Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
Commission File No. 000-19495
Embrex, Inc.
(Exact name of issuer as specified in its charter)
North Carolina 56-1469825
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1035 Swabia Court, Durham, NC 27703
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (919) 941-5185
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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
The number of shares of Common Stock, no par value, outstanding as of July 31,
1996, was 7,197,456.
<PAGE>
EMBREX, INC.
INDEX
<TABLE>
<CAPTION>
Part I Page
Financial Information:
Item 1:
<S> <C>
Balance Sheets.....................................................................3 of 16
Statements of Operations...........................................................4 of 16
Statements of Cash Flows...........................................................5 of 16
Notes to Consolidated Financial Statements.........................................6 of 16
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations......................................7 of 16
Part II
Other Information.........................................................................10 of 16
Signatures................................................................................11 of 16
Exhibit Index ............................................................................13 of 16
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
EMBREX, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
June 30 December 31
1996 1995
--------------- ----------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .............................................. $ 5,837 $ 5,354
Short-term investments.................................................. 1,508 1,972
Inventories:
Materials and supplies.............................................. 1,307 1,027
Product ............................................................ 578 600
Accounts receivable - trade............................................. 2,054 1,787
Other current assets.................................................... 387 108
------------ --------------
TOTAL CURRENT ASSETS................................................ 11,671 10,848
INOVOJECT(Register mark) SYSTEMS UNDER CONSTRUCTION......................... 240 801
INOVOJECT(Register mark) SYSTEMS ........................................... 16,482 13,846
Less accumulated depreciation........................................... ( 6,903) (5,271)
------------ ------------
9,579 8,575
EQUIPMENT, FURNITURE AND FIXTURES......................................... 2,456 2,274
Less accumulated depreciation .......................................... (1,526) (1,441)
----------- -------------
930 833
OTHER ASSETS:
Patents and exclusive licenses of patentable technology
(net of accumulated amortization of $53 in 1996 and $48 in 1995) 126 131
Debt issuance costs (net of accumulated amortization of $185 in
1996 and $125 in 1995)............................................ 69 201
Other non-current assets................................................ 303 400
------------ ------------
TOTAL ASSETS.................................................................. $ 22,918 $ 21,789
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses................................... $ 2,147 $ 2,581
Current portion of capital lease obligations............................ 2,753 2,333
Current portion of long-term debt...................................... 1,775 0
-------- ---------
TOTAL CURRENT LIABILITIES....................................... 6,675 4,914
CAPITAL LEASE OBLIGATIONS, less current portion............................. 7,292 7,172
LONG-TERM DEBT, less current portion........................................ 476 3,225
SHAREHOLDERS' EQUITY
Common Stock, no par value:
Authorized - 30,000,000 shares
Issued and outstanding - 7,050,040 and 6,714,724 shares at
June 30, 1996 and December 31, 1995, respectively............... 47,868 46,122
Additional paid-in capital............................................. 371 371
Accumulated deficit..................................................... (39,764) (40,015)
-------- ----------
TOTAL SHAREHOLDERS' EQUITY........................................... 8,475 6,478
-------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................... $ 22,918 $ 21,789
========= ========
</TABLE>
3
<PAGE>
STATEMENTS OF OPERATIONS
EMBREX, INC.
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
--------------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
INOVOJECT(Register mark) revenue...................... $ 4,621 $2,748 $8,941 $5,303
Product revenues...................................... 413 394 635 786
Other revenue........................................ 34 14 87 34
----------- ----------- --------- --------
TOTAL REVENUES................................. 5,068 3,156 9,663 6,123
COST OF PRODUCT AND INOVOJECT(Register mark) REVENUES...... 2,237 1,605 4,236 3,143
--------- ----------- ------- -------
2,831 1,551 5,427 2,980
OPERATING EXPENSES
General and administrative............................ 1,014 989 1,875 1,831
Sales and marketing.................................. 344 486 748 956
Research and development............................. 938 822 1,768 1,763
-------- --------- -------- ------
TOTAL OPERATING EXPENSES.......................... 2,296 2,297 4,391 4,550
OTHER INCOME (EXPENSE)
Interest income..................................... 84 95 156 148
Interest expense..................................... (399) (449) (843) (676)
---------- ---------- --------- --------
TOTAL OTHER EXPENSE.............................. (315) (354) (687) (528)
---------- ---------- --------- --------
INCOME (LOSS) BEFORE TAXES............... 220 (1,100) 349 (2,098)
INCOME TAXES 27 0 98 0
---------- ---------- ---------- ---------
NET INCOME (LOSS)......................... $ 193 $ (1,100) $ 251 $ (2,098)
========= ========= ========= =========
Net income (loss) per share of Common Stock.............. $ .03 $ (.18) $ .03 $ (.34)
========== ============ ========== ===========
Weighted average shares of
Common Stock outstanding (in thousands)............... 7,317 6,177 7,178 6,136
</TABLE>
4
<PAGE>
STATEMENTS OF CASH FLOWS
EMBREX, INC.
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Six Months Ended June 30
-------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................................... $ 251 $ (2,098)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................................... 1,858 1,402
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets.......... (824) (522)
Accounts payable and accrued expenses.............................. (325) (55)
--------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES............................ 960 (1,273)
INVESTING ACTIVITIES
Purchases of short-term investments........................................ 464 (96)
Purchases of INOVOJECT(Register mark) systems, equipment, furniture
and fixtures............................................................ (2,216) 140
Proceeds from capital lease obligations..................................... 1,853 3,950
------ -----
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES............................. 101 (14)
FINANCING ACTIVITIES
Issuance of Common Stock................................................... 259 87
Issuance of long-term debt (net) .......................................... 476 5,610
Payments on capital lease obligations....................................... (1,313) (714)
------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES............................. (578) 4,983
-------- -------
INCREASE IN CASH AND CASH EQUIVALENTS.......................................... 483 3,696
Cash and cash equivalents at beginning of period ....................... 5,354 2,803
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 5,837 $ 6,499
======== =======
</TABLE>
Supplemental Schedule of Noncash Financing Activity:
In May 1995, American Cyanamid Company, a subsidiary of American Home Products
Corporation, converted the promissory note issued by Embrex, Inc. to American
Cyanamid in 1991. The $1.2 million note, which would have been due on May 27,
1995, was converted into 320,000 shares of Common Stock.
Also, during the 1995 period, $1.1 million of the debentures issued in May 1995,
along with $9,000 of accrued interest were converted into 221,793 shares of
Common Stock net of unamortized debt issuance costs totaling $92,000.
During 1996, an additional $1.45 million debentures along with $109,000 of
accrued interest were converted into 312,381 shares of Common Stock net of
unamortized debt issuance costs totaling $72,000.
5
<PAGE>
EMBREX, INC.
FORM 10-Q
June 30, 1996
NOTES TO CONSOLIDATED INTERIM CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of Embrex,
Inc. and its wholly owned subsidiaries, Embrex Europe Limited and Embrex Sales,
Inc. (collectively referred to as the Company) and have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of financial condition and results of operations have been
included. Operating results for the six month period ended June 30, 1996 are not
necessarily indicative of the results that may be attained for the entire year.
For further information, refer to the financial statements and notes thereto
included in the Company's Form 10-K for the year ended December 31, 1995.
NOTE 2 - CASH AND CASH EQUIVALENTS
In connection with the secured line of credit discussed in NOTE 3 which follows,
the Company has deposited $470,000 as secured collateral with the lender.
NOTE 3 - LONG-TERM DEBT
During June 1996 the Company closed on a $2.0 million secured equipment
financing line which will be used to support the Company's continuing
international expansion efforts. The financing line is secured by compensating
cash balances, has a four-year term which calls for quarterly repayments of
principal, and carries an interest rate one percentage point above the rate
being earned by the Company on the compensating cash balances. At June 30, 1996,
the Company had borrowed approximately $470,000 against this line.
NOTE 4 - NET INCOME PER SHARE
Primary earnings per share are computed by dividing net income (loss) by the
weighted average number of shares of Common Stock and common stock equivalents
outstanding during the period. Common stock equivalents consist of stock
options, warrants, and common shares purchasable under the Employee Stock
Purchase Plan and are computed using the treasury stock method. The difference
between primary and fully diluted net income per common share is not significant
in all periods presented.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and 1995
Consolidated revenues for the second quarter of 1996 totaled $5.1 million
representing a year over year increase of $1.9 million, or 61 percent. Revenues
derived from sources outside of North America increased from 1 percent of
revenues during the 1995 period to 10 percent of revenues in the 1996 period.
The revenue growth is largely attributable to an increase in INOVOJECT revenues
which grew from $2.7 million in the 1995 period to $4.6 million in the 1996
period. Product revenues for the 1996 quarter totaled $413,000 compared to
$394,000 for the same period in 1995.
Consistent with the improvement noted during the first quarter of 1996, cost of
product and INOVOJECT revenues decreased from 51 percent of total revenues
during the 1995 quarter to 44 percent of revenues in the 1996 period.
In aggregate operating expenses were unchanged year over year, holding steady at
approximately $2.3 million during the second quarter of both 1996 and 1995 as
management continues to successfully control operating expenses and leverage its
know-how, patent position and market presence.
Net interest expense decreased from $354,000 in the 1995 period to $315,000 in
the 1996 period largely due to diminishing interest expense payments on
INOVOJECT lease lines.
Based on a stronger top line, improved gross margins, and the containment of
operating expenses, the Company posted its second consecutive profitable
quarter. Net income for the quarter ended June 30, 1996 totaled $193,000
compared to a loss of $1.1 million for the comparable 1995 period. Earnings per
share totaled $.03 for the 1996 quarter compared to a loss of $.18 per share for
the comparable 1995 period based on 7.3 million and 6.2 million weighted average
shares outstanding in the 1996 and 1995 periods, respectively.
Six Months Ended June 30, 1996 and 1995
Consolidated revenues for the six months ended June 30, 1996 totaled $9.7
million up from $6.1 million a year earlier. This increase in total revenues is
principally attributable to stronger INOVOJECT revenues which showed a
year-over-year increase of 58 percent growing from $5.3 million to $8.9 million.
Cost of product and INOVOJECT revenues totaled $4.2 million, or 44 percent of
total revenues, for the first six months of 1996 compared to $3.1 million, or 51
percent of total revenues, for the same 1995 period.
Operating expenses for the first half of 1996 totaled $4.4 million, down 3.5
percent ($159,000) from a year earlier. As noted under the review of the
quarterly results, management is committed to leveraging its resources and
controlling operating expenses.
7
<PAGE>
Net interest expense increased from $528,000 for the six months ended June 30,
1995 to $687,000 for the same 1996 period. This increase in interest expense
results primarily from INOVOJECT lease financing obtained during 1995 and the
first half of 1996.
Net income for the six months ended June 30, 1996 totaled $251,000, $.03 per
share of Common Stock, compared to a net loss of $2.1 million , $.34 per share
of Common Stock, for the same period in 1995.
Management anticipates further revenue growth over 1995 levels throughout 1996,
from its existing INOVOJECT(Register mark) operations in the United States and
Canada, new INOVOJECT(Register mark) system leases in other countries, product
sales of VNF to vaccine manufacturers and sales of its BDA-Blen product to
poultry producers. However, the precise timing of the anticipated regulatory
approval of BDA-Blen for IN OVO use in the United States, the rate at which the
marketplace will accept its INOVOJECT(Register mark) technology outside the
United States and Canada, the timing of approvals of third-party vaccines for
IN OVO use outside the United States and Canada, and possible decreases in U.S.
hatchery bird production as a result of high grain prices will impact the pace
of revenue growth and the attainment of, or increase in, profitability from the
installation and operational throughputs of INOVOJECT(Register mark) systems.
Management will continue to manage its costs of revenues in an effort to
maintain or improve gross margins, and will continue to carefully balance
operating and interest expenses against its goal of continuing and increasing
profitability.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
At June 30, 1996, the Company's cash and short-term investment balances totaled
$7.3 million - unchanged from year-end 1995.
Operating activities generated almost $1.0 million during the first six months
of 1996 despite an $824,000 increase in accounts receivable, inventory, and
other current assets associated with expanding operations. During the same
period, net investing activities yielded an additional $101,000.
Net financing activities consumed $578,000 during the period largely as a result
of repayments on capital lease obligations. Additionally, during the period the
Company closed on a $2.0 million secured equipment financing line which will be
used to support the Company's continuing international expansion efforts. The
financing line is secured by compensating cash balances, has a four-year term
which calls for quarterly repayments of principal, and carries an interest rate
one percentage point above the rate being earned by the Company on the
compensating cash balances. At June 30, 1996, the Company had borrowed
approximately $470,000 against this line.
As of June 30, 1996 the Company had outstanding purchase commitments of
approximately $3.5 million related to the production of the Company's BDA-BLEN
product and materials and supplies for the construction and maintenance of
INOVOJECT(Register mark) systems.
Based on its current operations, management believes that its available cash and
short-term investments, together with cash flow from operations and existing
equipment financing lines, will be sufficient to meet its foreseeable cash
requirements. At the present time, the Company has no plans to seek an extension
or modification of its outstanding, publicly-traded warrants which have an
expiration date of November 7, 1996.
8
<PAGE>
This report contains various forward-looking statements and information that are
based on management's beliefs as well as assumptions made by and information
currently available to management. These statements involve risks and
uncertainties that could cause actual results to differ materially, including
those risks discussed under "Six Months Ended June 30, 1996 and 1995" with
respect to anticipated revenue growth and the attainment of or increase in
profitability. In addition, the ability to obtain regulatory approval of
BDA-Blen for IN OVO use or any other product for IN OVO use is dependent upon a
number of factors, including the results of trials, the discretion of regulatory
officials, and potential changes in regulations. Finally, the adequacy of the
company's available cash and short term investments, together with cash flow
from operations and existing equipment financing lines to sustain current
operations, is subject to a number of variables, including the ability of the
company to maintain revenues and expenses at current or improved levels, which
is dependent upon continued customer demand for the INOVOJECT(Register mark)
system, the ability to service and maintain the INOVOJECT(Register mark)
systems within budgeted levels, and continued international placement of
INOVOJECT(Register mark) systems.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 16, 1996 the Annual Shareholders meeting was held and the
following matters were submitted to the shareholders for a vote. There were
6,594,337 shares either present or evidenced by proxy and below represents a
brief description of the matters voted on and the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes.
ELECTION OF DIRECTORS:
Votes Number of
Against Votes Broker
Director Votes For or Withheld Abstained Non-votes Totals
Charles E. Austin 6,200,198 394,139 0 0 6,594,337
Lester M. Crawford,
D.V.M., Ph.D. 6,187,698 406,639 0 0 6,594,337
Stephen Hartogensis 6,196,098 398,239 0 0 6,594,337
Randall L. Marcuson 6,131,598 462,739 0 0 6,594,337
Kenneth N. May, Ph.D. 6,185,498 408,839 0 0 6,594,337
Arthur M. Pappas 6,195,298 399,039 0 0 6,594,337
AMENDMENT TO ARTICLES OF INCORPORATION TO (I) INCREASE AMOUNT OF AUTHORIZED
COMMON STOCK FROM 15,000,000 TO 30,000,000 SHARES, (II) INCREASE THE AMOUNT OF
AUTHORIZED PREFERRED STOCK FROM 20,000 TO 15,000,000 SHARES, AND (III) TO CHANGE
THE PAR VALUE OF THE AUTHORIZED COMMON STOCK AND SERIES A PARTICIPATING
PREFERRED STOCK FROM NO PAR VALUE TO PAR VALUE STOCK, WITH A PAR VALUE OF $.01
PER SHARE:
Votes Number of
Against Votes Broker
Votes For or Withheld Abstained Non-votes Totals
Votes - this item 3,561,146 742,796 67,873 2,222,522 6,594,337
10
<PAGE>
AMENDMENT TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
ISSUANCE PURSUANT TO THE COMPANY'S INCENTIVE STOCK OPTION AND NONSTATUTORY STOCK
OPTION PLAN.
Votes Number of
Against Votes Broker
Votes For or Withheld Abstained Non-votes Totals
Votes - this item 2,632,628 1,038,096 78,866 2,844,747 6,594,337
RATIFICATION OF INDEPENDENT AUDITORS:
Votes Number of
Against Votes Broker
Auditor Votes For or Withheld Abstained Non-votes Totals
Ernst & Young 6,510,356 45,115 38,866 0 6,594,337
Item 5. Other information. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 3 - Articles of Amendment of Articles of Incorporation
effective May 28, 1996.
Exhibit 10 - Amendment dated May 16, 1996 to Incentive Stock Option
and Nonstatutory Stock Option Plan - June 1993.
Exhibit 27 - Financial Data Schedule.
The Company filed a report on Form 8-K on March 22, 1996, reporting
the Company's adoption of a shareholder rights plan. No other
reports on Form 8-K have been filed since that date.
11
<PAGE>
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.
Date: July 31, 1996
EMBREX, INC.
By: /s/ Randall L. Marcuson
Randall L. Marcuson
President and Chief Executive Officer
By: /s/ John L. Bradley, Jr.
John L. Bradley, Jr.
Vice President, Finance and Administration
12
<PAGE>
Embrex, Inc.
File No. 000-19495
Form 10-Q
For the Quarterly Period
Ended June 30, 1996
EXHIBIT INDEX
Sequential
Exhibit Page Number
3 Articles of Amendment of Articles of Incorporation
effective May 28, 1996. 14 of 16
10 Amendment dated May 16, 1996 to Incentive Stock
Option and Nonstatutory Stock Option Plan - June 1993. 16 of 16
27 Financial Data Schedule
13
Exhibit 3
State of North Carolina
Department of the Secretary of State
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
EMBREX, INC.
Pursuant to (Section symbol)55-10-06 of the General Statutes of North Carolina,
the undersigned corporation hereby submits the following Articles of Amendment
for the purpose of amending its Articles of Incorporation:
1. The name of the corporation is: EMBREX, INC.
2. The text of the amendment adopted is as follows:
Part A of Article FOURTH of the Restated Articles of Incorporation of the
corporation is hereby amended by deleting the first two paragraphs of
Article FOURTH and inserting in lieu thereof the following:
The corporation shall have authority to issue thirty million (30,000,000)
shares of common stock with a par value of one cent ($.01) per share, and
fifteen million (15,000,000) shares of preferred stock, with no par value.
The shares of preferred stock of the corporation may be issued from time
to time in one or more classes or series, the shares of each class or series
to have such designations, preferences, relative rights, powers, including
voting powers, and par value, if any (or qualifications, limitations or
restrictions thereof) as are stated in the resolution or resolutions
providing for the issuance of such class or series adopted by the board of
directors of the corporation. Authority is expressly granted to the board of
directors, subject to the provisions hereof and to any limitations provided
under the North Carolina Business Corporation Act, to authorize the issuance
of one or more classes, or one or more series within a class, of preferred
stock, and with respect to each such class or series to determine and fix by
resolution or resolutions the designations, preferences, relative rights,
powers, including voting powers, full or limited, or no voting power, and
the par value, if any, of such shares, or the qualifications, limitations or
restrictions of such shares. This paragraph is intended to afford to the
Board of Directors the maximum authority permitted under Section 55-6-02 of
the North Carolina General Statutes.
Notwithstanding anything to the contrary in this Article FOURTH, each
share of the corporation's Series A Participating Preferred Stock shall have
par value of one cent ($.01) per share.
14
<PAGE>
ARTICLES OF AMENDMENT OF EMBREX, INC.
Page 2
3. All of the shares of common stock of the Corporation shall be deemed to
have the par value set forth above, notwithstanding that the corporation
has outstanding shares of common stock represented by stock certificates
which state that such shares of common stock have no par value.
4. Except as set forth herein, the amendment shall have no effect
whatsoever on the corporation's Series A Participating Preferred Stock
as described in the corporation's Articles of Amendment filed with the
Secretary of State effective March 21, 1996, including with respect to
the number of authorized shares of preferred stock designated as Series
A Participating Preferred Stock.
5. The amendment was adopted and approved by the shareholders of the
corporation on May 16, 1996, and such shareholder approval was obtained
as required by Chapter 55 of the North Carolina General Statutes.
6. These articles will be effective upon filing.
IN WITNESS WHEREOF, the corporation has caused this instrument to be duly
executed as of the 28th day of May, 1996.
EMBREX, INC.
By: /s/
Randall L. Marcuson
President
15
<PAGE>
Exhibit 10
AMENDMENT
TO
EMBREX, INC.
INCENTIVE STOCK OPTION AND
NONSTATUTORY STOCK OPTION PLAN (JUNE 1993)
THIS AMENDMENT to the Embrex, Inc. Incentive Stock Option and Nonstatutory
Stock Option Plan (June 1993) (the "Plan") is made effective as of the 16th day
of May, 1996.
WHEREAS, the Board of Directors of Embrex, Inc. (the "Company") has
determined that it would be in the best interests of the Company and its
shareholders to amend the Plan to increase the number of shares of the Company's
Common Stock that may be issued under the Plan from 500,000 to 1,200,000;
WHEREAS, on March 21, 1996, the Board of Directors approved, subject to
shareholder approval, an amendment to the Plan to increase the number of shares
of Common Stock that may be issued under the Plan from 500,000 to 1,200,000 and
recommended that the shareholders approve the proposed amendment; and
WHEREAS, the Company's shareholders approved the proposed amendment to the
Plan at the Company's Annual Meeting of Shareholders held on May 16, 1996;
NOW, THEREFORE, pursuant to Section 18 of the Plan, the Plan is hereby
amended by deleting the second sentence of Section 4 in its entirety and
replacing it with the following:
"Subject to adjustment as provided in Sections 13 and 14 of the Plan,
the maximum number of shares of Common Stock of the Company which may be
issued and sold under the Plan is One Million Two Hundred Thousand
(1,200,000) shares."
This Amendment is limited as specified and shall not constitute a
modification or amendment of any other provision of the Plan or any option
agreement issued pursuant to the Plan.
Approved by the Board of
Directors on March 21,
1996, and approved by the
shareholders on May 16,
1996.
/s/
John L. Bradley, Jr.
Secretary
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,837
<SECURITIES> 1,508
<RECEIVABLES> 2,054
<ALLOWANCES> 0
<INVENTORY> 1,885
<CURRENT-ASSETS> 11,671
<PP&E> 19,178
<DEPRECIATION> 8,429
<TOTAL-ASSETS> 22,918
<CURRENT-LIABILITIES> 6,675
<BONDS> 7,768
0
0
<COMMON> 47,868
<OTHER-SE> (39,393)
<TOTAL-LIABILITY-AND-EQUITY> 22,918
<SALES> 635
<TOTAL-REVENUES> 9,663
<CGS> 218
<TOTAL-COSTS> 4,236
<OTHER-EXPENSES> 1,768
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 843
<INCOME-PRETAX> 349
<INCOME-TAX> 98
<INCOME-CONTINUING> 251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
