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, 1998
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) has 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 July
31, 1998, was 8,261,020.
<PAGE>
EMBREX, INC.
INDEX
Page
----
Part I
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 13
Item 3:
Quantitative and Qualitative Disclosures
About Market Risk.......................................10 of 13
Part II
Other Information:
Item 1: Legal Proceedings.......................................10 of 13
Item 2: Changes in Securities...................................11 of 13
Item 3: Defaults Upon Senior Securities.........................11 of 13
Item 4: Submission of Matters to a Vote of Security Holders ....11 of 13
Item 5: Other Information.......................................12 of 13
Item 6: Exhibits and Reports on Form 8-K........................12 of 13
Signatures......................................................13 of 13
Exhibit Index...................................................14 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Embrex, Inc.
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ........................................... $ 7,366 $ 8,580
Restricted Cash ..................................................... 275 275
Inventories:
Materials and supplies .......................................... 970 898
Product ......................................................... 1,225 603
Accounts receivable - trade (net of a $43 provision for uncollectible
accounts at June 30, 1998) .................................... 3,024 2,772
Other current assets ................................................ 651 595
-------- --------
Total Current Assets ............................................ 13,511 13,723
INOVOJECT(R)Systems Under Construction .................................. 539 690
INOVOJECT(R)Systems ..................................................... 22,882 21,024
Less accumulated depreciation ....................................... (14,416) (12,149)
-------- --------
8,466 8,875
Equipment, Furniture and Fixtures ....................................... 4,494 3,601
Less accumulated depreciation and amortization ...................... (2,244) (2,041)
-------- --------
2,250 1,560
Other Assets:
Patents and exclusive licenses of patentable technology (net of
accumulated amortization of $96 in 1998 and $80 in 1997) ........ 293 309
Other non-current assets ............................................ 4 4
-------- --------
Total Assets ............................................................ $ 25,063 $ 25,161
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable .................................................... $ 833 $ 1,312
Accrued expenses .................................................... 2,372 2,147
Current portion of capital lease obligations ........................ 2,654 2,391
Current portion of long-term debt ................................... 241 292
-------- --------
Total Current Liabilities ....................................... 6,100 6,142
Capital Lease Obligations, less current portion ......................... 1,779 3,269
Long-Term Debt, less current portion .................................... 11 9
Shareholders' Equity Common Stock,$.01 par value:
Authorized - 30,000,000 shares
Issued and outstanding -
8,250,976 and 8,239,946 shares at June 30, 1998 and
December 31, 1997, respectively ............................. 83 82
Additional paid-in capital .......................................... 54,829 54,788
Currency translation adjustments .................................... 62 (196)
Accumulated deficit ................................................. (37,801) (38,933)
-------- --------
Total Shareholders' Equity ...................................... 17,173 15,741
-------- --------
Total Liabilities and Shareholders' Equity .............................. $ 25,063 $ 25,161
======== ========
</TABLE>
3
<PAGE>
Embrex, Inc.
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
INOVOJECT(R)System revenue ................................. $ 6,574 $ 5,619 $ 13,152 $ 11,287
Product sales .............................................. 266 293 521 499
Other revenue .............................................. 121 10 145 61
-------- -------- -------- --------
Total Revenues ......................................... 6,961 5,922 13,818 11,847
Cost of Product Sales and INOVOJECT(R)System Revenues .......... 3,474 2,911 6,683 5,733
-------- -------- -------- --------
Gross Profit ........................................... 3,487 3,011 7,135 6,114
Operating Expenses
General and administrative ................................. 1,552 1,250 3,352 2,614
Sales and marketing ........................................ 126 172 323 371
Research and development ................................... 940 981 1,800 1,996
-------- -------- -------- --------
Total Operating Expenses ............................... 2,618 2,403 5,475 4,981
Operating Income ............................................... 869 608 1,660 1,133
Other Income (Expense)
Interest income ............................................ 73 122 152 245
Interest expense ........................................... (137) (282) (352) (605)
-------- -------- -------- --------
Total Other Expense .................................... (64) (160) (200) (360)
-------- -------- -------- --------
Income Before Taxes ............................................ 805 448 1,460 773
Income Taxes ................................................... (200) (31) (328) (94)
-------- -------- -------- --------
Net Income ............................................. $ 605 $ 417 $ 1,132 $ 679
======== ======== ======== ========
Net Income Per Share of Common Stock:
Basic ....................................................... $ 0.07 $ 0.05 $ 0.14 $ 0.08
Diluted ..................................................... $ 0.07 $ 0.05 $ 0.14 $ 0.08
Weighted Average Number of Shares Used in Per-Share Calculation:
Basic ....................................................... 8,249 8,203 8,246 8,131
Diluted ..................................................... 8,340 8,380 8,337 8,329
</TABLE>
4
<PAGE>
Embrex, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ........................................................... $ 1,132 $ 679
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization .................................... 2,486 1,871
Changes in operating assets and liabilities:
Accounts receivable, inventories and other current assets .... (998) (365)
Accounts payable and accrued expenses ........................ (254) 669
------- -------
Net Cash (Used In) Provided By Operating Activities ...................... 2,366 2,854
------- -------
INVESTING ACTIVITIES
Purchases of short-term investments .................................. 0 876
Purchases of INOVOJECT(R)systems, equipment, furniture and fixtures .. (2,600) (1,713)
Decrease in patents and other noncurrent assets ...................... 0 36
------- -------
Net Cash (Used In) Provided By Investing Activities ...................... (2,600) (801)
------- -------
FINANCING ACTIVITIES
Issuance of common stock ............................................. 42 185
Additions to long-term debt .......................................... 2 4
Payments on long-term debt ........................................... (55) (60)
Proceeds from capital lease obligations .............................. 70 35
Payments on capital lease obligations ................................ (1,297) (1,566)
------- -------
Net Cash (Used In) Provided By Financing Activities ...................... (1,238) (1,402)
------- -------
(Decrease) Increase in Cash and Cash Equivalents ......................... (1,472) 651
Currency Translation Adjustments ......................................... 258 (83)
Cash and cash equivalents at beginning of period ......................... 8,580 9,036
------- -------
Cash and Cash Equivalents At End Of Period ............................... $ 7,366 $ 9,604
======= =======
</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.
5
<PAGE>
EMBREX, INC.
FORM 10-Q
June 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 six-month periods ended June
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 $600,000
and $438,000 for the three months ended June 30, 1998 and 1997, respectively,
and $1,390,000 and $596,000 for the six months ended June 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 June 30, 1998 and 1997
Consolidated revenues for the second quarter of 1998 totaled $7.0 million,
representing an 18% increase of $1 million over the same period in 1997. During
this time, the Company achieved a 17% increase of approximately $1 million in
INOVOJECT(R) system revenue to $6.6 million from $5.6 million during the
comparable period in 1997. Substantially all of the 1998 and 1997 INOVOJECT(R)
system revenues were derived from INOVOJECT(R) system lease fees, in the United
States and Canada, and select international markets, with the growth in lease
revenues principally due to a 9% year-over-year increase in the number of
INOVOJECT(R) systems operating under lease agreements, and higher machine
throughput. 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.
Reflecting the on-going delay associated with obtaining regulatory approval for
the sale of Bursamune(TM) in the United Kingdom, revenue from product sales
declined 9% to $266,000 from the $293,000 recorded a year earlier. Overall, the
Company's gross profit margin during the second quarter remained relatively
unchanged at 50.1%, compared to 50.8% in the 1997 period.
Operating expenses increased to $2.6 million for the second quarter of 1998, up
$215,000 from the comparable 1997 amount. This change reflects increases of
$302,000 primarily attributable to general corporate expense and international
expansion, and $65,000 associated with product research and development, offset
by savings of $152,000 related to timing differences from the 1997 period, and
operating efficiencies.
Net interest expense decreased 60% from $160,000 in the 1997 period to $64,000
in 1998. This net reduction follows from diminishing interest expense payments
on INOVOJECT(R) system leases, offset by comparatively lower interest earnings
on a smaller amount of invested cash.
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 second
quarter net income. Net income of $605,000 for the quarter ended June 30, 1998
increased to 145% of the $417,000 profit earned during the comparable 1997
period. Diluted earnings per share increased by 40%, to $.07 for the 1998 second
quarter versus $.05 per share in the comparable 1997 period. Weighted average
shares of common stock outstanding were relatively unchanged at 8.3 million
shares for the 1998 quarter versus 8.4 million at the end of the second quarter
of 1997.
7
<PAGE>
Six Months Ended June 30, 1998 and 1997
Consolidated revenues for the six months ended June 30, 1998 totaled $13.8
million, up 17% from $11.8 million a year earlier. This increase is principally
attributable to stronger INOVOJECT(R) system revenues which account for 95% of
the $13.8 million total. Consistent with the 9% increase from June 30, 1997 in
the number of INOVOJECT(R) systems installed under lease agreements, and higher
machine throughput, INOVOJECT(R) system revenues showed a year-over-year
increase of 17%, growing $1.9 million to $13.2 million. 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 $6.7 million (48% of
total revenues) for the first six months of 1998 compared to $5.7 million (48%
of total revenues) for the same 1997 period, resulting in first-half gross
margins of 52% for the 1998 and the 1997 periods.
Operating expenses for the six months ended June 30, 1998 increased to $5.5
million, up $494,000 from the comparable 1997 amount. The increase principally
reflects $738,000 attributable to general corporate expense associated with
higher domestic sales, international expansion, and legal fees related to patent
infringement lawsuits filed by the Company and related matters; and $32,000
associated with product research and development, offset by savings of $276,000
related to timing differences from the 1997 period, and operating efficiencies.
Net interest expense decreased by $160,000 from $360,000 for the six months
ended June 30, 1997 to $200,000 for the same 1998 period. This 44% improvement
represents the net impact of a $253,000 decrease in interest expense
attributable to reductions in lease and debt obligations, offset by $93,000 less
interest earned on short-term investment balances.
Net income for the six months ended June 30, 1998 of $1,132,000 represents 167%
of the $679,000 reported for the same period ended June 30, 1997. The increase
of $453,000 translates into diluted earnings during the first half of 1998 that,
at $.14 per weighted average share of common stock outstanding, equals 175% of
the $.08 per weighted average share reported for the six months ended June
30,1997. Weighted average shares of common stock outstanding of 8.3 million
shares were unchanged at the end of both the second quarter of 1998 and 1997.
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 anticipates 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 South Korea, Peru, Equador, and Pakistan.
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 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 in 1998.
For the remainder of the year, the goals of management are to maintain
profitability, to continue its 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 June 30, 1998, the Company's cash, cash equivalents and restricted cash
($275,000) balances totaled $7.6 million, down approximately $1.2 million from
the $8.8 million on hand at year-end 1997.
Operating activities generated approximately $2.4 million in cash during the
first half of 1998, reflecting increases attributable to $1.1 million in net
income and $2.5 million from depreciation and amortization, the total of which
was offset by a $998,000 increase in accounts receivable, inventories, and other
current assets, and a $254,000 decrease in accounts payable and accrued
expenses. During the same period, investing activities consumed $2.6 million for
the purchase of INOVOJECT(R) systems to accommodate domestic and international
growth, and for leasehold improvements associated with construction of the
Company's avian research facility.
Net financing activities consumed $1.2 million during the period largely as a
result of repayments on capital lease obligations.
As of June 30, 1998 the Company had outstanding purchase commitments of
approximately $3.3 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) egg injection systems.
Based on its current operations, management believes that its available cash and
cash equivalents, together with cash flow from operations will be sufficient to
fund its capital investments and continued international expansion during the
balance of 1998.
9
<PAGE>
YEAR 2000 ISSUES
The Company has authorized the formation of a team to assess Year 2000 issues;
however, this assessment is not complete and the costs of achieving full Year
2000 readiness has not yet been determined. Embrex has determined that its
general ledger and primary financial accounting software is a DOS-based
application that operates on a client server network and that this application
uses only two digits to identify a year in the date field. The Company intends
to replace this application with a Windows(TM)-based system. Irrespective of the
Year 2000 issue, the Company needs to upgrade its accounting system to meet the
demands of its business, and is in the process of developing the implementation
plan for this upgrade. The Company believes that the additional costs associated
with the Year 2000 aspects of the upgrade will be immaterial.
For a description of certain other Year 2000 matters and related risk factors,
see Exhibit 99 to the registrant's Form 10-K for the year ended December 31,
1997 filed with the Securities and Exchange Commission on March 30, 1998 under
the heading "RISK FACTORS -- Upgrade to Company's Internal Systems and Year 2000
Compliance."
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 if appealed,
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,
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.
On July 30, 1998, a jury in the United States District Court for the Eastern
District of North Carolina (Raleigh Division) returned verdicts in favor of
Embrex in its actions against Service Engineering Corporation and Edward G.
Bounds for patent infringement and breach of contract. The verdicts fully upheld
the validity of all claims of the "Sharma" patent (United States Patent No.
4,450,630 exclusively licensed to Embrex by the United States Department of
Agriculture) and found that the defendants willfully infringed all asserted
claims of the patent. In addition, the verdicts found that the defendants had
breached a 1995 infringement settlement agreement and that the breach was not in
good faith. The verdicts rendered by the jury, which are subject to appeal by
the defendants, awarded Embrex damages of $500,000 plus litigation expenses and
court costs.
10
<PAGE>
For a description of certain patent infringement proceedings initiated by the
registrant and related legal proceedings, see 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.
On May 21, 1998 the Annual Shareholders meeting was held and the following
matters were submitted to the shareholders for a vote. There were 7,297,889
shares represented at the meeting in person or by proxy set and forth below is a
brief description of the matters voted on and the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes.
Election of Directors:
<TABLE>
<CAPTION>
Votes Votes Votes
Director Votes For Withheld Against Abstained Totals
- -------- --------- -------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Charles E. Austin 6,337,153 960,736 n/a n/a 7,297,889
C. Daniel Blackshear 6,297,378 1,000,511 n/a n/a 7,297,889
Lester M. Crawford,
D.V.M., Ph.D. 6,346,023 951,866 n/a n/a 7,297,889
Randall L. Marcuson 6,279,061 1,018,828 n/a n/a 7,297,889
Kenneth N. May, Ph.D. 6,344,853 953,036 n/a n/a 7,297,889
Arthur M. Pappas 6,240,538 1,057,351 n/a n/a 7,297,889
</TABLE>
Amend the Company's incentive stock option and nonstatutory stock option plan to
increase the maximum number of shares of common stock available for issuance
pursuant to the Plan:
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
2,399,464 730,580 36,101 4,131,744
In accordance with applicable law, broker non-votes were not counted as
"entitled to vote" on this matter.
Amend the Company's Bylaws to change the range of the number of Directors on the
Board of Directors from a minimum of one (1) and maximum of seven (7) to a
minimum of one (1) and maximum of twelve (12):
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
6,325,789 911,154 60,946 0
Ratify the action of the Board of Directors in appointing Ernst & Young LLP as
independent accountants for the fiscal year ending December 31, 1998:
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
7,248,812 30,356 18,721 0
11
<PAGE>
Item 5. Other information.
Any proposals which shareholders intend to present for a vote at the Company's
1999 annual meeting of shareholders, and which such shareholders desire to have
included in the Company's proxy materials related to that meeting, must be
received by the Company on or before December 28, 1998. Proposals received after
that date will not be considered for inclusion in such proxy materials.
In addition, if a shareholder intends to present a matter for a vote at the 1999
annual meeting of shareholders, other than by submitting a proposal for
inclusion in the Company's proxy statement for that meeting, the shareholder
must give timely notice in accordance with the Company's Bylaws. To be timely, a
shareholder's notice must be received by the Company not more than 90 days and
not less than 50 days before the meeting. The Company's Bylaws provide that an
annual meeting may be held in any month; the 1998 annual meeting was held on May
21, 1998, and it is anticipated that the 1999 annual meeting will be held on a
similar schedule.
Any shareholder proposal or notice described above must be in writing and sent
to the Company by registered mail, return receipt requested, to the Company's
executive offices at Post Office Box 13989, Research Triangle Park, North
Carolina 27709, Attention: Corporate Secretary. Any such proposal or notice also
will be subject to the requirements contained in the Company's Bylaws relating
to shareholder proposals and any applicable requirements of the Securities
Exchange Act of 1934.
The foregoing information supercedes the information regarding shareholder
proposals set forth in the Company's proxy statement relating to its 1998 annual
meeting, previously mailed to shareholders and filed with the Securities and
Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter for which this report is filed.
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: August 13, 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 June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,641
<SECURITIES> 0
<RECEIVABLES> 3,067
<ALLOWANCES> (43)
<INVENTORY> 2,195
<CURRENT-ASSETS> 651
<PP&E> 28,212
<DEPRECIATION> (16,660)
<TOTAL-ASSETS> 25,063
<CURRENT-LIABILITIES> 6,100
<BONDS> 1,790
0
0
<COMMON> 83
<OTHER-SE> 17,090
<TOTAL-LIABILITY-AND-EQUITY> 25,063
<SALES> 6,961
<TOTAL-REVENUES> 6,961
<CGS> (3,474)
<TOTAL-COSTS> (3,474)
<OTHER-EXPENSES> 2,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> 805
<INCOME-TAX> 200
<INCOME-CONTINUING> 605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 605
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
