SEC Filing | SIGA

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended March 31, 1999 Commission file number: 0-23047 SIGA PHARMACEUTICALS, 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 New York, NY 10170 (Address of principal executive offices) Registrant's telephone number, including area code: (212) 672-9100 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 7, 1999, the Registrant had outstanding 6,557,712 shares of its $.0001 par value Common Stock.

SIGA PHARMACEUTICALS, INC. (A development stage company) Part I. Financial Information Item 1. Financial Statements BALANCE SHEET March 31, December 31, 1999 1998 ------------ ------------ ASSETS Current Assets Cash and cash equivalents ................................................... $ 4,014,809 $ 4,966,873 Accounts receivable ......................................................... -- -- Prepaid sponsored research .................................................. -- -- Prepaid expenses ............................................................ 113,026 134,969 ------------ ------------ Total current assets ...................................................... 4,127,835 5,101,842 Equipment, net .............................................................. 1,658,529 1,696,404 Investments ................................................................. 91,199 132,220 Other assets ................................................................ 147,002 147,002 ------------ ------------ Total assets .............................................................. 6,024,565 7,077,468 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ............................................................ 286,087 266,371 Accrued expenses ............................................................ 58,771 143,364 Capital lease obligations ................................................... 312,477 369,288 ------------ ------------ Total liabilities ......................................................... 657,335 779,023 Non current capital lease obligations ....................................... 632,478 650,659 Commitments and contingencies .................................................. -- -- Stockholders' equity Preferred stock ($.0001 par value, 10,000,000 shares authorized, none issued and outstanding) .............................................. -- -- Common stock ($.0001 par value, 25,000,000 shares authorized, 6,577,712 and 6,577,712 issued and outstanding at March 31, 1999 and December 31, 1998, respectively) ...................................... 658 658 Additional paid-in capital .................................................. 16,712,044 16,697,424 Unrealized losses on available for sale securities .......................... (15,180) (34,816) Deficit accumulated during the development stage ............................ (11,962,770) (11,015,480) ------------ ------------ Total stockholders' equity ................................................ 4,734,752 5,647,786 ------------ ------------ Total liabilities and stockholders' equity ................................ 6,024,565 7,077,468 ============ ============ The accompanying notes are an integral part of these financial statements

SIGA PHARMACEUTICALS, INC. (A development stage company) STATEMENT OF OPERATIONS For The Period December 28, 1995 (Date of Three Months Ended Inception) to March 31, March 31, 1999 1998 1999 ------------ ------------ -------------- (Unaudited) (Unaudited) (Unaudited) Revenues - Research and development contracts 112,500 $ 112,500 $ 1,237,500 ------------ ------------ ------------ Operating expenses General and administrative (including amounts to related parties of $126,356 and $117,120 for the three months ended March 31, 1999 and 1998, respectively $ 525,085 540,818 5,653,351 Research and development (including amounts to related parties of $18,750 for each of the three months ended March 31, 1999 and 1998 553,704 512,217 5,090,449 Write-off of in-process research and development -- 1,457,458 1,457,458 Patent preparation fees 61,939 40,278 999,216 Stock option and warrant compensation -- 14,407 450,450 ------------ ------------ ------------ Total operating expenses 1,140,728 2,565,178 13,650,924 ------------ ------------ ------------ Operating loss (1,028,228) (2,452,678) (12,413,424) ------------ ------------ ------------ Interest income/(expense) 56,848 81,932 426,564 Net gain on sale of securities 24,090 -- 24,090 ------------ ------------ ------------ Net loss $ (947,290) $ (2,370,746) $(11,962,770) ------------ ------------ ------------ Other comprehensive income Unrealized gain/(loss) on available for sale securities 19,636 -- (15,180) ------------ ------------ ------------ Comprehensive income/(loss) $ (927,654) $ (2,370,746) $(11,977,950) Basic and diluted loss per share $ (0.14) $ (0.37) ------------ ------------ Weighted average common shares outstanding used for basic and diluted loss per share 6,577,712 6,424,859 ------------ ------------ The accompanying notes are an integral part of these financial statements

SIGA PHARMACEUTICALS, INC. (A development stage company) STATEMENT OF CASH FLOWS For The Period December 28, 1995 (Date of Three Months Ended Inception) to March 31, March 31, March 31, 1999 1998 1999 --------------------------------------------------------- (Unaudited) (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $ (947,290) $ (2,370,746) $(11,962,770) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 92,459 10,656 320,440 Stock, options & warrant compensation 14,620 14,407 640,940 Amortization of debt discount -- -- 133,000 Write-off of in-process research and development -- 1,457,458 1,457,458 Realized gain on sale of marketable securities (24,090) (24,090) Changes in assets and liabilities: Accounts receivable -- 150,000 -- Prepaid sponsored research 11,684 -- Prepaid expenses and ither current assets 21,943 41,615 (113,026) Other assets -- (112,618) (147,002) Accounts payable and accrued expenses (64,877) (186,671) 344,858 ------------ ------------ ------------ Net cash used in operating activities (907,235) (984,215) (9,350,192) ------------ ------------ ------------ Cash flows from investing activities: Capital expenditures (54,584) (81,587) (1,978,969) Purchase of minority interest (167,036) Proceeds from sale of securities 84,747 -- 84,747 ------------ ------------ ------------ Net cash flow used in investing activities 30,163 (81,587) (2,061,258) ------------ ------------ ------------ Cash flows from financing activities: Net proceeds from issuance of common stock -- 14,480,056 Receipts of stock subscriptions outstanding -- 1,248 Proceeds from bridge notes -- 1,000,000 Repayment of bridge notes (1,000,000) Proceeds from sale and leaseback of equipment 1,139,085 Principal payments on capital lease obligations (74,992) -- (194,130) ------------ ------------ ------------ Net cash provided from financing activities (74,992) -- 15,426,259 ------------ ------------ ------------ Net increase in cash and cash equivalents (952,064) (1,065,802) 4,014,809 Cash and cash equivalents at beginning of period 4,966,873 10,674,104 -- ------------ ------------ ------------ Cash and cash equivalents at end of period $ 4,014,809 $ 9,608,302 $ 4,014,809 ------------ ------------ ------------ The accompanying notes are an integral part of these financial statements

SIGA Pharmaceuticals, Inc. (A development stage company) 1. Basis of Presentation The financial statements of SIGA Pharmaceuticals, Inc. 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, 1998, included in the 1998 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 results of operations for the interim periods. The results of operations for the three ended March 31, 1999 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 1999. 2. License and Research Support Agreements In January 1996, the Company entered into a research agreement with a third party. Under the terms of the agreements, the Company had agreed to fund further research by the third parties in the annual amount of approximately $360,000. The agreement expired in January 1998; however, the Company has continued its relationship with the third party under similar terms for the period ended January 1999 and intends to continue its relationship with the third party on an informal basis. In February 1998, the Company entered into a research collaboration and license agreement with a third party. Under the terms of the agreement, the Company has been granted an exclusive world-wide license to make, use and sell products derived from the licensed technology, in exchange for royalty payments equal to a certain percentage of net sales of products incorporating the licensed technology, and certain milestone payments. In addition, the Company agreed to sponsor further research by the third party for the development of the licensed technologies in the amounts of approximately $187,000, $387,000 and $403,000, for the years ending December 31, 1998, 1999 and 2000. During the three months ended March 31, 1999 and 1998 the company incurred sponsored research expense in the amount of $44,808 and $0 under this agreement.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company is a development stage, biopharmaceutical company. Since its inception in December 1995, the Company's efforts have been principally devoted to research and development, securing patent protection, obtaining corporate relationships and raising capital. Since its inception through March 31, 1999, the Company has sustained cumulative net losses of $11,962,770, 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 the Company's common stock. In addition, a non-cash charge of $450,450 was incurred for stock option and warrant compensation expense. The Company's 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, 1999, research and development expenses amounted to $5,090,449, patent preparation and prosecution expenses totaled $999,216, and general and administration expenses amounted to $5,653,351. From inception through March 31, 1999 revenues from research and development agreements totaled $1,237,500. The Company expects to continue to incur substantial research and development costs in the future resulting from ongoing research and development programs, manufacturing of products for use in clinical trials and pre-clinical testing of the Company's products. The Company also expects that general and administrative costs, including patent and regulatory costs, necessary to support clinical trials, research and development, will continue to be substantial in the future. Accordingly, the Company expects to incur operating losses for the foreseeable future. There can be no assurance that the Company will ever achieve profitable operations. To date, the Company has not marketed, or generated revenues from the commercial sale of any products. The Company's current product candidates are not expected to be commercially available for several years. Results of Operations Three months ended March 31, 1999 to the three months ended March 31, 1998 Revenues from research and development contracts were $112,500 for the three months ended March 31, 1999, the same amount as received for the same period of 1998. The revenue was the result of payments made to the Company under an agreement entered into in July of 1997 with Wyeth-Ayerst, under which the Company receives certain payments for research and development activities sponsored by Wyeth-Ayerst.

Research and development expenses increased to $553,704 for the three months ended March 31, 1999, an 8.1% increase from the $512,217 of expenses incurred for the same period in 1998. The modest increase reflects the Company's concentration on its core development programs at a level that is consistent with its financial resources. Further, in the 1999 quarter, the Company's research and development activities were largely carried out at its Corvallis, Oregon research facility, greatly reducing the amount spent on third party research agreements as compared to the three months ended March 31, 1998. The Company incurred a non-cash charge for the three months ended March 31, 1998 totaling $1,457,458 for the write-off of in-process research and development associated with the acquisition of certain technology from MedImmune, Inc. in exchange for 335,530 shares of the Company's common stock. No similar charges were incurred in the three month period ended March 31, 1999. General and administrative expenses declined approximately 3% in the three months ended March 31, 1999 to $525,085 from $540,818 for the three months ended March 31, 1998. The decrease reflects the Company's ongoing effort to preserve its cash resources. Beginning in the quarter ended December 31, 1998 and carrying forward through the three month period ended March 31, 1999, the Company has materially reduced its level of general and administrative spending compared to the second and third quarters of the year ended December 31, 1998. The reduced level of general and administrative spending was largely attained through the restructuring of the Company's executive management and careful monitoring of expenses. Patent expense of $61,939 for the three months ended March 31, 1999 represents an increase of 53.8% from the $40,278 level of the prior year. The increase in spending is due to the Company's commitment to maintain and expand patent protection for the technology developed by the Company and under third party agreements. Total operating loss declined by $1,424,450 to $1,028,228 for the three months ended March 31, 1999 from $2,452,678 for the same period of 1998. Excluding the one time non-cash expense of $1,457,458 for the write-off of in-process research and development incurred for the three months ended March 31, 1998, the operating loss was essentially equal for the two periods. Interest income for the three months ended March 31, 1999 was $56,848 compared to $81,932 for the prior year period. The decline is the result of lower cash balances in the three month period of 1999 compared to the three months ended March 31, 1998. Net loss per common share of $0.14 for the three months ended March 31, 1999 represents a decrease in loss per share of $0.23 from the $0.37 loss incurred for the three months ended March 31, 1998. The decline in the loss per share is the result of the one-time non-cash charge for the write-off of in-process research and development incurred in the prior year period. Excluding this one-time charge, net loss per share for the three

months ended March 31, 1998 was $0.14, the same as the net loss per share for the 1999 period. Liquidity and Capital Resources As of March 31, 1999 the Company had $4,014,809 in cash and cash equivalents and $3,470,500 of net working capital. In July, August and September of 1998 the Company sold certain laboratory equipment, computer equipment and furniture to a third party, for $493,329, $385,423 and $260,333, respectively, under sale/leaseback arrangements. The leases have a term of 42 months and require minimum monthly payments of $13,171, $10,290 and $6,950, respectively. The Company has an option to purchase the equipment for Fair Market Value (defined in the agreement as 15% of original cost) at the end of the lease. In July of 1997 the Company entered into a collaborative research and license agreement with Wyeth-Ayerst. Under the terms of the agreement, the Company has granted Wyeth-Ayerst an exclusive worldwide license to develop, make, use and sell products derived from specified technologies. If certain milestones are met, the agreement requires Wyeth-Ayerst to sponsor further research by the Company for the development of the licensed technologies for a period of two years from the effective date of the agreement, in return for minimum payments to the Company totaling $1,200,000. Through March 31, 1999 the Company has received a total of $1,237,500 from Wyeth-Ayerst. The Company anticipates that its current resources will be sufficient to finance the Company's currently anticipated needs for operating and capital expenditures through at least the first quarter of 2000. The Company will continue to carefully monitor its general and administrative expenses and the progress of its research programs in an effort to reduce expenditures where appropriate. In addition, the Company will attempt to generate additional working capital through a combination of collaborative agreements, strategic alliances and equity financings. However, no assurance can be provided that additional capital will be obtained through these sources. The Company's working capital and capital requirements will depend upon numerous factors, including progress of the Company's research and development programs; pre-clinical and clinical testing; timing and cost of obtaining regulatory approvals; levels of resources that the Company devotes to the development of manufacturing and marketing capabilities; technological advances; status of competitors; and the ability of the Company to establish collaborative arrangements with other organizations.

Part II Other Information Item 1 Legal Proceedings NONE Item 2 Changes in Securities NONE Item 3 Defaults upon Senior Securities NONE Item 4 Submission of Matters to Vote of Security Holders NONE Item 5 Other Information NONE Item 6 Exhibits and Reports on Form 8-K NONE

SIGNATURE PAGE 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. SIGA PHARMACEUTICALS, INC. Dated: May 14, 1999 by: /s/ Thomas N. Konatich ------------------------------------------- Thomas N. Konatich Chief Financial Officer (Principal Accounting and Financial Officer and Vice President, Finance)

5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 4,014,809 0 0 0 0 4,127,835 1,988,969 330,440 6,024,565 657,335 0 0 0 658 16,712,044 6,024,565 0 112,500 0 0 1,140,728 0 0 (947,290) 0 (947,290) 0 0 0 (947,290) (0.14) (0.14)