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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-KSB/A
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No. 0-23047
December 31, 1999
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 |_|.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|.
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 20,
2000 as reported on the Nasdaq SmallCap Market was approximately $35,358,069. As
of March 20, 2000 the registrant had outstanding 6,654,837 shares of Common
Stock.
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EXPLANATORY NOTE
This Amendment No. 1 to Form 10-KSB (this "Amendment") is being filed by Siga
Technologies, Inc. to delete certain statements included in the financial
statements provided in response to the Item set forth below of its Annual Report
on Form 10-KSB for the year ended December 31, 1999 filed with the Securities
and Exchange Commission on March 30, 2000 (the "Form 10-KSB"). The following
change has been made to the information set forth in the Form 10-KSB:
In Item 8. Financial Statements and Supplementary Data, language in Note 1 to
the Financial Statements, the second paragraph under "Basis of presentation" has
been revised to read as follows:
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Since inception the Company has
incurred cumulative net operating losses of $14,651,980 and expects to
incur additional losses to perform further research and development
activities. The Company does not have commercial biomedical products, and
does not expect to have such for several years, if at all. In the current
year, the Company introduced a new business strategy and launched an
Internet initiative, the outcome of which is not assured.
The change is being made as a clarification to language used in the note.
SIGA Technologies, Inc.
(A development stage company)
Financial Statements
December 31, 1999 and 1998
SIGA Technologies, Inc.
(A development stage company)
Index to Financial Statements
- --------------------------------------------------------------------------------
Report of Independent Accountants..................................... F-2
Balance Sheet as of December 31, 1999 and 1998........................ F-3
Statement of Operations for the years ended December 31, 1999 and
1998, and for the period from inception through December 31, 1999. F-4
Statement of Changes in Stockholders' Equity for the period
from inception through December 31, 1999.......................... F-5
Statement of Cash Flows for the years ended December 31, 1999, and
1998, and for the period from inception through December 31, 1999. F-6
Notes to Financial Statements......................................... F-7
F-1
Report of Independent Accountants
To the Board of Directors and Stockholders
of SIGA Technologies, Inc.
In our opinion, the accompanying balance sheet and related statements of
operations, of cash flows and of changes in stockholders' equity present fairly,
in all material respects, the financial position of SIGA Technologies, Inc. (a
development stage company) at December 31, 1999 and 1998, and the results of its
operations and cash flows for the years ended December 31, 1999 and 1998, and
for the period from December 28, 1995 ("Inception") through December 31, 1999,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, NY
February 18, 2000 except
as to Note 13 which is
as of March 30, 2000
F-2
SIGA Technologies, Inc.
(A development stage company)
Balance Sheet
- --------------------------------------------------------------------------------
December 31,
1999 1998
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 1,758,541 $ 4,966,873
Accounts receivable 47,570 --
Prepaid expenses and other current assets 38,279 134,969
------------ ------------
Total current assets 1,844,390 5,101,842
Equipment, net 1,366,362 1,696,404
Investments -- 132,220
Other assets 147,002 147,002
------------ ------------
Total assets $ 3,357,754 $ 7,077,468
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 248,962 $ 266,371
Accrued expenses 104,096 143,364
Current portion of capital lease obligations 280,092 369,288
------------ ------------
Total current liabilities 633,150 779,023
Capital lease obligations, net of current portion 520,424 650,659
Commitments and contingencies (see Notes 6, 9, 10 and 11) -- --
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, 6,602,712 and 6,577,712
shares issued and outstanding at December 31, 1999
and December 31, 1998 respectively) 661 658
Additional paid-in capital 16,855,499 16,697,424
Unrealized losses on available for sale securities -- (34,816)
Deficit accumulated during the development stage (14,651,980) (11,015,480)
------------ ------------
Total stockholders' equity 2,204,180 5,647,786
------------ ------------
Total liabilities and stockholders' equity $ 3,357,754 $ 7,077,468
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
SIGA Technologies, Inc.
(A development stage company)
Statement of Operations
- --------------------------------------------------------------------------------
For the Period
December 28,
Year Ended 1995 (Date of
December 31, Inception) to
--------------------------- December 31,
1999 1998 1999
Revenue:
Research and development contracts $ 519,561 $ 450,000 $ 1,644,561
------------ ------------ ------------
Operating expenses:
General and administrative 2,284,790 2,784,763 7,413,056
Research and development (including
amounts to related parties of $75,000, $81,750
and $309,581 for the years ended December 31,
1999 and 1998, and for the period from the date
of inception to December 31, 1999, respectively) 1,672,778 4,385,213 7,666,981
Patent preparation fees 193,567 197,071 1,130,844
Settlement of litigation 97,969 -- 97,969
Stock option and warrant compensation -- 14,407 450,450
------------ ------------ ------------
Total operating expenses 4,249,104 7,381,454 16,759,300
------------ ------------ ------------
Operating loss (3,729,543) (6,931,454) (15,114,739)
------------ ------------ ------------
Interest income, net 26,383 379,788 396,099
Net gain on sale of securities 66,660 -- 66,660
------------ ------------ ------------
Net loss (3,636,500) (6,551,666) (14,651,980)
------------ ------------ ------------
Basic and diluted loss per share $ (0.55) $ (1.00)
============ ============
Weighted average common shares
outstanding used for basic and
diluted loss per share 6,579,424 6,540,022
============ ============
Comprehensive loss:
Net loss $ (3,636,500) $ (6,551,666) $(14,651,980)
Unrealized gains (losses) on available for sale
securities 34,816 (34,816) --
------------ ------------ ------------
Total comprehensive income/(loss) $ (3,601,684) $ (6,586,482) $(14,651,980)
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-4
SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity
- --------------------------------------------------------------------------------
Deficit
Accumulated
Additional Stock During the
Paid-in Subscriptions Development
Shares Par Value Capital Outstanding Stage
Issuance of common stock at inception 2,079,170 $ 208 $ 1,040 $ (1,248)
Net loss -- -- -- -- $ (1,000)
--------- -------- ----------- ---------- --------------
Balances at December 31, 1995 2,079,170 208 1,040 (1,248) (1,000)
Net proceeds from issuance and sale of common stock
($1.50 per share) 1,038,008 104 1,551,333 -- --
Net proceeds from issuance and sale of common stock
($3.00 per share) 250,004 25 748,985 --
Receipt of stock subscriptions outstanding -- -- -- 1,248 --
Issuance of compensatory options and warrants -- -- 367,461 -- --
Net loss -- -- -- -- (2,268,176)
--------- -------- ----------- ---------- --------------
Balances at December 31, 1996 3,367,182 337 2,668,819 -- (2,269,176)
Net proceeds from issuance and sale of common stock
($5.00 per share) 2,875,000 287 12,179,322
Issuance of warrants with bridge notes -- -- 133,000 -- --
Stock option and warrant compensation -- -- 68,582 -- --
Net loss -- -- -- -- (2,194,638)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1997 6,242,182 624 15,049,723 -- (4,463,814)
Issuance of common stock to acquire third party's
right to certain technology ($4.34 per share) 335,530 34 1,457,424
Issuance of compensatory options and warrants -- -- 175,870 -- --
Stock option and warrant compensation -- -- 14,407 -- --
Unrealized losses on available for sale securities -- -- -- -- --
Net loss -- -- -- -- (6,551,666)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1998 6,577,712 658 16,697,424 -- (11,015,480)
Issuance of common stock for software development ($1.25 per share) 25,000 3 31,247
Issuance of compensatory common stock,
options and warrants 51,550
Stock option and warrant compensation 75,278
Unrealized gains on available for sale securities
Net loss (3,636,500)
--------- -------- ----------- ---------- --------------
Balance at December 31, 1999 6,602,712 $ 661 $16,855,499 $ -- $ (14,651,980)
========= ======== =========== ========== ==============
Unrealized
Gains (Losses) Total
on Available Stockholders'
for Sale Equity
Securities (Deficit)
Issuance of common stock at inception $ --
Net loss -- $ (1,000)
--------- ------------
Balances at December 31, 1995 -- (1,000)
Net proceeds from issuance and sale of common stock
($1.50 per share) -- 1,551,437
Net proceeds from issuance and sale of common stock
($3.00 per share) -- 749,010
Receipt of stock subscriptions outstanding -- 1,248
Issuance of compensatory options and warrants -- 367,461
Net loss -- (2,268,176)
--------- ------------
Balances at December 31, 1996 -- 399,980
Net proceeds from issuance and sale of common stock
($5.00 per share) 12,179,609
Issuance of warrants with bridge notes -- 133,000
Stock option and warrant compensation -- 68,582
Net loss -- (2,194,638)
--------- ------------
Balance at December 31, 1997 -- 10,586,533
Issuance of common stock to acquire third party's
right to certain technology ($4.34 per share) 1,457,458
Issuance of compensatory options and warrants -- 175,870
Stock option and warrant compensation -- 14,407
Unrealized losses on available for sale securities (34,816) (34,816)
Net loss -- (6,551,666)
--------- ------------
Balance at December 31, 1998 (34,816) 5,647,786
Issuance of common stock for software development ($1.25 per share) 31,250
Issuance of compensatory common stock,
options and warrants 51,550
Stock option and warrant compensation 75,278
Unrealized gains on available for sale securities 34,816 34,816
Net loss (3,636,500)
--------- ------------
Balance at December 31, 1999 $ -- $ 2,204,180
========= ============
The accompanying notes are an integral part of these financial statements.
F-5
SIGA Technologies, Inc.
(A development stage company)
Statement of Cash Flows
- --------------------------------------------------------------------------------
For the Period
December 28,
Year Ended 1995 (Date of
---------------------------- Inception) to
December 31, December 31, December 31,
1999 1998 1999
Cash flows from operating activities:
Net loss $ (3,636,500) $ (6,551,666) $(14,651,980)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 366,816 211,520 594,797
Stock, option and warrant compensation 158,078 190,277 784,398
Loss on write-off of capital equipment 97,969 -- 97,969
Amortization of debt discount -- -- 133,000
Purchase of rights to certain technology -- 1,457,458 1,457,458
Realized gain on sale of marketable securities (66,660) -- (66,660)
Changes in assets and liabilities:
Accounts receivable (47,570) 150,000 (47,570)
Prepaid sponsored research -- 11,684 --
Prepaid expenses and other current assets 96,690 (91,271) (38,279)
Other assets -- (4,161) (147,002)
Accounts payable and accrued expenses (56,677) (55,873) 353,058
------------ ------------ ------------
Net cash used in operating activities (3,087,854) (4,682,032) (11,530,811)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (134,743) (1,878,110) (2,059,128)
Sale (purchase) of investment securities 233,696 (167,036) 66,660
------------ ------------ ------------
Net cash used in investing activities 98,953 (2,045,146) (1,992,468)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- 14,480,056
Receipt 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 1,139,085
Principle payments on capital lease obligations (219,431) (119,138) (338,569)
------------ ------------ ------------
Net cash provided from financing activities (219,431) 1,019,947 15,281,820
------------ ------------ ------------
Net increase in cash and cash equivalents (3,208,332) (5,707,231) 1,758,541
Cash and cash equivalents, beginning of period 4,966,873 10,674,104 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 1,758,541 $ 4,966,873 $ 1,758,541
============ ============ ============
There were no cash payments for income taxes for the periods ended December 31,
1999 and 1998.
Cash paid for interest was $145,507 and $28,851 for the periods ended December
31, 1999 and 1998, respectively.
The accompanying notes are an integral part of these financial statements.
F-6
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Organization and Basis of Presentation
Organization
SIGA Technologies, Inc. ("SIGA" or the "Company") was originally
incorporated in the State of Delaware on December 28, 1995 ("Inception")
as SIGA Pharmaceuticals, Inc. The Company is engaged in the discovery,
development and commercialization of vaccines, antibiotics, and novel
anti-infectives for the prevention and treatment of infectious diseases.
The Company's technologies are licensed from third parties. In 1998 the
Company opened its research facility in the State of Oregon, reducing the
Company's dependency on third parties to conduct research on its behalf.
In 1999, the Company launched an Internet initiative as a separate line of
business from its biomedical product development. The initial product of
this initiative will enable peer-to-peer communication and facilitate the
building of on-line communities on the Internet. In January 2000, as a
result of this new initiative, the shareholders of the Company agreed
changed its name to SIGA Technologies, Inc.
Basis of presentation
The Company's activities since inception have consisted primarily of
sponsoring and performing research and development, performing business
and financial planning, preparing and filing patent applications and
raising capital. Accordingly, the Company is considered to be a
development stage company.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Since inception the Company has
incurred cumulative net operating losses of $14,651,980 and expects to
incur additional losses to perform further research and development
activities. The Company does not have commercial biomedical products, and
does not expect to have such for several years, if at all. In the current
year, the Company introduced a new business strategy and launched an
Internet initiative, the outcome of which is not assured.
In January and March 2000, the Company raised $1,500,000 and $3,000,000,
respectively, in private placements. See Note 13. Management believes that
the current resources will be sufficient to support its planned operations
through the end of 2000.
The Company anticipates that it will need additional funds to complete the
development of its biomedical products and the successful launch of its
Internet initiative.
2. Summary of Significant Accounting Policies
Cash and cash equivalents
Cash and cash equivalents consist of short term, highly liquid
investments, with original maturities of less than three months when
purchased and are stated at cost. Interest is accrued as earned.
Investments
The Company accounts for investments under the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity
F-7
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Securities" ("SFAS 115"). At December 31, 1998 the Company classified its
investments in marketable securities as available for sale and reported
them at fair market value, with the unrealized holding gains and losses,
net of tax effect, reported as a separate component of stockholders'
equity. Any gains or losses from the sale of these securities were
recognized using the specific identification method. During 1999, the
Company sold its available for sale securities for $233,696, recognizing a
gain of $66,660.
Equipment
Equipment is stated at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of the respective assets, which are
as follows:
Laboratory equipment 5 years
Leasehold improvements Life of lease
Computer equipment 3 years
Furniture and fixtures 7 years
Revenue recognition
The Company has been awarded government research grants from the National
Institutes of Health ("NIH"). The NIH grants are used to subsidize the
Company's research projects. NIH revenue is recognized on a pro rata basis
as subsidized research costs are incurred. Such method approximates the
straight-line basis over the lives of the grants.
Payments from Wyeth-Ayerst for contract research and development are used
to subsidize the Company's research and development efforts. Such amounts
are recognized as revenue as the related services are performed by the
Company, provided the collection of the resulting receivables is probable.
In situations where the Company receives payments in advance of
performance of services, such amounts are deferred and recognized as
revenue as the related services are performed.
Upon the achievement of defined events, Wyeth-Ayerst is required to make
milestone payments to the Company. Such amounts are included in contract
research and development revenue and are recognized as revenue upon the
achievement of the event and when the collection of the resulting
receivable is probable.
Research and development
Research and development costs are expensed as incurred and include costs
of third parties who conduct research and development, pursuant to
development and consulting agreements, on behalf of the Company. Costs
related to the acquisition of technology rights, for which development
work is still in process, and that have no alternative future uses, are
expensed as incurred and considered a component of research and
development costs.
Income taxes
Income taxes are accounted for under the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Deferred income taxes are recorded for
temporary differences between financial statement carrying amounts and the
tax basis of assets and liabilities. Deferred tax assets and liabilities
reflect the tax rates
F-8
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more
likely than not that some or all of the deferred tax asset will not be
realized.
Net loss per common share
Effective December 31, 1997 the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which
requires presentation of basic earnings per share ("Basic EPS") and
diluted earnings per share ("Diluted EPS") by all entities that have
publicly traded common stock or potential common stock (options, warrants,
convertible securities or contingent stock arrangements). Basic EPS is
computed by dividing income (loss) available to common stockholders by the
weighted-average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares
outstanding during the period. The computation of Diluted EPS does not
assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings.
At December 31, 1999 and 1998, outstanding options to purchase 1,130,561
and 540,561 shares of common stock, respectively, with exercise prices
ranging from $1.00 to $5.50 have been excluded from the computation of
diluted loss per share as they are antidilutive. Outstanding warrants to
purchase 896,724 and 734,724 shares of common stock, at December 31, 1999
and 1998, respectively, with exercise prices ranging from $1.00 to $5.50
were also antidilutive and excluded from the computation of diluted loss
per share.
Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
The carrying value of cash and cash equivalents, and accounts payable and
accrued expenses approximates fair value due to the relatively short
maturity of these instruments.
Concentration of credit risk
The Company has cash in bank accounts that exceed the FDIC insured limits.
The Company has not experienced any losses on its cash accounts. No
allowance has been provided for potential credit losses because management
believes that any such losses would be minimal.
Accounting for stock based compensation
The Company has adopted Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As provided
for by SFAS 123, the Company has elected to continue to account for its
stock-based compensation programs according to the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, compensation expense has been recognized to
the extent of employee
F-9
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
or director services rendered based on the intrinsic value of compensatory
options or shares granted under the plans. The Company has adopted the
disclosure provisions required by SFAS 123.
Reclassifications
Certain prior year amounts have been reclassified to conform with the 1999
presentation.
New accounting pronouncements
On December 6, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements filed with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provides guidance
for disclosures related to revenue recognition policies. Management
believes that its revenue recognition policies and practices are in
conformance with SAB 101.
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise
and Related Information" ("SFAS 131"), which requires disclosure of
information about operating segments in annual financial statements for
reporting period beginning subsequent to December 15, 1997. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance. The adoption of FAS 131 did not have a material
impact on the Company's financial statements.
In July 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of the
FASB Statement No. 133, an Amendment of FASB Statement No. 133" ("SFAS
137"). SFAS No. 137 defers the effective date of SFAS 133, which
establishes accounting and reporting standards for derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and
for hedging activities. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset
or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variability in cash flows attributable to a particular risk,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available for sale
security and a forecasted transaction. As a result of SFAS 137, the
Company will be required to implement SFAS 133 for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company does not expect
the adoption of this pronouncement to have a material effect on the
Company's results of operations, financial position or cash flows.
3. Equipment
Equipment consisted of the following at December 31, 1999 and 1998
F-10
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
December 31,
1999 1998
----------- -----------
Laboratory equipment $ 785,888 $ 865,053
Leasehold improvements 618,315 618,315
Computer equipment 225,803 159,380
Furniture and fixtures 291,637 291,637
----------- -----------
1,921,643 1,934,385
Less - Accumulated depreciation (555,281) (237,981)
----------- -----------
Equipment, net $ 1,366,362 $ 1,696,404
=========== ===========
Depreciation expense for the years ended December 31, 1999 and December
31, 1998 was $366,541 and $221,520, respectively.
On December 31, 1999, title to fixed assets of $147,210, with accumulated
depreciation of $49,241, was transferred to Washington University as part
of the settlement agreement and mutual release with Washington University.
See Note 9.
At December 31, 1999 and 1998, laboratory equipment, computer equipment
and furniture included approximately $730,500, $117,000 and $291,600,
respectively, of equipment acquired under capital leases. Accumulated
depreciation related to such equipment approximated $246,000, $66,000 and
$66,000 respectively, at December 31, 1999, and $100,000, $27,000 and
$24,200 respectively, at December 31, 1998.
4. Stockholders' Equity
In September and October 1997, The Company completed an initial public
offering of 2,875,000 shares of its common stock at an offering price of
$5.00 per share. The Company realized gross proceeds of $14,375,000 and
net proceeds, after deducting underwriting discounts and commissions, and
other offering expenses payable by the Company, of $12,179,609.
Stock option plan and warrants
In January 1996, the Company implemented its 1996 Incentive and
Non-Qualified Stock Option Plan (the "Plan") whereby options to purchase
up to 333,333 shares of the Company's common stock may be granted to
employees, consultants and outside directors of the Company. In October
1998, the Company increased the number of options to purchase the
Company's common shares available for grant under the plan to 833,333. In
October 1999, the Company increased the number of options to purchase the
Company's common shares available for grant under the plan to 1,500,000.
The exercise period for options granted under the Plan, except those
granted to outside directors, is determined by a committee of the Board of
Directors. Stock options granted to outside directors pursuant to the Plan
must have an exercise price equal to or in excess of the fair market value
of the Company's common stock at the date of grant and become exercisable
over a period of three years with a third of the grant being exercisable
at the
F-11
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
completion of each year of service subsequent to the grant. The fair
market value of the Company's common stock before its initial public
offering in September 1997, was determined by a committee of the Board of
Directors. The committee was comprised entirely of employees who receive
stock options under the Plan.
Transactions under the Plan are summarized as follows:
Weighted
Average
Number of Exercise
Shares Price
Outstanding at December 31, 1997 117,061 $ 3.74
Granted 556,834 3.98
Forfeited (133,334) 4.14
---------- ---------
Outstanding at December 31, 1998 540,561 3.88
Granted 612,500 1.12
Forfeited (22,500) 1.37
---------- ---------
Total outstanding at December 31, 1999 1,130,561 $ 2.42
========== =========
Options available for future grant 369,439
Weighted average fair value of options granted during 1998 $ 2.45
Weighted average fair value of options granted during 1999 $ 0.87
The following table summarizes information about options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
---------------------------------------------- -------------------------
Weighted Number
Number Average Weighted Exercisable Weighted
Outstanding Remaining Average at Average
December 31, Contractual Exercise December 31, Exercise
1999 Life (Years) Price 1999 Price
$ 1.13 600,000 9.83 $1.13 75,000 $1.13
1.50 33,334 6.00 1.50 33,334 1.50
2.00 - 4.66 296,834 8.46 3.41 114,584 3.72
5.00 - 5.50 200,393 4.56 5.01 145,393 5.01
------------- ------------
1,130,561 368,311
============= ============
On December 31, 1999, there were a total of 876,724 warrants outstanding.
In November 1999, 16,000 shares of the Company's common stock were granted
in exchange for professional services. The Company recognized non-cash
compensation expense of $21,500 for the year ended December 31, 1999 based
upon the fair value of the stock on the date of grant. The Company expects
to issue the shares in 2000.
F-12
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In September 1999 the Company entered into a consulting agreement with one
of its directors under which the director will provide the Company with
business valuation services in exchange for warrants to purchase 100,000
shares of the Company's common stock, at an exercise price of $1.00 per
share. Of these warrants, 50,000 vested on the date of grant and the
remaining 50,000 will vest on the first anniversary of the consulting
agreement. The warrants become exercisable one year after they vest. The
Company recognized non-cash compensation expense of $46,848 for the year
ended December 31, 1999, based upon the fair value of such warrants.
In June 1998 the Company granted a consultant options to purchase 150,000
shares of the Company's common stock at an exercise price of $5.00 per
share. 50,000 options vested immediately, and the remaining 100,000 vest
pro rata over a period of ten quarters. The Company recognized non-cash
compensation expense of $58,480 and $102,340 for the years ended December
31, 1999 and 1998, respectively, based upon the fair value of the options
on the date of the grant.
In May 1998, the Company granted a consultant options to purchase 5,000
shares of the Company's common stock, at an exercise price of $4.25. The
Company recognized non-cash compensation expense of $15,655 for the year
ended December 31, 1998 based upon the fair value of such options on the
date of the grant.
In January 1998 the Company issued warrants to a third party to purchase
16,216 shares of the Company's common stock, at an exercise price of $4.60
per share. The Company recognized non-cash compensation expense of $57,875
for the year ended December 31, 1998 based upon the fair value of such
warrants on the date the grant.
In September 1997, in connection with the Company's IPO, the Company
issued the underwriters warrants to purchase 225,000 shares of common
stock at an exercise price of $8.25 per share. All the warrants, which
have a term of five years, are exercisable at December 31, 1999.
In November 1996, the Company entered into an employment agreement with
its former President and Chief Executive Officer. Under the terms of the
agreement, the employee received warrants to purchase 461,016 shares of
common stock at $3.00 per share (see Note 6). These warrants expire on
November 18, 2006. Upon termination of the employment agreement on April
21, 1998, 230,508 warrants were surrendered to the Company.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for warrants issued to employees and stock options granted
under the Plan. During the year ended December 31, 1998 compensation
expense of $14,407 was recognized for warrants issued to employees.
Compensation expense was calculated based upon the difference between the
exercise price of the warrant or option and the fair market value of the
Company's common stock on the date of grant. Had compensation cost for
warrants issued and stock options granted been determined based upon the
fair value at the grant date for awards, consistent with the methodology
prescribed under SFAS 123, the Company's net loss and loss per share would
have been increased by approximately $245,400, or $0.04 per share for the
year ended
F-13
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
December 31, 1999, and approximately $199,000, or $0.03 per share for the
year ended December 31, 1998.
The fair value of the options and warrants granted to employees and
consultants during 1999 and 1998 ranged from $0.73 to $3.47 on the date of
the respective grant using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for 1999: no dividend
yield, expected volatility of 100%, risk free interest rates of
5.78%-5.83%, and an expected term of 5 years. The following
weighted-average assumptions were used for 1998: no dividend yield,
expected volatility of 100%, risk free interest rates of 5.46%-5.55%, and
an expected term of 5 years.
5. Income Taxes
The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $7,087,000 and $4,718,000,
respectively, at December 31, 1999 and 1998 for federal and state income
tax purposes. These carryforwards are available to offset future taxable
income and begin expiring in 2010 for federal income tax purposes. As a
result of a previous change in stock ownership, the annual utilization of
the net operating loss carryforwards is subject to limitation.
The net operating loss carryforwards and temporary differences, arising
primarily from deferred research and development expenses result in a
noncurrent deferred tax asset at December 31, 1999 and December 31, 1998
of approximately $5,631,000 and $4,343,000, respectively. In consideration
of the Company's accumulated losses and the uncertainty of its ability to
utilize this deferred tax asset in the future, the Company has recorded a
valuation allowance of an equal amount on such date to fully offset the
deferred tax asset.
For the years ended December 31, 1999 and December 31, 1998, the Company's
effective tax rate differs from the federal statutory rate principally due
to net operating losses and other temporary differences for which no
benefit was recorded, state taxes and other permanent differences.
6. Related Parties
Consulting agreements
In 1998 the Company entered into a two year consulting agreement, expiring
January 15, 2000, with Prism Ventures LLC ("Prism") under which Prism was
to provide the Company business development, operations and other advisory
services. Pursuant to the agreement Prism was to receive an annual
consulting fee of $150,000 and an annual stock option grant to purchase
16,667 of the Company's common shares. The Chief Executive Officer and
Chairman of the Company are principals of Prism. In October 1998 the
Company and Prism agreed to suspend the agreement for as long as the two
principals are employed by the Company under the provisions of their
amended employment agreements. During the year ended December 31, 1998,
the Company incurred expense of $112,500 pursuant to the agreement.
F-14
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In connection with the development of its licensed technologies the
Company entered into a consulting agreement with the scientist who
developed such technologies, under which the consultant serves as the
Company's Chief Scientific Advisor. The scientist, who is a stockholder,
shall be paid an annual consulting fee of $75,000. The agreement, which
commenced in January 1996 and is only cancelable by the Company for cause,
as defined in the agreement, had an initial term of two years and provided
for automatic renewals of three additional one year periods unless either
party notifies the other of its intention not to renew. Research and
development expense incurred under the agreement amounted to $75,000 and
$81,570 for the years ended December 31, 1999 and 1998, respectively.
Employment agreements
In November 1999, the Company entered into two year employment agreements
with three newly-hired Vice Presidents ("VPs"), of Business Development,
Investor Relations, and Marketing, at annual salaries of $95,000,
$100,000, and $120,000, respectively. Each VP was also granted options to
purchase 100,000 shares of the Company's common stock at an exercise price
of $1.125 per share, to vest ratably over two years.
In September 1998 the Company and its Chief Executive Officer and Chairman
("EVPs") entered into employment agreements commencing October 1, 1998 and
expiring on December 31, 2000. Under the agreements, the EVPs were each to
be paid an annual minimum compensation of $225,000, and to be granted a
minimum of 16,666 options to purchase shares of the Company's common stock
per annum. In addition, one EVP was appointed as the Company's Chairman
and the other was appointed as the Chief Executive Officer. The Company
incurred $450,000 and $352,002 of expense for the years ended December 31,
1999 and 1998, respectively, pursuant to these agreements.
In November 1999, the EVPs were each granted non-qualified stock options
to purchase 150,000 shares under the Company's 1996 Incentive and
Non-Qualified Stock Option Plan, at an exercise price of $1.30, to expire
in ten years. 37,500 options vested immediately. 75,000 will vest in
November 2000, and the remaining 37,500 will vest in November 2001.
In January 2000, the Company signed new employment agreements with the
EVPs expiring in January 2005. The new agreements provide for a base
salary of $250,000, with annual increases of at least 5%. In addition,
both of the EVP's were granted fully-vested options to purchase 500,000
shares of the Corporations' common stock at $2.00 per share. Under the
provisions of the agreements the EVPs would each receive a cash payment
equal to 1.5% of the total consideration received by the Company in a
transaction resulting in a greater than 50% change in ownership of the
outstanding common stock of the Company.
In November 1996, the Company entered into an employment agreement,
expiring in November 1999, with its former President and Chief Executive
Officer. Under the terms of the agreement, the employee was to receive
annual base compensation of $225,000 and options to purchase 16,667 shares
of the Company's common stock, exercisable at the fair market value on the
date of grant. Upon execution of the agreement, the Company granted the
employee options to purchase 16,667 shares of its common stock at an
exercise price of $3.00 per share. In addition,
F-15
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
the employee was issued warrants to purchase 461,016 shares of common
stock at $3.00 per share (see Note 4). During the year ended December 31,
1998 the Company incurred $77,050 of expense pursuant to the agreement.
The agreement was terminated on April 21, 1998.
7. Technology Purchase Agreement
In February 1998, the Company entered into an agreement with a third party
pursuant to which the Company acquired the third party's right to certain
technology, intellectual property and related rights in the field of gram
negative antibiotics in exchange for 335,530 shares of the Company's
common stock . Research and development expense related to this agreement
amounted to $1,457,458 for the year ended December 31, 1998.
8. Collaborative Research and License Agreement
In July 1997, the Company entered into a collaborative research and
license agreement with Wyeth-Ayerst (the "Collaborator"). Under the terms
of the agreement, the Company has granted the collaborator an exclusive
worldwide license to develop, make, use and sell products derived from
specified technologies. The agreement required the collaborator 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 payments totaling $1,200,000. In consideration of
the license grant the Company is entitled to receive royalties equal to
specified percentages of net sales of products incorporating the licensed
technologies. The royalty percentages increase as certain cumulative and
annual net sales amounts are attained. The Company could receive milestone
payments, under the terms of the agreement of up to $13,750,000 for the
initial product and $3,250,000 for the second product developed from a
single compound derived from the licensed technologies. Such milestone
payments are contingent upon the Company making project milestones set
forth in the agreement, and, accordingly, if the Company is unable to make
such milestones, the Company will not receive such milestone payments.
During 1999 and 1998, the Company recognized $337,500 and $450,000,
respectively, in revenue related to this agreement. The Company is
currently in negotiations with the collaborator to extend research
payments beyond the initial two years. No assessment can be made as to the
outcome of these negotiations.
9. License and Research Support Agreements
In February of 1998, the company entered into a research collaboration and
license agreement with Washington University (the "University"). Under the
terms of the agreement, the Company was 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. Prior to this agreement, in July 1997 the
company had entered into a separate consulting agreement with a faculty
member of the University. A dispute arose between the Company and the
University and the consultant regarding, among other things, the
performance of the parties under the agreements. In May 1999, the
University sent the Company notice of intent to terminate the agreement in
90 days claiming certain payments were not made. It was the Company's
position that, among other things, such payments are not owed due to the
University's failure to perform.
F-16
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Under the arbitration clause of the agreement, the University, in July
1999, commenced an arbitration seeking an award in the amount of $230,000.
The Company also commenced an arbitration seeking a determination that
such amount is not owed the University and seeking its own award of $5
million. In February of 2000 the parties reached a settlement agreement
and mutual release of their obligations under the research collaboration
and licensing agreement entered into in February of 1998. Further, all
personal consulting agreements between the Company and Washington
University faculty members and employees were also terminated. Under the
terms of the settlement agreement any payments owed by the Company under
the research collaboration and licensing agreement are cancelled. In
addition, all payments owed faculty members under consulting agreements
are also cancelled. The University will reimburse the Company $37,037 for
certain patent expenses incurred under the research collaboration, and the
Company transferred title to equipment with a net book value of $98,000 to
the University. The Company recognized the write-off of fixed assets
during 1999. The Company has disclaimed any rights to patents licensed
under the February 1998 agreement. However, if the University successfully
commercializes any of the patents, it agrees to pay the Company licensing
revenue arising from products commercialized. Also as part of settlement
agreement and mutual release the Company and the University entered into
an agreement granting the Company a nonexclusive license to one of the
University's patents. Under the research collaboration and license
agreement, the Company incurred sponsored research expense of
approximately $187,000 during the year ended December 31, 1998. For the
quarter ended March 31, 1999, June 30, 1999, and September 30, 1999, the
Company recorded research and development expense payable to the
University under the research collaboration and license agreement in the
amounts of $25,000, $98,778, and $104,300, respectively. As a result of
the mutual settlement and release, these amounts were reversed as of
December 31, 1999.
In July and September, 1999 the Company was awarded two Phase I research
grants by the Small Business Innovation Research Program (SBIR) of $109,
072 and $293,446 respectively. The first grant was to help support the
Company's antibiotic discovery efforts for the period July 1, 1999 through
December 31, 1999. The second grant provides support for the Company's
effort to develop a vaccine targeting strep throat, in collaboration with
the National Institutes of Health (NIH). The grant award is for a period
of twelve months beginning on October 1, 1999. As of December 31, 1999 the
Company had recognized revenue from the two grants of $109,072 and $72,989
respectively.
In January 1996, the Company entered into a license and research support
agreement with Rockefeller University ("Rockefeller"). The Company agreed
to sponsor research by Rockefeller for the development of licensed
technologies for a period of two years from the date of the agreement, in
return for a payment of $725,000. The agreement expired in January 1998.
However, the Company has continued its relationship with Rockefeller under
similar terms. Sponsored research related to this third party amounted to
$125,000 and $360,000 for the years ended December 31, 1999 and 1998,
respectively.
10. Product Development Agreement
In October 1999 the Company entered into an agreement with Open-iMedia, a
software and web development company ("Development Company"). Under the
terms of the agreement the
F-17
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Company will acquire and the Development Company will continue to develop,
the source code for a client/server chat and instant messaging
application. The application is designed to enable peer-to-peer
communication and facilitate the building of on-line communities. In
exchange, the Company will pay the Development Company $200,000, payable
in three installments, and a grant of 125,000 shares of common stock. As
of December 31, 1999 the Development Company had received $100,000 and
25,000 shares of the Company's common stock.
In March 2000, the Company entered into an additional agreement with the
Development Company for creative and technical services, and for business
strategy consulting. In exchange, the Company will pay the Development
Company $280,000 and grant it 13,605 shares, each payable in three
installments.
11. Commitments and Contingencies
Operating lease commitments
The Company leases certain facilities and office space under operating
leases. Minimum future rental commitments under operating leases having
noncancelable lease terms in excess of one year are as follows:
Year ended December 31,
2000 $ 231,789
2001 234,672
2002 226,333
2003 105,002
2004 and thereafter 108,152
---------
$ 905,948
=========
Capital lease commitments
In July, August and September 1998, the Company sold certain laboratory
equipment, computer equipment and furniture to a third party for $493,329,
$385,422 and $260,333, respectively, under sale-leaseback agreements. The
leases have terms 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 at 15% of the original cost at the end of the lease
term.
F-18
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Future minimum lease payments for assets under capital leases at December
31, 1999 are as follows:
Year ended December 31,
2000 $ 364,933
2001 438,931
2002 131,342
---------
Total minimum lease payments 935,206
Less: amounts representing interest 134,690
---------
Present value of future minimum lease payments 800,516
Less: current portion of capital lease obligations 280,092
---------
Capital lease obligations, net of current portion $ 520,424
=========
12. Segments
Since the announcement in September 1999 that the Company intends to
pursue its Internet initiative, the Company has operated the Internet
initiative as a separate segment. The Internet segment generated operating
expenses of approximately $317,000 during 1999 and has identifiable assets
of approximately $81,000 at December 31, 1999.
13. Subsequent Events
In January 2000 the shareholders of the Company voted at the Annual
Meeting to change the name of the Company to Siga Technologies, Inc., and
to increase the number of authorized shares to 50,000,000.
In January 2000 the Company sold $1,500,000 of 6% Convertible debentures
due January 2002 with warrants to purchase 1,043,478 shares of common
stock in the Company to a group of private investors. The warrants had a
purchase price of $0.05 per warrant. The Company received net proceeds of
$1,499,674 from the total $1,552,174 raised. The interest on the
debentures is payable in either cash or stock at the Company's discretion.
The debentures are convertible into common stock at $1.44 per share. The
warrants have a term of five years and are exercisable at a price of $3.41
per share. Under certain circumstances the Company can force exercise of
the warrants. An additional 275,000 warrants, with a term of five years
and exercisable at a price of $1.45 per share, were issued for
professional services related to the sale of debentures.
In January 2000, the Company and its Chief Financial Officer ("CFO")
entered into an amendment to the CFO's employment agreement, extending his
employment until April 2002. Under this amendment, the CFO received
options to purchase 100,000 shares of the Company's common stock at $2.00
per share. The options vest ratably over two years and expire in January
2010.
F-19
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
In March 2000 the Company entered into an option agreement with the Ross
Products Division of Abbott Laboratories (Ross). The Agreement grants Ross
an exclusive option to negotiate an exclusive license to certain Company
technology and patents. In exchange for the option, Ross will make
payments to the Company amounting to $120,000 in three installments of
$40,000.
In March 2000 the Company raised $3,000,000 in a private offering of
common stock and warrants to purchase common stock. The Company sold
600,000 shares of common stock and 450,000 warrants. 210,000, 120,000 and
120,000 of the warrants are exercisable at $5.00, $6.38 and $6.90,
respectively. The warrants are redeemable by the Company upon meeting
certain conditions.
F-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Technologies, Inc.
(Registrant)
Date: May 9, 2000 By: /s/ Joshua D. Schein
------------------------------
Joshua D. Schein, Ph. D.
Chief Executive Officer
