SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
IGI, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
01-0355758
(IRS Employer Identification No.)
Wheat Road and Lincoln Avenue, Buena, New Jersey 08310
(856) 697-1441
(Address, Including Zip Code and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Edward B. Hager, M.D. Copies to:
IGI, Inc.John Ambrose Paul C. Remus, Esquire
IGI, Inc. Devine, Millimet & Branch, P.A.
Wheat Road and Lincoln Avenue Devine, Millimet & Branch, P.A.111 Amherst Street
Buena, New Jersey 08310 111 Amherst StreetP.O. Box 719
(856) 697-1441 P.O. Box 719Manchester, New Hampshire 03105
(603) 669-1000
(Name, Address, Including Zip Code, Manchester, New Hampshire 03105
and Telephone Number, Including (603) 669-1000
Area Code, of Agent for Service of Process)
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this from 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, 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. [ ]
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Offering Registration
Registered Registered Per Share(1) Price (1) Fee
- -----------------------------------------------------------------------------
Common Stock 1,907,543 $1.25 $2,384,428.75 $629.49
$.01 par value
- -----------------------------------------------------------------------------
Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457, and based upon a per share
price of $1.25, the average of the high and low prices of the Common
Stock of IGI, Inc., as reported on the American Stock Exchange on
September 28, 2000.
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 thereafter become effective on such date as the Commission,
acting pursuant to said Section 8(a) may determine.
- ---------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED __________, 2000----------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount Of
To Be To Be Price Offering Registration
Registered Registered Per Share(1) Price (1) Fee
- ----------------------------------------------------------------------------
Common Stock 500,000 $.70 $350,000 $88
$.01 par value
- ----------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to Rule 457, and based upon a per share
price of $.70, the average of the high and low prices of the Common
Stock of IGI, Inc., as reported on the American Stock Exchange on May
23, 2001.
PROSPECTUS
IGI, INC.
1,907,543500,000 SHARES COMMON STOCK
$.01 PAR VALUE PER SHARE
This Prospectus relates to the registrationThe selling stockholder identified on page 7 is offering for resale
500,000 shares of up to 1,907,543 shares
(the "Shares") of Common Stock, $.01 par value per share (the "Common
Stock"), of IGI, Inc., a Delaware corporation (the "Company"), which may be
offered from time to time for the account of American Capital Strategies
Ltd. (the "Selling Shareholder" or "ACS"), upon the exercise of the
Warrants (as hereinafter defined). See "THE OFFERING AND THE SELLING
SHAREHOLDER - The Selling Shareholder." The Warrants were issued by the
Company on October 29, 1999 in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act"). See "THE COMPANY - The Company's Debt." The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Shareholder.
The Common Stockour common stock under this prospectus.
Our common stock is traded on the American Stock Exchange ("AMEX")
under the
symbol "IGI""IG". On September 28, 2000,April 30, 2001, the last reported sale price of the Common Stockcommon
stock was $1.31$1.00 per share.
The distributionInvesting in our common stock involves a high degree of risk. You
should consider carefully the Shares by the Selling Shareholder may be
effected from time to timerisk factors beginning on page 1 in one or more transactions (which may involve
block transactions) in the over-the-counter market, on the AMEX or on any
exchange on which the Common Stock may then be listed, through negotiated
transactions, through the writing of options on shares (whether such
options are listed on an options exchange or otherwise) or a combination of
such methods of sale, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.
This Prospectus does not relate to the offering or sale of any such
options. The Selling Shareholder may effect such transactions by selling
the Shares to or through broker-dealers and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholder and or from purchasers of the
Shares for whom the broker-dealers may act as agent (which compensation may
be in excess of customary commissions). The Selling Shareholder also may
pledge the Shares as collateral for margin accounts and such Shares may be
resold pursuant to the terms of such accounts. See "THE OFFERING AND THE
SELLING SHAREHOLDER - The Selling Shareholder."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. FOR A DISCUSSION OF
CERTAIN MATERIAL RISKS TO BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE
SHARES OFFERED HEREBY, SEE "RISK FACTORS," WHICH BEGINS ON PAGE 8.this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of the disclosures made in this
Prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is May 25, 2001.
THE COMPANY 1
RISK FACTORS 1
We Face Challenges in Continuing as a Going Concern 1
We Have Losses from Operations and Need to Continue to Borrow 2
Due to FDA Concerns, We May Need to Stop the Sale of Some Products
or Pay Fines 3
We Face Investigations Relating to Hazardous Materials 4
We Are Being Investigated by the SEC 4
Warrants and Options That We Have Issued May Cause Dilution of
Shareholder Equity 5
WHERE YOU CAN FIND MORE INFORMATION 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 6
CAUTIONARY STATEMENT 7
THE OFFERING AND THE SELLING SHAREHOLDER 7
The Shares 7
The Selling Shareholder 7
Use of Proceeds 8
Plan of Distribution 8
EXPERTS 10
LEGAL MATTERS 11
THE COMPANY
IGI, Inc. was incorporated in Delaware in 1977. Our executive offices
are at Wheat Road and Lincoln Avenue, Buena, New Jersey. We have two
distinct business lines:
Consumer Products Production and marketing of cosmetics
and skin care products; and
Companion Pet Products Production and marketing of companion
pet products such as pharmaceuticals,
nutritional supplements and grooming
aids.
On September 29,15, 2000, we sold our poultry vaccine products business
that operated under the name "Vineland Laboratories." That sale is described
in more detail in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, which is incorporated by reference into this prospectus.
Our mailing address is: IGI, Inc., Wheat Road and Lincoln Avenue,
Buena, New Jersey 08310, and our telephone number is (856) 697-1441.
RISK FACTORS
The shares offered by this prospectus involve a high degree of risk.
You should not purchase any of these shares unless you can afford to lose
your entire investment. Before purchasing any of these shares, you should
consider carefully the following factors, in addition to the other
information concerning IGI, Inc. and its business included or incorporated
by reference in this prospectus.
We Face Challenges in Continuing as a Going Concern
Our independent public accountants for the fiscal years ended December
31, 2000 and 1999 issued opinions on our consolidated financial statements
containing explanatory paragraphs regarding our ability to continue in
business as a going concern. We have experienced difficulty in complying
with the financial covenants in our loan documents and were out of
compliance during much of the year 2000. ADDITIONAL INFORMATIONWe recently renegotiated our loan
agreements and were in compliance with the renegotiated agreements as of
April 30, 2001. If we fail to meet requirements in our loan documents and do
not receive waivers from the lenders, our lenders could demand repayment of
our loans. Demands for repayment could lead to curtailments of business
operations, sales of assets or possibly the commencement of bankruptcy
proceedings.
Our problems were particularly acute prior to the completion of the
sale of our Vineland Laboratories poultry vaccine products division on
September 15, 2000. During
the second and third quarters of 2000, our financial results deteriorated
significantly. This deterioration resulted largely from poor operating
results in our Vineland Laboratories division and our decision to stop the
production of two pet care products as a result of a review of our pet
products division by the Food and Drug Administration. Because of these
developments, we were unable to meet the financial covenants in our debt
agreements during 2000, and we sought and obtained agreements from our
lenders not to exercise their rights to declare our loans immediately due
and payable. The Companylenders agreed to these waivers and loaned additional
funds to us so that we could complete the sale of our Vineland Laboratories
division. Under these agreements with our lenders, the waivers would have
expired and our loans would have been immediately due and payable if we had
not completed the Vineland Laboratories sale as scheduled. We would not
have had the funds to repay the loans at that time.
As a result of these developments, which increased the uncertainty
regarding our ability to repay our debt, in August, 2000 we reclassified the
long-term debt in our consolidated financial statements as of December 31,
1999 as short term debt. The proceeds from the Vineland Laboratories sale
were used to repay a significant portion of our debt. However, we remain a
highly leveraged company. Our loan agreements contain restrictive covenants
and requirements, including requirements to achieve minimum fixed charge
coverage and interest coverage ratios. Furthermore, we are restricted in
our ability to borrow under our revolving line of credit based on qualifying
accounts receivable and inventory. Because of the Vineland Laboratories
sale, we no longer have the same amount of inventory and accounts receivable
nor do we have the same volume of operations to support our overhead and
administrative structure. We have renegotiated the terms of our loan
agreements to reflect our new business structure. However, we cannot provide
any assurance that we will be able to meet the new requirements in the
future.
We Have Losses from Operations and Need to Continue to Borrow
The completion of the Vineland Laboratories sale enabled us to repay
$11,693,000 out of our total borrowings from our lenders of $21,560,000. We
also disposed of a division that was generating operating losses. However,
after the sale, we still had an administrative infrastructure that had been
sustained, in part, by the operating revenues from the poultry vaccines
business. We have taken steps to reduce expenses in response to the
Vineland Laboratories sale, but we cannot predict whether we will be able to
cut costs sufficiently to become profitable in the near term.
For the fiscal year ended December 31, 2000, we had a net loss of
$11,437,000, which resulted in our shareholder equity becoming a deficit.
Part of this net loss was comprised of the following:
* An additional deferred tax valuation allowance of $6,459,000.
We established this allowance by accruing additional income tax
expense. It reflects our
2
analysis of the uncertainty that we will be able to utilize the
net operating loss carryforwards and other tax benefits that we
had been carrying as assets on our balance sheet.
* A loss from discontinued operations of $1,978,000. This amount
reflects the operating loss we incurred during 2000 in our
Vineland Laboratories division, which we sold.
* A $630,000 extraordinary loss from extinguishment of debt. We
had incurred costs in connection with our loans that were being
amortized over the life of the loans. When we prepaid some of
those loans with the proceeds from the Vineland sale, we
expensed $630,000 of deferred financing costs associated with
the reduction in our borrowing base under our revolving credit
facility.
We had a net loss attributable to common stock of $511,000, or $.05
per share for the three months ended March 31, 2001. This loss was due
primarily to one-time charges associated with closing our pet products
manufacturing facility. On March 2, 2001, we became aware of a heating oil
leak at our pet products manufacturing facility in Buena, New Jersey. We
immediately notified the New Jersey Department of Environmental Protection
and the local authorities. We had previously decided to stop manufacturing
our pet products and to begin outsourcing these activities. The heating oil
leak caused us to move more quickly on outsourcing the manufacturing. We
ceased manufacturing operations and closed the plant in early March. We
estimate that the clean-up associated with this leak will cost approximately
$310,000.
While we believe that the steps we have taken will help us return to
profitability, we cannot predict whether or when we will once again become
profitable.
Due to FDA Concerns, We May Need to Stop the Sale of Some Products or Pay
Fines
Our operations and products are subject to regulation by various state
and federal agencies, including the federal Food and Drug Administration.
As a result of inspections on April 17, 2000 and on July 5, 2000, the FDA
issued an inspection report containing a number of unfavorable observations
regarding our pet products business. In an effort to address many of the
FDA's concerns, in June 2000 we permanently discontinued production and
shipment of Liquichlor and temporarily stopped production of Cerumite, both
products of our pet products division. The aggregate annual sales volume
for these products for the fiscal year ended December 31, 1999 was
$1,059,000.
When the FDA receives our formal response to the July 5, 2000
observations, the FDA will evaluate our response and determine the ultimate
outcome of the FDA inspection. An unfavorable outcome could result in
fines, penalties and the potential halt
3
of the sale of some of the regulated products of our pet care business, any
or all of which could have significant negative effects on our company.
During 2000 and the first quarter of 2001, we incurred expenses of
$1,060,000 in connection with this inspection.
We Face Investigations Relating to Hazardous Materials
Our research and development processes involve the controlled use of
hazardous materials, chemicals, viruses and bacteria. We are subject to
federal, state and local laws, regulations and standards governing the use,
manufacturing, storage, handling and disposal of such materials and some of
the waste products we generate.
On April 6, 2000, officials of the New Jersey Department of
Environmental Protection inspected a storage site owned by us in Buena, New
Jersey and issued a Notice of Violation relating to the storage of waste
materials in a number of trailers at the site. We have established a
disposal and cleanup schedule and have completed removing materials from the
site. Small amounts of hazardous wastes were discovered during this
process, and we received a notice of violation relating to the storage of
these materials. We are cooperating with authorities and do not expect to
incur any significant fines or penalties. We expensed $160,000 in 2000 for
the disposal and cleanup activities.
In addition, to test for possible groundwater contamination from a May
2000 fuel oil spill at our former Vineland Laboratories facility, we
installed a test well. We have now received the results from that test
well, and they show no contamination. We have expensed the costs of the
initial remediation and the costs of drilling the test well. Under the
terms of the Vineland Laboratories sale, we have retained any liability for
this spill.
As described above, we became aware of a heating oil leak at our pet
products manufacturing facility in March 2001.
We Are Being Investigated by the SEC
We are the subject of an investigation by the Securities and Exchange
Commission, which was commenced in April 1998. The investigation relates to
fraudulent actions taken by former members of our management. Upon becoming
aware of the fraudulent activity, our Board of Directors commenced an
internal investigation which led to the termination of employment of those
responsible. We cooperated fully with the staff of the Commission and
disclosed to the Commission the results of our internal investigation. On
July 26, 2000, we reached an agreement in principle with the staff of the
Commission to resolve this matter. That agreement is subject to approval by
the Commission. If the proposed agreement is approved, we will neither
admit nor deny that the we violated the financial reporting and record-
keeping requirements of Section 13 of the Securities Exchange Act of 1934
as amended (the "Exchange Act"),for the fiscal years 1995, 1996 and 1997 and will agree to the entry of an
order requiring us to cease and desist from any such violation in accordance therewith files periodicthe
future. The proposed agreement does not provide for any monetary penalty.
If the
4
Commission does not approve the agreement, then the investigation will
likely continue, and we cannot predict the results.
Warrants and Options That We Have Issued May Cause Dilution of Shareholder
Equity
We have issued warrants to American Capital Strategies, Ltd. which
entitle ACS to purchase up to 1,907,543 shares of our common stock at a
price of $.01 per share. If ACS exercises these warrants, the maximum
payment that we will receive is $19,075. The shares issuable upon exercise
of these warrants constitute approximately 15.7% of the current number of
shares outstanding.
We have granted stock options pursuant to stock option plans we have
adopted. As of May 15, 2001, we had 410,175 shares of our common stock
reserved for issuance under these plans to consultants, scientific advisors,
employees and directors, and options to purchase 2,901,075 shares of our
common stock were outstanding and are exercisable at prices of between $.50
per share and $9.48 per share.
Our future financing efforts may be adversely affected by the
existence of these options and warrants. Holders may exercise them at times
when we would otherwise be able to obtain equity capital on terms more
favorable to us. Furthermore, the market price of our stock could be
adversely affected if holders exercise the options and warrants and sell a
substantial number of shares in the market.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"Commission. You may read
and copy any reports, statements or the "Commission"). Such
reports, proxy statements and other information concerningthat we file at the
Company may
be inspectedSecurities and copies may be obtained (at prescribed rates) at public
reference facilities maintained by the CommissionExchange Commission's Public Reference Room at Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and at the regional
offices of the Commission located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Northwest Atrium Center, 500 W. Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. In addition, electronically filedelectronic
versions of these documents including reports, proxy and information statements and other
information regarding the Company, can be obtained fromare available at the Commission's web site at
http://www.sec.gov. The Common StockSince our common stock is listed on the American Stock
Exchange, and reports, proxy statements and otherthis information concerning the Company canis also be inspectedavailable at theits offices of the American
Stock Exchange located at 86 Trinity
Place, New York, New York 10006. The Company hasYou may obtain information on the
operations of the Public Reference Room by calling the Securities and
Exchange Commission at (800) SEC-0330.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 (which, together with all amendments to such registration
statement, is referred to in this Prospectus as the "Registration
Statement") under the Securities Act of 1933. This
Prospectusprospectus constitutes a part of the Registration Statement but does not contain allregistration statement. Some of the
information set forth in the Registration Statement, certain parts of which
haveregistration statement has been omitted from this
prospectus in accordance with the rules and regulations of the
5
Commission. For further information, referenceThe registration statement is hereby madeavailable for you to review at
the Registration Statement. Each statement madelocations specified above. Our description in this Prospectus concerning
aprospectus of any
document filed as part of the Registration Statementregistration statement is qualified in its
entirety by
reference to suchthat document; you should refer to the document itself for a
complete statement of its provisions.
The Registration Statement may be inspected without charge at
the offices of the Commission or copies thereof may be obtained at
prescribed rates from the Public Reference Section of the Commission, at
the addresses set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The followingSecurities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can
disclose important information to you by referring you to those documents.
The information incorporated by reference is considered to be part of this
prospectus except to the extent it is superseded by information contained
directly in this prospectus or in later filed documents incorporated by
reference in this prospectus.
We incorporate by reference the documents listed below and any future
filings made with the Securities and Exchange Commission under Section
13(a), 13(c), 14 or 15(d) of the Company, which are on file withSecurities Exchange Act of 1934 after the
Commission, are incorporated indate of this Prospectusprospectus and prior to the time all of the securities offered
by reference and made a
part hereof:this prospectus have been sold:
(a) The Company'sOur Annual Report on Form 10-K for the year ended December 31,
1999, as amended by Form 10-K/A filed September 1,
2000.2000;
(b) The Company'sOur Quarterly Report on Form 10-Q for the quarter ended March
31, 2000.2001;
(c) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, as amended by Form 10-Q/A filed September
1, 2000.
(d) The Company'sOur Current ReportReports on Form 8-K dated June 19, 2000.
(e)April 20, 2001 and May 1,
2001;
(d) The Company's Current Report on Form 8-K dated July 17, 2000.
(f) The Company's Current Report on Form 8-K dated July 23, 2000.
(g) The Company's Current Report on Form 8-K dated September 28,
2000
(h) The Company'sDefinitive Proxy Statement Schedule 14A, effective
September 1, 2000.
(i)issued on behalf of our Board of
Directors in connection with the annual meeting of our
shareholders held on May 16, 2001; and
(e) The description of the Company's capitalour common stock contained in itsour
Registration Statement on Form S-3, filed May 15, 1997.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d)8-A dated June 9, 1988
registering our common stock under Section 12(b) of the Exchange
Act, subsequent to the date of this Prospectus and prior to the
termination of the offering of the Shares also shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a
document incorporatedincluding any amendments or deemed to be incorporated by reference herein
shall be deemed to be modified or supersededreports filed for the purposespurpose
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 supersedesupdating such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whomdescription.
6
You may request a copy of this Prospectus is delivered a copy of anythese filings, at no cost, by writing to us
at the following address or all oftelephoning us at the foregoing
documents upon written or oral request. Requests for such documents should
be directed tofollowing number:
IGI, Inc.,
Wheat Road and Lincoln Avenue
P.O. Box 687, Buena, New Jersey 08310
Attention: Domenic N. Golato, Chief Financial Officer
(856) 697-1441 Attention: Robert E. McDaniel,
Secretary.
You should rely only on the information incorporated by reference or
provided in this Prospectusprospectus or any prospectus supplement. The Company hasWe have not
authorized anyone other than the Company, to provide you with additional or different information.
You should not assume that any information in this Prospectusprospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.
CAUTIONARY STATEMENT
This Prospectusprospectus and the documents referred to above contain certain
"forward-looking""forward-
looking" statements including, among others, the statements regarding the
amount and nature of claims or liabilities that may be asserted against the Companyus,
investigations regarding our company, arrangements with our lenders and the Company'sour
prospects and future operating results. Without limiting the foregoing, wordsWords such as "anticipates,"
"believes," "expects," "intends," "plans""plans," and similar expressions are
intended to identify "forward-looking" statements. All of these "forward-looking""forward-
looking" statements are inherently uncertain, and stockholders must
recognize that actual events could cause actual results to differ materially
from the Company'sour expectations.
THE COMPANY
Overview of the Company's Business
The Company was incorporated in Delaware in 1977. Its executive
offices are at Wheat Road and Lincoln Avenue, Buena, New Jersey. The
Company is a diversified company engaged in two business segments: Consumer
Products Business - production and marketing of cosmetics and skin care
products, and Companion Pet Products Business - production and marketing of
companion pet products such as pharmaceuticals, nutritional supplements and
grooming aids. On September 15, 2000, the Company consummated the sale
(the "Vineland Sale") of the assets associated with the Company's now
former Poultry Vaccines Business, which involved the production and
marketing of poultry vaccines and other related products. At June 30,
2000 (unaudited and without giving effect to the Vineland Sale), the
Company had $37.1 million of total assets, $28.2 million of total
liabilities and $8.7 million of total stockholders' equity. At December
31,1999, the Company had $33.9 million of total assets, $24.3 million of
total liabilities and $5.5 million of total stockholders' equity.
The Vineland Sale
Overview
On September 15, 2000, the Company sold the assets (the "Poultry
Assets") associated with its Poultry Vaccine Business (the "Poultry
Business") to Lohmann Animal Health International, a Georgia general
partnership, which was formerly known as Vineland International (the
"Buyer"). The Vineland Sale was effected pursuant to an Asset Purchase
Agreement dated as of June 19, 2000 (the "Vineland Agreement") between the
Company and the Buyer.
Purchase Price; Escrow Fund
In exchange for receipt of the Poultry Assets, the Buyer assumed
liabilities of the Poultry Business in the aggregate equal to $2,300,000
and paid the Company cash in the amount of $12,500,000. A portion of the
cash purchase price equal to $500,000 was paid directly into an escrow fund
(the "Escrow Fund") maintained by Key Trust Company, N.A. (the "Escrow
Agent"), pursuant to an Escrow Agreement dated September 15, 2000 among the
Company, the Buyer and the Escrow Agent, to secure potential liability for:
(a) any downward adjustments to the purchase price under the Vineland
Agreement as a result of a decrease in the "net working capital" of the
Poultry Business between March 31, 2000 and September 15, 2000, the date of
the consummation of the Vineland Sale (the "Closing"), and (b)
indemnification obligations of the Company under the Vineland Agreement, as
described below.
"Net working capital" is defined under the Vineland Agreement as
current assets (inventory, net of reserves, plus accounts receivable, net
of allowances) minus current liabilities (the aggregate of accounts payable,
accrued commissions, accrued distributor commissions, accrued freight,
accrued payroll and accrued royalties). If the net working capital of the
Poultry Business as of March 31, 2000 exceeded the net working capital of the
Poultry Business as of the Closing by $100,000 or more, the Company must pay
such difference to the Buyer. The amount then in the Escrow Fund will be
applied to satisfy the Company's obligation in this regard, with any
shortfall being payable directly by the Company to the Buyer. However, if
the net working capital of the Poultry Business as of March 31, 2000 is less
than the net working capital as of the Closing by $100,000 or more, the Buyer
must pay such difference to the Company.
In addition, the moneys on deposit in the Escrow Fund secure the
obligations of the Company to indemnify the Buyer under the Vineland
Agreement if any such obligation arises prior to the date that is the later
to occur of the date of payment of the purchase price adjustments described
above and the date that is four (4) months after the Closing.
Any amount on deposit in the Escrow Fund will be released to the
Company upon the later to occur of the date that is four (4) months after
the date of Closing and the date on which any amount payable from the
Escrow Fund as a result of the purchase price adjustment has been paid. In
the event that the purchase price adjustment occurs prior to the expiration
of the four-month period following Closing and there remains a balance in
the Escrow Fund after the payment of the purchase price adjustment amount,
such balance will be subject to indemnification claims by the Buyer until
the end of such four month period and then released to the Company, subject
to a holdback for any claims by the Buyer for indemnification which claims
are unresolved as of such time.
Application of Vineland Sale Proceeds
On September 15, 2000, the date of the Closing of the Vineland Sale,
the Company applied the cash proceeds received from the Buyer as follows:
Repayment of Outstanding Debt $11,700,000
Payment of Certain Closing Costs 300,000
------------------------------------------------------------
TOTAL: $12,000,000
The Company's Debt
On October 29, 1999, the Company entered into a $22 million senior
bank credit agreement ("Senior Debt Agreement") with Fleet Capital
Corporation ("Fleet") and a $7 million subordinated debt agreement
("Subordinated Debt Agreement") with American Capital Strategies, Ltd.
("ACS").
The Senior Debt Agreement provides for a revolving line of credit
facility of up to $12 million based upon qualifying accounts receivable and
inventory, a $7 million term loan and a $3 million capital expenditures
credit facility. The borrowings under the revolving line of credit bear
interest at the prime rate plus 1.0% or the London Interbank offered rate
plus 3.25%. The borrowings under the term loan and capital expenditure
credit facility bear interest at the prime rate plus 1.5% or the London
Interbank offered rate plus 3.75%. As of June 30, 2000, borrowings under
the revolving line of credit, term loan and capital expenditures credit
facility were $7,364,000, $7,000,000 and $257,000, respectively.
Under the Subordinated Debt Agreement, the Company issued to ACS
$7,000,000 in senior subordinated notes; and warrants (the "Warrants")
evidencing the right to acquire 1,907,543 shares (as adjusted from time to
time in accordance with the terms thereof) of the Company's Common Stock at
an exercise price of $0.01 per share. Among other things, the Warrants
contained a right (the "put") to require the Company to repurchase the
Warrants or the Common Stock acquired upon exercise of the Warrants at
their then fair market value under certain circumstances. In addition, the
number of shares of Common Stock for which the Warrants may be exercised
will increase upon the Company's issuance or sale of Common Stock, other
than pursuant to the requirements of an employee benefit plan in effect on
or before October 29, 1999, at less than the fair market value per share of
the Common Stock at the time of such issue or sale.
Under the Subordinated Debt Agreement, ACS has the right to designate
for election to the Company's Board of Directors that number of directors
that bears the same ratio to the total number of directors as the number
equal to the sum of the number of shares of Company Common Stock owned by
ACS plus the number of shares issuable upon exercise of the Warrants bears to
the total number of outstanding shares of Company Common Stock on a
fully-diluted basis. If ACS waives its right to so designate Company
directors, for so long as ACS owns any Common Stock or Warrants or any of its
loans are outstanding, ACS has the right to designate at least one director
or observer on the Board of Directors. At September 1, 2000, ACS had one
observer on the Company's Board of Directors.
The debt agreements contain financial and other covenants and
restrictions. The Company was not in compliance under financial covenants
under the debt agreements related to the fixed charges coverage ratio,
maximum debt to equity ratio and accounts payable ratio as of December 31,
1999. However, as of April 12, 2000, Fleet and ACS amended the debt
agreements to waive the defaults as of December 31, 1999 and to establish
new covenants as of April 12, 2000. The Company was in compliance with all
debt agreement covenants as of April 12, 2000 and the Company expected that
it would be able to comply with the covenants in the amended debt
agreements through at least December 31, 2000.
In addition, the April 12, 2000 amendment to the Subordinated Debt
Agreement replaced the put provision for the Warrants with a "make-whole"
feature that requires the Company to compensate ACS in either Common Stock
or cash, at the option of the Company, if the proceeds ultimately realized
by ACS upon sale of the Common Stock obtained upon exercise of the Warrants
are less than the fair value of the Common Stock upon exercise of the
Warrants multiplied by the number of shares of Common Stock obtained upon
exercise. Fair value of the Common Stock upon exercise is defined as the
30-day average value prior to notice of exercise. ACS must exercise
reasonable effort to sell or place its shares in the marketplace over a
180-day period before it can invoke the make-whole provision. The make-
whole feature does not become effective until the earlier to occur of: (i)
October 29, 2004, (ii) the date of the payment in full of the subordinated
debt, (iii) the date of the payment in full of the senior debt, and (iv)
the sale by the Company of at least 30% of its assets in a single
transaction or a series of related transactions (unless ACS grants a waiver
permitting the sale). However, if the Company fails to obtain an effective
shelf registration statement with respect to the Shares within 180 days of
the date of the April amendment to the Subordinated Debt Agreement or if
the Commission issues a stop order suspending the effectiveness of such
registration statement, then the make-whole feature will be revoked and the
"put" provision contained in the original Subordinated Debt Agreement will
be reinstated.
Subsequent Events
In May, 2000, the FDA initiated an inspection of the Company's
Companion Pet Products division and issued an inspection report on Form FDA
483 on July 5, 2000. The July 5, 2000 FDA report includes several
unfavorable observations of manufacturing and quality assurance practices
and products of the division. The Company is currently compiling its
responses to the July 5, 2000 FDA report. In an effort to address a number
of the FDA's stated concerns, on May 24, 2000, the Company discontinued
production and shipment of Liquichlor and on June 1, 2000 temporarily
stopped production of Cerumite, both products of the Pet Products Division.
The aggregate annual sales volume for these products for the fiscal year
ended December 31, 1999 was $1,059,000. The Company has accrued $634,000
year to date in related expenses to improve production, to meet
documentation, procedural and regulatory compliance. After accounting for
this cessation of production and combining these results with continued
operating losses in the poultry vaccine business, the Company determined
that it was not in compliance with the financial covenants in the debt
agreements, as amended.
On June 26, 2000, the Company entered into Amendment No. 2 to Note
and Equity Purchase Agreement ("Second Subordinated Amendment") with ACS.
Pursuant to the Second Subordinated Amendment, the Company received
$500,000 and issued to ACS $500,000 of Series C Senior Subordinated Notes
due September 30, 2000 (the "Series C Notes"); and ACS waived compliance
with certain financial covenants applicable to Borrower contained in the
Subordinated Debt Agreement and modified certain interest payment dates
with respect to the Notes. In addition, the Second Subordinated Amendment
permits the Company to issue additional Series C Notes on July 31, 2000 to
pay the interest then due and payable on the Notes and the Series C Notes.
As of August 1, 2000, the Company issued to ACS an additional Series C Note
in the aggregate principal amount of approximately $300,000 for the
interest due.
Also, on June 26, 2000, the Company entered into a Second Amendment
to Loan and Security Agreement dated as of June 23, 2000 (the "Second
Senior Amendment") with Fleet. Pursuant to the Second Senior Amendment,
the Company obtained an "overadvance" of $500,000 under the senior
revolving line of credit (the "Overadvance"), repayable in full on the
earlier to occur of September 22, 2000 or the date of the consummation of
the Vineland Sale. Under the Second Senior Amendment, Fleet agreed to
forbear from exercising its right to accelerate the maturity of the Senior
Loans upon the default by the Borrower under certain financial covenants
(the "Forbearance Covenants") until the first to occur of: (a) September
22, 2000, (b) the date on which any default, other than a default under the
Forbearance Covenants, occurs under the Senior Debt Agreement, as amended;
or (c) the date of the termination of the Vineland Agreement. The Company
never made any draws under the Overadvance.
Due to the terms of the Second Senior Amendment and the Second
Subordinated Amendment discussed above and the possibility that then
existed that the Vineland Sale might not be timely consummated, the Company
reclassified all debt owed to ACS and Fleet as short-term debt. In
response, in August 2000, the Company's independent accountants determined
that substantial doubt exists about the Company's ability to continue as a
going concern. Even though the Company timely consummated the Vineland Sale
and repaid the Series C Notes, the Company remains highly leveraged;
furthermore, availability for borrowings under the revolving line of credit
facility is dependent on the level of the Company's qualifying accounts
receivable and inventory.
On September 15, 2000, the Company applied the proceeds of the
Vineland Sale to repay approximately $6,556,000 on the revolving line of
credit, approximately $4,062,000 on the term loan (leaving approximately
$2,705,000 of the term loan outstanding) and the entire outstanding balance
of the capital expenditure credit facility. In addition, on September 15,
2000, the Company applied approximately $818,000 to repay the Series C
Notes and interest accrued thereon in full.
The Company is currently generating losses that may extend through at
least the end of the year 2000, which could unfavorably affect future
financial covenants and the Company's availability for borrowing under the
revolving line of credit facility, which is dependent on the level of its
qualifying accounts and inventory. After applying the Vineland Sale
proceeds as discussed above, the Company believes it will have availability
for borrowing under the revolving line of credit. However, there can be no
assurance of continued availability. Further, as a result of the depletion
of the Company's inventory and accounts receivable upon the consummation of
the Vineland Sale, the Company is currently seeking to renegotiate the
financial covenants contained in the Company's debt agreements to better
reflect the Company's current business. There can be no assurance that the
Company will be able to comply with the debt agreement covenants unless
Fleet and ACS agree to revise the debt agreement covenants, which the
lenders have no legal obligation to do.
Regulatory and Legal Action
The production and marketing of the Company's products and its
research and development activities are subject to regulation for safety,
efficacy and quality by numerous government authorities in the United
States and other countries. The development, manufacturing and marketing
of veterinary pharmaceuticals are subject to regulation in the United
States for safety and efficacy by the Food and Drug Administration ("FDA")
in accordance with the Food, Drug and Cosmetic Act. In the United States,
pharmaceuticals and vaccines are subject to rigorous FDA regulation
including preclinical and clinical testing. The Company's manufacturing
procedures, equipment and facilities are subject to compliance with FDA
rules and regulations and related oversight and inspections by the FDA.
In addition to regulations enforced by the FDA, the Company is also subject
to regulation under the Occupational Safety and Health Act, the Toxic
Substances Control Act, the Resource Conservation and Recovery Act and other
present and potential future federal, state or local regulations.
FDA Inspection Observations
In May, 2000, the FDA initiated an inspection of the Company's
Companion Pet Products division and issued an inspection report on Form FDA
483 on July 5, 2000. The July 5, 2000 FDA report includes several
unfavorable observations of manufacturing and quality assurance practices
and products of the division. The Company is currently compiling its
responses to the July 5, 2000 FDA report. In an effort to address a number
of the FDA's stated concerns, on May 24, 2000, the Company discontinued
production and shipment of Liquichlor and on June 1, 2000 temporarily
stopped production of Cerumite, both products of the Pet Products Division.
The aggregate annual sales volume for these products for the fiscal year
ended December 31, 1999 was $1,059,000.
Upon receipt of the Company's formal response to the July 5, 2000
observations, the FDA will evaluate the Company's response and will
determine the ultimate outcome of the FDA inspection. An unfavorable
outcome could result in fines, penalties and the potential halt of the sale
of certain regulated products, any or all of which could have a material,
adverse effect on the Company. The Company has incurred $634,000 year to
date in related expenses to improve production, to compile and complete
documentation and to achieve procedural and substantive regulatory
compliance.
SEC Investigation
On July 26, 2000, the Company reached an agreement in principle with
the staff of the SEC to resolve matters arising with respect to the
informal investigation of the Company commenced by the SEC in April 1998.
Under the agreement, which will not be final until approved by the SEC, the
Company neither admits nor denies that the Company violated the financial
reporting and record-keeping requirements of Section 13 of the Securities
Exchange Act of 1934, as amended, for the fiscal years 1995, 1996 and 1997.
Further, in the agreement, the Company agrees to the entry of an order to
cease and desist from any such violation in the future. No monetary
penalty is expected.
The investigation and settlement focus on fraudulent actions taken by
former members of the company's management. Upon becoming aware of the
fraudulent activity, IGI, through its Board of Directors, immediately
commenced an internal investigation which led to the termination of
employment of those responsible. IGI then cooperated fully with the staff
of the SEC and disclosed to the Commission the results of the internal
investigation.
NJDEP Action
On April 6, 2000, officials of the New Jersey Department of
Environmental Protection inspected a company storage site in Buena, New
Jersey and issued a Notice of Violation relating to the storage of waste
materials in a number of trailers at the site. The Company has established
a disposal and cleanup schedule and has commenced operations to remove
materials from the site. Small amounts of hazardous waste were discovered
and the Company was issued a notice of violation relating to the storage of
these materials. The Company is cooperating with the authorities and
expects the assessment of fines or penalties. The Company has expensed the
full cost of $160,000 related to the disposal and cleanup.
On or around, May 17, 2000, the Company became aware of a spill at
its now-former Vineland Laboratories facility of about 965 gallons of #2
fuel oil. By May 26, 2000 the Company had completed remediation of the soil
and nearby creek that were affected by the heating oil spill. To assure
that the nearby groundwater was not contaminated by the spill, the
Company's environmental consultants advised the Company to drill a test
well. The well is being drilled and the Company expects to have analytical
results by the end of September, 2000. The Company has expensed the costs
of the initial remediation and accrued the costs of drilling the test well.
Any residual liability as a result of the fuel oil spill was retained by
the Company as a "Retained Liability" under the Vineland Agreement.
Cohanzick Partners, LP Action
On April 14, 1999, a lawsuit was filed in the U.S. District Court for
the Southern District of New York by Cohanzick Partners, LP, against IGI,
Inc., Edward B. Hager, the Company's Chairman, the following directors of
the Company: Terrence D. Daniels, Jane E. Hager, Constantine L. Hampers and
Terrence O'Donnell and the following former directors and officers of the
Company: Kevin J. Bratton, Stephen G. Hoch, Surendra Kumar, Donald J.
Machpee, Lawrence N. Zitto, Paul D. Paganucci, David G. Pinosky and John O.
Marsh (collectively, the "IGI Defendants") and John P. Gallo, the Company's
former President. The suit which sought approximately $420,000 in actual
damages together with fees, costs and interest, alleges violations of the
securities laws, fraud, and negligent misrepresentation concerning certain
disclosures made and other actions taken by the Company in 1996 and 1997.
The IGI Defendants settled the matter pursuant to a Stipulation and Order
of Dismissal signed by the Court on July 19, 2000. In exchange for the
plaintiff's agreement to dismiss its claims against the IGI Defendants, the
Company issued to the plaintiff 35,000 shares of unregistered Common Stock
of the Company, $.01 par value per share, and the Company's insurer agreed
to pay $97,500 to the plaintiff. The Company issued the 35,000 shares of
Common Stock in June, 2000 and recorded the issuance at the fair market
value of the Common Stock on the date of issuance ($1.375 per share) or
$48,125 in the aggregate. As of December 31, 1999, the Company established
a reserve with respect the Cohanzick suit of $88,750. The Company intends
to record the $48,125 upon issuance of stock as an offset to its reserve in
the third quarter 2000.
RISK FACTORS
The Shares offered pursuant to this Prospectus involve a high degree
of risk and should not be acquired by any person who cannot afford the loss
of the entire investment. Accordingly, prospective investors should
consider carefully the following factors, in addition to the other
information concerning the Company and its business included or
incorporated by reference in this Prospectus.
Going Concern; Substantial Indebtedness
As a result of the timely consummation of the Vineland Sale, the
Company has repaid the Series C Notes. However, in anticipation that the
Vineland Sale might not be timely consummated and, therefore, of the
possibility that the Overadvance and Series C Notes might not be timely
repaid, the Company reclassified its long-term debt, outstanding as of
December 31, 1999 as short term debt.
Even given the consummation of the Vineland Sale and the timely
repayment of Series C Notes, the Company remains very highly leveraged and
subject to restrictive covenants and restraints which are contained in its
Senior Debt Agreement, as amended, and its Subordinated Debt Agreement, as
amended, such as requirements to achieve minimum tangible net worth and
minimum fixed charge coverage ratios. Furthermore, the Company's available
borrowings under the revolving line of credit from Fleet are dependent upon
the level of the Company's qualifying accounts receivable and inventory. As
a result of the depletion of the Company's inventory and accounts receivable
upon the consummation of the Vineland Sale, the Company is currently seeking
to renegotiate the financial covenants contained in the Company's debt
agreements to better reflect the Company's current business. There can be no
assurance that the Company will be able to comply with the debt agreement
covenants unless Fleet and ACS agree to revise the debt agreement covenants,
which the lenders have no legal obligation to do.
Over the past eight months, the Company has obtained several waivers
and extensions from its lenders under the debt agreements relating
primarily to the Company's failure to satisfy certain financial covenants
contained in the debt agreements and to timely pay interest. There can be
no assurance that the Company will be able to continue to obtain waivers or
extensions from the lenders with respect to any non-compliance. If the
Company is not successful in meeting its financial covenants, a default
could occur under the debt agreements and any such default, if not
resolved, could lead to curtailment of certain the Company's business
operations, sale of certain assets or commencement of bankruptcy
proceedings.
In response to these and other events, the Company's independent
accountants determined that substantial doubt exists about the Company's
ability to continue as a going concern.
Government Regulation
The Company's operations and products are subject to regulation by
various state and federal agencies, including the FDA, which, on July 5,
2000, issued an inspection report containing a number of unfavorable
observations with respect to the Company's pet products business. In an
effort to address a number of the FDA's concerns, the Company has
discontinued production and shipment of Liquichlor and has temporarily
stopped production of Cerumite, both products of the Pet Products Division.
The aggregate annual sales volume for these products for the fiscal year
ended December 31, 1999 was $1,059,000.
Upon receipt of the Company's formal response to the July 5, 2000
observations, the FDA will evaluate the Company's response and will
determine the ultimate outcome of the FDA inspection. An unfavorable
outcome could result in fines, penalties and the potential halt of the sale
of certain regulated products, any or all of which could have a material,
adverse effect on the Company. The Company has incurred $634,000 year to
date in related expenses.
Hazardous Materials; Environmental Matters.
The Company's research and development processes may involve the
controlled use of hazardous materials, chemicals, viruses and bacteria. The
Company is subject to federal, state and local laws, regulations and
standards governing the use, manufacture, storage, handling and disposal of
such materials and certain waste products.
On April 6, 2000, officials of the New Jersey Department of
Environmental Protection inspected a company storage site in Buena, New
Jersey and issued a Notice of Violation relating to the storage of waste
materials in a number of trailers at the site. The Company has established
a disposal and cleanup schedule and has commenced operations to remove
materials from the site.
In addition, to assure that no groundwater contamination resulted
from a May, 2000 fuel oil spill at the Company's former Vineland
Laboratories facility, the Company is drilling a test well and expects to
have analytical results by the end of September, 2000. The Company has
expensed the costs of the initial remediation and accrued the costs of
drilling the test well. Any liabilities in connection with the fuel oil
spill have been retained by the Company under the Vineland Agreement.
Losses from Operations and Capital Requirements
The successful consummation of the Vineland Sale enabled the Company
to repay a significant amount of its outstanding debt and dispose of a
division that was generating substantial operating losses for the Company.
Nonetheless, after closing the Vineland Sale, the Company has retained
administrative infrastructure that was, in part, sustained by the operating
revenues of the Poultry Business. The Company has initiated steps to
reduce its overhead and infrastructure in response to the Vineland Sale;
but there is no assurance that the Company will be successful in
sufficiently reducing its costs so as to continue to comply with the
financial covenants contained in the Company's debt agreements.
The Company is currently generating losses that may extend through at
least the end of the year 2000. These losses could unfavorably affect
future compliance with financial covenants and the Company's availability
for borrowing under the revolving line of credit facility, which is
dependent on the level of the Company's qualifying accounts and inventory.
There can be no assurance that the Company will continue to comply with the
debt agreement covenants and that funds will continue to be available to
the Company under its revolving line of credit.
As discussed under "Government Regulation," the Company is reviewing
the FDA inspection report issued on July 5, 2000 with respect to the
Company's pet products division. Resolution of the issues raised by the
FDA may include the need to upgrade certain of the equipment and
manufacturing processes associated with the pet products business. The
amount of any such expenditures and the Company's ability to finance them
cannot now be predicted.
Dilution
As described in the Company's Annual Report on Form 10-K, as amended
by Form 10-K/A, for the year ended December 31, 1999, the Company has
issued its Common Stock and granted stock options pursuant to various
employment benefit plans adopted by the Company. As of December 31, 1999,
360,000 shares of Common Stock are reserved for issuance under these plans
to consultants, scientific advisors, employees and directors, and options
to purchase 1,909,866 shares of Common Stock are outstanding and are
exercisable at prices between $1.56 per share and $9.88 per share.
Upon exercise of the Warrants and without giving effect to any other
issuance of Common Stock, under the Company's employee benefit plans or
otherwise, in the aggregate, the Shares will constitute approximately
15.7% of the issued and outstanding Common Stock. To the extent the Shares
offered hereby are made available pursuant to a partial exercise of the
Warrants, additional Common Stock, up to a maximum of 1,907,543 shares (as
that number may be increased pursuant to the terms of the Warrants), may be
issued upon future exercise of the remaining Warrants.
The existence of the Warrants and the options that have been or may
be issued under the Company's employee benefit plans may prove to be a
hindrance to future financing efforts by the Company. Further, the holders
of such options and Warrants may be able to exercise them at a time when
the Company may otherwise be able to obtain additional equity capital on
terms more favorable to the Company. Furthermore, sales of substantial
amounts of shares underlying the aforesaid options and Warrants, including
the Shares offered hereby, could adversely affect the prevailing market
prices for the Common Stock and the exercise of any such options or
Warrants may have a dilutive effect on the net tangible book value per
share of the Common Stock.
THE OFFERING AND THE SELLING SHAREHOLDER
The Shares
All of the shares of Common Stock to be registered under this
Prospectus and Registration Statement (the "Shares") andcommon stock offered by this Prospectusprospectus will be
sold for the account of the Selling Shareholder.Univest Mgt. Inc. E.P.S.P. ("Univest") or its
pledgees, donees, transferees or other successors-in-interest.
The Selling Shareholder
PursuantThis prospectus relates to the Subordinated Debt Agreement, the Selling Shareholder
acquired the Warrants evidencing the right to acquire 1,907,543 shares (as
adjusted from time to time in accordance with the terms thereof)resale of the
Company's Common Stock at an exercise price of $0.01 per share. The number
of500,000 shares of Common Stock for which the Warrants may be exercised will
increase upon the Company's issuance or sale of Common Stock at less than the
fair market value per share of the Common Stock at the time of such issue or
sale, unless such sale or issuance is pursuant to the requirements of an
employee benefit plan in effect on or before October 29, 1999.
On February 11, 2000, the Selling Shareholder filed a Schedule 13G with
the Commission reporting beneficial ownership of 1,907,543our common
stock by Univest.
Univest beneficially owns 750,000 shares of Common
Stock, all of which are issuable upon exercise of the Warrants. ACS reported
thatour common stock and it
has sole voting and dispositive power over all 1,907,543 shares.
With750,000 shares, including the
exception of its role as subordinated lender to the Company under
the Subordinated Debt Agreement, as amended, ACSshares that are being offered by this prospectus. Univest has no position,
office or other material relationship with the CompanyIGI, Inc. or any of its
affiliates orand has not had any such position, office or other material
relationship within the last three years.
7
Use of Proceeds
Upon exercise of the Warrants by the Selling Shareholder, the Company
will receive the exercise price of $.01 per Share, or a maximum of $19,075,
which will be used for general corporate purposes. The CompanyWe will not receive any of the proceeds from the saleUnivest's resale of the
Sharesshares offered by the Selling
Shareholder. The Company hasthis prospectus. We have agreed to pay all costs of the
registration of the Shares. Suchthese shares. We estimate that these costs, fees and
expenses are estimated to bewill total approximately $24,629.$10,088.
Plan of Distribution
Univest and its pledgees, donees, transferees or other successors-in-
interest selling shares of our common stock may sell the shares offered by
this prospectus from time to time. The Selling Shareholder is entitledselling shareholder will act
independently of us in making decisions with respect to distributethe timing, manner
and size of each sale. The sales may be made on one or more exchanges or in
the over-the-counter market or otherwise, at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The selling shareholder may effect such
transactions by selling the shares to or through broker-dealers. Our common
stock may be sold by one or more of, or a combination of, the following:
* block trade in which the broker-dealer so engaged will attempt to sell
our common stock as agent but may position and resell a portion of the
block as principal to facilitate the transaction,
* purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus,
* an exchange distribution in accordance with the rules of such
exchange,
* ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
* in privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented
from time to time up to 1,907,543describe a specific plan of distribution. In effecting
sales, broker-dealers engaged by the selling shareholder may arrange for
other broker-dealers to participate in the resales.
The selling shareholder may enter into hedging transactions with
broker-dealers in connection with distributions of our common stock or
otherwise. In such transactions, broker-dealers may engage in short sales
of the shares in the course of hedging the positions they assume with the
selling shareholder. The selling shareholder also may sell shares short and
redeliver our common stock to close out such short positions. The selling
shareholder may enter into option or other transactions with broker-dealers
which require the delivery to the broker-dealer of our common stock. The
broker-dealer may
8
then resell or otherwise transfer such shares pursuant to this prospectus.
The selling shareholder also may loan or pledge the shares to a broker-
dealer. The broker-dealer may sell our common stock so loaned, or upon a
default the broker-dealer may sell the pledged shares pursuant to this
prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling shareholder. Broker-
dealers or agents may also receive compensation from the purchasers of our
common stock for whom they act as agents or to whom they sell as principals,
or both. Compensation as to a particular broker-dealer might be in excess
of customary commissions and will be in amounts to be negotiated in
connection with our common stock. Broker-dealers or agents and any other
participating broker-dealers or the selling shareholder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act of
1933 in connection with sales of the shares. Accordingly, any such
commission, discount or concession received by them and any profit on the
resale of our common stock purchased by them may be deemed to be
underwriting discounts or commissions under the Securities Act of 1933.
Because the selling shareholder may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act of 1933, the selling
shareholder will be subject to the prospectus delivery requirements of the
Securities Act of 1933. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 promulgated under the
Securities Act of 1933 may be sold under Rule 144 rather than pursuant to
this prospectus. The selling shareholder has advised us that he/she has not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of the securities. To our
knowledge, there is no underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling shareholder.
Our common stock will be sold only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states our common stock may not be sold unless it has
been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange Act of 1934,
any person engaged in the distribution of our common stock may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, the selling shareholder will be subject to
applicable provisions of the Exchange Act of 1934 and the associated rules
and regulations under the Exchange Act of 1934, including Regulation M,
which provisions may limit the timing of purchases and sales of shares of
our common stock by the Shares. Ifselling shareholder. We will make copies of this
prospectus available to the Warrants were exercised
effective August 15, 2000, in the aggregate, the Shares would constitute
approximately 15.7%selling shareholder and have informed them of
the issuedneed for delivery of copies of this prospectus to purchasers at or prior
to the time of any sale of our common stock.
9
We will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act of 1933 upon being notified by a
selling shareholder that any material arrangement has been entered into with
a broker-dealer for the sale of shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer. Such supplement will disclose:
* the name of each such selling shareholder and outstanding Common Stock of the Company on August 15, 2000.participating
broker-dealer(s),
* the number of shares involved,
* the price at which such shares were sold,
* the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
* that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus, and
* other facts material to the transaction.
We will bear all costs, expenses and fees in connection with the
registration of our common stock. The Selling Shareholder's planselling shareholder will bear all
commissions and discounts, if any, attributable to the sales of distribution
is set forth on the cover pageshares.
The selling shareholder may agree to indemnify any broker-dealer or agent
that participates in transactions involving sales of this Prospectus.the shares against
certain liabilities, including liabilities arising under the Securities Act.
EXPERTS
The consolidated financial statements and financial statement schedule
of IGI, Inc. as of December 31, 2000 and for the year then ended have been
incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing. The report of KPMG LLP
covering the December 31, 2000 consolidated financial statements contains an
explanatory paragraph that states that the Company has suffered recurring
losses from operations and has negative working capital and a stockholders'
deficit as of December 31, 2000. These matters raise substantial doubt
about the Company's ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of this
uncertainty.
The consolidated financial statements as of December 31, 1999 and
1998, and for each of the two years in the period ended December 31, 1999,
incorporated in this
Prospectus 10
prospectus by reference to the Company'sour Annual Report on Form 10-K, for the year ended
December 31, 1999, as amended by Form 10-K/A filed September 1, 2000, have been so
incorporated in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern
as described in Note 8 to the consolidated financial statements)statements which appear in
IGI, Inc.'s Annual Report on Form 10-K/A for the year ended December 31,
1999) of PricewaterhouseCoopers LLP, independent accountants, given uponon the
authority of thatsaid firm as an expertexperts in accountingauditing and auditing.accounting.
LEGAL MATTERS
The validity of the Common Stockshares of common stock offered herebyby this prospectus
will be passed upon for the Companyus by Devine, Millimet & Branch, P.A.,Professional
Association, Manchester, New Hampshire. 11
PART II
Item 14 Other Expenses of Issuance and Distribution
The following is an itemized statement of expenses to be incurred in
connection with this Registration Statement. All of the expenses will be
paid by the Company.
Securities and Exchange Commission registration fee $ 629.49
Blue Sky fees and expenses 0.00
Public accountants' fees 12,000.00
Company legal fees and expenses 12,000.00
Miscellaneous expenses 0.00
---------------------------------------------------------------------
TOTAL: $24,629.49
IGI, Inc. (the "Company").
Securities and Exchange Commission registration fee $ 88
Blue Sky fees and expenses 0
Public accountants' fees 5,000
Company legal fees and expenses 5,000
Miscellaneous expenses 0
-------
TOTAL: $10,088
All of the above items, except the registration fee, are estimates.
Item 15 Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with
specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation -B a "derivative action"), if they acted in good faith and in
a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorney's fees)
actually and reasonably incurred in connection with the defense or
settlement of such action, and the statute requires court approval before
there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is
not exclusive of other indemnification that may be granted by a
corporation's by-laws, disinterested director vote, stockholder vote,
agreement or otherwise.
Under the terms of the Company's Bylaws and subject to the applicable
provisions of Delaware law, the Company has indemnified each of its
directors and officers and, subject to the discretion of the Board of
Directors, any other person, against expenses incurred or paid in connection
with any claim made against such director or officer or any actual or
threatened action, suit or proceeding in which such director or officer may
be involved by reason of being or having been a director or officer of the
Company or of serving or having served at the Company's request as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other
12
enterprise, or by reason of any action taken or not taken by such director
or officer in such capacity, and against the amount or amounts paid by such
director or officer in settlement of any such claim, action, suit or
proceeding or any judgment or order entered therein.
Section 102(b)(7) ifof the DGCL permits a provision in the certificateCertificate
of incorporationIncorporation of each corporation organized thereunder, such as the
Company, eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. The Company's
Certificate of Incorporation, as amended, eliminates the liability of
directors to the extent permitted by the DGCL.
The Company carries directors' and officers' liability insurance that
covers certain liabilities and expenses of Company directors and officers.
The Company has entered into employment agreements with certain officers and
directors to effectuate these indemnity provisions.
Item 16 Exhibits
5.1 Opinion of Devine, Millimet & Branch, P. A.
23.1and Consent of Devine, Millimet & Branch,
P.A.Professional Association
23.1 Consent of KMPG LLP
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney
Item 17 Undertakings
A. Undertaking Pursuant to Rule 415.
The Company hereby undertakes:
(1) to file, during any period in which offers or 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 (the "Securities
Act");
(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 (NotwithstandingStatement.
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 forform of
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 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.);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) do
not apply if the Registration Statement is on Form S-3 and
the information required to be included in post-effective
amendment by those paragraphs is contained in periodic
reports filed by the Company pusuantpursuant to Section 13 or
Section 15 (d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act, 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-effectivepost-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
B. Undertaking Regarding Filings Incorporating Subsequent Exchange
Act Documents by Reference.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
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 the initial bona fide offering thereof.
C. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the
14
Company pursuant to the foregoing provisions, or otherwise, the Company 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 Company 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.
15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Buena, State of New Jersey, on September 29, 2000.May
25, 2001.
IGI, INC.
By: /s/ John Ambrose
-------------------------------------------------------
JOHN AMBROSE
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ Edward B. HagerEarl R. Lewis Chairman of the Board September 28, 2000May 25, 2001
- ----------------------------
EDWARD B. HAGER
/s/ Robert E. McDaniel Chief Executive Officer September 28, 2000
- ---------------------------- (Principal executive
ROBERT E. MCDANIEL officer)---------------------------
EARL R. LEWIS
/s/ John Ambrose President September 28, 2000and Chief Executive May 25, 2001
- ------------------------------------------------------- Officer (Principal executive
JOHN AMBROSE officer)
/s/ Domenic N. Golato Senior Vice President and September 28, 2000May 25, 2001
- ------------------------------------------------------- Chief Financial Officer
DOMENIC N. GOLATO (Principal financial officer
and principal accounting
officer)
/s/ Stephen J. MorrisJohn Freal Director September 28, 2000May 25, 2001
- ----------------------------
STEPHEN J. MORRIS
/s/ Terrence D. Daniels Director September 28, 2000
- ----------------------------
TERRENCE D. DANIELS---------------------------
JOHN FREAL
/s/ Jane E. Hager Director September 28, 2000May 25, 2001
- -------------------------------------------------------
JANE E. HAGER
/s/ Constantine L. Hampers Director September 28, 2000May 25, 2001
- -------------------------------------------------------
CONSTANTINE L. HAMPERS
16
/s/ Stephen J. Morris Director May 25, 2001
- ---------------------------
STEPHEN J. MORRIS
/s/ Terrence O' DonnellO'Donnell Director September 28, 2000May 25, 2001
- -------------------------------------------------------
TERRENCE O'DONNELL
/s/ Donald W. Joseph Director September 28, 2000
- ----------------------------
DONALD W. JOSEPH
Director September 28, 2000
- ----------------------------
EARL R. LEWIS
The undersigned, by signing his name hereto, does hereby sign this
registration statement or amendment thereto on behalf of each of the above-
indicated directors or officers of IGI, Inc. pursuant to powers of attorney
executed by each such director or officer.
/s/ Robert E. McDanielJohn Ambrose
------------------------------------
Robert E. McDaniel,John Ambrose, Attorney-in-Fact
EXHIBIT INDEX
The following Exhibits are filed as part of this Registration
Statement on Form S-3 or are incorporated herein by reference.
Exhibit No. Description Page
- ---------------------------------------------------------------------------
5.1 Opinion and Consent of Devine, Millimet & Branch, P. A.Exhibit No. Description Page
- ----------- ----------- ----
5.1 Opinion and Consent of Devine, Millimet 19
& Branch, Professional Association
23.1 Consent of KPMG LLP 21
23.2 Consent of PricewaterhouseCoopers LLP 22
24.1 Power of Attorney
23