|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
|_| TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d)
OF SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ______to_________
Commission File Number 333-13287
EARTHSHELL CORPORATION
(Exact name of registrant as specified in its charter)
| Deleware | 77-0322379 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
800
Miramonte Drive, Santa Barbara, California 93109
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (805) 897-2248
| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 outstanding of the registrant's common stock as of August 14, 2001 is 114,169,194.
Part I. Financial Information
Item 1. Financial Statements Page
a) Balance Sheets
as of June 30, 2001 (unaudited) and December 31, 2000 ...................... 1
b) Statements of Operations
for the three and six months ended June 30, 2001 and June 30, 2000 (unaudited)
and for the period from November 1, 1992 (inception) through June 30, 2001
(unaudited)................................................................. 2
c) Statements of Stockholders' Equity (Deficit)
for the period from November 1, 1992 (inception) to June 30, 2001 (unaudited)
3
d) Statements of Cash Flows
for the six months ended June 30, 2001 and June 30, 2000 (unaudited) and for
the period from November 1, 1992 (inception) through June 30, 2001 (unaudited)
4
e) Notes to Financial Statements
(unaudited)............................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................... 9
Part II. Other Information
Item 1. Legal Proceedings................................................................ 9
Item 2. Changes in Securities............................................................ 9
Item 3. Defaults Upon Senior Securities.................................................. 9
Item 4. Submission of Matters to a Vote for Security Holders............................. 9
Item 5. Other Information................................................................ 9
Item 6 Exhibits and Reports on Form 8-K................................................. 9
Signature..................................................................................... 10
June 30 December 31,
2001 2000
(unaudited)
------------------- --------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $4,783,828 $7,791,654
Prepaid expenses and other current assets...................... 514,637 492,889
------------------- --------------------
Total current assets...................................... 5,298,465 8,284,543
RESTRICTED CASH...................................................... 3,500,000 3,500,000
PROPERTY AND EQUIPMENT, NET.......................................... 35,399,813 36,265,647
INVESTMENT IN JOINT VENTURE.......................................... 378,428 423,428
------------------- --------------------
TOTAL................................................................ $44,576,706 $48,473,618
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses........................... $4,086,453 $5,910,897
Trade payable to majority stockholder........................... - 266,312
------------------- --------------------
Total current liabilities................................... 4,086,453 6,177,209
------------------- --------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 10,000,000 shares authorized;
9,170,000 Series A shares designated; no shares issued and
outstanding as of June 30, 2001 and December 31, 2000......
- -
Common stock, $.01 par value, 200,000,000 shares authorized;
111,919,194 and 104,502,335 shares issued and outstanding as
of June 30, 2001 and December 31, 2000.....................
1,119,192 1,045,023
Additional paid-in common capital.............................. 250,817,966 235,192,471
Deficit accumulated during the development stage............... (211,446,905) (193,941,085)
------------------- --------------------
Total stockholders' equity........................................... 40,490,253 42,296,409
------------------- --------------------
TOTAL................................................................ $44,576,706 $48,473,618
=================== ====================
See notes to financial statements.
For the For the November 1,
Three Months Six Months 1992
Ended June 30, Ended June 30, (inception)
through June 30,
------------------------------ ------------------------------ -----------------
2001 2000 2001 2000 2001
-------------- -------------- -------------- -------------- -----------------
Expenses:
Related party research and development...... $367,694 $2,486,429 $691,142 $4,470,852 $67,619,589
Other research and development.............. 4,007,152 4,908,675 8,430,443 8,978,396 71,620,204
Related party general and administrative
...expenses................................. - 36,134 - 80,435 2,240,502
Other general and administrative expenses... 3,893,262 2,238,128 6,078,168 4,226,038 49,228,701
Depreciation and amortization............... 1,225,267 1,427,842 2,510,449 2,850,096 15,998,368
Related party patent expenses............... - 126,383 - 269,773 8,693,105
-------------- -------------- -------------- -------------- -----------------
Total expenses.............................. 9,493,375 11,223,591 17,710,202 20,875,590 215,400,469
Interest income............................. (85,071) (333,228) (204,382) (819,659) (10,524,105)
Related party interest expense.............. - - - - 4,770,731
Other interest expense...................... - - - - 1,788,738
-------------- -------------- -------------- -------------- -----------------
Loss Before Income Taxes.................... 9,408,304 10,890,363 17,505,820 20,055,931 211,435,833
Income Taxes................................ - - - - 11,071
------------- -------------- -------------- -------------- -----------------
Net Loss.................................... 9,408,304 10,890,363 17,505,820 20,055,931 211,446,904
Preferred Dividends ........................ - - - - 9,926,703
------------ -------------- -------------- -------------- -----------------
Net Loss Available To Common
Stockholders............................. $9,408,304 $10,890,363 $17,505,820 $20,055,931 $221,373,607
=============== ============== ============== ============== =================
Basic And Diluted Loss Per Common
Share.................................... $0.08 $0.11 $0.16 $0.20 $2.47
Weighted Average Number Of Common
Shares.................................. 111,009,853 100,381,321 109,007,431 100,213,243 89,770,765
See notes to financial statements.
Cumulative Convertible Additional Additional Deficit
Preferred Stock Paid-In Paid-In Accumulated
Series A Preferred Common Stock Common during
---------------------- ------------------------- Development
Shares Amount Capital Shares Amount Capital Stage Total
------------ -------- ------------- ----------- ------------ ---------- -------------- ----------
ISSUANCE OF COMMON STOCK AT
INCEPTION................ - - - 82,530,000 $3,150 $6,850 - $10,000
Sale of preferred stock, net 6,988,850 $267 $24,472,734 - - - - 24,473,001
Net loss.................... - - - - - - $(7,782,551) (7,782,551)
------------ -------- ------------- ----------- --------- ------------ -------------- -----------
BALANCE, DECEMBER 31, 1993 6,988,850 267 24,472,734 82,530,000 3,150 6,850 (7,782,551) 16,700,450
Net loss.................... - - - - - - (16,582,080) (16,582,080)
------------ -------- ------------- ----------- --------- ------------ -------------- ------------
BALANCE, DECEMBER 31, 1994 6,988,850 267 24,472,734 82,530,000 3,150 6,850 (24,364,631) 118,370
Contribution to equity...... - - - - - 1,117,723 - 1,117,723
Net loss.................... - - - - - - (13,914,194) (13,914,194)
------------ -------- ------------ ------------ --------- ------------ -------------- ------------
BALANCE, DECEMBER 31, 1995 6,988,850 267 24,472,734 82,530,000 3,150 1,124,573 (38,278,825) (12,678,101)
Contribution to equity...... - - - - - 650,000 - 650,000
Issuance of stock warrants.. - - - - - 246,270 - 246,270
Net loss.................... - - - - - - (16,950,137) (16,950,137)
------------ -------- ------------ ------------ --------- ----------- -------------- -----------
BALANCE, DECEMBER 31, 1996 6,988,850 267 24,472,734 82,530,000 3,150 2,020,843 (55,228,962) (28,731,968)
Compensation related to
stock options and warrant - - - - - 3,156,659 - 3,156,659
Net loss.................... - - - - - - (18,992,023) (18,992,023)
------------ -------- ------------ ------------ -------- ------------ -------------- -----------
BALANCE, DECEMBER 31, 1997 6,988,850 267 24,472,734 82,530,000 3,150 5,177,502 (74,220,985) (44,567,332)
262 to 1 stock split........ - 69,621 (69,621) - 822,150 (822,150) - -
Conversion of preferred
stock to common stock.... (6,988,850) (69,888) (24,403,113) 6,988,850 69,888 24,403,113 - -
Issuance of common stock.... - - - 10,526,316 105,263 205,883,493 - 205,988,756
Preferred stock dividends... - - - - - (9,926,703) - (9,926,703)
Net loss.................... - - - - - - (26,620,052) (26,620,052)
------------ -------- ------------ ----------- -------- ------------- --------------- ------------
BALANCE, DECEMBER 31, 1998 - - - 100,045,166 1,000,451 224,715,255 (100,841,037) 124,874,669
Net loss.................... - - - - - - (44,188,443) (44,188,443)
------------ -------- ------------ ------------ --------- ------------ -------------- -----------
BALANCE, DECEMBER 31, 1999 - - - 100,045,166 1,000,451 224,715,255 (145,029,480) 80,686,226
Net Loss.................... - - - - - - (48,911,605) (48,911,605)
Issuance of common stock.... - - - 4,457,169 44,572 10,477,216 10,521,788
------------ -------- ------------ ----------- ---------- ------------- -------------- ------------
BALANCE, DECEMBER 31, 2000 - - - 104,502,335 1,045,023 235,192,471 (193,941,085) 42,296,409
Net Loss.................... - - - - - - (17,505,820) (17,505,820)
Issuance of common stock.... - - - 7,416,859 74,169 15,625,495 - 15,699,664
------------ -------- ------------ ----------- ---------- ------------- -------------- ------------
BALANCE, JUNE 30, 2001 - - - 111,919,194 $1,119,192 $250,817,966 $(211,446,905) $40,490,253
============ ======== =========== ============ ========== ============= ============== ============
See notes to financial statements.
November 1,
For the 1992
Six Months Ended (inception)
June 30, through
June 30,
------------------------------ ----------------
2001 2000 2001
------------- -------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(17,505,820) $(20,055,931) $(211,446,905)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization............................ 2,510,449 2,850,096 15,998,368
Issuance of stock options to director, consultant and officer - - 3,861,522
Issuance of stock grants to director, consultant and officer 515,398 - 751,724
Amortization of debt issue costs......................... - - 271,277
Loss on sale or disposal of property and equipment....... - 194,937 18,486,753
Loss from investment in joint venture.................... 45,000 103,598 137,010
Net Loss on Sale of Investments.......................... - - 32,496
Accretion of Discounts on Investments.................... - - (410,084)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets................ (21,748) (158,588) (514,637)
Accounts payable and accrued expenses.................... (1,588,118) (978,015) 4,086,453
Trade payable to majority stockholder.................... (266,312) (875,882) -
------------- -------------- ----------------
Net cash used in operating activities................... (16,311,151) (18,919,785) (168,746,023)
------------- -------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of short-term investments................... - 8,970,638 (52,419,820)
Purchase of restricted time deposit......................... - - (3,500,000)
Proceeds from sales and redemptions of investments.......... - - 52,797,408
Proceeds from sale of property and equipment................ - - 297,670
Investment in joint venture................................. - (515,438)
Purchase of property and equipment.......................... (1,644,615) (3,764,414) (71,054,339)
------------- -------------- ----------------
Net (cash used) provided by investing activities........ (1,644,615) 5,224,224 (74,394,519)
------------- -------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholders..... - - 14,270,000
Proceeds from drawings on line of credit with bank.......... - - 14,000,000
Proceeds from issuance of common stock...................... 14,947,940 3,615,929 246,532,364
Common stock issuance costs................................. - - (15,178,641)
Preferred dividends paid.................................... - - (9,926,703)
Proceeds from issuance of preferred stock................... - - 25,675,000
Preferred stock issuance costs.............................. - - (1,201,999)
Repayment of line of credit with bank....................... - - (14,000,000)
Repayment of note payable................................... - - (12,245,651)
------------- -------------- ----------------
Net cash provided by financing activities............... 14,947,940 3,615,929 247,924,370
------------- -------------- ----------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............ (3,007,826) (10,079,633) 4,783,828
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 7,791,654 26,412,553 -
------------- -------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $4,783,828 $16,332,920 4,783,828
============= ============== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Income taxes........................................... - 800 $11,071
Interest............................................... - - $3,028,240
Warrants issued with debt................................... - - $306,168
Transfer of property from EKI............................... - - $28,745
Conversion of preferred stock to common stock............... - - $69,888
Tax Liability related to stock grants....................... $236,326 - -
See notes to financial statements.
EARTHSHELL CORPORATION
NOTES TO FINANCIAL STATEMENTS (Unaudited)
JUNE 30, 2001
The foregoing interim financial information is unaudited and has been prepared from the books and records of EarthShell Corporation (the “Company”). In the opinion of management, the financial information reflects all adjustments necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company in conformity with generally accepted accounting principles. All such adjustments were of a normal recurring nature for interim financial reporting.
The accompanying unaudited financial statements and these notes do not include certain information and footnote disclosures required by generally accepted accounting principles which were included in the Company’s financial statements for the year ended December 31, 2000. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto for the year ended December 31, 2000 included in the Company’s Annual Report on Form 10-K.
Basic and diluted loss per common share is calculated based on the weighted average shares outstanding of 111,009,853 and 109,007,431 for the three and six months ended June 30, 2001, respectively and 100,381,321 and 100,213,243 for the three and six months ended June 30, 2000. Basic and diluted per share calculation is the same because common stock equivalents are anti-dilutive. Incremental dilutive shares which would be issuable using the treasury stock method would be 382,237 and 43,761 at June 30, 2001 and 2000, respectively.
For the three months ended June 30, 2001 and 2000, the Company paid or accrued $367,694 and $2,486,429 respectively, and $691,142 and $4,470,852 for the six months ended June 30, 2001 and 2000, respectively for services performed by EKI under the Amended and Restated Technical Services Agreement as amended October 1, 1997, between the Company and EKI. On January 1, 2001 the Company directly hired the EKI personnel critical to the Company’s future development programs and since that time has significantly reduced the use of EKI technical services and related expenses. The related party expenses for 2001 are attributable to research and development related to sandwich wraps and films being performed for the Company by an affiliate of EKI.
Effective January 1, 2001 the Company assumed direct responsibility for managing the patent portfolio underlying its license from EKI and pays such patent expenses directly. For the three and six months ended June 30, 2000, the Company paid or accrued $126,383 and $269,773 respectively to EKI for patent costs under the Amended and Restated Agreement for Allocation of Patent Costs effective October 1, 1997.
EARTHSHELL CORPORATION
NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
JUNE 30, 2001
Property and Equipment
At June 30, 2001, property and equipment consisted of the following:
Commercial Manufacturing Equipment: Construction in progress, at the Owings Mills
Maryland plant of Sweetheart Company............................................... $35,494,703
Product Development Center:
Equipment..................................................................... 3,793,737
Construction in progress...................................................... 8,971,871
Leasehold improvements........................................................ 571,361
----------------
13,336,969
Office equipment and furniture..................................................... 774,146
Less: accumulated depreciation and amortization.................................... (14,206,005)
----------------
Property and equipment - net....................................................... $35,399,813
================
On August 2, 1999, Novamont S.p.A., an Italian company specializing in the manufacture of a biodegradable plastic resin and products, filed a complaint in the United States District Court for the Northern District of Illinois alleging four counts of infringement of three patents. On August 3, 2001 the Company entered into a Settlement Agreement with Novamont wherein the lawsuit by Novamont was dismissed with no material adverse financial effect on the Company, and the Company's rights to manufacture and distribute the foodservice disposable through its operating partners are fully protected and expanded to include the application of Novamont technology.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsInformation contained in this Quarterly Report on Form 10-Q including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” or “continue,” or the negative thereof or other comparable terminology. Any one factor or combination of factors could cause the Company’s actual operating performance or financial results to differ substantially from those anticipated by management that are described herein. Factors influencing the Company’s operating performance and financial results include, but are not limited to, changes in the general economy, the availability of financing, governmental regulations concerning, but not limited to, environmental issues, and other risks and unforeseen circumstances affecting the Company’s business and should be read in conjunction with other risk factors discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
The Company was organized in November 1992 as a Delaware corporation and is a development stage company engaged in the commercialization of a proprietary composite material, designed with the environment in mind, for the manufacture of disposable packaging for the foodservice industry, such as hinged-lid containers, plates, bowls, sandwich wraps, and cups. The Company has an exclusive, worldwide, royalty-free license from EKI to use and license the EKI technology to manufacture and sell disposable, single-use containers for packaging or serving food or beverages intended for consumption within a short period of time (“EARTHSHELL Products”). The Company does not have the right to use the EKI technology for other purposes. The Company licenses or joint ventures with existing manufacturers of foodservice disposables to manufacture and distribute EARTHSHELL Products. The Company expects to derive revenues primarily from license royalties and profit distributions from joint ventures that are licensed to manufacture EARTHSHELL Products.
The Company has experienced aggregate net losses of approximately $211 million from its inception through June 30, 2001 and expects to continue to incur operating losses until its products are more broadly used and have achieved greater market acceptance and market penetration. EARTHSHELL Products are being sold through or in cooperation with its operating partners and these sales are being booked according to the terms of the respective operating agreement. For example, under the terms of its agreement with Sweetheart Cup Company, sales of the Company's clamshells for the Big Macâ sandwich are recorded on Sweetheart's books as revenue, and are credited to the Company as an offset to the cost of start-up manufacturing operations. Successful future operations will depend upon the ability of the Company, its licensees and joint venture partners to commercialize multiple EARTHSHELL Products.
Comparison of the Three and Six Months Ended June 30, 2001, to the Three and Six Months June 30, 2000.
Total Research and Development Expenses Total research and development expenditures for the development of EarthShell Products decreased $4.3 million to $9.1 million from $13.4 million for the six months ended June 30, 2001 compared to the six months ended June 30, 2000, and decreased $3.0 million to $4.4 million from $7.4 million for the three months ended June 30, 2001 compared to the three months ended June 30, 2000. Approximately $2.5 million of the cost reduction is directly related to reducing the operating costs of the Owings Mills facility related to the continued development and production of the EarthShell Big Mac® sandwich container, and approximately $0.8 million from a reduction in other research and development efforts, and approximately $1.0 million of the decrease results from a non-recuring abandonment charge taken during the six months ended June 30, 2000.
Total General and Administrative Expenses Total general and administrative expenses increased $1.8 million to $6.1 million from $4.3 million for the six months ended June 30, 2001 compared to the six months ended June 30, 2000, respectively, and increased $1.6 million to $3.9 million from $2.3 million for the three months ended June 30, 2001 compared to June 30, 2000, respectively. Approximately $0.7 million of the increase is a non cash charge relating to various issuance of stock grants during the quarter ended June 30, 2001. Approximately $0.3 million of the increase results from re-classification to general and administrative expense of certain personnel changes related to technical personnel, and $0.6 million of the increase from legal expense related to the settlement of the lawsuit with Novamont, and the direct management of the patent portfolio effective January 1, 2001.
Depreciation and Amortization Expense Depreciation and amortization expense decreased $0.4 million to $2.5 million from $2.9 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000.
Related Party Patent Expenses Legal fees reimbursed to EKI under the Amended and Restated Agreement for Allocation of Patent Costs with EKI decreased $0.3 million to $0 million from $0.3 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000. Beginning January 1, 2001 the Company assumed direct responsibility for managing and paying for the maintenance of the patent portfolio underlying the license with EKI, and accordingly these costs are now being recorded within general and administrative expense for the Company. Legal fees for patent expense are no longer reimbursed to EKI as they were in fiscal periods prior to 2001.
Interest Income Interest Income decreased $0.6 million to $0.2 million from $0.8 million for the six months ended June 30, 2001 compared to the six months ended June 30, 2000 due to reduced cash balances on hand.
Net Loss The Company’s net loss decreased $2.5 million to $17.5 million from $20.0 million for the six months ended June 30, 2001 compared to the six months ended June 30, 2000, and decreased $1.5 million to $9.4 million from $10.9 million for the three months ended June 30, 2001 compared to the three months ended June 30, 2000 as a result of the foregoing factors.
Cash Flow The Company’s principal use of cash for the six months ended June 30, 2001 was to fund operations, including the continued development and purchase of equipment to facilitate the development of manufacturing capacity for EARTHSHELL Products. Net cash used in operations was $16.3 million for the six months ended June 30, 2001 down from $18.9 million for the six months ended June 30, 2000. Net cash (used in) and provided by investing activities was ($1.6) million and $5.2 million for the six months ended June 30, 2001 and 2000, respectively. Net cash provided by financing activities was $14.9 million and $3.6 million for the six months ended June 30, 2001 and 2000, respectively. As of June 30, 2001 the Company had cash totaling $4.8 million.
Capital Requirements The Company expects to spend approximately $10.0 million in capital expenditures in the year 2001 related to developing the manufacturing facilities and prototypes for the line of EarthShell Products. The Company paid or accrued approximately $1.6 million in capital expenditures for the first six months ended June 30, 2001. The Company spent approximately $6.6 million in capital expenditures for the year ended December 31, 2000.
Sources of Capital As part of the Company’s initial public offering on March 27, 1998, the Company issued 10,526,316 shares of common stock, for which it received net proceeds of $206 million. The Company has signed an agreement with Acqua Wellington North American Equities Fund, LTD (“Acqua Wellington”), pursuant to which the Company may, from time to time and in its sole discretion present Acqua Wellington with draw-down notices requiring Acqua Wellington to purchase up to $2,500,000 of the Company’s common stock in respect of each draw-down notice. The Company issues and sells the shares to Acqua Wellington at a per share price equal to the average price of the Company’s common stock over a period of time after the draw-down notice less a discount of 5%. In addition, the agreement gives Acqua Wellington the option to purchase an additional $2.5 million of the Company’s common stock per month, subject to certain conditions.
The common stock purchase agreement with Acqua Wellington provides that the Company generally may not request draw-downs unless the Company’s common stock is trading at $3.00 per share or more. As an alternative, Acqua Wellington has purchased and continues to purchase shares from the Company from time-to-time at negotiated prices.
During the six months ended June 30, 2001 the Company issued approximately 7.1 million shares of common stock to Acqua Wellington and received net proceeds from such issuance of approximately $14.9 million. As of June 30, 2001 up to $35.0 million remains available to the Company under the equity drawn-down facility with Acqua Wellington, with $17.5 million available at the Company's request, and $17.5 million at Acqua Wellington's option.
As the Company accomplishes its core goals, it continues discussions with certain financing institutions to secure additional sources of long term funding. The Company believes that its existing cash, the financing provided through the Acqua Wellington equity draw-down facility, as well as new sources, will enable it to continue funding its operations, including the Owings Mills facility, as well as continue with its next generation development of EarthShell Products over the remainder of the fiscal year. The Company cannot assure, however, that commitments can be obtained on favorable terms, if at all.
Not applicable
Part II. Other Information
On August 2, 1999, Novamont S.p.A., an Italian company specializing in the manufacture of a biodegradable plastic resin and products, filed a complaint in the United States District Court for the Northern District of Illinois alleging four counts of infringement of three patents. On August 3, 2001 the Company entered into a Settlement Agreement with Novamont wherein the lawsuit by Novamont was dismissed with no material adverse financial effect on the Company, and the Company's rights to manufacture and distribute the foodservice disposable through its operating partners are fully protected and expanded to include the application of Novamont technology.
Not Applicable
Not applicable
The Annual Meeting of Stockholders of the Company was held on May 8th, 2001, at which time Essam Khashoggi, Simon K. Hodson, John Daoud, Layla Khashoggi, Howard J. Marsh, Lynn Scarlett, Michael S. Noling were elected as the Board of Directors.
Not applicable
10.48
Settlement Agreement with Novamont dated August 3, 2001
10.49
Amendment to Common Stock Purchase Agreement dated March 28, 2001
The Company filed no reports on Form 8-K during the quarter ended June 30, 2001.
Signature
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.
EarthShell Corporation
Date: August 14, 2001 By: /s/ D. SCOTT HOUSTON
--------------------------------------
D. Scott Houston
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Officer)