<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended March 31,
1995 1994
<CAPTION>
<S> <C> <C>
Net sales $ 7,116,926 $ 6,950,343
Cost of sales 3,297,237 3,402,063
----------- -----------
Gross profit 3,819,689 3,548,280
Selling, general and
administrative expenses 2,709,602 2,625,670
Research and development expenses 343,815 244,017
Research revenues (400,000) -
----------- -----------
Operating profit 1,166,272 678,593
Interest expense, net (239,163) (188,558)
----------- -----------
Income before provision
for income taxes 927,109 490,035
Provision for income taxes 283,000 166,000
----------- -----------
Net income $ 644,109 $ 324,035
=========== ===========
Income per common and common
equivalent share: <C> <C>
Net income $ .07 $ .04
===== =====
Average number of common and common <C> <C>
equivalent shares 9,777,328 9,113,078
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
ASSETS 1995 1994
----------- -----------
<CAPTION>
<S> <C> <C>
Current assets:
Cash and equivalents $ 830,084 $ 953,976
Accounts receivable, less allowance
for doubtful accounts of $181,000 7,621,526 7,276,843
Inventories 8,382,404 8,075,147
Current deferred taxes 36,641 36,641
Prepaid expenses and other
current assets 1,492,693 912,496
----------- -----------
Total current assets 18,363,348 17,248,519
----------- -----------
Notes receivable, less
current maturities 624,634 570,589
----------- -----------
Property, plant and equipment - at cost:
Land 417,011 416,011
Buildings and improvements 6,378,497 6,356,842
Machinery and equipment 8,148,639 7,981,998
Construction in progress 1,818,400 1,182,821
----------- -----------
16,762,547 15,937,672
Less accumulated depreciation (7,646,498) (7,454,437)
----------- -----------
9,116,049 8,483,235
----------- -----------
Deferred income taxes 1,087,005 1,370,005
Net assets of biotechnology
business segment 2,931,085 2,066,303
Other assets 686,462 756,607
----------- -----------
$32,808,583 $30,501,842
=========== ===========
Continued
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
(Unaudited)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
----------- ------------
<CAPTION>
<S> <C> <C>
Current liabilities:
Note payable to bank $ 3,410,000 $ 3,790,000
Current maturities of
long-term debt 11,654 29,338
Accounts payable 1,645,151 1,580,349
Accrued payroll 156,598 498,880
Other accrued expenses 371,054 660,989
Income taxes payable 12,827 15,184
Deferred income taxes 9,390 9,390
----------- -----------
Total current liabilities 5,616,674 6,584,130
----------- -----------
Deferred income taxes 187,075 187,075
----------- -----------
Long-term debt, less
current maturities 10,018,557 10,019,138
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 30,000,000
shares authorized; 9,102,846 and
9,018,637 shares issued in 1995
and 1994, respectively 91,028 90,186
Additional paid-in capital 20,901,803 20,390,726
Common stock subscribed,
226,655 shares 2,500,000 -
Deficit (3,708,823) (4,352,932)
----------- -----------
19,784,008 16,127,980
Less treasury stock;
179,789 shares and 156,145
share, at cost in 1995 and 1994,
respectively (2,634,373) (2,253,123)
Stockholders' notes receivable (163,358) (163,358)
----------- -----------
Total stockholders' equity 16,986,277 13,711,499
----------- -----------
$32,808,583 $30,501,842
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
1995 1994
----------- ----------
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 644,109 $ 324,035
Reconciliation of net income to net cash
used by operating activities:
Depreciation and amortization 220,058 219,818
Provision for loss on accounts
receivable and inventories 30,000 30,000
Issuance of stock to 401(k) plan 5,567 9,016
Change in deferred income taxes 283,000
Changes in operating assets and liabilities:
Accounts receivable (344,683) (577,906)
Inventories (337,257) 145,936
Prepaid and other assets (580,197) 20,355
Accounts payable and
accrued expenses (567,415) 248,281
Income taxes payable/refundable (2,357) 167,527
Net cash (used by) provided ----------- -----------
from operating activities (649,175) 587,062
----------- -----------
Cash flows from investing activities:
Capital expenditures, net (824,875) (153,780)
Increase in notes receivable
from officer (54,045) (5,072)
Decrease (increase) in other assets 42,148 (20,831)
Increase in net assets
of biotechnology segment (864,782) (796,935)
----------- -----------
Net cash used by investing activities (1,701,554) (976,618)
----------- -----------
Cash flows from financing activities:
Net (repayments) borrowings under line
of credit agreements (380,000) 310,000
Payments of long-term debt (18,265) (20,000)
Proceeds from exercise of common
stock options 125,102 20,883
Proceeds from common
stock subscribed 2,500,000 -
----------- -----------
Net cash provided from
financing activities 2,226,837 310,883
----------- -----------
Net decrease in cash and equivalents (123,892) (78,673)
Cash and equivalents at
beginning of year 953,976 880,797
Cash and equivalents at ----------- -----------
March 31, 1995 and 1994 $ 830,084 $ 802,124
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
</TABLE>
<PAGE>
IGI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements have been
prepared by IGI, Inc. without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the interim
periods presented. All such adjustments are of a normal
recurring nature.
Certain information in footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles has been condensed or
omitted pursuant to such rules and regulations, although the
Company believes the disclosures are adequate to make the
information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
2. Net Income Per Common Share
Net income per share of common stock is computed by dividing
net income by the weighted average number of shares of common
stock and common stock equivalents, if dilutive, outstanding
during the three month periods ended March 31, 1995 and 1994.
Common stock equivalents include shares issuable upon the
exercise of dilutive common stock options. Fully diluted
earnings per share approximate primary earnings per share.
3. Inventories
Inventories are valued at the lower of cost or market using
the last-in, first-out (LIFO) method and consist of the
following:
<TABLE>
March 31, 1995 December 31, 1994
<CAPTION>
<S> <C> <C>
Finished Goods $2,935,404 $2,704,408
Work-in-process 3,071,905 2,925,494
Raw Materials 2,375,095 2,445,245
---------- ----------
Total $8,382,404 $8,075,147
========== ==========
</TABLE>
Inventory values computed under the first-in, first-out
(FIFO) method approximate the values determined using LIFO.
IGI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
4. Discontinued Operations
On March 17, 1994, IGI's Board of Directors voted to dispose
of the biotechnology business segment through the combination of
its majority-owned subsidiaries Molecular Packaging Systems,
Inc. ("MPS") and Novavax, Inc. and the subsequent tax-free
spinoff to the IGI's shareholders. On March 20, 1995, the
Company received a favorable ruling from the IRS that the Spinoff will be
tax-free to IGI and its shareholds and the Company intends to
dispose of this segment during the second quarter of 1995. The
Company recorded a reserve of $1,000,000 at December 31, 1994 for estimated
losses through the anticipated disposal date of June 30, 1995. Since the
operations of MPS and Novavax comprise all of IGI's biotechnology segment,
the Consolidated Financial Statements of IGI for the three-month period ended
March 31, 1995 report the results of the Biotechnology Business as
discontinued operations.
The components of the losses from discontinued operations
for the periods ended March 31, 1995 and March 31, 1994 were:
<TABLE>
1995 1994
---------- ----------
<CAPTION>
<S> <C> <C>
Selling, general and
administrative $ 362,652 $ 425,022
Research and development
expenses, net 659,913 669,438
Credit for income taxes (315,000) (166,000)
---------- ----------
Operating losses 707,565 928,460
Charge operating losses against reserve
for loss on disposal (707,565) (928,460)
---------- ----------
Net loss from discontinued
operations $ - 0 - $ - 0 -
========== ==========
</TABLE>
The components of the net assets of biotechnology segment at
March 31, 1995 and December 31, 1994 were:
<TABLE>
1995 1994
---------- ----------
<CAPTION>
<S> <C> <C>
Net current assets $ 581,732 $ 442,707
Property, plant and equipment,
net 1,513,769 1,549,666
Deferred patent costs, net 1,128,019 1,073,930
---------- ----------
Accrual for estimated loss
on disposal (292,435) (1,000,000)
---------- ----------
$2,931,085 $2,066,303
========== ==========
</TABLE>
5. Equity Transaction
In January 1995, the Company received $2,500,000 from an industry partner
for 226,655 shares of the Company's common stock under an August 1993 agreement.
This amount has been recorded as Common Stock Subscribed.
<PAGE>
IGI, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three months ended March 31, 1995 compared to 1994
- --------------------------------------------------
Sales increased by $167,000 or 2% due principally to a
$135,000 or 49% increase of product sales in the Company's
Cosmetic and Consumer Product segment. The majority of these
sales were for cosmetic products utilizing the Company's Novasome lipid
vesicule technology. Gross profit increased by $271,000 or 8% due to the
higher sales volume. As a percentage of sales, gross profit was 54%, up from
51% for the first quarter of 1994. This improvement was due to
the increased sales of higher margin cosmetic products as well as
manufacturing efficiencies in the Company's Animal Health
Products segment.
Selling, general and administrative expenses were comparable
to 1994 levels. Research and development expenses increased by
$100,000 or 41% due to stepped up development in applications
of the Novasome and Ultrasponge technologies in the Cosmetic and
Consumer Product segment, principally for flavors, paints and
cosmetic applications. During the first quarter of 1995, the
Company entered into licensing and research agreements
for the Company's technologies and has recognized $400,000
under these agreements as research revenues.
Net interest expense increased by $51,000 due principally to
increases in the Company's borrowing rates which were 9.25% for
1995 compared to 6.25% in the first quarter of 1994. The
provision for income taxes is lower than the statutory rate due
principally to the utilization of research and development tax
credits.
During the first quarter of 1995, the Company incurred $708,000
of expenses, net of a tax benefit of $315,000, related to its Biotechnology
Business segment, which is reported as discontinued operation. These expenses
were charged to the $1,000,000 reserve that was established at
December 31, 1994. The Company believes that the remaining $292,000 reserve
balance of this discontinued operation is sufficient for estimated losses
through the anticipated disposal date of June 30, 1995. (See Note 4 of Notes
to the Consolidated Financial Statements.)
<PAGE>
IGI, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
On March 17, 1994, IGI's Board of Directors voted to dispose of the
biotechnology business segment through the combination of its majority-
owned subsidiaries Molecular Packaging Systems, Inc. ("MPS") and
Novavax, Inc. and the subsequent tax-free spinoff to the IGI's shareholders.
On March 20, 1995, the Company received a favorable ruling from the IRS that the
Spinoff will be tax-free to IGI and its shareholders and the Company intends
to dispose of this segment during the second quarter of 1995.
The Company recorded a reserve of $1,000,000 at December 31, 1994 for
estimated losses through the anticipated disposal date of June 30, 1995.
Since the operations of MPS an Novavax comprise all of IGI's
biotechnology segment, the Consolidated Financial Statements of IGI for the
three-month period ended March 31, 1995 report the results of the
Biotechnology Business as discontinued operations.
Subsequent to the Spinoff, Novavax will have significant funding
requirements to meet the costs associated with the development of human
pharmaceutical and vaccine products. IGI and/or Novavax intend to raise
funds through the sale of debt and/or equity securities to obtain the
required funds. After the Spinoff and completion of the proposed financing,
Novavax is expected to have approximately $8,000,000 to meet its
short-term cash requirements. It is expected that Novavax will be required
to seek additional funding to finance its future operations. There are no
assurances, however, that these funds will be obtained or, if obtained, will
be sufficient to meet its research efforts which will include eventual human
clinical trials. IGI will have no further funding obligations to Novavax
after the Spinoff.
The Company used $649,000 from operating activities due
principally increases in inventories and accounts receivable
related to the increase in international sales. The Company used
$1,701,000 in investing activities for capital expenditures related to its
new 25,000 square foot research, marketing and production facility in Buena,
New Jersey as well as for the funding of reserved expenses incurred by its
biotechnology business segment, which is reported as a discontinued operation.
Funding for the Company's operating and investing activities were provided by
borrowings under the Company's working capital line of credit.
At May 1, 1995 the Company had short term investments of
$837,434 as well as $1,400,000 available under its revolving
credit agreement and $2,185,000 under the working capital line of
credit. Subsequent to the Spinoff of the Biotechnology Business
operations, funds generated from the continuing operations,
existing bank credit facilities are expected to be
sufficient to meet the Company's cash requirements for its
operations. In January 1995, SmithKline Beecham purchased 226,655 shares of
Common Stock of the Company for the sum of $2,500,000. Proceeds from this
transaction were used to repay bank debt. As contemplated by the terms of the
proposed Spinoff, the Company plans to pay Novavax the sum of $4 million for a
fully paid license to use the Novasome Technolgy in its business. THe Company
intends to fund this requirement through borrowings under its existing credit
facilities. The Company will require additional funds to expand its
business. The Company intends to renegotiate its existing bank credit
facility once the Spinoff is completed. No assurance can be given that the
Company will be successful in obtaining the required funds, and, if not,
the Company may be required to cut back on its expansion plans or otherwise
modify its business strategy.
<PAGE>
IGI, INC. AND SUBSIDIARIES
Part II OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material legal proceedings pending to which the
Company is a party.
Item 2 - Changes in Securities
The constituent instruments defining the rights of the
holders of any class of securities were not modified nor were the
rights evidenced by any class of registered securities materially
limited or qualified during the period covered by this report.
Item 3 - Defaults Upon Senior Securities
No defaults occurred during the period covered in this report.
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Net Income Per Common Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
IGI, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
IGI, INC.
(Registrant)
Date: May 8, 1995
By:
Donald J. MacPhee
Vice President
(Principal Financial
and Accounting Officer)
<TABLE>
EXHIBIT 11
IGI, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
<CAPTION>
Three months ended
March 31, March 31,
1995 1994
<S> <C> <C>
Net income for primary
earnings per share $ 644,109 $ 324,035
========== ==========
Primary:
Weighted average shares outstanding
Common stock equivalents (net of common
stock deemed reacquired)
based on average market price 8,884,456 8,791,868
226,655 321,210
--------- ---------
Total equivalent shares for
primary computation 9,777,328 9,113,078
========= =========
Per Share Amounts:
Primary:
Net income $ .07 $ .04
===== =====
Fully diluted earnings per share have been omitted as they
approximate primary earnings per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 830,084
<SECURITIES> 0
<RECEIVABLES> 7,621,526
<ALLOWANCES> 181,000
<INVENTORY> 8,382,404
<CURRENT-ASSETS> 18,363,348
<PP&E> 16,762,547
<DEPRECIATION> 7,646,498
<TOTAL-ASSETS> 33,091,583
<CURRENT-LIABILITIES> 5,899,674
<BONDS> 0
<COMMON> 91,028
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,091,583
<SALES> 7,116,926
<TOTAL-REVENUES> 7,116,926
<CGS> 3,297,237
<TOTAL-COSTS> 2,343,983
<OTHER-EXPENSES> (71,568)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310,731
<INCOME-PRETAX> 927,109
<INCOME-TAX> 283,000
<INCOME-CONTINUING> 644,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 644,109
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
