless the corporation has a resident
agent appointed for the purpose of service of process. Any officer may be
required by the Directors to give bond for the faithful performance of his
duties to the corporation in such amount and with such sureties as the Directors
may determine.
4. Tenure. Except as otherwise provided by law, by the Articles of
Organization or by these By-laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their successors are chosen and qualified; and
all other officers shall hold office until the first meeting of the Directors
following the next annual meeting of stockholders and until their successors are
chosen and qualified, unless a shorter term is specified in the vote choosing or
appointing them. Any officer may resign by delivering his written resignation to
the corporation at its principal office or to the President, Clerk or Secretary,
and such resignation shall be effective upon receipt unless it is specified to
be effective at some other time or upon the happening of some other event.
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5. Removal. The Directors may remove any officer with or without cause by
vote of a majority of the Directors then in office; provided, that an officer
may be removed for cause only after a reasonable notice and opportunity to be
heard before the Board of Directors.
6. President, Chairman of the Board, and Vice-President. The President
shall, unless otherwise provided by the Directors, be the chief executive
officer of the corporation and shall, subject to the direction of the Directors,
have general supervision and control of its business. Unless otherwise provided
by the Directors he shall preside, when present, at all meetings of stockholders
and, unless a Chairman of the Board has been elected and is present, of the
Directors.
If a Chairman of the Board of Directors is elected he shall preside at all
meetings of the Board of Directors at which he is present. The Chairman shall
have such other powers as the Directors may from time to time designate.
Any Vice-President shall have such powers as the Directors may from time
to time designate.
7. Treasurer and Assistant Treasurer. The Treasurer shall, subject to the
direction of the Directors, have general charge of the financial affairs of the
corporation and shall cause accurate books of account to be kept. He shall have
custody of all funds, securities, and valuable documents of the corporation,
except as the Directors may otherwise provide.
Any Assistant Treasurer shall have such powers as the Directors may from
time to time designate.
8. Clerk and Assistant Clerks. The Clerk shall record all proceedings of
the stockholders in a book to be kept therefor. Unless a transfer agent is
appointed, the Clerk shall keep or cause to be kept in Massachusetts, at the
principal office of the corporation or at his office, the stock and transfer
records of the corporation, in which are contained the names of all stockholders
and the record address and the amount of stock held by each.
In case a Secretary is not elected, the Clerk shall record all proceedings
of the Directors in a book to be kept therefor.
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In the absence of the Clerk from any meeting of the stockholders, an
Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the duties of the Clerk. Any
Assistant Clerk shall have such additional powers as the Directors may from time
to time designate.
9. Secretary and Assistant Secretaries. If a Secretary is elected, he
shall keep a record of the meetings of the Directors and in his absence, an
Assistant Secretary, if one be elected, otherwise a Temporary Secretary
designated by the person presiding at the meeting, shall keep a record of the
meetings of the Directors.
Any Assistant Secretary shall have such additional powers as the Directors
may from time to time designate.
10. Other Powers and Duties. Each officer shall, subject to these By-laws,
have in addition to the duties and powers specifically set forth in these
By-laws, such duties and powers as are customarily incident to his office, and
such duties and powers as the Directors may from time to time designate.
ARTICLE IV
Capital Stock
1. Certificates of Stock. Subject to the provisions of Section 2 below,
each stockholder shall be entitled to a certificate of the capital stock of the
corporation in such form as may be prescribed from time to time by the
Directors. The certificate shall be signed by the President or a Vice-President,
and by the Treasurer or an Assistant Treasurer; provided, however, such
signatures may be facsimiles if the certificate is signed by a transfer agent,
or by a registrar, other than a Director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer at the time of its issue.
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Every certificate issued for shares of stock at a time when such shares
are subject to any restriction on transfer pursuant to the Articles of
Organization, these By-laws or any agreement to which the corporation is a party
shall have the restriction noted conspicuously on the certificate and shall also
set forth on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction and a statement
that the corporation will furnish a copy thereof to the holder of such
certificate upon written request and without charge. Every stock certificate
issued by the corporation at a time when it is authorized to issue more than one
class or series of stock shall set forth upon the face or back of the
certificate either the full text of the preferences, voting powers,
qualifications and special and relative rights of the shares of each class and
series, if any, authorized to be issued, as set forth in the Articles of
Organization, or a statement of the existence of such preferences, powers,
qualifications, and rights, and a statement that the corporation will furnish a
copy thereof to the holder of such certificate upon written request and without
charge.
2. Stockholder Open Accounts. The corporation may maintain or caused to be
maintained stockholder open accounts in which may be recorded all stockholders'
ownership of stock and all changes therein. Certificates need not be issued for
shares so recorded in a stockholder open account unless requested by the
stockholder.
3. Transfers. Subject to the restrictions, if any, stated or noted on the
stock certificates, shares of stock may be transferred in the records of the
corporation by the surrender to the corporation or its transfer agent of the
certificate therefor, properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the corporation or its
transfer agent may reasonably require. When such stock certificates are thus
properly surrendered to the corporation or its transfer agent, the corporation
or transfer agent shall cause the records of the corporation to reflect the
transfer of the shares of stock. Except as may be otherwise required by law, by
the Articles of Organization or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown in its records as the
owner of such
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stock for all purposes, including the payment of dividends and the right to vote
with respect thereof, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
4. Record Date. The Directors may fix in advance a time which shall be not
more than sixty (60) days before the date of any meeting of stockholders or the
date for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or distribution or the
right to give such consent or dissent. In such case only stockholders of record
on such record date shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. Without fixing such
record date the Directors may for any of such purposes close the transfer books
for all or any part of such period.
If no record date is fixed and the transfer books are not closed, the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors acts with respect thereto.
5. Replacement of Certificates. In case of the alleged loss, mutilation or
destruction of a certificate of stock, a duplicate certificate may be issued in
place thereof, upon such terms and conditions as the Directors may prescribe.
6. Issue of Capital Stock. The whole or any part of the then authorized
but unissued shares of each class of stock may be issued at any time or from
time to time by the Board of Directors without action by the stockholders.
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7. Reacquisition of Stock. Shares of stock previously issued which have
been reacquired by the corporation, may be restored to the status of authorized
but unissued shares by vote of the Board of Directors, without amendment of the
Articles of Organization.
ARTICLE V
Provisions Relative to Directors,
Officers, Stockholders and Employees
1. Certain Contracts and Transactions. In the absence of fraud or bad
faith, no contract or transaction by this corporation shall be void, voidable or
in any way affected by reason of the fact that the contract or transaction is
(a) with one or more of its officers, Directors, stockholders or employees, (b)
with a person who is in any way interested in this corporation or (c) with a
corporation, organization or other concern in which an officer, Director,
stockholder or employee of this corporation is an officer, director,
stockholder, employee or in any way interested. The provisions of this section
shall apply notwithstanding the fact that the presence of a Director or
stockholder, with whom a contract or transaction is made or entered into or who
is an officer, director, stockholder or employee of a corporation, organization
or other concern with which a contract or transaction is made or entered into or
who is in any way interested in such contract or transaction, was necessary to
constitute a quorum at the meeting of the Directors (or any authorized committee
thereof) or stockholders at which such contract or transaction was authorized
and/or that the vote of such Director or stockholder was necessary for the
adoption of such contract or transaction, provided that if said interest was
material, it shall have been known or disclosed to the Directors or stockholders
voting at said meeting on said contract or transaction. A general notice to any
person voting on said contract or transaction that an officer, Director,
stockholder or employee has a material interest in any corporation, organization
or other concern shall be sufficient disclosure as to such officer, Director,
stockholder or employee
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with respect to all contracts and transactions with such corporation,
organization or other concern. This section shall be subject to amendment or
repeal only by action of the stockholders.
2. Indemnification. Each Director and officer of the corporation, and any
person who, at the request of the corporation, serves as a director or officer
of another organization shall be indemnified by the corporation against any
cost, expense (including attorneys' fees), judgment, liability and/or amount
paid in settlement reasonably incurred by or imposed upon him in connection with
any action, suit or proceeding (including any proceeding before any
administrative or legislative body or agency), to which he may be made a party
or otherwise involved or with which he shall be threatened, by reason of his
being, or related to his status as, a Director or officer of the corporation or
of any other organization, which other organization he serves or has served as
director or officer at the request of the corporation (whether or not he
continues to be an officer or Director of the corporation or such other
organization at the time such action, suit or proceeding is brought or
threatened), unless such indemnification is prohibited by the Business
Corporation Law of the Commonwealth of Massachusetts. The foregoing right of
indemnification shall be in addition to any rights to which any such person may
otherwise be entitled and shall inure to the benefit of the executors or
administrators of each such person. The corporation may pay the expenses
incurred by any such person in defending a civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit, or
proceeding, upon receipt of an undertaking by such person to repay such payment
if it is determined that such person is not entitled to indemnification
hereunder. This section shall not affect any rights to indemnification to which
corporate personnel other than Directors and officers may be entitled by
contract or otherwise under law. This section shall be subject to amendment or
repeal only by action of the stockholders.
<PAGE>
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ARTICLE VI
Miscellaneous Provisions
1. Fiscal Year. Except as from time to time otherwise determined by the
Directors, the fiscal year of the corporation shall be the twelve (12) months
ending the last day of May. Following any change in the fiscal year previously
adopted, a certificate of such change, signed under the penalties of perjury by
the Clerk or an Assistant Clerk, shall be filed forthwith with the state
secretary.
2. Seal. The seal of this corporation shall, subject to alteration by the
Directors, bear its name, the word "Massachusetts", and the year of its
incorporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the President or the Treasurer
except as the Directors may generally or in particular cases otherwise
determine.
4. Voting of Securities. Except as the Directors may otherwise designate,
the President or Treasurer may waive notice of, and appoint any person or
persons to act as proxy or attorney in fact for this corporation (with or
without power of substitution) at any meeting of stockholders or shareholders of
any other corporation or organization, the securities of which may be held by
the corporation.
5. Corporate Records. The original, or attested copies, of the Articles of
Organization, By-laws and records of all meetings of incorporators and
stockholders, and the stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in Massachusetts at the principal office of the corporation or at
an office of its transfer agent or of the Clerk or of its resident agent. Said
copies and records need not all be kept in the same office. They shall be
available at all reasonable times to the inspection of any stockholder for any
proper purpose but not to secure a list of stockholders or other information for
the purpose of selling said list or information or
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copies thereof or of using the same for a purpose other than in the interest of
the applicant, as a stockholder, relative to the affairs of the corporation.
6. Articles of Organization. All references in these By-laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
7. Amendments. These By-laws, to the extent provided in these By-laws, may
be amended or repealed, in whole or in part, and new By-laws adopted either (a)
by the stockholders at any meeting of the stockholders by the affirmative vote
of the holders of at least a majority in interest of the capital stock present
and entitled to vote, provided that notice of the proposed amendment or repeal
or of the proposed making of new By-laws shall have been given in the notice of
such meeting, or (b) if so authorized by the Articles of Organization, by the
Board of Directors at any meeting of the Board by the affirmative vote of a
majority of the Directors then in office, but no amendment or repeal of a By-law
shall be voted by the Board of Directors and no new By-law shall be made by the
Board of Directors which alters the provisions of these By-laws with respect to
removal of Directors, or the election of committees by Directors and the
delegation of powers thereto, nor shall the Board of Directors make, amend or
repeal any provision of the By-laws which by law, the Articles of Organization
or the By-laws requires action by the stockholders. Not later than the time of
giving notice of the meeting of stockholders next following the making,
amending, or repealing by the Directors of any By-law, notice thereof stating
the substance of such change shall be given to all stockholders entitled to vote
on amending the By-laws. Any By-law or amendment of a By-law made the Board of
Directors may be amended or repealed by the stockholders by affirmative vote as
above provided in this Section 7.
8. 1987 Massachusetts Control Share Acquisition Act. The 1987
Massachusetts Control Share Acquisition Act, Chapter 110D of the Massachusetts
General Laws, as it may be amended from time to time, shall not
apply to the corporation.
Exhibit 10.1
THIRD LOAN MODIFICATION AGREEMENT
This THIRD LOAN MODIFICATION AGREEMENT is entered into as of August 27,
1998, by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02181, doing business under the name "Silicon Valley
East ("Bank"), and ENDOGEN, INC., a MASSACHUSETTS corporation with its principal
place of business at 30 COMMERCE WAY, WOBURN, MASSACHUSETTS 01801 ("Borrower").
RECITALS
Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows:
AGREEMENT
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a
Revolving Promissory Note dated August 28, 1996 in the maximum principal amount
of $850,000 (the "Revolving Note") a Term Promissory Note dated August 28, 1996
in the maximum principal amount of $400,000 (the "Term Note") and an Equipment
Line Promissory Note dated October 8, 1997 in the maximum principal amount of
$250,000 (the "Equipment Note"). The Revolving Note, the Term Note and the
Equipment Note are governed by the terms of a Loan and Security Agreement dated
August 28, 1996 between Borrower and Bank, as amended by Loan Modification
Agreements dated as of May 7, 1997 and August 27, 1997 between Borrower and
Bank, and as such Loan and Security Agreement may be further amended from time
to time (the "Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Bank under the
Revolving Note, the Term Note and the Loan Agreement shall be referred to as the
"Indebtedness."
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, the Revolving
Note, the Term Note and the Equipment Note, together with all other documents
securing payment of the Indebtedness, shall be referred to as the "Existing Loan
Documents."
3. DESCRIPTION OF CHANGES IN TERMS.
3.1 Modifications to Revolving Note. The Revolving Note is hereby
amended as follows:
The entire principal amount and all accrued interest shall be due
and payable on AUGUST 26, 1999.
3.2 Modifications to Definitions. Section 1.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms, and in the case of new definitions, by adding those
new definitions to that Section 1.1:
"Revolving Maturity Date" means August 26, 1999.
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form
and amount, and by an insurer satisfactory to Bank less the amount of
any deductible(s) which may be or become owing thereon; or (2)
supported by one or more letters of credit in favor of Bank as
beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank; or (3) derived from sales of products
or services to Nycomed Amhersham International plc or to
<PAGE>
Yamanouchi Pharmaceutical Co., Ltd., or (4) that Bank approves on a
case-by-case basis.
3.3 Modifications to Interest Rate Provisions. Section 2.4(a) of the Loan
Agreement is hereby replaced in its entirety with the following:
(a) Interest Rate. Except as set forth in Section 2.4(b), all Advances
shall bear interest on the average Daily Balance at a rate equal to
ONE HALF (0.5) percentage point above the Prime Rate; and the Term
Loan shall bear interest on the average Daily Balance at a rate equal
to ONE AND ONE-QUARTER (1.25) percentage points above the Prime Rate.
3.4 Deletion of Tangible Net Worth Covenant. Section 6.10 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.10 Tangible Net Worth. INTENTIONALLY OMITTED
3.5 Modifications to Exhibits. Exhibit D of the Loan Agreement is hereby
replaced in its entirety with Exhibit D to this Agreement.
4. FACILITY FEE. Borrower shall pay to Bank a Facility Fee equal to FOUR
THOUSAND TWO HUNDRED FIFTY AND NO/100THS Dollars ($4,250), which fee shall be
due upon delivery of this Third Loan Modification Agreement to Bank and shall be
fully earned and non-refundable. as well as any out-of-pocket expenses incurred
by the Bank through the date hereof, including reasonable attorneys' fees and
expenses, and after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
5. CONDITIONS PRECEDENT TO FURTHER ADVANCES. The obligation of Bank to
make further advances to Borrower under this line is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Third Loan Modification Agreement duly executed by Borrower;
(b) a Certificate of Clerk of Borrower with respect to charter
amendments, incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Third Loan
Modification Agreement.
7. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has
no defenses against any of the obligations to pay any amounts under the
Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Third Loan
Modification Agreement (including the effects of Section 6 hereof), the Existing
Loan Documents remain unchanged and in full force and effect, (iii) Bank's
agreement to modify the Existing Loan Documents pursuant to this Third Loan
Modification Agreement shall in no way obligate Bank to make any future
modifications to the Existing Loan Documents, (iv) it is the intention of Bank
and Borrower to retain as liable parties all makers and endorsers of the
Existing Loan Documents, unless a party is expressly released by Bank in
writing, (v) no maker, endorser or guarantor will be released by virtue of this
Third Loan Modification Agreement, and (vi) the terms of this Section 8 apply
not only to this Third Loan Modification Agreement but also to all subsequent
loan modification agreements, if any.
2
<PAGE>
9. EFFECTIVENESS. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower": ENDOGEN, INC. "Bank": SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Owen A. Dempsey By: /s/ Phillip S. Ernst
------------------------------ ---------------------------
Owen A. Dempsey, President Phillip S. Ernst, VP
SILICON VALLEY BANK
By: /s/ Dawn Young
--------------------------------------
Title: Vice President
-----------------------------------
(Signed in Santa Clara County, California)
EXHIBIT D FOLLOWS
3
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
Borrower: Endogen, Inc. Lender: Silicon Valley Bank
30 Commerce Way 3003 Tasman Drive
Woburn, MA 01801 Santa Clara, CA 95054
The undersigned authorized officer of ENDOGEN, INC. hereby certifies that
in accordance with the terms and conditions of the Loan and Security Agreement
dated AUGUST 28, 1996 between Borrower and Bank, as amended (the "Loan
Agreement"), (i) Borrower is in complete compliance for the period ending
___________ of all required conditions and terms except as noted below and (ii)
all representations and warranties of Borrower stated in the Agreement are true,
accurate and complete in all material respects as of the date hereof. Attached
herewith are the required documents supporting the above certification. The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principals (GAAP) and are consistent from one period to the
next except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column
Reporting Covenant Required Complies
- ------------------ -------- --------
SEC Form 10Q Within 5 days of SEC filing Yes No
SEC Form 10K Within 5 days of SEC filing Yes No
A/R & A/P Agings Monthly within 25 days Yes No
A/R Audit Annual Yes No
Financial Covenants Required Actual Complies
- ------------------- -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio commencing 1.10:1.0 __________:1.0 Yes No
8/31/97
Maximum Debt/TNW 0.75:1.0 __________:1.0 Yes No
Minimum Profitability* $1 $____________ Yes No
Minimum Debt Service 1.5:1.0 __________:1.0 Yes No
* Maximum loss of $75,000 allowed in any one quarter during the fiscal year
commencing 6/1/98.
Comments Regarding Exceptions:
On behalf of Borrower, the Officer further acknowledges that at any such time as
Borrower is out of compliance with any of the terms set forth in the Agreement,
including, without limitation, any of the financial covenants, Borrower cannot
receive any advances.
Sincerely,
4
<PAGE>
- ---------------------------------- -------------------------------------
Signature BANK USE ONLY
- ---------------------------------- Received by:
TITLE
-------------------------------------
- ---------------------------------- Date:
DATE
-------------------------------------
Verified:
-------------------------------------
Date:
-------------------------------------
Compliance Status: Yes No
-------------------------------------
5
EXHIBIT 11.1
Computation of Earnings Per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, 1998 August 31, 1997
--------------- ---------------
<S> <C> <C>
BASIC
- -----
Weighted average number of common
shares outstanding 3,445,085 3,420,036
---------- ----------
Net income applicable to common shares $ 31,205 $ 94,181
========== ==========
Basic earnings per share $ 0.01 $ 0.03
========== ==========
DILUTED
- -------
Weighted average number of common
shares outstanding 3,445,085 3,420,036
Weighted average incremental
shares from the assumed exercise
of stock options and warrants 133,315 164,589
---------- ----------
3,578,400 3,584,625
========== ==========
Net income applicable to common shares
and common equivalent shares $ 31,205 $ 94,181
========== ==========
Diluted earnings per share $ 0.01 $ 0.03
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB for the quarter ended August
31, 1998, of Endogen, Inc. to which this exhibit is a part and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,178
<SECURITIES> 0
<RECEIVABLES> 1,410
<ALLOWANCES> 50
<INVENTORY> 2,003
<CURRENT-ASSETS> 5,127
<PP&E> 3,893
<DEPRECIATION> 2,003
<TOTAL-ASSETS> 7,887
<CURRENT-LIABILITIES> 1,260
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 6,442
<TOTAL-LIABILITY-AND-EQUITY> 7,887
<SALES> 2,492
<TOTAL-REVENUES> 2,517
<CGS> 985
<TOTAL-COSTS> 2,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 49
<INCOME-TAX> 18
<INCOME-CONTINUING> 31
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB for the quarter ended August
31, 1997, of Endogen, Inc. to which this exhibit is a part and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 420
<SECURITIES> 0
<RECEIVABLES> 1,494
<ALLOWANCES> 50
<INVENTORY> 1,931
<CURRENT-ASSETS> 4,252
<PP&E> 3,546
<DEPRECIATION> 1,283
<TOTAL-ASSETS> 7,424
<CURRENT-LIABILITIES> 1,313
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 5,896
<TOTAL-LIABILITY-AND-EQUITY> 7,424
<SALES> 2,324
<TOTAL-REVENUES> 2,324
<CGS> 893
<TOTAL-COSTS> 2,186
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 135
<INCOME-TAX> 41
<INCOME-CONTINUING> 94
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB for the quarter ended November
30, 1997, of Endogen, Inc. to which this exhibit is a part and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 741
<SECURITIES> 0
<RECEIVABLES> 1,470
<ALLOWANCES> 50
<INVENTORY> 2,002
<CURRENT-ASSETS> 4,644
<PP&E> 3,747
<DEPRECIATION> 1,454
<TOTAL-ASSETS> 7,778
<CURRENT-LIABILITIES> 1,489
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 6,110
<TOTAL-LIABILITY-AND-EQUITY> 7,778
<SALES> 4,914
<TOTAL-REVENUES> 4,914
<CGS> 1,779
<TOTAL-COSTS> 4,510
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 398
<INCOME-TAX> 132
<INCOME-CONTINUING> 266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 266
<EPS-PRIMARY> .08
<EPS-DILUTED> .07
</TABLE>
