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                                                                      Exhibit 99

                                  RISK FACTORS

     IN ADDITION TO THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
     IN THIS REPORT, YOU SHOULD CONSIDER THE FOLLOWING FACTORS CAREFULLY IN
     EVALUATING US AND OUR BUSINESS BEFORE MAKING AN INVESTMENT DECISION. IF ANY
     OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION, OR RESULTS
     OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED.

     OUR FUTURE GROWTH DEPENDS ON EXPANSION OF INTERNATIONAL REVENUES AND WE
     WILL BE SUBJECT TO INCREASED RISKS IN THE INTERNATIONAL MARKETPLACE

     We estimate that our Inovoject(R) system inoculates more than 80% of all
     eggs produced for the United States and Canada broiler poultry markets.
     Given this market penetration, we expect only limited growth in the number
     of system installations and only minor system revenue growth in this
     market. Additionally, due to our market penetration and the significance of
     the United States and Canada poultry markets to our revenue, any adverse
     conditions in these markets could have a material and adverse affect on our
     revenues. For this reason, we must expand our device installations and
     product sales in markets outside the United States and Canada in order to
     realize significant overall revenue growth. In each of 2002 and 2001, sales
     outside of the United States accounted for 31% of our consolidated
     revenues, up from 29% in 2000. Lack of market acceptance of our devices and
     in ovo ("in the egg") products in these markets would adversely affect our
     revenue growth. Revenue growth outside the United States and Canada depends
     on gaining market acceptance of our devices and in ovo administration of
     biological products in markets outside the United States and Canada to
     treat prevailing poultry diseases in those markets.

     International sales are also subject to a variety of risks, including risks
     arising from the following:

     .  currency fluctuations, trading restrictions, tariffs, trade barriers and
        taxes;

     .  adverse changes in local investment or exchange control regulations,
        potential restrictions on the flow of international capital, and the
        possibility of expropriation, confiscatory taxation or price controls;
        and

     .  economic and political conditions beyond our control, including
        country-specific conditions such as political instability, government
        corruption and civil unrest.

     OUR FUTURE GROWTH ALSO DEPENDS ON THE DEVELOPMENT AND MARKET ACCEPTANCE OF
     NEW PRODUCTS

     In addition to international expansion, we need to develop and market new
     products in order to continue to generate increased revenues and growth of
     our business. We currently are developing, both independently and in
     collaboration with others, various products which address poultry health
     and performance needs. These products are being designed to be delivered in
     ovo through the Inovoject(R) system and are in various stages of
     development. There is no guarantee that any new products will be
     successfully developed and marketed. In addition, we have not initiated the
     regulatory approval process for some of these potential products, and we
     cannot assure you that regulatory approval will be obtained. Our inability
     to develop new products or any delay in our development of them may
     adversely affect our revenue growth. Because of a number of factors, a

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     new product may not reach the market without lengthy delays, if at all.
     Some of the factors which may affect our development and marketing of new
     products include the following:

     .  our research and evaluations of compounds and new technologies may not
        yield product opportunities;

     .  potential products may involve extensive and time-consuming clinical
        trials to demonstrate safety and effectiveness, and the results of such
        trials are uncertain;

     .  potential products may require collaborative partners and we may be
        unable to identify partners or enter into arrangements on terms
        acceptable to us;

     .  we may not be able to contract for the manufacture of new products at a
        cost or in quantities necessary to make them commercially viable;

     .  domestic and international regulatory approval of these products may not
        be obtained or may be obtained only with lengthy delays;

     .  we may not be able to secure additional financing that may be needed to
        bring a potential product to market;

     .  we may experience unexpected safety or efficacy concerns with respect to
        marketed products, whether or not scientifically justified, leading to
        adverse public reaction, product recalls, withdrawals or declining
        sales;

     .  marketing products developed jointly with other parties may require
        royalty payments or other payments by us to our co-developers, which may
        adversely affect our profitability;

     .  we may be unable to accurately predict market requirements and evolving
        standards; and

     .  we may not be able to attract and retain sufficient numbers of qualified
        development personnel.

     We have developed and commercialized a technology using our proprietary
     viral neutralizing factor (VNF(R)). Our Bursaplex(R) product uses this
     technology. However, Bursaplex(R) has only been sold in commercial
     quantities during the past six years, and there is no assurance that the
     product will continue to be sold in commercial quantities.

     In July, 2001 we submitted a registration application to the United States
     Department of Agriculture (USDA) for Newplex(TM), our in ovo Newcastle
     disease vaccine, which like Bursaplex(R) is based on VNF(R) technology.
     Although this product has been submitted for registration there is no
     assurance that USDA approval will be obtained or that this product will be
     sold in commercial quantities.

     There can be no assurance that we will successfully complete the
     development and commercialization of any new products or that such
     products, if developed and commercialized, will meet revenue and profit
     expectations.

     ECONOMIC FACTORS AFFECTING OUR CUSTOMERS MAY ADVERSELY AFFECT OUR FINANCIAL
     RESULTS

     Our revenues principally come from sales and leases to the poultry
     industry. If there is a general economic decline in that industry, our
     operations and financial condition could be materially and adversely
     affected. Also, domestic and global economic factors beyond our control may
     adversely

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     impact our customers and, as a result, our revenues and earnings. Examples
     of these factors include the following:

     .  fluctuations in the prices of poultry feed and energy;

     .  disease outbreaks that adversely affect poultry production;

     .  market demand for poultry products, including the supply and pricing of
        alternative proteins;

     .  costs to comply with applicable laws and regulations, including those
        relating to environmental protection, food safety, market regulation and
        genetically modified organisms or ingredients;

     .  product recalls and related adverse publicity and consumer reaction;

     .  access to foreign markets together with foreign economic conditions,
        including currency fluctuations; and

     .  the extent to which our cost of products and operating expenses increase
        faster than contractual price adjustments with our customers.

     For example, if rising poultry feed prices increase the production costs of
     commercial poultry producers or a foreign government bans the importation
     of U.S. chicken, these producers may reduce production. This decreased
     production could adversely impact our revenues, since a principal component
     of our revenues are fees charged to customers for the number of eggs
     injected or processed by Embrex devices.

     WE FACE RISKS OF RAPIDLY CHANGING TECHNOLOGY AND COMPETITION

     We are involved in areas of technology which 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 our competitors are well established and have
     substantially greater marketing, financial, technological and other
     resources than us. With expiration of the Sharma Patent, competitive in ovo
     delivery methods are under development and may gain commercial acceptance.
     The poultry biological business is especially competitive and dominated by
     a few very large companies with an established global presence. Also,
     competitors may succeed in developing technologies and products that are
     more effective than any which have been or are being developed by us or
     which would render our technology and products obsolete or non-competitive.
     We may not be successful in establishing or maintaining technological
     competitiveness. Increased competition could mean lower prices for our
     products, reduced demand for our products and a corresponding reduction in
     our ability to recover development, engineering and manufacturing costs.
     Any of these developments could have an adverse effect on our business,
     results of operations and financial condition.

     WE DO NOT MANUFACTURE ANY OF OUR PRODUCTS AND ARE CURRENTLY DEPENDENT ON A
     SINGLE CONTRACT MANUFACTURER FOR INOVOJECT(R) AND EGG REMOVER(R) DEVICES,
     FOR VNF(R) PRODUCTION, AND FOR BURSAPLEX(R) PRODUCTION

     We currently do not have facilities for the production of our devices and
     biological products. Therefore, we rely principally upon relationships with
     contract manufacturers. There can be no assurance that we can maintain
     manufacture and supply agreements on terms and at costs acceptable to us.
     We have various relationships with manufacturers and suppliers, including
     those described below. The loss of any of these relationships could
     adversely affect our operating

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     results. There are a number of risks associated with our dependence on
     third-party manufacturers including:

       .  reduced control over delivery schedules;

       .  quality assurance;

       .  manufacturing yields and costs;

       .  the potential lack of adequate capacity during periods of
          unanticipated demand;

       .  limited warranties on products supplied to us;

       .  increases in prices and the potential misappropriation of our
          intellectual property;

       .  catastrophic loss of production capacity due to property damage,
          either man made or by nature; and

       .  the loss of these contract manufacturers due to financial
          circumstances in their respective businesses or their exit from the
          business lines that manufacture our devices and products.

     If our third-party manufacturers fail to provide us with an adequate supply
     of finished products, our business would be harmed. We have no long-term
     contracts or arrangements with any of our vendors that guarantee product
     availability or the continuation of particular payment terms. In addition,
     we are currently dependent on a single contract manufacturer for several of
     our key products as described below. Although we believe our relationship
     with each of the manufacturers is sound, we cannot assure you that we will
     continue to maintain relationships with them or that they will continue to
     exist.

     Inovoject(R) and Egg Remover(TM) Systems

     We rely on Precision Automation Company, Inc. (Precision) to fabricate all
     of our Inovoject(R) and Egg Remover(TM) systems. While other machine
     fabricators exist and have constructed limited numbers of Inovoject(R)
     systems, we do not currently have alternative sources for production of
     either the Inovoject(R) or Egg Remover(TM) systems. If Precision is unable
     to carry out its manufacturing obligations to our satisfaction, we may be
     unable to obtain alternative manufacturing, or to obtain such manufacturing
     on commercially reasonable terms or on a timely basis. Any delays in the
     manufacturing process may adversely impact our ability to meet commercial
     demands for Inovoject(R) and Egg Remover(TM) system installations and delay
     receipt of revenues from those installations.

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     Biological Products

     We obtain all of our requirements for the active ingredient in VNF(R)
     (Viral Neutralizing Factor) from SPAFAS, Inc. (SPAFAS), a subsidiary of
     Charles River Laboratories, Inc. Under our agreement with SPAFAS, we
     maintain appropriate inventory levels and place orders with SPAFAS to allow
     us to satisfy anticipated customer demand for VNF(R). The manufacture of
     our VNF(R) product generally must be performed in licensed facilities and
     is subject to USDA regulation. The regulatory approval granted by the USDA
     for Bursaplex(R) in January 1997 specifically covers vaccines produced with
     SPAFAS-manufactured VNF(R). Although there are other manufacturers that may
     be capable of manufacturing VNF(R), we do not currently have alternative
     sources for production of VNF(R).

     We obtain all of our requirements for Bursaplex(R) from Merial Select, Inc.
     (Select), a Merck and Aventis company. The manufacture of Bursaplex(R) must
     be performed in licensed facilities, under approved regulatory methods. As
     the manufacturer, Select holds the USDA permit for Bursaplex(R). Although
     there are other manufacturers that may be capable of manufacturing avian
     infectious bursal disease (IBD) products, we do not currently have
     alternative sources for production of Bursaplex(R).

     If either SPAFAS or Select is unable to carry out its manufacturing
     obligations (described immediately above) to our satisfaction, we may be
     unable to obtain alternative manufacturing, or to obtain such manufacturing
     on commercially reasonable terms or on a timely basis. A change of supplier
     for the Company could adversely affect our future operating results due to
     the time it would take a new supplier to obtain regulatory approval by the
     USDA of its production process or manufacturing facilities. We could also
     be sued for breach under various contracts under which we are obligated to
     supply VNF(R) or Bursaplex(R) to third parties. Current regulatory
     approvals in foreign countries are based on product manufactured with
     SPAFAS VNF(R) or Bursaplex(R) as manufactured by Select. A change of
     manufacturer may result in the need to reapply for regulatory approval in
     those countries and may lead to suspended sales of that product until new
     approvals could be secured. Any delays in securing new approvals would have
     an adverse effect on our revenues and growth prospects. We cannot guarantee
     that we would be able to secure new approvals in every country or that such
     approvals would be granted in a timely fashion.

     WE ARE DEPENDENT ON DISTRIBUTORS IN CERTAIN MARKETS

     We market and distribute our devices principally by leasing and licensing
     the systems directly to hatcheries. In some markets, such as Japan, we
     instead rely upon distributors for our devices. We also rely on third
     parties to market certain biological products, such as products containing
     VNF(R), and we may enter into other arrangements in the future. There can
     be no assurance that we can maintain these relationships on terms
     acceptable to us. The loss of any of these relationships could adversely
     affect our operating results. There are a number of risks associated with
     our dependence on distributors and other third parties including:

       .  reduced control over regulatory efforts which may delay local
          regulatory approvals and thus market introduction;

       .  reduced control over marketing and sales efforts and in turn the
          extent of resulting market penetration or acceptance;

       .  reduced control over distribution and related customer satisfaction;
          and

       .  potential delays in distribution associated with securing new
          distributors, if current relationships are not maintained.

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     POULTRY HEALTH AND DISEASE FACTORS AFFECTING OUR CUSTOMERS MAY ADVERSELY
     AFFECT OUR FINANCIAL RESULTS

     Any widespread poultry health problem or disease outbreak could have a
     negative impact on global poultry production. Our revenues and earnings
     derived from both the U.S. and international poultry industry could be
     materially and adversely affected. In addition, the emergence of new
     disease variants, serotypes and strains in the domestic and/or global
     markets may reduce the efficacy of our biological products and result in
     reduced revenues and earnings.

     THE LOSS OF KEY CUSTOMERS COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

     Historically, a significant portion of our revenues has come from a
     relatively small number of customers. Tyson Foods, Inc. (Tyson) accounted
     for approximately 19% of our consolidated 2002 revenues. Our top three
     customers, including Tyson, accounted for approximately 30% of our
     consolidated 2002 revenues, which is down from 32% in 2001 and 34% in 2000.
     We expect a similar level of customer concentration to continue in future
     years. The poultry market is highly concentrated, with the largest poultry
     producers dominating the market. For example, in 2002, Tyson supplied
     approximately 22% of all broilers grown in the United States. The
     concentration of our revenues with these large customers makes us
     particularly dependent on factors affecting those customers. If we lose a
     large customer and fail to add new customers to replace lost revenues, our
     operating results will be materially and adversely affected. Also, if these
     customers reduce the number of eggs they produce at hatcheries, we will
     receive lower device revenues since our fees are based on the number of
     eggs injected.

     IF WE LOSE THE PROTECTION OF OUR PATENTS AND PROPRIETARY RIGHTS, OUR
     FINANCIAL RESULTS COULD SUFFER

     Some of our products and processes used to produce our products involve
     proprietary rights, including patents. We own some of the technologies
     employed in these processes, and some are owned by others and licensed to
     us. The Inovoject(R) system utilizes a process that was patented by the
     USDA in the United States. We held an exclusive license to this primary
     patent (Sharma Patent), which expired in June 2002. We have supplemented
     the Sharma Patent with additional U.S. and foreign patents covering
     specific design features of the Inovoject(R) system. However, there is a
     risk that a competitive system could become commercially available in the
     United States now that the Sharma Patent has expired.

     We believe that patent protection of materials or processes we develop and
     any products that may result from the research and development efforts of
     our licensors and us are important to the commercial success of our
     products. The loss of the protection of these patents and proprietary
     rights could adversely affect our business and our competitive position in
     the market. The patent position of companies such as ours generally is
     highly uncertain and involves complex legal and factual questions. Some of
     the reasons for this uncertainty include the following:

       .  To date, no consistent regulatory policy has emerged regarding the
          breadth of claims allowed in biotechnology patents. So, there can be
          no assurance that patent applications relating to our products or
          technology will result in patents being issued or that, if issued, the
          patents will afford protection against competitors with similar
          technology;

       .  Some patent licenses held by us may be terminated upon the occurrence
          of specified events or become non-exclusive after a specified period;

       .  Companies that obtain patents claiming products or processes that are
          necessary for or

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          useful to the development of our products could bring legal actions
          against us claiming infringement (though we currently are not the
          subject of any patent infringement claim);

       .  Issuance of a valid patent does not prevent other companies from using
          alternative, non-infringing technology so we cannot be sure that any
          of our patents (or patents issued to others and licensed to us) will
          provide significant commercial protection;

       .  We may not have the financial resources necessary to obtain patent
          protection in some countries or to enforce any patent rights we may
          hold;

       .  The laws of some foreign countries may not protect proprietary rights
          to the same extent as the laws of the United States, and many
          companies have encountered significant problems in protecting their
          proprietary rights in these foreign countries;

       .  We may be required to obtain licenses from others to develop,
          manufacture or market our products. We may not be able to obtain these
          licenses on commercially reasonable terms, and the patents underlying
          the licenses may be valid and enforceable; and

       .  We also rely upon unpatented, proprietary technology, which we may not
          be able to protect fully if others independently develop substantially
          equivalent proprietary information or techniques, improperly gain
          access to our proprietary technology, or disclose this technology to
          others.

     We attempt to protect our proprietary materials and processes by relying on
     trade secret laws and non-disclosure and confidentiality agreements with
     our employees and other persons with access to our proprietary materials or
     processes or who have licensing or research arrangements with us. We plan
     to continue to use these protections in the future but we cannot be sure
     that these agreements will not be breached or that we would have adequate
     remedies for any breach. Even with these protections, others may
     independently develop or obtain access to these materials or processes,
     which may adversely affect our competitive position.

     If we are sued for infringing the patent or other proprietary rights of a
     third party, we could incur substantial costs and diversion of management
     and technical personnel, whether or not the litigation is ultimately
     determined in our favor.

     We have been involved in the patent litigation summarized below:

     Embrex v. Service Engineering Corporation and Edward G. Bounds, Jr.

     In September 1996, we filed a patent infringement suit against Service
     Engineering Corporation and Edward G. Bounds, Jr. in the U.S. District
     Court for the Eastern District of North Carolina. We made the following
     claims against the defendants:

     Their development of an in ovo injection device, designed to compete with
     our patented Inovoject(R)injection method, infringes at least one claim of
     U.S. Patent No. 4,458,630, exclusively licensed to us for the in ovo
     injection of vaccines into an avian embryo (the Sharma Patent); and

     They violated the terms of a Consent Judgment and Settlement Agreement
     entered into with us in November 1995 in which prior litigation was
     concluded with Service Engineering Corporation and Edward G. Bounds, Jr.
     agreeing not to engage in future activities violating the Sharma Patent.

     We sought injunctive relief to prevent infringement of the Sharma Patent as
     well as monetary damages.

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<PAGE>

     In November 1996, Service Engineering Corporation and Edward G. Bounds, Jr.
     responded to our suit by asserting various affirmative defenses and denying
     the substantive claims in our complaint.

     This suit concluded on July 30, 1998 with a jury verdict in favor of us,
     which verdict:

  .  fully upheld the validity of all asserted claims of the Sharma Patent,
     finding that the defendants had willingly infringed all asserted claims of
     the patent;

  .  found that the defendants had breached the 1995 Consent Judgment and
     Settlement Agreement and that the breach was not in good faith; and

  .  awarded us damages of $500,000 plus litigation expenses and court costs.

     The Court entered a Judgment in favor of us on September 28, 1998, which
     included a monetary award of $2,612,885 and an injunction prohibiting the
     defendants from practicing methods claimed in, or otherwise infringing, the
     Sharma Patent. That injunction has expired with the expiration of the
     Sharma Patent in June of 2002.

     On October 28, 1998, Service Engineering Corporation and Edward G. Bounds,
     Jr. filed a notice of appeal in the U.S. Court of Appeals for the Federal
     Circuit seeking a reversal of the Judgment. In July 2000, the U.S. Court of
     Appeals for the Federal Circuit affirmed the district court's decision to
     award to Embrex litigation expenses plus costs valued at approximately $1.5
     million. In addition, the appeals court upheld the finding that Service
     Engineering Corporation and Edward Bounds had willfully infringed all
     asserted claims of the Sharma Patent. However, the appeals court vacated
     the award of direct infringement damages finding that the district court
     erroneously awarded direct damages without proper evidence to support the
     award. Therefore, the appeals court remanded that award ($500,000 which was
     trebled) to the district court for further proceedings for determination of
     a reasonable royalty for the infringement of the patented method by Service
     Engineering Corporation and Edward G. Bounds, Jr. These proceedings were
     opened on August 28, 2000, but were stayed early in 2001 pending the
     conclusion of a bankruptcy proceeding initiated by Edward G. Bounds, Jr.

     OUR FORT DODGE LITIGATION MAY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS

     In April 2002, we initiated a lawsuit against Fort Dodge Australia, Pty.
     Ltd. and Wyeth, Fort Dodge, asserting claims for breach of contract and
     unfair and deceptive trade practices arising out of an agreement by Fort
     Dodge to manufacture, register and market throughout Europe, the Middle
     East and Africa a poultry vaccine for administration using Embrex's
     Inovoject(R) system. Fort Dodge answered the complaint and filed a
     counterclaim alleging breach of contract by Embrex and additional claims
     arising out of the agreement. The case is pending in U.S. District Court
     for the Eastern District of North Carolina. We have denied all of Fort
     Dodge's allegations and we are vigorously prosecuting our claims while
     defending the counterclaim. Our results of operations have been impacted
     and will continue to be impacted by the significant costs of pursuing this
     litigation. Moreover, there can be no assurance we will prevail in our
     claims against Fort Dodge or our defenses to its counterclaims. Even if the
     court finds in our favor, we have no assurances that any damage award will
     exceed our costs of pursuing this litigation or that we would be able to
     collect any damages from Fort Dodge.

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     THE LOSS OF KEY COLLABORATORS AND OTHER KEY PARTIES COULD ADVERSELY AFFECT
     OUR FINANCIAL RESULTS

     We currently conduct our operations with various third-party collaborators,
     licensors or licensees. We plan to continue developing these relationships
     and believe our present and future collaborators, licensors and licensees
     will perform their obligations under their agreements with us, based on an
     economic motivation to succeed. However, financial or other difficulties
     facing these parties may affect the amount and timing of funds and other
     resources devoted by the parties under these agreements. In addition,
     disagreements may arise with these third parties which could delay or lead
     to the termination of the development or commercialization of new products,
     or result in litigation or arbitration, which would be time consuming and
     expensive. Thus, there is no assurance that we will develop any new
     products or generate any revenues from these collaborative agreements.

     WE ARE SUBJECT TO AN INHERENT RISK OF PRODUCT LIABILITY

     The development, manufacture, distribution and marketing of our products
     involve an inherent risk of product liability claims and associated adverse
     publicity. These claims may be made even with respect to those products
     that are manufactured in licensed and approved facilities or that otherwise
     possess regulatory approval for commercial sale. These claims could expose
     us to significant liabilities that could prevent or interfere with the
     development and marketing of our products. Product liability claims could
     require us to spend significant time and money in litigation or pay
     significant damages. Although we currently maintain liability insurance,
     which we believe is adequate to cover the Company's potential exposure in
     this area, there can be no assurance that the coverage limits of our
     policies will be adequate. Such insurance is expensive, difficult to obtain
     and may not continue to be available on acceptable terms or at all.

     GOVERNMENT REGULATION AND THE NEED FOR REGULATORY APPROVAL MAY ADVERSELY
     AFFECT OUR BUSINESS

     Regulatory approval required in various areas of our business may adversely
     affect our operations. The primary emphasis of these requirements is to
     assure the safety and effectiveness of our products. While the use of the
     Inovoject(R) system is not subject to regulatory approval in the United
     States, it may require regulatory approval by foreign agencies. Also,
     research and development activities and the investigation, manufacture and
     sale of poultry health products are subject to regulatory approval in the
     United States by either the USDA or the United States Food & Drug
     Administration (FDA) and state agencies, as well as by foreign agencies.
     Obtaining regulatory approval is a lengthy, costly and uncertain process.
     Approval by the USDA generally takes 1 to 3 years, while approval by the
     FDA may take 5 or more years. Various problems may arise during the
     regulatory approval process and may have an adverse impact on our
     operations. Changes in the policies of U.S. and foreign regulatory bodies
     could increase the time required to obtain regulatory approval for each new
     product. Delays in obtaining approval may adversely affect the marketing
     of, and the ability to receive revenues and royalties from, products
     developed by us. There is no assurance that any future products developed
     by us or by our collaborative partners will receive regulatory approval
     without lengthy delays, if at all. Even when approved, regulators may
     impose limitations on the uses for which the product may be marketed and
     may continue to review a product after approving it for marketing.
     Regulators may impose restrictions and sanctions, including banning the
     continued sale of the product, if they discover problems with the product
     or its manufacturer.

     Pursuant to some of our licensing or joint development agreements, the
     licensees or joint developers bear the costs associated with the regulatory
     approval process for some products. We plan to continue to enter into these
     types of agreements in the future. If we cannot generate sufficient funds
     from operations or enter into licensing or joint development agreements to
     develop products, we may not have the financial resources to complete the
     regulatory approval process

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<PAGE>

     with respect to all or any of the products currently under development. We
     may need to obtain approval from appropriate regulators before we can sell
     our products in a particular jurisdiction.

     Other regulations apply or may apply to research and manufacturing
     activities, including federal, state and local laws, regulations and
     recommendations relating to the following:

       .  safe working conditions;

       .  laboratory and manufacturing practices; and

       .  use and disposal of hazardous substances used in conjunction with
          research activities.

     It is difficult to predict the extent to which these or other government
     regulations may adversely impact the production and marketing of our
     products.

     OUR INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD ADVERSELY AFFECT
     OUR BUSINESS

     We must continue to attract and retain experienced and highly educated
     scientific and management personnel and advisors to be able to develop
     marketable products and maintain a competitive research and technological
     position. Competition for qualified employees among biotechnology companies
     is intense. There can be no assurance that we will be able to continue to
     attract and retain qualified staff. The departure of any key executive or
     our inability to recruit and retain key scientific or management personnel
     could have an adverse affect on our business, results of operations or
     financial condition. Our ability to replace key individuals may be
     difficult and may take an extended period of time because of the limited
     number of individuals in the biotechnology industry with the breadth of
     skills and experience required to develop and commercialize products
     successfully. Competition to hire from this limited pool is intense, and we
     may be unable to hire, train, retain or motivate such individuals. We have
     obtained insurance in the amount of $1,000,000 on the life of Randall L.
     Marcuson, our President and Chief Executive Officer, of which we are the
     sole beneficiary. This amount may not be sufficient to compensate us for
     the loss of his services.

     IF WE CANNOT CONTINUE TO PROVIDE TIMELY SUPPORT AND MAINTENANCE TO OUR
     CUSTOMERS, OUR BUSINESS MAY SUFFER

     We are required to supply, support, and maintain large numbers of
     Inovoject(R) systems at our customers' hatcheries on a timely basis at a
     reasonable cost to us. There can be no assurance that we will be able to
     continue to provide these services on a timely or cost-effective basis. If
     we are unable to do so, our customers may reduce their use of our products,
     which could adversely affect our operating results.

     WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DISCOURAGE OR DELAY A TAKEOVER

     Provisions of our certificate of incorporation and bylaws could have the
     effect of discouraging or delaying an acquisition of our company. For
     example, the Board of Directors has the authority to issue up to 15,000,000
     shares of Preferred Stock in one or more series and to determine the
     designations, preferences and relative rights and qualifications,
     limitations or restrictions 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, an issuance could
     result in a class of securities outstanding that would have preferences
     with respect to voting rights and dividends and in

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     liquidation over the Common Stock, and could (upon conversion or otherwise)
     enjoy all of the rights applicable to Common Stock. The authority of the
     Board of Directors to issue Preferred Stock potentially could be used to
     discourage attempts by others to obtain control of us through merger,
     tender offer, proxy contest or otherwise by making these 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. No agreements or understandings currently exist for the
     issuance of Preferred Stock, and the Board of Directors has no present
     intention to issue any Preferred Stock. We adopted a shareholder rights
     plan which could have the effect of discouraging a takeover of us. The
     rights plan, if triggered, would make it more difficult to acquire us by,
     among other things, allowing existing shareholders to acquire additional
     shares at a substantial discount, thus substantially inhibiting the ability
     of an interested party to obtain control of the Company.

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