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 September 30, 1998
Commission File No. 000-19495
Embrex, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1469825
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1035 Swabia Court, Durham, NC 27703
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (919) 941-5185
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, $0.01 par value, outstanding as of October
31, 1998, was 8,264,290.
<PAGE>
EMBREX, INC.
INDEX
Part I Page
Financial Information: ----
Item 1: Financial Statements
Balance Sheets.........................................3 of 13
Statements of Operations...............................4 of 13
Statements of Cash Flows...............................5 of 13
Notes to Consolidated Financial Statements.............6 of 13
Item 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations..........7 of 14
Item 3:
Quantitative and Qualitative Disclosures
About Market Risk.....................................10 of 14
Part II
Other Information:
Item 1: Legal Proceedings...................................11 of 14
Item 2: Changes in Securities...............................11 of 14
Item 3: Defaults Upon Senior Securities.....................11 of 14
Item 4: Submission of Matters to a Vote of Security
Holders.............................................11 of 14
Item 5: Other Information...................................11 of 14
Item 6: Exhibits and Reports on Form 8-K....................12 of 14
Signatures..................................................13 of 14
Exhibit Index...............................................14 of 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Embrex, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
----------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ..................... $ 7,432 $ 8,580
Restricted Cash ............................... 275 275
Inventories:
Materials and supplies ...................... 973 898
Product ..................................... 1,257 603
Accounts receivable - trade (net of allowance
for uncollectible accounts of $43 and $0 at
September 30, 1998 and December 31, 1997,
respectively) ................................. 3,234 2,772
Other current assets .......................... 510 595
-------- --------
Total Current Assets ........................ 13,681 13,723
INOVOJECT(R)Systems under construction ........... 398 690
INOVOJECT(R)Systems .............................. 23,711 21,024
Less accumulated depreciation ................. (15,517) (12,149)
-------- --------
8,194 8,875
EQUIPMENT, Furniture and Fixtures ................ 4,734 3,601
Less accumulated depreciation and amortization (2,362) (2,041)
-------- --------
2,372 1,560
Other Assets:
Goodwill, patents, and exclusive licenses of
patentable technology (net of accumulated
amortization of $106 in 1998 and $80 in 1997) . 283 309
Other non-current assets ...................... 4 4
-------- --------
Total Assets ..................................... $ 24,932 $ 25,161
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable .............................. $ 643 $ 1,312
Accrued expenses .............................. 2,248 2,147
Current portion of capital lease obligations .. 2,684 2,391
Current portion of long-term debt ............. 12 292
-------- --------
Total Current Liabilities ................... 5,587 6,142
Capital Lease Obligations, less current portion .. 1,283 3,269
Long-Term Debt, less current portion ............. 10 9
Shareholder's Equity Common Stock, $.01 par value:
Authorized - 30,000,000 shares
Issued and outstanding -
8,263,322 and 8,239,946 shares at
September 30, 1998 and December 31,
1997, respectively ....................... 83 82
Additional paid-in capital .................... 54,890 54,788
Currency translation adjustments .............. 127 (196)
Accumulated deficit ........................... (37,048) (38,933)
-------- --------
Total Shareholders' Equity .................. 18,052 15,741
-------- --------
Total Liabilities and Shareholders' Equity ....... $ 24,932 $ 25,161
======== ========
</TABLE>
3
<PAGE>
Embrex, Inc.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
INOVOJECT(R)System revenue .................................. $ 7,198 $ 6,252 $20,351 $ 17,538
Product sales ............................................... 169 246 689 745
Other revenue ............................................... 37 33 182 94
-------- ------- ------- ----------
Total Revenues ............................................ 7,404 6,531 21,222 18,377
Cost of Product Sales and INOVOJECT(R)System Revenues .......... 3,401 3,194 10,084 8,927
-------- ------- ------- ----------
Gross Profit .............................................. 4,003 3,337 11,138 9,450
Operating Expenses
General and administrative .................................. 1,715 1,425 4,829 3,825
Sales and marketing ......................................... 104 104 461 504
Research and development .................................... 1,360 1,056 3,364 3,237
-------- ------- ------- ----------
Total Operating Expenses .................................. 3,179 2,585 8,654 7,566
Operating Income ............................................... 824 752 2,484 1,884
Other Income (Expense)
Interest income ............................................. 150 118 302 363
Interest expense ............................................ (129) (260) (481) (865)
-------- ------- ------- ----------
Total Other Income (Expense) .............................. 21 (142) (179) (502)
-------- ------- ------- ----------
Income Before Taxes ............................................ 845 610 2,305 1,382
Income Taxes ................................................... 92 70 420 164
-------- ------- ------- ----------
Net Income ................................................ $ 753 $ 540 $ 1,885 $ 1,218
======== ======= ======= ==========
Net Income Per Share of Common Stock:
Basic ....................................................... $ 0.09 $ 0.07 $ 0.23 $ 0.15
Diluted ..................................................... $ 0.09 $ 0.06 $ 0.23 $ 0.15
Weighted Average Number of Shares Used in Per-Share Calculation:
Basic ....................................................... 8,262 8,236 8,251 8,166
Diluted ..................................................... 8,339 8,369 8,338 8,342
</TABLE>
4
<PAGE>
Embrex, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income ........................................................ $ 1,885 $ 1,218
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................... 3,716 2,935
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets .... (1,105) (584)
Accounts payable and accrued expenses ........................ (568) 886
--------- ----------
Net Cash Provided By Operating Activities ............................ 3,928 4,455
INVESTING ACTIVITIES
Purchases of short-term investments ............................... 0 876
Purchases of INOVOJECT(R)systems, equipment, furniture and fixtures (3,529) (2,615)
Decrease in other noncurrent assets ............................... 0 1
--------- ----------
Net Cash Used In Investing Activities ................................ (3,529) (1,738)
FINANCING ACTIVITIES
Issuance of common stock .......................................... 103 307
Additions to long-term debt ....................................... 1 0
Payments on long-term debt ........................................ (280) (160)
Proceeds from capital lease obligations ........................... 80 128
Payments on capital lease obligations ............................. (1,774) (2,560)
--------- ----------
Net Cash Used In Financing Activities ................................ (1,870) (2,285)
--------- ----------
(Decrease) Increase in Cash and Cash Equivalents ..................... (1,471) 432
Currency Translation Adjustments ..................................... 323 (130)
Cash and cash equivalents at beginning of period ..................... 8,580 9,036
--------- ----------
Cash and Cash Equivalents At End Of Period ........................... $ 7,432 $ 9,338
========= ==========
</TABLE>
Supplemental Schedule of Noncash Financing Activity:
During 1997, $425,000 of outstanding debentures along with $66,000 of accrued
interest were converted into 98,267 shares of Common Stock net of unamortized
debt issuance costs totaling $1,000. In addition, 419 shares of Embrex Common
Stock were issued pursuant to the non-cash exercise of warrants related to the
initial sale of such debentures.
5
<PAGE>
EMBREX, INC.
FORM 10-Q
September 30, 1998
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 three-month and nine-month periods ended
September 30, 1998 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, 1997.
NOTE 2 - COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income
(SFAS 130). This Statement establishes standards for reporting and display of
comprehensive income and its components in the financial statements. Initial
application of this Statement is required for interim periods of fiscal years
beginning after December 15, 1997; however, interim period disclosure is limited
to reporting a total for comprehensive income. In accordance with SFAS 130, the
Company has determined total comprehensive income, net of tax, to be $821,000
and $492,000 for the three months ended September 30, 1998 and 1997,
respectively, and $2,208,000 and $1,088,000 for the nine months ended September
30, 1998 and 1997, respectively. Embrex's total comprehensive income represents
net income plus the after-tax effect of foreign currency translation adjustments
for the periods presented.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
Company's financial statements and related notes appearing elsewhere in this
report.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997
Consolidated revenues for the third quarter of 1998 totaled $7.4 million,
representing a 13.4% increase of $873,000 over the same period in 1997. During
this time, the Company achieved a 15.1% increase of approximately $946,000 in
INOVOJECT(R) system revenue to $7.2 million from $6.3 million during the
comparable period in 1997. Substantially all of the 1998 and 1997 INOVOJECT(R)
system revenues were derived from INOVOJECT(R) system revenues in the United
States and Canada, and select international markets, with the growth in lease
revenues principally due to higher machine throughput, and to an 8.0%
year-over-year increase in the number of INOVOJECT(R) systems operating under
lease agreements. Given its approximate 80% market penetration in the United
States and Canada, the Company anticipates diminished growth in the number of
INOVOJECT(R) system installations in that market.
The Company's ability to generate revenue from product sales has been hindered
or constrained by the previously announced delay associated with Ft. Dodge's
obtaining British regulatory approval for the sale of Bursamune(TM) in the
United Kingdom, lower levels of breeder and broiler flock vaccination rates, and
fewer incidences of bursal disease in the United States. Product sales declined
31.3% to $169,000 in the third quarter of 1998 from the $246,000 recorded for
the same period a year earlier. Overall, the Company's gross profit margin
performance of 54% during the third quarter exceeded the 51% level achieved
during the comparable 1997 period.
Operating expenses increased to $3.2 million for the third quarter of 1998, up
$594,000 from the same period in 1997. The change principally reflects increased
business activity, a one-time $152,000 true-up adjustment to reflect modified
pricing of Company-rebuilt parts which was offset by a corresponding change in
cost of revenue, legal fees pertaining to patent infringement matters, and
international expansion in Latin America.
Net other expense declined by $163,000 from the comparable 1997 quarter. The
favorable change was primarily due to a 50.4% reduction in interest expense
following repayment of outstanding INOVOJECT(R) system lease obligations.
The stronger bottom-line performance demonstrates the benefit of the Company's
focus on revenue growth and on maintaining INOVOJECT(R) system operating
efficiencies, the combination of which enabled the Company to post record third
quarter net income. Net income of $753,000 for the quarter ended September 30,
1998 increased 39% from the $540,000 profit earned during the comparable 1997
period. Diluted earnings per share increased 50% to $.09 for the 1998 third
quarter versus $.06 per share in the previous 1997 period. Weighted average
shares of common stock outstanding were relatively unchanged at 8.339 million
shares for the 1998 quarter versus 8.369 million at the end of the third quarter
of 1997.
7
<PAGE>
Nine Months Ended September 30, 1997 and 1996
Consolidated revenues for the nine months ended September 30, 1998 totaled $21.2
million, up 15.5% from $18.4 million a year earlier. This increase is
principally attributable to stronger INOVOJECT(R) system revenues which account
for 95.9% of the $21.2 million total. Consistent with the 8.0% increase from
September 30, 1997 in the number of INOVOJECT(R) systems installed under lease
agreements, INOVOJECT(R) system revenues showed a year-over-year increase of
16.0%, growing $2.8 million to $20.4 million for the nine-month period.
Substantially all of the 1998 and 1997 INOVOJECT(R) system revenues were derived
from INOVOJECT(R) system lease fees.
Cost of product and INOVOJECT(R) system revenues totaled $10.1 million (47.5% of
total revenues) for the first nine months of 1998 compared to $8.9 million
(48.6% of total revenues) for the comparable 1997 period, resulting in
nine-month gross margins of 52.5% and 51.4%, respectively.
Operating expenses for the nine months ended September 30, 1998 increased to
$8.7 million, up $1.1 million from the comparable 1997 amount. The increase is
principally attributable to the cost of international expansion in Asia and
Latin America, and legal fees related to patent infringement matters. Expansion
of the Company's presence in Asia and Latin America accounted for $712,000 of
the $1.1 million increase in the 1998 nine-month period, legal fees represented
$462,000 of the 1998 increase, and a reduction in 1998 in the areas of sales and
marketing provided offsetting cost savings.
Net other expense decreased by $323,000 from $502,000 for the nine months ended
September 30, 1997 to $179,000 for the same 1998 period. This 64.3% improvement
is attributable to a $384,000 decrease in interest expense related to reductions
in lease and debt obligations, and to a $61,000 reduction in interest earned on
invested cash.
Net income for the nine months ended September 30, 1998 of $1,885,000 represents
155% of the $1,218,000 reported for the same period ended September 30, 1997.
The increase of $667,000 translates into earnings during the first nine months
of 1998 that, at $.23 per weighted average share of common stock outstanding,
equals 153% of the $.15 per weighted average share reported for the nine months
ended September 30, 1997. Weighted average shares of common stock outstanding on
a diluted basis were relatively unchanged at 8.342 million at September 30, 1997
compared to 8.338 million at September 30, 1998.
Given its approximate 80% market penetration in the United States and Canada,
the Company anticipates diminished growth in the number of INOVOJECT(R) system
installations in that market. Nevertheless, management expects further revenue
growth throughout the balance of 1998 relative to the levels achieved in 1997.
This growth is expected to come primarily from existing INOVOJECT(R) system
operations in the United States and Canada, and new INOVOJECT(R) system leases
in other countries, and secondarily from sales of the Company's Bursaplex(TM)
product to poultry producers.
Bursaplex(TM), a product which combines the Company's VNF(R) compound with an
Infectious Bursal Disease (IBD) vaccine, and which in 1997 was granted final
approval from the United States Department of Agriculture for both post-hatch
and in ovo delivery in the United States, has also received final approval from
equivalent regulatory authorities in Equador, Pakistan, Peru, South Korea,
Thailand, and Vietnam.
8
<PAGE>
Bursamune(TM), which also contains Embrex's VNF(R) compound, is an IBD vaccine
produced by Cyanamid Websters, the Australian affiliate of Fort Dodge Animal
Health, a division of American Home Products. Fort Dodge is the official
registrant of Bursamune(TM) in Europe, the Middle East, and Africa for
regulatory purposes. Bursamune(TM) is under regulatory review in certain
countries in Europe and the Middle East. In June 1997, Fort Dodge indicated that
its application for United Kingdom regulatory approval of Bursamune(TM) had been
provisionally disapproved; however, the United Kingdom regulatory authority
requested that further data be supplied. Both companies are cooperating with the
regulatory authority to supply the requested information and it is anticipated
that the review process will be completed during the first quarter of 1999 or
earlier.
For the remainder of the year, the goals of management are to maintain
profitability, to continue efforts to achieve worldwide placements of the
INOVOJECT(R) system, and to continue development of proprietary in ovo vaccines.
Growth in INOVOJECT(R) system fees and revenue from the sale of vaccine products
during the rest of 1998 will be a function of the rate at which the marketplace
outside the United States and Canada accepts INOVOJECT(R) system technology, the
timing of approvals of Bursamune(TM) and Bursaplex(TM), and third-party vaccines
for in ovo use. In addition, normal fluctuations in the market price of grain,
domestic consumption levels and export opportunities in all Embrex markets may
impact the timing and quantity of egg injections and the corresponding in ovo
administration of vaccines. Moreover, additional delays in obtaining U.K.
regulatory approval for the sale of Bursamune(TM) would negatively impact the
Company's ability to generate revenue from both the use of INOVOJECT(R) systems,
and the sale of vaccine products in certain European markets.
CHANGES IN FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
At September 30, 1998, the Company's cash and cash equivalents totaled $7.4
million, down approximately $1.2 million from the $8.6 million on hand at
year-end 1997. Embrex believes it will be able to continue its use of existing
cash in conjunction with cash flow generated by operations to fund its announced
repurchase of common shares, to fund its capital needs, and to continue its
international expansion during the balance of 1998.
Operating activities generated $3.9 million in cash during the first nine months
of 1998, reflecting additions attributable to $1,885,000 in net income and $3.7
million from depreciation and amortization, the total of which was then offset
by $1,673,000 chiefly attributable to increases in accounts receivable,
inventories, and reductions in accounts payable. During the same period,
investing activities consumed $3.5 million due to the purchase of INOVOJECT(R)
systems, fixed assets, and leasehold improvements.
Net financing activities consumed $1.9 million during the period, largely
representing repayments of capital lease obligations.
As of September 30, 1998 the Company had outstanding purchase commitments of
approximately $3.5 million related to production of the Company's Bursaplex(TM)
and Bursamune(TM) products, and materials and supplies for the construction and
maintenance of INOVOJECT(R) systems.
9
<PAGE>
Based on its current operations, management believes that its available cash and
cash equivalents, together with cash flow from operations will be sufficient to
meet its foreseeable cash needs in connection with its operations, including to
make necessary capital investments, to continue international expansion and
funding of R&D programs, and to fund the repurchase of common stock pursuant to
its previously announced stock repurchase program.
YEAR 2000
The Company has established a team to address Year 2000 issues. The team has
begun to inventory and assess the Company's computer hardware and software
systems, as well as embedded systems in its INOVOJECT(R) system, manufacturing
and laboratory equipment and office facilities, such as security and fire alarm
systems. Once this inventory and assessment is complete, the team will develop
remediation, testing, and implementation plans. The Company anticipates
completing its assessment and planning not later than February 1999. Until the
Company completes this planning phase, the Company believes it is premature to
develop contingency plans to address what would happen if its execution of these
plans were to fail to address the Year 2000 issue. The Company expects to
complete all remediation, testing and implementation not later than October
1999.
To date, the Company has determined that its general ledger and primary
financial accounting software, a DOS-based application, uses only two digits to
identify a year in the date field. The Company intends to replace this
application with a Year 2000-compliant Windows-based system by mid-1999;
however, the Company had planned to make this upgrade irrespective of the Year
2000 problem in order to meet the demands of its business. The Company also is
developing plans to upgrade other software and hardware as necessary to address
both its increased internal needs and the impact of the Year 2000 on its
systems. The Company's inability or the inability of its software or hardware
vendors to upgrade the Company's systems in a manner that fully addresses its
needs and the Year 2000 could have an adverse impact on the Company's ability to
produce the information necessary to manage its business, communicate with its
customers and prepare its financial statements.
The Company also plans to survey substantially all of its customers and vendors
through a Year 2000 questionnaire which focuses on the strategies, activities
and contingency plans undertaken by those parties to achieve Year 2000
compliance. Any information received in response to the questionnaire will
assist the Company in assessing its readiness for the Year 2000 issue and
identify any potential negative impact to the Company from possible disruptions
in their ability to do business with the Company after December 31, 1999. The
inability of the Company's vendors and customers to fully address the Year 2000
issue could have an adverse impact on the Company's ability to operate and
manage the INOVOJECT(R) system at its customers' hatcheries, to manage its
business and to communicate with its customers and suppliers, any of which could
have a material adverse effect on the Company's financial results.
The Company expects to incur no more than $500,000 in addressing Year 2000
issues, including approximately $10,000 spent to date and capital expenditures
other than for information systems identified above. The Company's estimates
regarding cost and timing are based upon presently available information and may
change as the Company continues to address Year 2000 issues. Actual results
could differ materially from the Company's expectations as a result of numerous
factors, including the continued availability of certain resources, the
cooperation of third parties, the ability to locate and correct all relevant
computer codes, unforseen circumstances that would cause the Company to allocate
its resources elsewhere, and similar uncertainties.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking" statements, including statements with
respect to future products, services, markets and financial results. These
statements involve risks and uncertainties that could cause actual results to
differ materially, including without limitation the ability of the Company to
penetrate new markets, the outcome of its patent litigation, the Company's
ability to complete commercial development of potential future products or
obtain regulatory approval of its products, which approval is dependent upon a
number of factors, such as results of trials, the discretion of regulatory
officials, and potential changes in regulations, and the Company's dependence on
certain customers. Additional information on these risks and other factors which
could affect the Company's financial results are included in the Company's Form
10-K filed with the Securities and Exchange Commission and other filings with
the SEC, including the Company's Forms 10-Q and 8-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not
applicable.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is seeking collection of damages awarded by the United States
District Court of North Carolina (Raleigh Division) jury pursuant to the verdict
rendered on July 30, 1998 in response to the patent infringement and breach of
contract actions initiated against Service Engineering Corporation and Edward G.
Bounds. That Court entered a Judgment on September 28, 1998 that included a
monetary award of $2,612,885 in favor of the Company and an injunction
prohibiting Service Engineering Company and Edward G. Bounds from practicing the
methods claimed in Patent No. 4,458,630 or otherwise infringing United States
Patent No.
4,458,630.
On October 28, 1998, Service Engineering Corporation and Edward G. Bounds filed
a notice of appeal in the United States Court of Appeals for the Federal Circuit
seeking a reversal of that Judgment. The Company plans to oppose the appeal.
For a description of certain patent infringement proceedings initiated by the
registrant and related legal proceedings, see the registrant's Form 10-K for the
year ended December 31, 1997 filed with the Securities and Exchange Commission
on March 30, 1998.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
Item 5. Other information. Not applicable.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedule.
(b) Reports on Form 8-K. Not applicable.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 16, 1998
EMBREX, INC.
By: /s/ Randall L. Marcuson
-----------------------------------
Randall L. Marcuson
President and Chief Executive Officer
By: /s/ Don T. Seaquist
-----------------------------------
Don T. Seaquist
Vice President, Finance and Administration
13
<PAGE>
Embrex, Inc.
File No. 000-19495
Form 10-Q
For the Quarterly Period
Ended September 30, 1998
EXHIBIT INDEX
Sequential
Exhibit Page Number
------- -----------
27 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,707
<SECURITIES> 0
<RECEIVABLES> 3,234
<ALLOWANCES> 0
<INVENTORY> 2,740
<CURRENT-ASSETS> 13,681
<PP&E> 29,130
<DEPRECIATION> (17,879)
<TOTAL-ASSETS> 24,932
<CURRENT-LIABILITIES> 5,587
<BONDS> 1,293
0
0
<COMMON> 83
<OTHER-SE> 17,969
<TOTAL-LIABILITY-AND-EQUITY> 24,932
<SALES> 21,222
<TOTAL-REVENUES> 21,222
<CGS> 10,084
<TOTAL-COSTS> 10,084
<OTHER-EXPENSES> 8,654
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 179
<INCOME-PRETAX> 2,305
<INCOME-TAX> 420
<INCOME-CONTINUING> 1,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,885
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
