<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from:
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Commission file number 0-26476
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IGG INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter.)
NEVADA 33-0231238
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification no.)
One Kendall Square Building 300, Suite 200
Cambridge, Massachusetts 02139
(Address of principal executive offices, including zip code.)
(617) 621-3133
Registrant's telephone number, including area code.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES x NO
The number of shares outstanding of the Registrant's Common
Stock, no par value per share, at March 31, 1996 was 8,407,341
shares.
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<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS
Board of Directors
IGG International, Inc.
Cambridge, Massachusetts
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying consolidated balance sheet of
IGG International, Inc. (a development stage enterprise) as of
March 31, 1996, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for the
three months ended March 31, 1996, and 1995, and for the period
from December 8, 1992 (inception) through March 31, 1996. The
review was conducted in accordance with Statements on Standards
for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information
included in these financial statements is the representation of
the management of IGG International, Inc.
A review consists principally of inquiries of Company personnel
and analytical procedures applied to financial data. It is
substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As shown in the consolidated financial statements, the
Company incurred a net loss of $496,093 during the three months
ended March 31, 1996, and as of that date, had an accumulated
deficit during the development stage of $1,378,355. As discussed
in Note 1, these conditions raise substantial doubt that the
Company will be able to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The balance sheet for the year ended December 31, 1995 was
audited by us and we expressed an unqualified opinion on it in
our report dated March 22, 1996. We have not performed any
auditing procedures since that date.
Kevin J. Williams & Co.
Spokane, Washington
May 13, 1996
<PAGE> 3
IGG INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
_________ _________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 250,490 $ 579,193
Prepaid rent 28,052 18,348
Other 10,788 12,657
_________ ________
TOTAL CURRENT ASSETS 289,330 610,198
EQUIPMENT, net of
accumulated depreciation 16,810 25,632
OTHER ASSETS
Deposits 2,197 1,621
_________ _________
TOTAL ASSETS $ 308,337 $ 637,451
========= =========
</TABLE>
<PAGE> 4
IGG INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
LIABILITIES AND SHAREHOLDERS 1995 1996
EQUITY (DEFICIT) _________ _________
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 9,011 $ 27,618
Professional fees payable 136,297 132,913
Accrued interest 33,970 7,230
Notes payable to
shareholders, net 400,000 65,000
________ ________
TOTAL CURRENT LIABILITIES 579,278 232,761
________ ________
COMMITMENTS AND CONTINGENCIES -0- -0-
MINORITY STOCK INTERESTS -0- -0-
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock,
$.01 par value,
5,000,000 shares
authorized; no shares
issued and outstanding -0- -0-
Common stock, $.01 par
value, 25,000,000
shares authorized;
7,501,491 shares, and
8,407,341 shares issued
and outstanding at
December 31, 1995,
and March 31, 1996,
respectively 75,075 84,073
Additional paid-in capital 536,246 1,698,972
Deficit accumulated during
development stage (882,262) (1,378,355)
__________ __________
TOTAL SHAREHOLDERS' EQUITY
(DEFICIT) (270,941) 404,690
__________ __________
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY (DEFICIT) $ 308,337 $ 637,451
========== ==========
</TABLE>
<PAGE> 5
IGG INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
December 8,
1992
(inception)
Three Months Ended through
March 31, March 31,1996
1995 1996
___________ __________ ____________
<S> <C> <C> <C>
REVENUES $ -0- $ -0- $ -0-
___________ __________ ____________
GENERAL AND
ADMINISTRATIVE EXPENSES
Professional fees 6,380 36,517 261,346
Officers' salaries 6,000 66,000 181,000
Depreciation 363 1,831 7,997
Amortization-debt
issuance costs 3,170 -0- 31,697
Other 15,523 119,632 426,799
__________ __________ ____________
Total 31,436 223,980 908,839
RESEARCH AND
DEVELOPMENT COSTS
Consultants, supplies
and testing 21,752 173,932 342,115
__________ __________ ____________
OPERATING LOSS (53,188) (397,912) (1,250,954)
__________ __________ ____________
OTHER INCOME (EXPENSES)
Interest expense (3,597) (104,006) (140,201)
Interest income 1,037 5,825 12,800
__________ __________ ____________
Total other income
(expenses) (2,560) (98,181) (127,401)
__________ __________ ____________
NET LOSS $ (55,748) $ (496,093) $ (1,378,355)
========== ========== ============
NET LOSS PER COMMON SHARE $ (0.01) $ (0.06) $ (0.18)
========== ========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,023,809 8,307,433 7,485,533
========== ========== ===========
</TABLE>
<PAGE> 6
IGG INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 8,
1992
Three months ended (inception)
March 31, March 31, through
1995 1996 March 31, 1996
___________ ___________ ___________
<S> <C> <C> <C>
Cash flows from
operating activities:
Interest received $ 1,037 $ 4,834 $ 10,118
Cash paid for
services and
administration (57,492) (372,032) (1,075,791)
Interest paid -0- -0- (2,225)
Debt issuance costs (31,697) -0- (31,697)
___________ ___________ ___________
Net cash used in
operating activities (88,152) (367,198) (1,099,595)
___________ ___________ ___________
Cash flows from
investing activities:
Purchase of equipment (570) (10,653) (33,629)
Loans to shareholders -0- -0- (40,000)
Repayment of share-
holder loans -0- -0- 40,000
Deposits paid, net -0- 576 (1,621)
Net cash used in
acquisition (3,822) -0- (3,822)
___________ ___________ ___________
Net cash used in
investing activities (4,392) (10,077) (39,072)
___________ ___________ ___________
</TABLE>
<PAGE> 7
IGG INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 8,
1992
Three months ended (inception)
March 31, March 31, through
1995 1996 March 31, 1996
___________ ___________ ___________
<S> <C> <C> <C>
Cash flows from
financing activities:
Short-term borrowing 398,000 -0- 398,000
Payments on short-
term borrowing -0- (25,000) (25,000)
Proceeds from
issuance of
common stock 1,000 764,876 1,387,429
Payment of capital
acquisition fees -0- (33,898) (43,898)
Capital contributed
by shareholders -0- -0- 1,329
Loans from share-
holders, net 1,200 -0- -0-
___________ ___________ ___________
Net cash provided by
financing activities 400,200 705,978 1,717,860
___________ ___________ ___________
Net increase in cash 307,656 328,703 579,193
Cash-beginning balance 17,131 250,490 -0-
___________ ___________ ___________
Cash-ending balance $ 324,787 $ 579,193 $ 579,193
=========== =========== ===========
</TABLE>
<PAGE> 8
IGG INTERNATIONAL, INC
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
December 8,
1992
Three months ended (inception)
March 31, March 31, through
1995 1996 March 31, 1996
___________ ___________ ___________
<S> <C> <C> <C>
Reconciliation of net
loss to net cash
used in operating
activities:
Net loss $ (55,748) $ (496,093) $(1,378,355)
___________ ____________ ___________
Adjustments:
Interest expense
for extension of
notes payable paid
in common stock -0- 100,000 100,000
Interest on notes
converted to
common stock -0- 30,746 30,746
Amortization of
debt issuance
costs 3,170 -0- 31,697
Amortization of
debt discount 200 -0- 2,000
Debt issuance
costs paid (31,697) -0- (31,697)
Depreciation 363 1,831 7,997
Increase(decrease)
in accounts payable (500) 15,223 160,531
Increase in other
assets (7,337) (1,869) (11,396)
Decrease (increase)
in prepaid rent -0- 9,704 (18,348)
Increase (decrease)
in accrued interest 3,397 (26,740) 7,230
___________ ___________ ___________
Total Adjustments (32,404) 128,895 278,760
___________ ___________ ___________
Net cash used in
operating activities $ (88,152) $ (367,198) $(1,099,595)
=========== =========== ===========
</TABLE>
<PAGE> 9
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
IGG International, Inc. ("the Company"), formerly Alvarada, Inc.,
a Nevada corporation, is a successor by reverse acquisition (Note
7) to International Gene Group, Inc, a Michigan corporation. The
Company is a development stage enterprise formed for the research
and development of pharmaceutical products based on carbohydrate
chemistry. International Gene Group, Inc. will continue as a
subsidiary of IGG International, Inc. In June 1995, the Company
incorporated a new subsidiary, Agricultural Glycosystems, Inc. in
the state of Michigan. The Company is the sole shareholder in
this subsidiary. Agricultural Glycosystems, Inc. will develop
agricultural applications for products that are also based upon
carbohydrate chemistry and these products will be either licensed
from or jointly developed with the Government of Israel's
Agricultural Research Organization. IGG International, Inc.
maintains an office in Cambridge, Massachusetts, and Agricultural
Glycosystems maintains an office in Malvern, Pennsylvania.
PRINCIPLES OF CONSOLIDATION
The Company's financial statements include the accounts of the
Company, its majority owned subsidiary, International Gene Group,
Inc., and its wholly owned subsidiary Agricultural Glycosystems,
Inc. All material intercompany transactions and accounts have
been eliminated in the consolidated financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. Cash in interest-bearing accounts as of December
31, 1995 and March 31, 1996 totals $215,432 and $542,629,
respectively. This includes over $100,000 and $500,000,
respectively, which is held by a single bank and could represent
a concentration of credit risk. The Company's management
believes such risk is minimal since these funds are in a "sweep"
account which is daily reinvested in government securities funds.
<PAGE> 10
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
EQUIPMENT
Equipment is carried at cost. Depreciation is calculated on
accelerated methods over estimated useful lives ranging from 5 to
7 years.
ADVANCES TO AND FROM OFFICERS
In recent years, the officers have, as necessary, advanced funds
to the Company. Most of these advances have been converted to
additional paid-in capital. At times, the officers have received
advances from the Company.
PATENTS
Amounts paid to secure patent rights are expensed as paid until
the products under development have passed testing and prove to
be viable per regulatory requirements.
DEBT ISSUANCE COSTS
Debt issuance costs consist of legal and other related costs
incurred in connection with the Company's private placement
offering in early 1995. These costs were amortized over the
remaining life of the one-year promissory notes. Debt issuance
costs net of accumulated amortization totaled $31,697 as of
December 31, 1995.
RESEARCH AND DEVELOPMENT
Research and development costs, which consist primarily of
consultants, supplies and testing, are charged to operations as
incurred.
<PAGE> 11
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LOSS PER SHARE
Loss per share is computed using the weighted average number of
common shares outstanding or deemed to be outstanding during the
period, including any warrants which are exercisable and
outstanding. The computation of loss per share does not include
common stock equivalents which are anti-dilutive.
STOCK SPLIT
In March 1995, the Company effected a 78.14-for-1 reverse stock
split for all shares outstanding at that date. All references in
the financial statements to issued and outstanding shares and per
share data reflect this reverse stock split.
INCOME TAXES
As of March 31, 1996, the Company had accumulated net operating
losses of approximately $1,350,000. These losses are available
to reduce taxable income and the corresponding future federal and
state income taxes. These losses may be carried forward for
fifteen years, with the earliest expiration year of 2008.
MINORITY INTEREST
At March 31, 1996, minority shareholders held an approximately
six percent interest in International Gene Group, Inc. No value
for this minority interest is shown on the accompanying balance
sheet, as the subsidiary had a shareholders' deficit at March 31,
1996.
ADVANCES TO AND FROM OFFICERS
In recent years, the officers have, as necessary, advanced funds
to the Company. Most of these advances have been converted to
additional paid-in capital. At times, the officers have received
advances from the Company.
<PAGE> 12
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GOING CONCERN
The consolidated financial statements of the Company have been
prepared on a going-concern basis. That basis of accounting
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of conducting business
operations. As shown in the consolidated financial statements,
operations for the year ended December 31, 1995 resulted in a net
loss of $675,833, and as of that date the Company had a
shareholders' deficit of $270,941. During the three months ended
March 31, 1996, the Company's net loss was $496,093. The
Company's future is dependent on its ability to continue to
obtain additional capital or adequate financing to fund
successive phases of human clinical testing of its products in
order to prove their efficacy and marketability, and to achieve a
level of sales adequate to support its operations.
The Company is currently engaged in raising additional capital
from qualified investors. The Company is making presentations to
various venture capital sources to raise additional capital. The
Company is also pursuing possible strategic partnerships or
collaborations with other companies interested in its substances
under development. In the quarter ending March 31, 1996, the
additional capital raised through the sale of common stocks
totaled $730,978.
RESTATEMENT
The restatement of the financial statements have resulted in
certain changes in presentation which have no effect on the net
losses or shareholder's equity for December 31, 1995, or the year
then ended.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of and for the three months
ended March 31, 1995 and 1996, included herein have been prepared
by the Company, without audit. They reflect all adjustments
which are, in the opinion of the management, necessary to present
fairly the results of operations for these periods. All such
adjustments are normal recurring adjustments. The results of
operations for the periods presented are not necessarily
indicative of the results to be expected for the full fiscal
year.
<PAGE> 13
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 2. EQUIPMENT
The Company's equipment at December 31, 1995 and March 31, 1996
consists of the following:
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1996
<S> <C> <C>
Computer and office equipment $ 22,976 $ 33,629
Less: accumulated
depreciation (6,166) (7,997)
_________ _________
TOTAL $ 16,810 $ 25,632
========= =========
</TABLE>
NOTE 3. NOTES PAYABLE
In March 1995, the Company raised $400,000 from a private
placement offering to accredited investors of eight "investment
units". This offering was intended to provide a "bridge" loan
for the research and development activities of the Company, and
was contingent on the completion of the reverse acquisition (Note
6). Each investment unit consisted of a $50,000 promissory note
and 25,000 shares of common stock. The promissory notes, which
pay ten percent interest per annum, have a maturity date of
January 1, 1996 although this date may be extended at the
Company's option for an additional year. As a condition of
extending the notes, the Company is obligated to issue an
additional 10,000 shares of common stock to the note holders of
each unit, resulting in a total of an additional 80,000 shares of
common stock being issued. In 1996, the Company elected to
extend the loan and issued the 80,000 shares valued at $1.25 per
share. This expense was treated as additional interest paid in
the first quarter of 1996 totalling $100,000.
<PAGE> 14
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 3. NOTES PAYABLE (continued)
The private placement offering document further requires that, if
the Company successfully completes a public or private offering
of equity securities for $500,000 or more, it must use 50% of the
proceeds of such offering to repay the promissory notes. Under
the offering document, the Company may elect to convert all or
part of the promissory notes and accrued interest to common stock
at a stated conversion rate of $.5001 per share of common stock,
or at an alternate conversion rate contingent upon the future
trading price of the Company's stock.
The Company has discounted the aforementioned promissory notes to
a value of $398,000. The discount of $2,000, based upon the
stock's assigned value of $.01, has been attributed to stock
issued with the investment units. The Company accrued interest
payable on the promissory notes at December 31, 1995 of $33,970.
Expenses associated with the private placement offering totaled
$31,697. These charges have been capitalized and were amortized
over the original period of the loans. These expenses include
legal and promotional costs associated with the debt offering and
the related reverse acquisition of Alvarada, Inc.
In January 1996, promissory note holders converted $310,000 of
the aforementioned promissory notes at the rate of $1.25 per
common share to 248,000 shares. The noteholders also converted
$30,746 in accrued interest at the rate of $1.25 per common share
into 24,597 shares. As of May 13, 1996, the Company is offering
to convert those notes still outstanding to common stock at the
rate of $2.00 per share of common stock.
<PAGE> 15
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED ATTORNEY FEES
In 1993 and 1994, the Company engaged the services of a Detroit,
Michigan law firm for the purpose of raising funds for the
Company from private investors. While ultimately unsuccessful in
raising any significant funds for the Company, the law firm
billed the Company $111,635 for its services in late 1994. This
same amount is recorded in full as an accrued liability on the
Company's balance sheet at December 31, 1995 and March 31, 1996.
The Company disputes the amount of the legal charges and expects
to settle this obligation for an amount less than the recorded
liability. As of May 13, 1996, the amount and timing of any
settlement is unknown. As of December 31, 1995 and March 31,
1996, the Company owed additional legal and accounting bills
totalling $24,662 and $21,278, respectively.
NOTE 5. SHAREHOLDERS' EQUITY
International Gene Group, Inc. was incorporated on December 8,
1992 with an authorized capitalization of 60,000 shares of no par
common stock. The Company did not begin its activities or issue
stock until early 1993. In 1993, the original shareholders
received common stock for services provided and contributed
$43,687 in cash. In 1994, these shareholders contributed an
additional $1,590 in cash. During 1994, the Company sold common
stock by subscription agreements for a total of $62,700.
As of March 7, 1995, the majority shareholders of International
Gene Group , Inc., controlling 19,633 shares of common stock,
acquired eighty-one percent control of Alvarada, Inc. through a
reverse acquisition in exchange for their stock (Note 7). The
investment of the remaining shareholders, controlling 1,278
shares of International Gene Group, Inc., is recorded as minority
interest in this subsidiary (Note 1).
<PAGE> 16
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 5. SHAREHOLDERS' EQUITY (continued)
The acquisition is being accounted for as a reverse acquisition
and the subsequent capital structure of the continuing entity
includes the restated stock of Alvarada, Inc. at $.01 par value
and a combination of the companies' additional paid-in capital.
After the reverse stock split in 1995, the authorized capital
stock of Alvarada, Inc., subsequently known as IGG International,
Inc., was amended to include thirty million (30,000,000)
authorized shares of stock, consisting of twenty-five million
(25,000,000) shares of common stock with a par value of $.01, and
five million (5,000,000) shares of preferred stock with a par
value of $.01.
On March 31, 1995, in exchange for accepting a seat on the Board
of Directors, the Company agreed to issue Mr. James C. Czirr
warrants to purchase up to a total of 300,000 shares of the
Company's common stock exercisable at $.10 per share through
March 2005. As of December 31, 1995, one hundred thousand of
these warrants are considered outstanding and exercisable. As of
March 31, 1996, two hundred thousand of these warrants are
considered as outstanding and excercisable. On October 2, 1995,
the Company agreed to give Mr. Czirr a one-quarter of one percent
(0.25%) royalty interest in all products licensed or developed by
Agricultural Glycosystems, Inc. and, in addition, 3,500 shares of
common stock in the Company per month, to be distributed under a
benefit plan to be adopted, for his future efforts in developing
the Company. The final document concerning the details of this
agreement is currently not yet executed as of May 13, 1996.
On October 1, 1995, the Company agreed to issue 1,500 shares of
common stock per month to Ms. Yael Zisling in exchange for her
coordination and direction of public and investor relationships.
These shares are to be distributed under a benefit plan to be
adopted. The Company has the right upon thirty days notice to
convert this distribution to a cash payment of $4,000 per month.
The original agreement provided for Ms. Zisling's services for a
three-month period. The Company paid Ms. Zisling $6,000 in cash
in February 1996, in partial consideration of her efforts.
<PAGE> 17
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 5. SHAREHOLDERS' EQUITY (continued)
Additional capital raised by the Company in 1995 includes
$271,666 from the down payment on a subscription for 684,874
shares of common stock with a total subscription price of
$815,000. The future payments on this subscription are
contingent upon the Company being able to raise additional
investor subscription proceeds matching or exceeding the original
down payment and subsequently matching or exceeding each of the
two future semi-annual payments of $271,666. The Company has
currently satisfied the requirement for matching the down payment
and the subsequent payments due on the above mentioned
subscription.
NOTE 6. RELATED PARTY TRANSACTIONS
In January 1994, the Company agreed that its founder, Dr. David
Platt, would receive an inventor's royalty from the Company of
two percent of net sales, in exchange for the licensed patent
rights on the modified pectin and related substances being
developed. The Company has agreed to pay all of the costs to
procure and maintain any patents granted under this agreement.
The agreement includes a requirement that the royalties paid in
the sixth year of this agreement and all subsequent years meet a
minimum requirement of $50,000. If this requirement is not met,
Dr. Platt may terminate the agreement and retain the patent
rights. The Company may terminate the agreement on sixty days'
notice.
As of March 31, 1995, the Company entered into an agreement with
a director and shareholder, Mr. James C. Czirr, to perform full
time consulting services at the rate of $8,000 per month plus
reimbursable expenses. In June 1995, Mr. Czirr's consulting
contract was canceled and he was removed from the Company's Board
of Directors. As of September 28, 1995, Mr. Czirr again became a
consultant to the Company and had his interests modified, as
discussed in Note 5.
<PAGE> 18
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 7. ACQUISITION AND RECAPITALIZATION
On March 7, 1995, Alvarada, Inc. acquired International Gene
Group, Inc. by exchanging 5,821,086 shares of its issued and
outstanding common stock for 19,633 issued and outstanding shares
of International Gene Group, Inc. As a result of this exchange,
Alvarada, Inc. acquired approximately 94% of the outstanding
common stock of International Gene Group, Inc. The shares issued
in this exchange are considered as being issued from the earliest
period presented, January 1, 1993, for the calculation of
weighted average shares outstanding. In the reverse acquisition,
no adjustment of assets of either company to "fair value" has
been made, and goodwill has not been recognized as a result of
the acquisition.
Prior to the acquisition of International Gene Group, Inc.,
Alvarada, Inc. had approximately 1,349,860 shares of common stock
issued and outstanding. As shares were reissued from the stock
split and acquisition, any fractional shares were rounded upward
in accordance with the agreements. As of March 28, 1995,
Alvarada, Inc. changed its name to IGG International, Inc.
ACQUISITION
The assets and liabilities of Alvarada, Inc. as of March 7, 1995,
prior to the acquisition of 94% of International Gene Group,
Inc., consisted of the following recorded at their historical
amounts:
<PAGE> 19
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 7. ACQUISITION AND RECAPITALIZATION (continued)
<TABLE>
<S> <C>
Cash $ 139
Cash in escrow-bridge loan 400,000
Debt issuance costs 31,697
_________
Total assets 431,836
_________
Accounts payable (5,000)
Accounts payable-debt issuance costs (31,458)
Promissory notes payable, net (398,000)
Shareholder loans (21,200)
_________
Total liabilities (435,658)
__________
Net liabilities acquired $ (3,822)
==========
</TABLE>
Alvarada, Inc. had an accumulated deficit during development
stage of $274,784 as of December 31, 1994. Prior to the reverse
acquisition of March 7, 1995, Alvarada, Inc. had a net loss of
$1,548 from the beginning of the year until this date. Prior to
this acquisition, during February 1995, shareholders contributed
$500 for 6,399 shares of common stock.
NOTE 8. LEASES
The Company leases office space in Cambridge, Massachusetts under
a two-year operating lease expiring on August 24, 1997. The
Company elected to pay the first year's rent in advance, which
included the base rent of $27,150, charges for common area
maintenance and real estate taxes of $11,670 and a security
deposit of $2,263. The rent paid under this agreement will be
adjusted for actual common area charges and real estate taxes.
Also as of September 1995, the Company was leasing a vehicle
under an operating lease of $400 per month over a forty-two month
period.
<PAGE> 20
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 8. LEASES (continued)
Minimum future rental payments under non-cancelable operating
leases with remaining terms in excess of one year as of March 31,
1996 for each of the next five calendar years in the aggregate
are as follows:
Year ended December 31,
1996 $ 13,349
1997 29,871
1998 4,800
1999 1,200
2000 -0-
The Company's subsidiary, Agricultural Glycosystems, rents office
space on a month-to-month basis in Malvern, Pennsylvania. The
monthly rental payment is $700 plus any additional services and
is being accounted for as an operating lease. In connection with
this lease, the Company paid a security deposit of $650 in 1995.
NOTE 9. LICENSING AGREEMENT
AGRICULTURAL GLYCOSYSTEMS, INC.
On December 29, 1995, the Company's subsidiary Agricultural
Glycosystems, Inc. (AGI) entered into a licensing agreement with
the Government of Israel's Agricultural Research Organization
concerning shared technology. The licensing agreement requires
that AGI pay a three percent (3%) royalty on the net selling
price of any licensed products arising from the shared
technology. As an additional condition of this agreement, AGI
will fund a research and development program requiring payments
over the next five years totaling $1,573,000. In the first year
of the licensing agreement, AGI is obligated to pay $327,000
followed by successive annual payments of $332,000, $314,000,
$300,000 and $300,000, respectively. This agreement will be
effective until the patents concerning the licensed technology
have expired or the agreement is terminated by the parties
involved. The Company paid $30,000 of the first year's payment
in 1995, and an additional $70,000 in early 1996.
<PAGE> 21
IGG INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1995
and the three month periods ended March 31, 1996 and 1995
_________________________________________________________________
NOTE 10. SUBSEQUENT EVENTS
On April 26, 1996, the Company entered into an agreement with
Trinity American Corporation granting Trinity warrants for
500,000 shares of the Company's common stock. These warrants are
exercisable at $5.00 per share for a term of 365 days or 100 days
after the Securities and Exchange Commission declares the
registration statement effective, registering the warrants and
underlying shares.
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and the notes thereto.
LIQUIDITY, CAPITAL RESOURCES AND MATERIAL CHANGES IN FINANCIAL
CONDITION:
The need for sustained funding of the Company's current research
and development programs drives management's efforts to raise
additional capital. Once raised, such funds are targeted for the
Company's continuing toxicity studies and clinical studies of the
HIV and cancer treatment products. The Company has, in the
quarter ending March 31, 1996, through its wholly owned
subsidiary, Agricultural Glycosystems, Inc. (AGI), continued the
development of a natural fungicide using similar carbohydrate
chemistry.
Currently, the Company is making presentations to financial
institutions and individual investors in order to raise capital.
The Company has obtained commitments from a single investor who
has provided the Company with over $270,000 in capital in the
fourth quarter of 1995 and will provide an additional $540,000 in
1996 if corresponding additional amounts are raised from other
sources. As of March 31, 1996, the aforementioned investor's
requirement of additional capital raised from other sources was
met due to the Company attracting $730,978 during the quarter
from sales of its common stock. The Company expects to attempt
to conduct an additional public offering of its equity
securities, after completing additional clinical and field test
of its substances in development.
As of March 31, 1996, the Company has in excess of $575,000 in
cash to sustain its development and fund raising efforts for the
next six months. Although the Company has current liabilities in
excess of $232,000, nearly $72,200 of this amount is short-term
notes and the accrued interest thereon (which may be converted to
equity) and over $110,000 is accrued professional fees, which are
disputed. Management expects that the disputed professional fees
will be settled for an amount significantly less than recorded.
In the quarter ended March 31, 1996, the Company did convert
$340,000 of notes payable and accrued interest to common stock.
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
In the first quarter of 1996, the Company raised in excess of
$730,000 from the issuance of common stock. In the same period
of 1995, the Company had raised only $368,000, mostly from the
net proceeds of short-term debt securities issued. The March
1995 acquisition of Alvarada, Inc. by the majority shareholders
of International Gene Group, Inc. to form IGG International, Inc.
provided most of these resources. The cash raised in 1996 and
1995 has been used to expand the Company's research and to
position the Company for the raising of additional funds.
The Company has no bank lines of credit or other commercial
financing sources at present and does not expect to obtain any.
It is not known whether additional funds could be borrowed from
shareholders or other sources.
GOING CONCERN QUALIFICATION
Our auditors stated that the consolidated financial statements of
the Company for the year ended December 31, 1995 were prepared on
the going-concern basis. As of December 31, 1995, the
shareholders' deficit was $270,941 and the Company had a deficit
accumulated during the development stage of $882,262. In the
first three months of 1996, the Company has expended funds which
caused the accumulated deficit to increase by $496,093. The
Company expects to continue in a deficit situation until the
first of its products under development is approved by regulatory
authority for sale. The Company's future is dependent on its
ability to continue to obtain additional capital or adequate
financing until such time as its clinical and field testing is
completed and its products are marketable with sales levels
adequate to support future operations.
RESULTS OF OPERATIONS
Material Changes in Operations for the Comparative Quarters ended
March 31, 1996 and 1995:
The Company is developing medical treatments from carbohydrate
chemistry for cancer and HIV, and its subsidiary AGI is using
carbohydrate chemistry to develop and market a natural fungicide.
During the first three months of 1995, the Company acquired
financial resources in its acquisition of Alvarada, Inc. and
expended over $21,752 on research, mostly for animal studies and
production of test substances. In the first three months of
1996, the Company expended $173,932 on additional research and
development. The payments in 1996 include $70,000 paid to the
Government of Israel's Agricultural Research Organization as part
of a licensing and research agreement on shared technologies.
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The Company's expenditures have increased significantly between
the first quarter of 1995 and 1996. In the first quarter of
1995, the Company expended $31,436 on professional services,
administrative and general expenses, while similar expenditures
in the first quarter of 1996 totaled $223,980.
In the first quarter of 1996, the Company recorded $100,000 in
interest expense on shareholders' loans in return for the option
of extending the loans for another year or converting such loans
to equity in the Company. Consistent with the original agreement
and in payment of this amount, the Company issued 80,000 common
shares valued at $1.25 per share to note-holders in the first
quarter of 1996. The Company also accrued $4,006 in interest on
these notes which, while not actually paid, may be converted into
additional equity in the Company at a later date.
The Company has not received any revenue from the sale and
development of its products, nor will it derive any significant
revenues until regulatory authorities have approved its products
for sale. The Company did, however, receive $5,825 and $1,037 in
interest income on cash reserves in the first three months of
1996 and 1995, respectively.
Testing of the Company's product for HIV treatment, known as
MMS-1, was completed at the University of Kentucky in April 1996.
Test results showed that the MMS-1 compound was very effective
over the test period at increasing survival rates and the immune
function in viral-infected laboratory mice. This study is part
of the final package that will be submitted to the FDA for IND
approval as a potential treatment of HIV. The Company's schedule
for development anticipates that clinical testing on this
compound will begin in 1997.
<PAGE> 25
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.
Dated this 31st day of July, 1996.
IGG INTERNATIONAL, INC.
(the "Registrant")
BY: /s/ Bradley J. Carver, President, Treasurer, Chief Financial
Officer and a member of the Board of Directors
<PAGE> 26
EXHIBIT INDEX
Exhibit No. Description
24.1 Consent of Kevin J. Williams &
Co., C.P.A.
27 Financial Data Schedule
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
IGG International, Inc.
Cambridge, Massachusetts
We consent to the use of our review report dated May 13, 1996, on
the financial statements of IGG International, Inc. as of March 31,
1996, for the filing with and attachment to the Form 10-Q for the
quarter ending March 31, 1996.
Kevin J. Williams & Co.
Spokane, Washington
July 31, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at March 31, 1996 (Unaudited) and
the Consolidated Statement of Income for the three months ended March 31, 1996
(Unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 579,193
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 610,198
<PP&E> 33,629
<DEPRECIATION> 7,997
<TOTAL-ASSETS> 637,451
<CURRENT-LIABILITIES> 232,761
<BONDS> 0
0
0
<COMMON> 84,073
<OTHER-SE> 320,617
<TOTAL-LIABILITY-AND-EQUITY> 637,451
<SALES> 0
<TOTAL-REVENUES> 5,825
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 397,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,006
<INCOME-PRETAX> (496,093)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (496,093)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
