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