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. Paul C. Remus, Esquire
Wheat Road and Lincoln Avenue, Devine, Millimet & Branch, P.A.
Buena, New Jersey 08310 111 Amherst Street
(856) 697-1441 P.O. Box 719
(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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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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
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<S> <C> <C> <C> <C>
Common Stock 1,907,543 $1.25 $2,384,428.75 $629.49
$.01 par value
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<FN>
<F1> 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.
</FN>
</TABLE>
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.
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SUBJECT TO COMPLETION, DATED __________, 2000
PROSPECTUS
IGI, INC.
1,907,543 SHARES COMMON STOCK
$.01 PAR VALUE PER SHARE
This Prospectus relates to the registration 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 Stock is traded on the American Stock Exchange ("AMEX")
under the symbol "IGI". On September 28, 2000, the last reported sale
price of the Common Stock was $1.31 per share.
The distribution of the Shares by the Selling Shareholder may be
effected from time to time 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.
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 this Prospectus. Any
representation to the contrary is a criminal offense.
The date of this Prospectus is September 29, 2000.
ADDITIONAL INFORMATION
The Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information concerning the Company may
be inspected and copies may be obtained (at prescribed rates) at public
reference facilities maintained by the Commission 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 filed
documents, including reports, proxy and information statements and other
information regarding the Company, can be obtained from the Commission's
web site at http://www.sec.gov. The Common Stock is listed on the American
Stock Exchange, and reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the American
Stock Exchange located at 86 Trinity Place, New York, New York 10006.
The Company has filed with the 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 Prospectus constitutes
a part of the Registration Statement but does not contain all of the
information set forth in the Registration Statement, certain parts of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement. Each statement made in this Prospectus concerning
a document filed as part of the Registration Statement is qualified in its
entirety by reference to such document 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 following documents of the Company, which are on file with the
Commission, are incorporated in this Prospectus by reference and made a
part hereof:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as amended by Form 10-K/A filed September 1,
2000.
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000.
(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's Current Report on Form 8-K dated June 19, 2000.
(e) 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's Proxy Statement, Schedule 14A, effective
September 1, 2000.
(i) The description of the Company's capital stock contained in its
Registration Statement on Form S-3, filed May 15, 1997.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) 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 incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered a copy of any or all of the foregoing
documents upon written or oral request. Requests for such documents should
be directed to IGI, Inc., Wheat Road and Lincoln Avenue, P.O. Box 687,
Buena, New Jersey 08310, (856) 697-1441, Attention: Robert E. McDaniel,
Secretary.
You should rely only on the information incorporated by reference or
provided in this Prospectus or any prospectus supplement. The Company has
not authorized anyone, other than the Company, to provide you with
additional or different information. You should not assume that any
information in this Prospectus or any prospectus supplement is accurate as
of any date other than the date on the front of those documents.
CAUTIONARY STATEMENT
This Prospectus and the documents referred to above contain certain
"forward-looking" statements, including, among others, the statements
regarding the amount and nature of claims or liabilities that may be
asserted against the Company and the Company's prospects and future
operating results. Without limiting the foregoing, words such as
"anticipates," "believes," "expects," "intends," "plans" and similar
expressions are intended to identify "forward-looking" statements. All of
these "forward-looking" statements are inherently uncertain, and
stockholders must recognize that actual events could cause actual results
to differ materially from the Company's 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:
<TABLE>
<S> <C>
Repayment of Outstanding Debt $11,700,000
Payment of Certain Closing Costs 300,000
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TOTAL: $12,000,000
</TABLE>
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") and offered by this
Prospectus will be sold for the account of the Selling Shareholder.
The Selling Shareholder
Pursuant 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) of the
Company's Common Stock at an exercise price of $0.01 per share. 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 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 1,907,543 shares of Common
Stock, all of which are issuable upon exercise of the Warrants. ACS reported
that it has sole voting and dispositive power over all 1,907,543 shares.
With the exception of its role as subordinated lender to the Company under
the Subordinated Debt Agreement, as amended, ACS has no position, office or
other material relationship with the Company or any of its affiliates or had
any such position, office or other material relationship within the last
three years.
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 Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Shareholder. The Company has agreed to pay all costs of the registration
of the Shares. Such costs, fees and expenses are estimated to be
approximately $24,629.
Plan of Distribution
The Selling Shareholder is entitled to distribute from time to time
up to 1,907,543 shares of the Shares. If the Warrants were exercised
effective August 15, 2000, in the aggregate, the Shares would constitute
approximately 15.7% of the issued and outstanding Common Stock of the
Company on August 15, 2000. The Selling Shareholder's plan of distribution
is set forth on the cover page of this Prospectus.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Company's 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 financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given upon the
authority of that firm as an expert in accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Devine, Millimet & Branch, P.A., Manchester, New
Hampshire.
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.
<TABLE>
<S> <C>
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
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TOTAL: $24,629.49
</TABLE>
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 - 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 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) if the DGCL permits a provision in the certificate
of incorporation 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.
23.1 Consent of Devine, Millimet & Branch, P.A.
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 (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 for 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.);
(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
pusuant 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-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 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.
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.
IGI, INC.
By: /s/ John Ambrose
-------------------------
JOHN AMBROSE
President
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. Hager Chairman of the Board September 28, 2000
----------------------------
EDWARD B. HAGER
/s/ Robert E. McDaniel Chief Executive Officer September 28, 2000
---------------------------- (Principal executive
ROBERT E. MCDANIEL officer)
/s/ John Ambrose President September 28, 2000
----------------------------
JOHN AMBROSE
/s/ Domenic N. Golato Senior Vice President and September 28, 2000
---------------------------- Chief Financial Officer
DOMENIC N. GOLATO (Principal financial
officer and principal
accounting officer)
/s/ Stephen J. Morris Director September 28, 2000
----------------------------
STEPHEN J. MORRIS
/s/ Terrence D. Daniels Director September 28, 2000
----------------------------
TERRENCE D. DANIELS
/s/ Jane E. Hager Director September 28, 2000
----------------------------
JANE E. HAGER
/s/ Constantine L. Hampers Director September 28, 2000
----------------------------
CONSTANTINE L. HAMPERS
/s/ Terrence O' Donnell Director September 28, 2000
----------------------------
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. McDaniel
------------------------------------
Robert E. McDaniel, 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.
<TABLE>
<CAPTION>
Exhibit No. Description Page
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<S> <C>
5.1 Opinion and Consent of Devine, Millimet & Branch, P. A.
23.1 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney
</TABLE>
