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
June 30, 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 August 12, 2002 the registrant had outstanding 10,140,053 shares of Common
Stock.
SIGA TECHNOLOGIES INC.
(A development stage company)
UNAUDITED BALANCE SHEET
June 30, December 31,
2002 2001
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents .................................................. $ 1,844,188 $ 3,148,160
Accounts receivable ........................................................ 156,148 55,000
Prepaid expenses ........................................................... 92,542 153,416
------------ ------------
Total current assets ...................................................... 2,092,878 3,356,576
Equipment, net ............................................................. 581,650 703,239
Other assets ............................................................... 131,021 147,873
------------ ------------
Total assets .............................................................. $ 2,805,549 $ 4,207,688
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................... $ 626,604 $ 210,391
Accrued expenses ........................................................... 144,511 263,616
Capital lease obligations .................................................. 92,657 192,196
Deferred Revenue .......................................................... 900 --
------------ ------------
Total current liabilities ................................................. 864,672 666,203
Commitments and contingencies ................................................. -- --
Stockholders' equity
Preferred stock ($.0001 par value, 10,000,000 shares authorized,
379,294 and 379,294 issued and outstanding at June 30, 2002
and December 31, 2001, respectively) ....................................... 398,441 398,441
Common stock ($.0001 par value, 25,000,000 shares authorized,
10,140,053 and 10,139,553 issued and outstanding at June 30, 2002
and December 31, 2001, respectively) ..................................... 1,017 1,016
Additional paid-in capital ................................................. 29,387,238 29,348,786
Deferred Compensation ..................................................... (10,961) (35,583)
Deficit accumulated during the development stage ........................... (27,834,858) (26,171,175)
------------ ------------
Total stockholders' equity ................................................ 1,940,877 3,541,485
------------ ------------
Total liabilities and stockholders' equity ................................ $ 2,805,549 $ 4,207,688
============ ============
The accompanying notes are an integral part of these financial statements
1
SIGA TECHNOLOGIES INC.
(A development stage company)
UNAUDITED STATEMENT OF OPERATIONS
For The Period
December 28,
1995 (Date of
Three months ended Six months ended Inception) to
June 30, June 30, June 30,
2002 2001 2002 2001 2002
------------ ----------- ------------ ----------- ------------
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues
Research and Development Contracts $ 139,319 $ 682,500 $ 139,319 $ 987,000 $ 3,426,500
------------ ----------- ------------ ----------- ------------
Operating expenses
General and administrative 668,162 635,245 1,008,760 700,600 16,392,205
Research and development 413,630 428,937 770,603 859,547 12,779,678
Patent preparation fees 18,169 63,317 45,414 80,938 1,400,169
------------ ----------- ------------ ----------- ------------
Total operating expenses 1,099,961 1,127,499 1,824,777 1,641,085 30,572,052
------------ ----------- ------------ ----------- ------------
Operating loss (960,642) (444,999) (1,685,458) (654,085) (27,145,552)
Interest income/(expense) 9,255 (74,660) 21,775 (233,765) (325,269)
Loss on impairment of investment -- -- -- -- (430,697)
Other Income/Gain on sale of securities -- -- -- -- 66,660
------------ ----------- ------------ ----------- ------------
Net loss $ (951,387) $ (519,659) $ (1,663,683) $ (887,850) $(27,834,858)
============ =========== ============ =========== ============
Weighted average shares outstanding: basic and diluted 10,140,053 7,807,470 10,083,998 7,668,049
------------ ----------- ------------ -----------
Net Loss per Share: basic and diluted $ (0.09) $ (0.07) $ (0.16) $ (0.12)
============ =========== ============ ===========
The accompanying notes are an integral part of these financial statements
2
SIGA TECHNOLOGIES INC.
(A development stage company)
UNAUDITED STATEMENT OF CASH FLOWS
For The Period
December 28,
1995 (Date of
Six months ended Inception) to
June 30, 2002 June 30,
2002 2001 2002
------------------------------------------
Cash flows from operating activities:
Net loss $(1,663,683) $ (887,850) $(27,834,858)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 156,446 154,924 1,431,795
Stock, options & warrant compensation 62,513 (245,098) 2,938,256
Loss on impairment of investment -- -- 430,697
Loss on write-off of capital equipment -- -- 97,969
Amortization of debt discount -- 220,872 954,705
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 (101,148) 11,488 (156,147)
Prepaid expenses and other current assets 60,874 (160,984) (92,542)
Other assets 16,852 (3,427) (131,020)
Accounts payable and accrued expenses 297,108 17,807 784,647
Deferred Revenue 900 (445,000) 900
Accrued Interest -- 20,391 100,672
------------------------------------------
Net cash used in operating activities (1,170,138) (1,316,877) (19,583,784)
------------------------------------------
Cash flows from investing activities:
Capital expenditures (34,857) -- (2,192,111)
Sale (purchase) of investment securities -- -- 66,660
Investment in Open-I-Media -- -- (170,000)
------------------------------------------
Net cash flow used in investing activities (34,857) -- (2,295,451)
------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 850,003 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 562 97,459 409,818
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 (99,539) (153,742) (1,046,428)
------------------------------------------
Net cash provided from financing activities (98,977) 793,720 23,723,423
------------------------------------------
Net increase in cash and cash equivalents (1,303,972) (523,157) 1,844,188
Cash and cash equivalents at beginning of period 3,148,160 1,707,385 --
------------------------------------------
Cash and cash equivalents at end of period $ 1,844,188 $ 1,184,228 $ 1,844,188
==========================================
The accompanying notes are an integral part of these financial statements
3
Notes to the June 30, 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 and six months ended June 30, 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 through the
first 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. License and Research Support Agreement
In May, 2002, the Company was awarded a Phase II Small Business Innovation
Research (SBIR) grants from the National Institutes for Health in the amount
$865,000. The grant is for a three-year period, and will support the Company's
antibiotic and vaccine development programs. During the three months ended June
30, 2002, the Company recorded revenue in the amount of $60,219 relating to the
grant.
3. New Accounting Pronouncements
In July 2002, SFAS 146, Accounting for Costs Associates with Exit or
Disposal Activities, was issued. SFAS 146 addresses the recognition, measurement
and reporting of costs associated with exit or disposal activities, that are
currently accounted for pursuant to EITF Issue No. 94-3, Liabilities Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity.
Under SFAS No. 146, such liabilities, with the exception of certain one-time
termination benefits, will be recognized and measured initially at their fair
value in the period in which the liability is incurred. SFAS No. 146 is
effective for the fiscal years beginning after December 31, 2002.
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 June 30, 2002, we have sustained cumulative net losses of
$27,834,858, 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 $2,938,256 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 June 30, 2002, research and
development expenses amounted to $12,779,678, patent preparation and prosecution
expenses totaled $1,400,169, general and administration expenses amounted to
$16,392,205. From inception through June 30, 2002 revenues from research and
development agreements and government grants totaled $3,426,500.
Since inception, SIGA has had limited resources, has incurred cumulative
net operating losses of $27,834,858 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 first quarter of
2003. In the event that we are unable to raise additional capital, operations
will need to be scaled back or discontinued.
Our biotechnology 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 July of 2002 we announced the termination of the
letter of intent to acquire all the shares of Holdings due to the unfavorable
market conditions that existed at the time of the termination.
5
Results of Operations
Three Months ended June 30, 2002 and June 30, 2001.
Revenue for the three months ended June 30, 2002 was $139,319 compared to
$682,500 for the three months ended June 30, 2001, a decrease of approximately
80%. Revenue for the three months ended June 30, 2001 included recognition of
$562,500 received from Wyeth-Ayerst over prior periods that had been recorded as
deferred revenue until an amendment to our agreement with Wyeth was signed
during the period ended June 30, 2001. Excluding the Wyeth revenue recognition,
revenue increased by approximately 16% in the three months ended June 30, 2002
compared to the three-month period of the prior year. Revenue during the three
months ended June 30, 2002 consisted primarily of $75,000 from Oregon State
University for completion of work performed under contract to them and revenue
from a Small Business Innovation Research (SBIR) grant from the National
Institutes of Health (NIH) that we received in June of 2002. The grant is for a
total of approximately $865,000 to support research over a two-year period. Of
the total grant, approximately $521,000 has been allotted for work to be
performed in the first twelve months of the grant.
General and administrative expenses for the three months ended June 30,
2002 were $668,162, a decrease of approximately 5% from the $635,245 expense
incurred for the three months ended June 30, 2001. Expenses for the three months
ended June 30, 2001 contained expenses associated with the "change in control"
that occurred in April of 2001. These costs were primarily the legal expenses to
effect the change as well certain expenses incurred on behalf of the former
board and executive management of company. The three months ended June 30, 2002
included high levels of expenses associated with the terminated "letter of
intent" to acquire the shares of Allergy Therapeutics Holdings, Ltd., primarily
legal and accounting. Payroll expenses were materially lower for the current
year period, reflecting the reduction of staffing associated with the "change in
control' in the prior year period.
Research and development expenses decreased to $413,630 for the three
months ended June 30, 2002 from $428,937 for the three months ended June 30,
2001. The approximate 4% decline in expenses, reflects and essentially
consistent level of activity in the two periods.
Patent preparation expense of $18,169 for the three months ended June 30,
2002 was approximately 71% lower than the $63,317 incurred for the three months
ended June 30, 2001. The three months ended June 30, 2001 included payments to
UCLA for patent costs incurred under our agreement with the university, no
similar costs were incurred in the current year period.
Net interest income was $9,255 for the three months ended June 30, 2002
compared to net interest expense of $74,660 for the three months ended June 30,
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 June 30, 2002 was $951,387, an
approximate 83% increase from the $519,659 loss for the three months ended June
30, 2001. The increase in the loss was the result of the recognition of $562,500
of revenue for the three months ended June 30, 2001 that had been recorded as
deferred income pending the completion of the Wyeth-Ayerst contract extension.
Six Months ended June 30, 2002 and June 30, 2001.
Revenue for the six months ended June 30, 2002 was $139,319, a decrease of
approximately 86% from revenue of $987,000 for the six months ended June 30,
2001. Revenue for the six months ended June 30, 2001 included recognition of
$562,500 received from Wyeth-Ayerst over prior periods that had been recorded as
deferred revenue until an amendment to our agreement with Wyeth was signed
during the period ended June 30, 2001. In addition, we also received a milestone
payment from Wyeth-Ayerst. No payments were received from them in the current
six-month period.
6
General and administrative expenses for the six months ended June 30, 2002
were $1,008,760 compared to expenses of $700,600 for the six months ended June
30, 2001, an increase of approximately 43%. The increase is primarily the result
of a non-cash credit for $534,885 recognized during the six months ended June
30, 2001 to account for the cancellation of certain vested warrants granted to a
consultant upon termination of its consulting agreement. Excluding the non-cash
credit, general and administrative expenses declined approximately 18% in the
six months ended June 30, 2002. The decrease was primarily the result of lower
salary expense compared to the prior year period.
Research and development expenses decreased to $770,603 for the six months
ended June 30, 2002 from $859,547 for the six months ended June 30, 2001. The
approximate 10% decline in expenses was the result of lower expenses for
payroll, supplies and sponsored research.
Patent preparation expense for the six months ended June 30, 2002 was
$45,414 compared to $80,938 for the six months ended June 30, 2001, a decrease
of approximately 44%. The six months ended June 30, 2001 included payments to
UCLA for patent costs incurred under our agreement with the university, no
similar costs were incurred in the current year period.
Net interest income was $21,775 for the six months ended June 30, 2002
compared to net interest expense of $233,765 for the six months ended June 30,
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 six months ended June 30, 2002 was $1,663,683, compared
to a loss of $887,850 for the six months ended June 30, 2001. The approximate
87% increase from the prior year period was largely the result of the
recognition of $562,500 of revenue that had been recorded as deferred income
pending the completion of the Wyeth-Ayerst contract amendment and the
recognition of a non-cash credit of $534,885 to account for the cancellation of
certain vested warrants to a consultant as described above.
Liquidity and Capital Resources
As of June 30, 2002 we had $1,844,188 in cash and cash equivalents.
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 July of 2002 the letter of intent was terminated
due to changes in market conditions. We incurred approximately $550,000 of
expenses in connection with this contemplated transaction.
In June of 2002 we received a Small Business Innovation Research (SBIR)
grant from the National Institutes of Health (NIH). The grant is for a total of
approximately $865,000 to support research over a two-year period. Of the total
grant, approximately $521,000 has been allotted for work to be performed in the
first twelve months of the grant. During the three months ended June 30, 2002,
we recorded revenue in the amount of $60,219 relating to the grant.
We anticipate that our current resources and the funding available through
the SBIR grant will be sufficient to finance our currently anticipated needs for
operating and capital expenditures through the first 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 terms. In the event we are unable to raise additional
capital, operations will need to be scaled back or discontinued.
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 - None
Item 7. Exhibit 99.1 - Certification of Acting Chief Executive Officer.
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: August 14, 2002 By: /s/ Thomas N. Konatich
-------------------------------------
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting Officer and
Financial Officer and Vice
President, Finance)