As filed with the Securities and Exchange Commission on December 19, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EMBREX, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1469825
(State or other jurisdiction (I.R.S.Employer
of incorporation or organization) Identification No.)
1035 SWABIA COURT
DURHAM, NORTH CAROLINA 27703
(919) 941-5185
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RANDALL L. MARCUSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EMBREX, INC.
1035 SWABIA COURT
DURHAM, NORTH CAROLINA 27703
(919) 941-5185
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
COPIES TO:
GERALD F. ROACH, ESQ.
CHRISTOPHER B. CAPEL, ESQ.
SMITH, ANDERSON, BLOUNT,
DORSETT, MITCHELL & JERNIGAN, L.L.P.
2500 FIRST UNION CAPITOL CENTER
RALEIGH, NORTH CAROLINA 27601
(919) 821-1220
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share (1)...... 638,805 $6.31(2) $4,030,859.50 $1,221.47
Common Stock, par value $.01 per share (3)...... 180,000(4) $8.4375(5) $1,518,750.00 $ 460.23
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Covers shares of Common Stock owned by certain selling stockholders which
may be offered from time to time by the selling stockholders after the
effective date of this Registration Statement.
(2) Based upon the average of the last reported bid and asked prices of the
Common Stock as reported by the Nasdaq Stock Market on December 17, 1996,
estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as
amended.
(3) Covers shares of Common Stock reserved for issuance upon exercise of the
1993 Warrants (as defined below).
(4) Plus such indeterminate number of shares as may be issued pursuant to
certain anti-dilution provisions contained in the 1993 Warrants
as permitted by Rule 416 under the Securities Act of
1933, as amended.
(5) Based upon the exercise price for each share of Common Stock issuable upon
exercise of the 1993 Warrants in accordance with Rule 457(g) under the
Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement (the "Registration Statement") contains two
prospectuses: one relating to the offering by certain stockholders of Embrex,
Inc. (the "Company") of 638,805 shares of the common stock, par value $.01 per
share ("Common Stock"), of the Company currently outstanding (the "Stockholder
Offering Prospectus") and one relating to the offering by the Company of 180,000
shares (subject to adjustment) of the Common Stock that are reserved by the
Company for issuance upon the exercise of certain outstanding warrants to
purchase Common Stock (the "Company Offering Prospectus"). The Stockholder
Offering Prospectus is set forth in full beginning on the next page. The Company
Offering Prospectus is set forth in full immediately after the Stockholder
Offering Prospectus and before Part II of the Registration Statement.
<PAGE>
EMBREX, INC.
638,805 SHARES
COMMON STOCK, PAR VALUE $.01 PER SHARE
---------------------
The shares offered hereby (the "Shares") consist of 638,805 shares of
common stock, par value $.01 per share (the "Common Stock"), of Embrex, Inc., a
North Carolina corporation ("Embrex" or the "Company"), which are owned by the
selling stockholders listed herein under "Selling Stockholders" (collectively,
the "Selling Stockholders"). The Shares were acquired from Embrex by the Selling
Stockholders upon exercise of certain warrants (the "1991 Warrants") to purchase
shares of Common Stock pursuant to a Warrant Agreement, dated November 7, 1991
(the "1991 Warrant Agreement"), between the Company and Josephthal Lyon & Ross
Incorporated ("Josephthal"). See "Selling Stockholders."
The Shares may be offered from time to time by the Selling Stockholders
after the date of this Prospectus. The Company shall pay all expenses in
connection herewith, except that each Selling Stockholder shall pay any
commissions, discounts, or other fees payable to broker-dealers in connection
with any sale of the Shares. The Company will not receive any of the proceeds
from the sale of the Shares by the Selling Stockholders.
The Selling Stockholders have not advised Embrex of any specific plans for
the distribution of the Shares covered by this Prospectus other than as
described herein, but it is anticipated that the Shares will be sold from time
to time primarily in transactions (which may include block transactions) on The
Nasdaq Stock Market at the market price then prevailing, although sales may also
be made in negotiated transactions or otherwise. The Selling Stockholders and
the brokers and dealers through whom sales of the Shares may be made may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and their commissions or discounts and other
compensation may be regarded as underwriters' compensation. See "Plan of
Distribution."
The Company's Common Stock is quoted on the Nasdaq National Market of The
Nasdaq Stock Market (the "Nasdaq National Market") under the symbol "EMBX." On
December __, 1996, the last reported closing price of the Common Stock was
$______ per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER __, 1996
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, the Company's proxy
statement, dated April 12, 1996, with respect to the 1996 annual meeting of the
shareholders of the Company and the description of the Company's Common Stock
contained in its Registration Statement on Form 8-A as filed with the Securities
and Exchange Commission (the "Commission") on August 27, 1991 are hereby
incorporated by reference in this Prospectus except as superseded or modified
herein. All documents filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), after the date of this Prospectus and prior to the termination
of the offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part of
this Prospectus except as so modified or superseded.
Embrex hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all documents and
information that have been incorporated by reference herein (not including
exhibits thereto unless such exhibits are specifically incorporated by reference
into the information incorporated herein). Such documents and information are
available upon request from the Company, 1035 Swabia Court, Durham, North
Carolina 27703, Attention: Investor Relations; Telephone: (919) 941-5185.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following regional offices: New York Regional Office, 7 World Trade Center, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549-1004. The Commission maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. Quotations relating to the Company's Common Stock appear on the
Nasdaq National Market and such reports and other information concerning the
Company can also be inspected at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W., Washington, D.C. 20006-1506.
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The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete; and with respect to each such contract or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matters involved, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and exhibits thereto. The information so omitted,
including exhibits, may be obtained from the Commission at its principal office
in Washington, D.C. upon payment of the prescribed fees, or may be inspected
without charge at the Public Reference Facilities of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING
STOCKHOLDERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10b-6A UNDER THE EXCHANGE ACT.
SEE "PLAN OF DISTRIBUTION."
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THE COMPANY
Embrex was incorporated in North Carolina in May 1985 and has developed
and commercialized the INOVOJECT(R) system, a proprietary, automated, in-the-egg
injection system that eliminates the need for manual vaccination of newly
hatched broiler chicks. Embrex is also developing and marketing patented
pharmaceutical and biological products to improve bird health, reduce bird
production costs and provide other economic benefits to the poultry industry.
The Company's principal executive offices are located at 1035 Swabia Court,
Durham, North Carolina 27703, and its telephone number is (919) 941-5185.
RISK FACTORS
INFORMATION SET FORTH IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AND SECTION
21E OF THE EXCHANGE ACT, WHICH REPRESENT THE COMPANY'S REASONABLE JUDGMENT
CONCERNING THE FUTURE AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE THE COMPANY'S ACTUAL OPERATING RESULTS AND FINANCIAL POSITION TO DIFFER
MATERIALLY. SUCH FORWARD-LOOKING STATEMENTS ARE FURTHER QUALIFIED BY THE
IMPORTANT FACTORS SET FORTH BELOW.
DEPENDENCE ON CERTAIN CUSTOMERS
The Company's revenues are highly dependent on expenditures by the
poultry producing industry. The Company's operations could be materially and
adversely affected by a general economic decline in this industry. The Company
has in the past derived, and may in the future derive, a significant portion of
its revenues from a relatively limited number of customers. In 1995, two
customers (Tyson Foods, Inc. and Perdue Farms, Inc.) accounted for approximately
35% and 11%, respectively, of the Company's consolidated revenues. The Company
also has experienced such concentration in the current year and is likely to do
so in future years. The loss of any such customer could materially adversely
affect the Company's revenues.
POSSIBLE NEED FOR ADDITIONAL FINANCING
From its inception in May 1985 through September 30, 1996, Embrex had
cumulative operating losses (accumulated deficit) of $39.6 million. Until the
first quarter of 1996, Embrex had incurred operating losses since its inception.
Although the Company has been profitable in the first three quarters of 1996,
there can be no assurance that Embrex will continue to operate profitably.
The ability of Embrex to attain revenues sufficient to meet its cash
requirements for operations is dependent upon continued market acceptance of the
INOVOJECT(R) system on lease terms acceptable to Embrex and on the successful
development and commercialization of additional products. The extent of the
Company's future revenues, if any, derived from INOVOJECT(R) fees is subject to
many variables such as whether additional agreements for INOVOJECT(R) systems
are reached, the timing of any agreements, whether existing or new installation
schedules are met, and the extent to which customers use the INOVOJECT(R)
system.
Until the Company realizes revenues sufficient to satisfy its cash
requirements, it will depend on its current cash and short-term investment
balances and on access to external financing to meet its equipment, working
capital and operating requirements. Although the Company anticipates that its
existing funds, as well as revenues from operations, will be sufficient to
sustain its existing operations for at least the next 12 months, there are no
assurances that such funds will be sufficient. If additional funds become
necessary to sustain existing operations, the Company will be required to seek
additional financing, and there can be no assurance that such financing will be
obtainable or that, if available, such financing will be on terms favorable or
acceptable to the
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Company. The Company may need additional financing in order to
sustain its anticipated growth, in the event it does not generate revenues
sufficient to satisfy its cash requirements for future growth. Obtaining
additional financing for such purposes may be difficult or impossible, or
financing may only be available on terms unfavorable or unacceptable to the
Company.
EFFECT OF ECONOMIC FACTORS ON REVENUES
The Company's revenues may be impacted by economic factors that are
beyond the Company's control, such as fluctuations in the price of poultry feed.
A principal component of the Company's revenues is fees charged to customers for
the number of eggs injected with the INOVOJECT(R) system. Rising poultry feed
prices increase the production costs of commercial poultry producers and may
cause them to reduce production which, in turn, could adversely impact the
Company's revenues.
NO ASSURANCE OF MARKET ACCEPTANCE OR DEVELOPMENT OF NEW PRODUCTS
Embrex's principal existing product, the INOVOJECT(R) system, has only
been in full commercial use since 1993. The market acceptance of new
technologies, including those of the Company, is subject to a number of factors,
including the ability of the technology to meet the potential customers' needs
more effectively than competitive products or technologies and any concerns
which may be associated with the use of new technology, such as reliability and
maintenance.
In addition to the presently marketed INOVOJECT(R) system, Embrex, both
itself and together with collaborators, is developing vaccines for control of
viral and parasitic diseases and products for health and performance
modification which are in various stages of development. These products are
subject to the risks inherent in the development of products based on innovative
technologies.
Embrex has developed and commercialized a new technology using its
proprietary viral neutralizing factor ("VNF") which permits a single dose
immunization of an egg embryo for the life of the bird. The Company markets a
vaccine known as BDA-Blen which uses Embrex's VNF. The vaccine has been
approved for post-hatch use, and approval for IN OVO use is currently pending.
However, BDA-Blen has not yet been accepted in the market and there is no
assurance that the product will be successfully marketed even if it is shown
to be effective.
The development and commercialization of additional new products will
require substantial testing and development and regulatory approval.
GOVERNMENT REGULATION AND NEED FOR REGULATORY APPROVAL
Although the use of the INOVOJECT(R) system is not subject to
regulatory approval in the U.S., the research and development activities of
Embrex as well as the investigation, manufacture and sale of poultry health and
performance enhancement products are subject to regulation either by the United
States Department of Agriculture ("USDA") or the United States Food and Drug
Administration ("FDA") and state and foreign agencies. The process of obtaining
governmental approval is costly and at the USDA generally takes from one to
three years and at the FDA five or more years. There can be no assurance that
any future product that Embrex may develop will be approved by the USDA, the FDA
or any other regulatory agency. Delays in obtaining regulatory approval may
adversely affect the marketing of any products developed by Embrex and the
ability of Embrex to receive product revenues and royalties. There can be no
assurance that regulatory approvals for Embrex's future products will be
obtained without lengthy delays, if at all.
Moreover, Embrex is, or may become, subject to various federal, state
and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing
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practices and the use and disposal of hazardous substances used in conjunction
with Embrex's research work. In addition, Embrex cannot predict the extent of
governmental regulations which might have an adverse effect on the production
and marketing of Embrex's products.
Embrex has entered into and intends to continue to enter into licensing
or joint development agreements pursuant to which costs associated with the
regulatory approval process for some products are and will be borne by the
licensees or joint developers. To the extent that Embrex is unable to generate
sufficient funds from operations or enter into licensing or joint development
agreements to develop products, it may not have the financial resources to
complete the regulatory approval process with respect to all or any of the
products currently under development. Products developed by Embrex may not be
marketed commercially in any jurisdiction in which required approvals have not
been obtained.
PATENTS AND PROPRIETARY RIGHTS
Certain of Embrex's products and certain of the processes by which
Embrex is able to produce its products are proprietary. Embrex has ownership
rights to some of the technologies employed in these processes, and some are
owned by others and exclusively licensed to Embrex. Embrex believes that patent
protection of materials or processes it develops and any products that may
result from Embrex's and licensors' research and development efforts are
important to the possible commercialization of Embrex's products. The patent
position of companies such as Embrex generally is highly uncertain and involves
complex legal and factual questions. To date no consistent policy has emerged
regarding the breadth of claims allowed in biotechnology patents. Accordingly,
there can be no assurance that patent applications relating to Embrex's products
or technology will result in patents being issued or that, if issued, the
patents will afford protection against competitors with similar technology.
Moreover, some patent licenses held by Embrex may be terminated upon the
occurrence of certain events or become non-exclusive after a specified period.
In addition, companies that obtain patents claiming products or processes that
are necessary for or useful to the development of Embrex's products could bring
legal actions against Embrex claiming infringement. Embrex is currently not the
subject of any patent infringement claim. There can be no assurance that Embrex
will have the financial resources necessary to enforce any patent rights it may
hold. Also, Embrex may be required to obtain licenses from others to develop,
manufacture or market its products. There can be no assurance that Embrex will
be able to obtain such licenses on commercially reasonable terms or that the
patents underlying the licenses will be valid and enforceable.
Embrex also relies upon unpatented, proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information or techniques or properly gain access to
Embrex's proprietary technology, or disclose such technology or that Embrex can
meaningfully protect its rights in such unpatented proprietary technology.
Embrex attempts and will continue to attempt to protect its proprietary
materials and processes by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees and certain other persons who have
access to its proprietary materials or processes or who have licensing or
research arrangements with Embrex. Despite these protections, no assurance can
be given that others will not independently develop or obtain access to such
materials or processes or that Embrex's competitive position will not be
adversely affected thereby.
Recently, the Company filed an action for patent infringement and
breach of contract against Service Engineering Corp. and a related party. The
infringement action relates to a patent exclusively licensed to Embrex for the
IN OVO injection of vaccines into an avian embryo; the breach of contract action
is based on a previous infringement action by Embrex against these parties which
was settled. The defendants have filed counterclaims against the Company seeking
invalidity of the patent and alleging, among other things, that Embrex violated
federal law by misrepresenting
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the defendants' commercial activities and sought to maintain prices for IN OVO
vaccinations at an artificially high level. The outcome of this litigation is
uncertain and there is no assurance that Embrex will prevail on the merits or
successfully defend the validity of its patent.
DEPENDENCE ON KEY PERSONNEL
Embrex's ability to develop marketable products and maintain a
competitive research and technological position will depend on its ability to
continue to attract and retain experienced and highly educated, scientific and
management personnel and advisors. Competition for qualified employees among
biotechnology companies is intense and the loss of key scientific or management
personnel would adversely affect Embrex. Embrex has obtained insurance in the
amount of $1,000,000 on the life of Randall L. Marcuson, its President and Chief
Executive Officer, of which Embrex is the sole beneficiary. There can be no
assurance that Embrex will be able to continue to attract and retain qualified
staff.
SUPPORT AND MAINTENANCE REQUIREMENTS
The Company is required to supply, support, and maintain large numbers
of INOVOJECT(R) systems at its customers' hatcheries on a timely basis at a
reasonable cost to the Company. There can be no assurance that the Company will
be able to continue to provide such services on a cost-effective basis.
TECHNOLOGY AND COMPETITION
The areas of technology in which Embrex is involved are subject to
rapid and significant technological change. Competitors include independent
companies that specialize in biotechnology as well as major chemical and
pharmaceutical companies, universities, and public and private research
organizations, many of which are well established and have substantially greater
marketing, financial, technological and other resources than Embrex. There can
be no assurance that competitors will not succeed in developing technologies and
products that are more effective than any which have been or are being developed
by Embrex or which would render Embrex's technology and products obsolete or
non-competitive.
DEPENDENCE ON OTHERS
Embrex plans to continue to conduct its operations with third party
collaborators, licensors or licensees. While Embrex believes its present and
future collaborators, licensors and licensees will have an economic motivation
to succeed in performing their obligations under its agreements with them, the
amount and timing of funds and other resources to be devoted under such
agreements will be controlled by such other parties and are subject to financial
or other difficulties that may befall such other parties. Thus, no assurance can
be given that Embrex will generate any revenues from such agreements.
Embrex does not have large scale facilities for the production of
Embrex's INOVOJECT(R) system and biological products and does not plan to
develop such facilities in the foreseeable future. Embrex therefore will rely
principally upon relationships with contract manufacturers. There can be no
assurance that manufacture and supply agreements will be maintained on terms and
at costs acceptable to Embrex.
The Company has developed a strategic relationship with a single
contract manufacturer to fabricate its INOVOJECT(R) systems. While other machine
fabricators exist and have contracted limited numbers of INOVOJECT(R) systems, a
change in fabricators could cause a delay in manufacturing and a possible delay
in the timing of future INOVOJECT(R) installations and revenues from those
installations.
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The Company has granted Select Laboratories, Inc. ("Select"), a
division of Rhone Merieux, exclusive rights to manufacture bursal disease
vaccines containing Embrex's proprietary VNF product
for Embrex to market in the North American, South American and Asian
regions. Embrex has also granted Arthur Webster Pty. Ltd. ("Webster") exclusive
rights to manufacture bursal disease vaccines containing the Company's VNF
product to be marketed in Europe, the Middle East and Africa. Additionally, the
Company has two contract suppliers of its VNF product. The manufacture of the
bursal disease vaccines being produced by Select and Webster and the Company's
VNF product generally must be performed in licensed facilities and/or under
approved regulatory methods. Although there are other manufacturers who are
capable of manufacturing bursal disease products and producing products such as
VNF, a change of suppliers could adversely effect the Company's future operating
results due to the time it would take a new supplier to obtain regulatory
approval of its production process and/or manufacturing facilities.
ISSUANCE OF PREFERRED STOCK; SHAREHOLDER RIGHTS PLAN; ANTI-TAKEOVER EFFECTS
The Board of Directors has the authority to issue up to 15,000,000
shares of Preferred Stock, no par value per share, in one or more series and to
determine the designations, preferences and relative participating, optional or
other special rights and qualifications, limitations or restrictions thereof, of
the shares constituting any series of Preferred Stock, without any further vote
or action by the shareholders. The issuance of Preferred Stock by the Board of
Directors could affect the rights of the holders of Common Stock. For example,
such issuance could result in a class of securities outstanding that would have
preferences with respect to voting rights and dividends and in liquidation over
the Common Stock, and could (upon conversion or otherwise) enjoy all of the
rights appurtenant to Common Stock. As of the date of this Prospectus, there are
no issued and outstanding shares of Preferred Stock.
The authority of the Board of Directors to issue Preferred Stock could
potentially be used to discourage attempts by others to obtain control of the
Company through merger, tender offer, proxy contest or otherwise by making such
attempts more difficult to achieve or more costly. The Board of Directors may
issue the Preferred Stock without shareholder approval and with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. There are no agreements or understandings for the issuance of
Preferred Stock and the Board of Directors has no present intention to issue any
Preferred Stock.
In March 1996, Embrex adopted a shareholder rights plan which could
have the effect of discouraging a takeover of the Company. The rights plan, if
triggered, would make it more difficult to acquire the Company by, among other
things, allowing existing shareholders to acquire additional shares at a
substantial discount, thus substantially inhibiting an acquiror's ability to
obtain control of the Company.
INTERNATIONAL SALES AND MARKETING
The company intends to continue its efforts to expand its markets
outside of North America. Sales outside of North America accounted for
approximately 8.1%, 4.2% and 1.8% of revenues in fiscal 1996 (through September
30), 1995 and 1994, respectively. The volume and consistency of such sales is
subject to economic and political conditions in the markets in which Embrex does
business, which are beyond the Company's control. In addition, there is no
assurance that INOVOJECT(R) will be successfully marketed outside of North
America since market acceptance is often dependent on the need for drugs to be
administered and on regulatory approval of IN OVO administration.
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USE OF PROCEEDS
The Shares offered by the Selling Stockholders are not being sold by
the Company, and the Company will not receive any proceeds from the sale
thereof. See "Plan of Distribution."
SELLING STOCKHOLDERS
The Selling Stockholders are employees or former employees of, and
include controlling persons of, Josephthal, the representative of the
underwriters for the initial public offering of the Company's Common Stock in
1991 and a subsequent underwritten offering of Common Stock by the Company in
1993. Josephthal is also a market maker for the Common Stock.
The Company entered into the 1991 Warrant Agreement with Josephthal
providing for the issuance to Josephthal, or its designees, of the 1991 Warrants
to purchase up to 220,000 shares (subject to adjustment) of Common Stock and
also providing certain registration rights with respect to the shares issuable
upon exercise of the 1991 Warrants. The 1991 Warrants were issued to the Selling
Stockholders as designees of Josephthal and the Shares offered hereby are being
registered pursuant to such registration rights.
The following table sets forth certain information as of December 1,
1996 regarding the shares of the Company's Common Stock owned of record or known
to the Company to be owned beneficially by each Selling Stockholder and as
adjusted to give effect to the sale of the Shares offered hereby. The Shares are
being registered to permit public secondary trading in the Shares and the
Selling Stockholders may offer the Shares for resale from time to time. See
"Plan of Distribution."
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SHARES BENEFICALLY SHARES
OWNED PRIOR TO NUMBER OF BENEFICIALLY OWNED
NAME OF SELLING OFFERING SHARES AFTER OFFERING
STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
Matthew Balk 0 -- 23,148 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Paul Fitzgerald 0 -- 1,840 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Frank Garriton 0 -- 2,903 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Michael Loew 0 -- 21,603 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Dan Purjes 0 -- 437,915 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Lawrence Rice 0 -- 41,270 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Charles Roden 0 -- 28,316 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Averell W. Satloff 0 -- 10,653 0 --
810 7th Avenue
New York, NY 10019
Peter Sheib 0 -- 46,476 0 --
200 Park Avenue, 24th Floor
New York, NY 10166
Michael Taylor 0 -- 24,681 0 --
Gilford Securities
850 Third Avenue
New York, NY 10022
TOTAL 638,805
Other than as a result of the ownership of shares of Common Stock or as
set forth above, none of the Selling Stockholders has had any material
relationship with the Company within the three year period ending on the date of
this Prospectus.
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PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. The Company will not receive any proceeds from any sales of the
Shares but has received proceeds of approximately $3,085,447 from the exercise
of the 1991 Warrants, which proceeds will be used for general working capital
purposes. All costs, expenses and fees in connection with the registration of
the Shares offered hereby will be borne by the Company. Commissions, discounts,
or other fees payable to broker-dealers, if any, attributable to the sale of
Shares will be borne by the Selling Stockholders (or their donees or pledgees).
The decision to offer and sell the Shares, and the timing and amount of
any offers or sales that are made, is and will be within the sole discretion of
the Selling Stockholders. Sales of Shares may be effected from time to time in
transactions (which may include block transactions) on the Nasdaq National
Market, in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale or at negotiated prices. The Selling Stockholders may effect such
transactions by selling Common Stock directly to purchasers or to or through
broker-dealers which may act as agents or principals. Such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholder and/or the purchasers of Common Stock for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The Selling Stockholders and any broker-dealers that act
in connection with the sale of the Common Stock might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the shares of Common
Stock as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. The Selling Shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act. Liabilities under the federal securities laws cannot be
waived.
Because the Selling Stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Stockholders will be subject to prospectus delivery requirements under the
Securities Act.
The Selling Stockholders, any selling broker or dealer and any
"affiliated purchasers" may be subject to Rule 10b-6 under the Exchange Act,
which Rule, with certain exceptions, prohibits any such person from bidding for
or purchasing any security which is the subject of a distribution until the
participation of such person in that distribution is completed. In addition,
Rule 10b-7 under the Exchange Act prohibits any "stabilizing bid" or
"stabilizing purchase" for the purpose of pegging, fixing or stabilizing the
price of Common Stock in connection with this offering.
Accordingly, unless granted an exemption by the Commission from Rule
10b-6 under the Exchange Act or unless otherwise permitted under Rule 10b-6A,
the Selling Stockholders will not be permitted to engage in any stabilization
activity in connection with the Company's securities, and will not be permitted
to bid for or purchase any securities of the Company or to attempt to induce any
person to purchase any of the Company's securities other than as permitted under
the Exchange Act. Selling Stockholders who may be "affiliated purchasers" as
defined in Rule 10b-6 have been advised that they must coordinate their sales
with each other for purposes of Rule 10b-6. Josephthal has advised the Company
that it may seek to comply with Rule 10b-6A with respect to transactions in the
Company's Common Stock during the distribution of the Shares and will suspend
market making activities in the Company's Common Stock during any period in
which such activities would be prohibited under the Exchange Act.
The Common Stock is quoted on the Nasdaq National Market and the Shares
have been authorized for quotation on the Nasdaq National Market.
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<PAGE>
The Company and the Selling Stockholders have agreed to indemnify each
other against certain liabilities arising under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed
upon for the Company by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., 2500 First Union Capitol Center, Raleigh, North Carolina 27601.
EXPERTS
The consolidated financial statements of the Company incorporated
herein by reference from the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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EMBREX, INC.
180,000 SHARES
COMMON STOCK, PAR VALUE $.01 PER SHARE
---------------------
The shares offered hereby (the "Shares") consist of 180,000 shares (subject
to adjustment as described below) of common stock, par value $.01 per share (the
"Common Stock"), of Embrex, Inc., a North Carolina corporation ("Embrex" or the
"Company"), reserved for issuance by the Company upon the exercise of warrants
(the "1993 Warrants") to purchase shares of Common Stock pursuant to a Warrant
Agreement, dated as of July 29, 1993 (the "1993 Warrant Agreement"), by and
among Embrex, Josephthal Lyon & Ross Incorporated and Foley Mufson Howe &
Company. See "Description of Warrants."
The Company's Common Stock is quoted on the Nasdaq National Market of The
Nasdaq Stock Market (the "Nasdaq National Market") under the symbol "EMBX." On
December __, 1996, the last reported closing price of the Common Stock was
$______ per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
THE DATE OF THIS PROSPECTUS IS DECEMBER __, 1996
13
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1995, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996, the Company's proxy
statement, dated April 12, 1996, with respect to the 1996 annual meeting of the
shareholders of the Company, the description of the Company's Common Stock
contained in its Registration Statement on Form 8-A as filed with the Securities
and Exchange Commission (the "Commission") on August 27, 1991 are hereby
incorporated by reference in this Prospectus except as superseded or modified
herein. Also incorporated by reference herein is the 1993 Warrant Agreement,
which is an exhibit to the Company's Registration Statement on Form SB-2 as
filed with the Commission on June 4, 1993 (File No. 33-63896). All documents
filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date
of this Prospectus and prior to the termination of the offering shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except as
so modified or superseded.
Embrex hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request of such person, a copy of any and all documents and
information that have been incorporated by reference herein (not including
exhibits thereto unless such exhibits are specifically incorporated by reference
into the information incorporated herein). Such documents and information are
available upon request from the Company, 1035 Swabia Court, Durham, North
Carolina 27703, Attention: Investor Relations; Telephone: (919) 941-5185.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following regional offices: New York Regional Office, 7 World Trade Center, New
York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained at prescribed rates from the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549-1004. The Commission maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. Quotations relating to the Company's Common Stock appear on the
Nasdaq National Market and such reports and other information concerning the
Company can also be inspected at the offices of the Nasdaq Stock Market, 1735 K
Street, N.W., Washington, D.C. 20006-1506.
14
<PAGE>
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which have been omitted as permitted by
the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete; and with respect to each such contract or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matters involved, each such
statement being qualified in all respects by such reference. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and exhibits thereto. The information so omitted,
including exhibits, may be obtained from the Commission at its principal office
in Washington, D.C. upon payment of the prescribed fees, or may be inspected
without charge at the Public Reference Facilities of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE
WITH RULE 10b-6A UNDER THE EXCHANGE ACT. SEE "PLAN OF DISTRIBUTION."
15
<PAGE>
THE COMPANY
Embrex was incorporated in North Carolina in May 1985 and has developed
and commercialized the INOVOJECT(R) system, a proprietary, automated, in-the-egg
injection system that eliminates the need for manual vaccination of newly
hatched broiler chicks. Embrex is also developing and marketing patented
pharmaceutical and biological products to improve bird health, reduce bird
production costs and provide other economic benefits to the poultry industry.
The Company's principal executive offices are located at 1035 Swabia Court,
Durham, North Carolina 27703, and its telephone number is (919) 941-5185.
RISK FACTORS
INFORMATION SET FORTH IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AND SECTION
21E OF THE EXCHANGE ACT, WHICH REPRESENT THE COMPANY'S REASONABLE JUDGMENT
CONCERNING THE FUTURE AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE THE COMPANY'S ACTUAL OPERATING RESULTS AND FINANCIAL POSITION TO DIFFER
MATERIALLY. SUCH FORWARD-LOOKING STATEMENTS ARE FURTHER QUALIFIED BY THE
IMPORTANT FACTORS SET FORTH BELOW.
DEPENDENCE ON CERTAIN CUSTOMERS
The Company's revenues are highly dependent on expenditures by the
poultry producing industry. The Company's operations could be materially and
adversely affected by a general economic decline in this industry. The Company
has in the past derived, and may in the future derive, a significant portion of
its revenues from a relatively limited number of customers. In 1995, two
customers (Tyson Foods, Inc. and Perdue Farms, Inc.) accounted for approximately
35% and 11%, respectively, of the Company's consolidated revenues. The Company
also has experienced such concentration in the current year and is likely to do
so in future years. The loss of any such customer could materially adversely
affect the Company's revenues.
POSSIBLE NEED FOR ADDITIONAL FINANCING
From its inception in May 1985 through September 30, 1996, Embrex had
cumulative operating losses (accumulated deficit) of $39.6 million. Until the
first quarter of 1996, Embrex had incurred operating losses since its inception.
Although the Company has been profitable in the first three quarters of 1996,
there can be no assurance that Embrex will continue to operate profitably.
The ability of Embrex to attain revenues sufficient to meet its cash
requirements for operations is dependent upon continued market acceptance of the
INOVOJECT(R) system on lease terms acceptable to Embrex and on the successful
development and commercialization of additional products. The extent of the
Company's future revenues, if any, derived from INOVOJECT(R) fees is subject to
many variables such as whether additional agreements for INOVOJECT(R) systems
are reached, the timing of any agreements, whether existing or new installation
schedules are met, and the extent to which customers use the INOVOJECT(R)
system.
Until the Company realizes revenues sufficient to satisfy its cash
requirements, it will depend on its current cash and short-term investment
balances and on access to external financing to meet its equipment, working
capital and operating requirements. Although the Company anticipates that its
existing funds, as well as revenues from operations, will be sufficient to
sustain its existing operations for at least the next 12 months, there are no
assurances that such funds will be sufficient. If additional funds become
necessary to sustain existing operations, the Company will be required to seek
additional financing, and there can be no assurance that such financing will be
obtainable or that, if available, such financing will be on terms favorable or
acceptable to the
16
<PAGE>
Company. The Company may need additional financing in order to sustain its
anticipated growth, in the event it does not generate revenues sufficient to
satisfy its cash requirements for future growth. Obtaining additional financing
for such purposes may be difficult or impossible, or financing may only be
available on terms unfavorable or unacceptable to the Company.
EFFECT OF ECONOMIC FACTORS ON REVENUES
The Company's revenues may be impacted by economic factors that are
beyond the Company's control, such as fluctuations in the price of poultry feed.
A principal component of the Company's revenues is fees charged to customers for
the number of eggs injected with the INOVOJECT(R) system. Rising poultry feed
prices increase the production costs of commercial poultry producers and may
cause them to reduce production which, in turn, could adversely impact the
Company's revenues.
NO ASSURANCE OF MARKET ACCEPTANCE OR DEVELOPMENT OF NEW PRODUCTS
Embrex's principal existing product, the INOVOJECT(R) system, has only
been in full commercial use since 1993. The market acceptance of new
technologies, including those of the Company, is subject to a number of factors,
including the ability of the technology to meet the potential customers' needs
more effectively than competitive products or technologies and any concerns
which may be associated with the use of new technology, such as reliability and
maintenance.
In addition to the presently marketed INOVOJECT(R) system, Embrex, both
itself and together with collaborators, is developing vaccines for control of
viral and parasitic diseases and products for health and performance
modification which are in various stages of development. These products are
subject to the risks inherent in the development of products based on innovative
technologies.
Embrex has developed and commercialized a new technology using its
proprietary viral neutralizing factor ("VNF") which permits a single dose
immunization of an egg embryo for the life of the bird. The Company markets
a vaccine known as BDA-Blen which uses Embrex's VNF. The vaccine has been
approved for post-hatch use, and approval for IN OVO use is currently pending.
However, BDA-Blen has not yet been accepted in the market and there is no
assurance that the product will be successfully marketed even if it is shown
to be effective.
The development and commercialization of additional new products will
require substantial testing and development and regulatory approval.
GOVERNMENT REGULATION AND NEED FOR REGULATORY APPROVAL
Although the use of the INOVOJECT(R) system is not subject to
regulatory approval in the U.S., the research and development activities of
Embrex as well as the investigation, manufacture and sale of poultry health and
performance enhancement products are subject to regulation either by the United
States Department of Agriculture ("USDA") or the United States Food and Drug
Administration ("FDA") and state and foreign agencies. The process of obtaining
governmental approval is costly and at the USDA generally takes from one to
three years and at the FDA five or more years. There can be no assurance that
any future product that Embrex may develop will be approved by the USDA, the FDA
or any other regulatory agency. Delays in obtaining regulatory approval may
adversely affect the marketing of any products developed by Embrex and the
ability of Embrex to receive product revenues and royalties. There can be no
assurance that regulatory approvals for Embrex's future products will be
obtained without lengthy delays, if at all.
Moreover, Embrex is, or may become, subject to various federal, state
and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing
17
<PAGE>
practices and the use and disposal of hazardous substances used in conjunction
with Embrex's research work. In addition, Embrex cannot predict the extent of
governmental regulations which might have an adverse effect on the production
and marketing of Embrex's products.
Embrex has entered into and intends to continue to enter into licensing
or joint development agreements pursuant to which costs associated with the
regulatory approval process for some products are and will be borne by the
licensees or joint developers. To the extent that Embrex is unable to generate
sufficient funds from operations or enter into licensing or joint development
agreements to develop products, it may not have the financial resources to
complete the regulatory approval process with respect to all or any of the
products currently under development. Products developed by Embrex may not be
marketed commercially in any jurisdiction in which required approvals have not
been obtained.
PATENTS AND PROPRIETARY RIGHTS
Certain of Embrex's products and certain of the processes by which
Embrex is able to produce its products are proprietary. Embrex has ownership
rights to some of the technologies employed in these processes, and some are
owned by others and exclusively licensed to Embrex. Embrex believes that patent
protection of materials or processes it develops and any products that may
result from Embrex's and licensors' research and development efforts are
important to the possible commercialization of Embrex's products. The patent
position of companies such as Embrex generally is highly uncertain and involves
complex legal and factual questions. To date no consistent policy has emerged
regarding the breadth of claims allowed in biotechnology patents. Accordingly,
there can be no assurance that patent applications relating to Embrex's products
or technology will result in patents being issued or that, if issued, the
patents will afford protection against competitors with similar technology.
Moreover, some patent licenses held by Embrex may be terminated upon the
occurrence of certain events or become non-exclusive after a specified period.
In addition, companies that obtain patents claiming products or processes that
are necessary for or useful to the development of Embrex's products could bring
legal actions against Embrex claiming infringement. Embrex is currently not the
subject of any patent infringement claim. There can be no assurance that Embrex
will have the financial resources necessary to enforce any patent rights it may
hold. Also, Embrex may be required to obtain licenses from others to develop,
manufacture or market its products. There can be no assurance that Embrex will
be able to obtain such licenses on commercially reasonable terms or that the
patents underlying the licenses will be valid and enforceable.
Embrex also relies upon unpatented, proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information or techniques or properly gain access to
Embrex's proprietary technology, or disclose such technology or that Embrex can
meaningfully protect its rights in such unpatented proprietary technology.
Embrex attempts and will continue to attempt to protect its proprietary
materials and processes by relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees and certain other persons who have
access to its proprietary materials or processes or who have licensing or
research arrangements with Embrex. Despite these protections, no assurance can
be given that others will not independently develop or obtain access to such
materials or processes or that Embrex's competitive position will not be
adversely affected thereby.
Recently, the Company filed an action for patent infringement and
breach of contract against Service Engineering Corp. and a related party. The
infringement action relates to a patent exclusively licensed to Embrex for the
IN OVO injection of vaccines into an avian embryo; the breach of contract action
is based on a previous infringement action by Embrex against these parties which
was settled. The defendants have filed counterclaims against the Company seeking
invalidity of the patent and alleging, among other things, that Embrex violated
federal law by misrepresenting
18
<PAGE>
the defendants' commercial activities and sought to maintain prices for IN OVO
vaccinations at an artificially high level. The outcome of this litigation is
uncertain and there is no assurance that Embrex will prevail on the merits or
successfully defend the validity of its patent.
DEPENDENCE ON KEY PERSONNEL
Embrex's ability to develop marketable products and maintain a
competitive research and technological position will depend on its ability to
continue to attract and retain experienced and highly educated, scientific and
management personnel and advisors. Competition for qualified employees among
biotechnology companies is intense and the loss of key scientific or management
personnel would adversely affect Embrex. Embrex has obtained insurance in the
amount of $1,000,000 on the life of Randall L. Marcuson, its President and Chief
Executive Officer, of which Embrex is the sole beneficiary. There can be no
assurance that Embrex will be able to continue to attract and retain qualified
staff.
SUPPORT AND MAINTENANCE REQUIREMENTS
The Company is required to supply, support, and maintain large numbers
of INOVOJECT(R) systems at its customers' hatcheries on a timely basis at a
reasonable cost to the Company. There can be no assurance that the Company will
be able to continue to provide such services on a cost-effective basis.
TECHNOLOGY AND COMPETITION
The areas of technology in which Embrex is involved are subject to
rapid and significant technological change. Competitors include independent
companies that specialize in biotechnology as well as major chemical and
pharmaceutical companies, universities, and public and private research
organizations, many of which are well established and have substantially greater
marketing, financial, technological and other resources than Embrex. There can
be no assurance that competitors will not succeed in developing technologies and
products that are more effective than any which have been or are being developed
by Embrex or which would render Embrex's technology and products obsolete or
non-competitive.
DEPENDENCE ON OTHERS
Embrex plans to continue to conduct its operations with third party
collaborators, licensors or licensees. While Embrex believes its present and
future collaborators, licensors and licensees will have an economic motivation
to succeed in performing their obligations under its agreements with them, the
amount and timing of funds and other resources to be devoted under such
agreements will be controlled by such other parties and are subject to financial
or other difficulties that may befall such other parties. Thus, no assurance can
be given that Embrex will generate any revenues from such agreements.
Embrex does not have large scale facilities for the production of
Embrex's INOVOJECT(R) system and biological products and does not plan to
develop such facilities in the foreseeable future. Embrex therefore will rely
principally upon relationships with contract manufacturers. There can be no
assurance that manufacture and supply agreements will be maintained on terms and
at costs acceptable to Embrex.
The Company has developed a strategic relationship with a single
contract manufacturer to fabricate its INOVOJECT(R) systems. While other machine
fabricators exist and have contracted limited numbers of INOVOJECT(R) systems, a
change in fabricators could cause a delay in manufacturing and a possible delay
in the timing of future INOVOJECT(R) installations and revenues from those
installations.
19
<PAGE>
The Company has granted Select Laboratories, Inc. ("Select"), a
division of Rhone Merieux, exclusive rights to manufacture bursal disease
vaccines containing Embrex's proprietary VNF product
for Embrex to market in the North American, South American and Asian
regions. Embrex has also granted Arthur Webster Pty. Ltd. ("Webster") exclusive
rights to manufacture bursal disease vaccines containing the Company's VNF
product to be marketed in Europe, the Middle East and Africa. Additionally, the
Company has two contract suppliers of its VNF product. The manufacture of the
bursal disease vaccines being produced by Select and Webster and the Company's
VNF product generally must be performed in licensed facilities and/or under
approved regulatory methods. Although there are other manufacturers who are
capable of manufacturing bursal disease products and producing products such as
VNF, a change of suppliers could adversely effect the Company's future operating
results due to the time it would take a new supplier to obtain regulatory
approval of its production process and/or manufacturing facilities.
ISSUANCE OF PREFERRED STOCK; SHAREHOLDER RIGHTS PLAN; ANTI-TAKEOVER EFFECTS
The Board of Directors has the authority to issue up to 15,000,000
shares of Preferred Stock, no par value per share, in one or more series and to
determine the designations, preferences and relative participating, optional or
other special rights and qualifications, limitations or restrictions thereof, of
the shares constituting any series of Preferred Stock, without any further vote
or action by the shareholders. The issuance of Preferred Stock by the Board of
Directors could affect the rights of the holders of Common Stock. For example,
such issuance could result in a class of securities outstanding that would have
preferences with respect to voting rights and dividends and in liquidation over
the Common Stock, and could (upon conversion or otherwise) enjoy all of the
rights appurtenant to Common Stock. As of the date of this Prospectus, there are
no issued and outstanding shares of Preferred Stock.
The authority of the Board of Directors to issue Preferred Stock could
potentially be used to discourage attempts by others to obtain control of the
Company through merger, tender offer, proxy contest or otherwise by making such
attempts more difficult to achieve or more costly. The Board of Directors may
issue the Preferred Stock without shareholder approval and with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. There are no agreements or understandings for the issuance of
Preferred Stock and the Board of Directors has no present intention to issue any
Preferred Stock.
In March 1996, Embrex adopted a shareholder rights plan which could
have the effect of discouraging a takeover of the Company. The rights plan, if
triggered, would make it more difficult to acquire the Company by, among other
things, allowing existing shareholders to acquire additional shares at a
substantial discount, thus substantially inhibiting an acquiror's ability to
obtain control of the Company.
INTERNATIONAL SALES AND MARKETING
The company intends to continue its efforts to expand its markets
outside of North America. Sales outside of North America accounted for
approximately 8.1%, 4.2% and 1.8% of revenues in fiscal 1996 (through September
30), 1995 and 1994, respectively. The volume and consistency of such sales is
subject to economic and political conditions in the markets in which Embrex does
business, which are beyond the Company's control. In addition, there is no
assurance that INOVOJECT(R) will be successfully marketed outside of North
America since market acceptance is often dependent on the need for drugs to be
administered and on regulatory approval of IN OVO administration.
20
<PAGE>
USE OF PROCEEDS
In the event that the holders of the 1993 Warrants elect to exercise
the 1993 Warrants in whole or in part, the Company anticipates that the proceeds
(which are not determinable at this time since the exercise price is subject to
adjustment from time to time under the 1993 Warrant Agreement) would be used for
working capital and other general corporate purposes.
DESCRIPTION OF 1993 WARRANTS
In connection with the underwritten offering in July 1993 of 1,800,000
shares of Common Stock, Embrex sold to the managing underwriters of such
offering (or their designees), for nominal consideration, the 1993 Warrants,
under which are issuable 180,000 shares of Common Stock. The 1993 Warrants
were initially exercisable at a price of $8.4375 per share of Common Stock for
a period of four years beginning on July 29, 1994. The 1993 Warrants contain
anti-dilution adjustment provisions which provide for reductions, which
could be significant under certain circumstances, in the exercise price of the
1993 Warrants upon the occurrence of certain events, including the issuance of
shares of Common Stock by the Company for a price below the exercise price of
the 1993 Warrants and corresponding increases in the number of securities
purchasable upon exercise of the 1993 Warrants, and for adjustment of the type
of securities issuable upon exercise of the 1993 Warrants to reflect any
changes in the Common Stock. The Registration Statement of which this
Prospectus is a part covers both the shares originally issuable under the 1993
Warrants and, pursuant to Rule 416 under the Securities Act, any additional
shares issuable as a result of the events described in this paragraph.
This description of the 1993 Warrants is a summary of their principal
terms and does not purport to be complete. Reference is made to the 1993 Warrant
Agreement, under which the 1993 Warrants were issued, which is incorporated
herein by reference. See "Incorporation of Certain Documents by Reference" and
"Available Information."
PLAN OF DISTRIBUTION
The Company is registering the Shares for issuance to the holders of
the 1993 Warrants upon exercise of the 1993 Warrants. The Shares are currently
reserved for issuance by Embrex. All costs, expenses and fees in connection with
the registration of the Shares offered hereby will be borne by the Company.
The Company anticipates that the Common Stock issuable upon exercise of
the 1993 Warrants will be authorized for quotation on the Nasdaq National
Market.
Under the 1993 Warrant Agreement, the Company and the holders of the
1993 Warrants have agreed to indemnify each other against certain liabilities
arising under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed
upon for the Company by Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., 2500 First Union Capitol Center, Raleigh, North Carolina 27601.
21
<PAGE>
EXPERTS
The consolidated financial statements of the Company incorporated
herein by reference from the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
22
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table shows the estimated expenses of the issuance and
distribution of the securities offered hereby.
SEC Registration Fee.................... $ 1,681.70
Legal Fees and Expenses................. 15,000.00
Accounting Fees and Expenses............ 7,500.00
Printing and Engraving Expenses......... 750.00
Miscellaneous Expenses.................. 100.00
______________
Total $ 25,031.70
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 55-8-50 through 55-8-58 of the North Carolina Business
Corporation Act permit a corporation to indemnify its directors, officers,
employees or agents under either or both a statutory or non-statutory scheme of
indemnification. Under the statutory scheme, a corporation may, with certain
exceptions, indemnify a director, officer, employee or agent of the corporation
who was, is, or is threatened to be made, a party to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative, or investigative, because of the fact that such person was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. This indemnity may include the obligation to
pay any judgment, settlement, penalty, fine (including an excise tax assessed
with respect to an employee benefit plan) and reasonable expenses incurred in
connection with the proceeding (including attorneys' fees), but no such
indemnification may be granted unless such director, officer, agent or employee
(i) conducted himself in good faith, (ii) reasonably believed (1) that any
action taken in his official capacity with the corporation was in the best
interest of the corporation or (2) that in all other cases his conduct at least
was not opposed to the corporation's best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. Whether a director has met the requisite standard of conduct for the
type of indemnification set forth above is determined by the board of directors,
a committee of directors, special legal counsel or the shareholders in
accordance with Section 55-8-55. A corporation may not indemnify a director
under the statutory scheme in connection with the proceeding by or in the right
of the corporation in which the director was adjudged liable to the corporation
or in connection with the proceeding in which a director was adjudged liable on
the basis of having received an improper personal benefit.
In addition to, and separate and apart from the indemnification
described above under the statutory scheme, Section 55-8-57 of the North
Carolina Business Corporation Act permits a corporation to indemnify or agree to
indemnify any of its directors, officers, employees or agents against liability
and expenses (including attorneys' fees) in any proceeding (including
proceedings brought by or on behalf of the corporation) arising out of their
status as such or their activities in such capacities, except for any
liabilities or expenses incurred on account of activities that were, at the time
taken, known or believed by the person to be clearly in conflict with the best
interests of the corporation. The Company will indemnify any person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the Board of Directors of the Company, the
shareholders of the Company or the Company's independent legal counsel.
Accordingly, the Company may indemnify its directors, officers, employees and
agents in accordance with either the statutory or non-statutory standard.
II-1
<PAGE>
Sections 55-8-52 and 55-8-56 of the North Carolina Business Corporation
Act require a corporation, unless its articles of incorporation (unlike the
Company's) provide otherwise, to indemnify a director or officer who has been
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which such director or officer was a party. Unless prohibited by the articles
of incorporation, a director or officer also may make application and obtain
court-ordered indemnification if the court determines that such director or
officer is fairly and reasonably entitled to such indemnification as provided in
Sections 55-8-54 and 55-8-56.
Finally, Section 55-8-57 of the North Carolina Business Corporation Act
provides that a corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee or agent of the
corporation against certain liabilities incurred by such persons, whether or not
the corporation is otherwise authorized by the North Carolina Business
Corporation Act to indemnify such party. The Company's directors and officers
are currently covered under directors' and officers' insurance policies
maintained by the Company.
As permitted by North Carolina law, the Company's Articles of
Incorporation limits the personal liability of directors for monetary damages
for breaches of duty as a director provided that such limitation will not apply
to (i) acts or omissions not made in good faith that the director at the time of
the breach knew or believed were in conflict with the best interests of the
Company, (ii) any liability for unlawful distributions under N.C. Gen. Stat.
Section 55-8-33, (iii) any transaction from which the director derived an
improper personal benefit or (iv) acts or omissions occurring prior to the date
the provision became effective.
ITEM 16. EXHIBITS
The following documents (unless indicated) are filed herewith and made
a part of this Registration Statement.
Exhibit
No. Description
4.01(1) Specimen Common Stock Certificate
4.02(1) Restated Articles of Incorporation
4.03(2) Articles of Amendment to Restated Articles of Incorporation
4.04(3) Bylaws
5.01 Opinion of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P.
23.01 Consent of Ernst & Young LLP
23.02 Consent of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P. (included in Exhibit 5.01 hereto)
24.01 Powers of Attorney (included on the signature page hereof)
(1) Exhibit to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended December 31,
1991 and incorporated herein by reference.
(2) Exhibit to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended December 31,
1995 and incorporated herein by reference.
II-2
<PAGE>
(3) Exhibit to the Company's Registration Statement on Form S-1 as filed with
the Securities and Exchange Commission (Registration No. 33-42482)
effective November 7, 1991 and incorporated herein by reference.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers and sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of the
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
section do not apply if the registration statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities and Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Durham, State of North
Carolina, on December 19, 1996.
EMBREX, INC.
By: /s/ Randall L. Marcuson
Randall L. Marcuson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Randall L. Marcuson and Don T. Seaquist
and each of them, each with full power to act without the other, his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons on December
19, 1996 in the capacities indicated.
SIGNATURE TITLE
/s/ Randall L. Marcuson Director, President and Chief Executive Officer
Randall L. Marcuson
/s/ Don T. Seaquist Vice President Finance and Administration
Don T. Seaquist (Principal Accounting and Financial Officer)
/s/ Charles E. Austin Director
Charles E. Austin
/s/ Lester M. Crawford Director
Lester M. Crawford
/s/ Stephen Hartogensis Director
Stephen Hartogensis
/s/ Kenneth N. May Director
Kenneth N. May
/s/ Arthur M. Pappas Director
Arthur M. Pappas
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NUMBER OF EXHIBIT
4.01(1) Specimen Common Stock Certificate
4.02(1) Restated Articles of Incorporation
4.03(2) Articles of Amendment to Restated Articles of Incorporation
4.04(3) Bylaws
5.01 Opinion of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P.
23.01 Consent of Ernst & Young LLP
23.02 Consent of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P. (included in Exhibit 5.01 hereto)
24.01 Powers of Attorney (included on the signature page hereof)
(1) Exhibit to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended December 31,
1991 and incorporated herein by reference.
(2) Exhibit to the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended December 31,
1995 and incorporated herein by reference.
(3) Exhibit to the Company's Registration Statement on Form S-1 as filed with
the Securities and Exchange Commission (Registration No. 33-42482)
effective November 7, 1991 and incorporated herein by reference.
EXHIBIT 5.01
SMITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN, L.L.P.
Raleigh, North Carolina
Phone 919-821-1220
Fax 919-821-6800
December 19, 1996
(919) 821-6759
Embrex, Inc.
1035 Swabia Court
Durham, North Carolina 27703
Ladies and Gentlemen:
As counsel for Embrex, Inc. (the "Company"), we furnish the following
opinion in connection with the preparation of a Registration Statement on Form
S-3 ("Registration Statement") to be filed by the Company with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Act"), relating to the registration of (a) 638,805 shares (the "Resale Shares")
of the Company's common stock, par value $.01 per share ("Common Stock"), which
have been included in the Registration Statement for the respective accounts of
the persons identified in the Registration Statement as Selling Stockholders and
(b) 180,000 shares (the "Warrant Shares"), subject to adjustment, reserved for
issuance by the Company upon the exercise of certain warrants to purchase shares
of Common Stock described in the Registration Statement (the "1993 Warrants").
This opinion is furnished pursuant to the requirement of Item 601(b)(5) of
Regulation S-K under the Act.
<PAGE>
We have examined the Restated Articles of Incorporation, as amended,
and the Bylaws of the Company, the minutes of meetings of its Board of
Directors, and such other corporate records of the Company and other documents
and have made such examinations of law as we have deemed relevant for purposes
of this opinion. We also have received a certificate of an officer of the
Company, dated of even date herewith, relating to the Registration Statement.
Based on and subject to the foregoing and to the additional
qualifications set forth below, it is our opinion that (a) the Resale Shares
have been legally issued in accordance with the Company's Restated Articles of
Incorporation, as amended, and its Bylaws and, assuming due delivery against
payment therefor when the Resale Shares were issued upon the exercise of certain
warrants to purchase Common Stock, are fully paid and nonassessable, and (b) the
Warrant Shares, when issued by the Company in accordance with the Company's
Restated Articles of Incorporation, as amended, and its Bylaws, will be legally
issued and, assuming due delivery against payment therefor when the Warrant
Shares are issued upon the exercise of the 1993 Warrants, will be fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. Such consent shall not be deemed to be an admission that
this firm is within the category of persons whose consent is required under
Section 7 of the Act or the regulations promulgated pursuant to the Act.
This opinion is limited to the laws of the State of North Carolina and
no opinion is expressed as to the laws of any other jurisdiction.
Our opinion is as of the date hereof, and we do not undertake to advise
you of matters which might come to our attention subsequent to the date hereof
which may affect our legal opinion expressed herein.
Sincerely yours,
SMITH, ANDERSON, BLOUNT, DORSETT,
MITCHELL & JERNIGAN, L.L.P.
By: /s/ Christopher B. Capel
Christopher B. Capel
CBC/dto
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Embrex, Inc. for the
registration of 818,805 shares of its common stock and to the incorporation by
reference therein of our report dated February 2, 1996, with respect to the
consolidated financial statements and schedules of Embrex, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Raleigh, North Carolina
December 13, 1996
