SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File No. 0-23047
March 31, 2002
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3864870
(State or other jurisdiction of (IRS Employer Id. No.)
incorporation or organization)
420 Lexington Avenue, Suite 620
New York, NY 10170
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (212) 672-9100
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value
(Title of Class)
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 Exchange 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 [ ].
As of May 10, 2002 the registrant had outstanding 10,140,053 shares of Common
Stock.
================================================================================
SIGA TECHNOLOGIES INC.
(A development stage company)
BALANCE SHEET - UNAUDITED
March 31, December 31,
2002 2001*
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents .................................................. $ 2,538,862 $ 3,148,160
Accounts receivable ........................................................ 63,689 55,000
Prepaid expenses ........................................................... 115,126 153,416
------------ ------------
Total current assets ...................................................... 2,717,676 3,356,576
Equipment, net ............................................................. 625,016 703,239
Other assets ............................................................... 127,057 147,873
------------ ------------
Total assets .............................................................. $ 3,469,749 $ 4,207,688
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................... $ 250,409 $ 210,391
Accrued expenses ........................................................... 190,952 263,616
Capital lease obligations .................................................. 131,377 192,196
------------ ------------
Total current liabilities ................................................. 572,738 666,203
------------ ------------
Commitments and contingencies ................................................. -- --
Stockholders' equity
Preferred stock ($.0001 par value, 10,000,000 shares authorized, 379,294 and
379,294 issued and outstanding at March 31, 2002
and December 31, 2001, respectively) ....................................... 398,441 398,441
Common stock ($.0001 par value, 25,000,000 shares authorized,
10,139,553 and 10,139,553 issued and outstanding at March 31, 2002
and December 31, 2001, respectively) ..................................... 1,016 1,016
Additional paid-in capital ................................................. 29,404,296 29,348,786
Deferred Compensation ..................................................... (23,272) (35,583)
Deficit accumulated during the development stage ........................... (26,883,470) (26,171,175)
------------ ------------
Total stockholders' equity ................................................ 2,897,011 3,541,485
------------ ------------
Total liabilities and stockholders' equity ................................ $ 3,469,749 $ 4,207,688
============ ============
* The December 31, 2001 balances have been derived from the audited
financial statements included in the Form 10-KSB.
The accompanying notes are an integral part of these financial statements
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SIGA TECHNOLOGIES INC.
(A development stage company)
STATEMENT OF OPERATIONS - UNAUDITED
For The Period
December 28,
1995 (Date of
Three months ended Inception) to
March 31, March 31,
2002 2001 2002
------------ ----------- ------------
Revenues
Research and Development Contracts $ -- $ 304,500 $ 3,287,181
------------ ----------- ------------
Operating expenses
General and administrative 340,598 65,355 15,724,043
Research and development 356,972 430,610 12,366,048
Patent preparation fees 27,245 17,621 1,381,999
Settlement of litigation --
Stock option and warrant compensation -- -- --
------------ ----------- ------------
Total operating expenses 724,815 513,586 29,472,090
------------ ----------- ------------
Operating loss (724,815) (209,086) (26,184,909)
Interest income/(expense) 12,520 (159,105) (334,525)
Loss on impairment of investment (430,697)
Other Income/Gain on sale of securities -- -- 66,660
------------ ----------- ------------
Net loss $ (712,295) $ (368,191) $(26,883,470)
============ =========== ============
Weighted average shares 10,139,553 7,528,628
------------ -----------
Net Loss per Share $ (0.07) $ (0.05)
============ ===========
The accompanying notes are an integral part of these financial statements
2
SIGA TECHNOLOGIES INC.
(A development stage company)
STATEMENT OF CASH FLOWS - UNAUDITED
For The Period
December 28,
1995 (Date of
Three months ended Inception) to
March 31, March 31,
2002 2001 2002
------------ ------------ ------------
Cash flows from operating activities:
Net loss $ (712,295) $ (368,191) $(26,883,470)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 78,223 86,021 1,353,572
Stock, options & warrant compensation 67,822 (387,042) 2,943,565
Loss on impairment of investment 430,697
Loss on write-off of capital equipment -- -- 97,969
Amortization of debt discount -- 151,178 954,705
Purchase of rights to certain technology 1,457,458
Realized gain on marketable securities (66,660)
Non-cash research and development 500,344
Changes in assets and liabilities:
Accounts receivable (8,689) 22,800 (63,689)
Prepaid expenses and other current assets 38,290 5,644 (115,125)
Other assets 20,816 (1,879) (127,056)
Accounts payable and accrued expenses (32,646) (82,200) 454,893
Deferred Revenue -- 125,000 --
Accrued Interest -- 20,249 100,672
Deferred Compensation -- --
------------ ------------ ------------
Net cash used in operating activities (548,479) (428,420) (18,962,125)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures -- -- (2,157,254)
Sale (purchase) of investment securities -- -- 66,660
Investment in Open-I-Media -- -- (170,000)
------------ ------------ ------------
Net cash flow used in investing activities -- -- (2,260,594)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- 21,720,026
Receipts of stock subscriptions outstanding -- -- 1,248
Gross proceeds from sale of convertible debentures 1,500,000
Proceeds from exercise of options 65,812 409,256
Net proceeds from sale of warrants 52,174
Convertible debentures and warrants issuance costs (52,500)
Proceeds from bridge notes -- 1,000,000
Repayment of bridge notes -- (1,000,000)
Proceeds from sale & leaseback of equipment -- 1,139,085
Principal payments on capital lease obligations (60,819) (75,671) (1,007,708)
------------ ------------ ------------
Net cash provided from financing activities (60,819) (9,859) 23,761,581
------------ ------------ ------------
Net increase in cash and cash equivalents (609,298) (438,279) 2,538,862
Cash and cash equivalents at beginning of period 3,148,160 1,707,385 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,538,862 $ 1,269,106 $ 2,538,862
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements
3
Notes to the March 31, 2002 Financial Statements
1. Basis of Presentation
The financial statements of Siga Technologies, Inc. (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the rules of the Securities and Exchange
Commission (the "SEC") for quarterly reports on forms 10-QSB and do not include
all of the information and footnote disclosures required by generally accepted
accounting principles for complete financial statements. These statements should
be read in conjunction with the Company's audited financial statements and notes
thereto for the year ended December 31, 2001, included in the 2001 Form 10-KSB.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of normal adjustments, necessary
for a fair presentation of the results of operations for the interim periods.
The results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results of operations to be expected for the full
year ending December 31, 2002.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. Management believes that current
resources will be sufficient to support its planned operations into the second
quarter of 2003. The Company does not have commercial biomedical products, and
does not expect to have such for several years, if at all. The Company believes
that it will need additional funds to complete the development of its biomedical
products.
2. Consulting Agreements
In June 2001, the Company entered into a one year consulting agreement
under which the consultant assists the Company with public relations efforts in
Europe in exchange for 50,000 shares of the Company's restricted common stock.
The restricted stock vests at an equal rate over the period of the agreement. As
the restricted stock vests, the Company will record charges to earnings based
upon the difference between the fair value and the price of the restricted
stock. For the three months ended March 31, 2002 the Company has recorded a
charge in the amount of $25,676.
In June 2001, the Company entered into a consulting agreement, under the
terms of the consulting agreement the consultant will provide services to the
Company for a three year period commencing on September 10, 2001. In
consideration for the consulting services the consultant will be paid an annual
fee of $50,000 payable quarterly. In addition, the Company granted the
consultant options to purchase 225,000 shares of common stock at $3.94 per
share. On September 10, 2001, ten percent of the options vest and the remaining
shall vest in 36 monthly installments beginning on October 10, 2001. As the
options vest, the Company will record charges to earnings based upon the fair
market value of the options as computed in accordance with the Black-Scholes
method. For the three months ended March 31, 2002 the Company has recorded a
charge in the amount of $29,835.
3. Acquisitions
In March 2002, the Company entered into a non-binding Letter of Intent to
acquire all of the outstanding shares of Allergy Therapeutics (Holdings) Limited
("Allergy") in a stock-for-stock transaction in which, assuming the exercise of
certain outstanding options, the current Siga stockholders and the current
Allergy stock holders will each own approximately 50% of the outstanding common
stock of the combined company. SIGA is responsible for 50% of the costs
associated with the transaction.
4
Management's Discussion and Analysis of Financial Condition and Result of
Operations
The following discussion should be read in conjunction with our financial
statements and notes to those statements and other financial information
appearing elsewhere in this Quarterly Report. In addition to historical
information, the following discussion and other parts of this Quarterly Report
contain forward-looking information that involves risks and uncertainties.
Overview
We are a development stage, technology company, whose primary focus is in
biopharmaceutical product development. Since inception in December 1995 our
efforts have been principally devoted to research and development, securing
patent protection, obtaining corporate relationships and raising capital. Since
inception through March 31, 2002, we have sustained cumulative net losses of
$26,883,470, including non-cash charges in the amount of $1,457,458 for the
write-off of research and development expenses associated with the acquisition
of certain technology rights acquired from a third party in exchange for our
common stock. Also included in the cumulative loss to date, are non-cash charges
of $2,943,565 incurred for stock option and warrant compensation expense. Our
losses have resulted primarily from expenditures incurred in connection with
research and development, patent preparation and prosecution and general and
administrative expenses. From inception through March 31, 2002, research and
development expenses amounted to $12,366,048, patent preparation and prosecution
expenses totaled $1,381,999, general and administration expenses amounted to
$15,724,043. From inception through March 31, 2002 revenues from research and
development agreements and government grants totaled $3,287,181.
Since inception, SIGA has had limited resources, has incurred cumulative
net operating losses of $26,883,470 and expects to incur additional losses to
perform further research and development activities. We do not have commercial
biomedical products, and we do not expect to have such for several years, if at
all. We believe that we will need additional funds to complete the development
of our biomedical products. Our plans with regard to these matters include
continued development of our products as well as seeking additional research
support funds and financial arrangements. Although we continue to pursue these
plans, there is no assurance that we will be successful in obtaining sufficient
financing on terms acceptable to us. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Management
believes it has sufficient funds to support operations through the second
quarter of 2003.
Our operations are run out of our research facility in Corvallis, Oregon.
We continue to seek to fund a major portion of our ongoing vaccine and
antibiotic programs through a combination of government grants and strategic
alliances. While we have had success in obtaining strategic alliances and
grants, no assurance can be given that we will continue to be successful in
obtaining funds from these sources. Until additional relationships are
established, we expect to continue to incur significant research and development
costs and costs associated with the manufacturing of product for use in clinical
trials and pre-clinical testing. It is expected that general and administrative
costs, including patent and regulatory costs, necessary to support clinical
trials and research and development will continue to be significant in the
future.
To date, we have not marketed, or generated revenues from the commercial
sale of any products. Our biopharmaceutical product candidates are not expected
to be commercially available for several years, if at all. Accordingly, we
expect to incur operating losses for the foreseeable future. There can be no
assurance that we will ever achieve profitable operations.
In March of 2002, we signed a non-binding letter of intent to acquire all
of the outstanding shares of Allergy Therapeutics (Holdings) Limited in a
stock-for-stock transaction in which, assuming the exercise of certain
outstanding options, the current SIGA stockholders, and the current Allergy
Therapeutics shareholders, will each own approximately 50% of the outstanding
common stock of the combined company.
5
Results of Operations
Three Months ended March 31, 2002 and March 31, 2001.
There were no revenues from grants and research and development contracts
for the three months ended March 31, 2002 compared to $304,500 for the three
months ended March 31, 2001. The absence of revenue for the period ended March
31, 2002 is the primarily the result of the research and development portion of
our agreement with Wyeth-Ayerst coming to an end on September 30, 2001. In
addition, there was no new revenue from government grants. For the three months
ended March 31, 2001 we recognized revenue of $304,500 from grants and
development contracts. We have made application for additional grants under the
Small Business Innovation Research (SBIR) grant program, however no assurance
can be made that we will receive any further funding.
General and administrative expenses for the three months ended March 31,
2002 were $340,598 compared to $65,355 for the same period of the prior year.
The approximate 421% increase in expenses for the three months ended March 31,
2002 compared to the 2001 period is the result of a non-cash credit for $534,885
recognized during the three months ended March 31, 2001 to account for the
cancellation of certain vested warrants granted to a consultant upon termination
of its consulting agreement. Excluding this credit, general and administrative
expenses were $259,643 lower for the three months ended March 31, 2002 compared
to the prior year period. The reduction of approximately 43% from the three
months ended March 31, 2001 was primarily the result of a material reduction in
personnel expenses.
Research and development expenses decreased to $356,972 for the three
months ended March 31, 2002 from $430,610 for the same period in 2001. The
approximate 17% decline in expenses from the three months ended March 31, 2001
was primarily the result of lower payroll costs, laboratory supplies and
sponsored R&D, partially offset by higher consulting expenses.
Patent preparation expense of $27,245 for the three months ended March
31, 2002 was approximately 55% higher than the $17,621 incurred for the three
months ended March 31, 2001. The increase in spending from the prior year period
is the result of an increase in costs associated with foreign patent filings.
Net interest income was $12,520 for the three months ended March 31, 2002
compared to net interest expense of $159,105 for the three months ended March
31, 2001. The improvement in net interest was the result of the conversion of
the remainder of the $1,500,000 principle amount of the 6% convertible debenture
and accrued interest into equity in the second half of 2001.
Net loss for the three months ended March 31, 2002 was $712,295, an
approximate 93% increase from the $368,191 loss for the three months ended March
31, 2001. The increase in the loss was the result of the $534,885 non-cash
credit recognized in the 2001 discussed in the general and administrative
paragraph above. Excluding this non-cash credit, the net loss incurred for the
three months ended March 31, 2002 was $190,871 less than the loss incurred in
the prior year period, a decrease of approximately 21%.
Liquidity and Capital Resources
As of March 31, 2002 we had $2,538,862 in cash and cash equivalents. Cash
expended in the quarter ended March 31, 2002 was for normal operating
activities, which included costs associated with the preparation of our annual
report to the SEC on Form 10-KSB for the year ended December 31, 2001.
In March of 2002, we signed a non-binding letter of intent to acquire all
the outstanding shares of Allergy Therapeutics (Holdings) Limited in a
stock-for-stock transaction in which, assuming the exercise of certain
outstanding options, the current SIGA stockholders and the and the current
Allergy Therapeutics shareholders will each own approximately 50% of the common
stock of the combined company. We expect to incur significant legal, accounting
and other due diligence expenses in connection with the transaction. Under the
terms of the agreement SIGA is responsible for 50% of the costs associated with
the transaction.
We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
into the second quarter of 2003. In addition, we will attempt to generate
additional working capital through a combination of collaborative agreements,
strategic alliances, research grants, equity and debt financing. However, no
assurance can be provided that additional capital will be obtained through these
sources or, if obtained, will be on commercially reasonable
6
terms.
Our working capital and capital requirements will depend upon numerous
factors, including pharmaceutical research and development programs;
pre-clinical and clinical testing; timing and cost of obtaining regulatory
approvals; levels of resources that we devote to the development of
manufacturing and marketing capabilities; technological advances; status of
competitors; and our ability to establish collaborative arrangements with other
organizations.
7
Part II
Other information
Item 1. Legal Proceedings - SIGA is not a party, nor is its property the subject
of, any legal proceedings other than routine litigation incidental to its
business.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
On March 20, 2002 we filed an 8-K regarding our entering into a letter of
intent to acquire all the outstanding shares of Allergy Therapeutics Holdings,
LTD.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGA Technologies, Inc.
(Registrant)
Date: May 14, 2002 By: /s/ Thomas N. Konatich
---------------------------------
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting Officer and
Financial Officer and Vice
President, Finance)
9