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
September 30, 2000
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 November 10, 2000 the registrant had outstanding 7,453,545 shares of
Common Stock.
SIGA TECHNOLOGIES INC.
(A development stage company)
BALANCE SHEET
September 30, December 31,
2000 1999
------------ ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents .................................................. $ 2,689,622 $ 1,758,541
Accounts receivable ........................................................ 45,533 47,570
Prepaid expenses ........................................................... 11,958 38,279
------------ ------------
Total current assets ..................................................... 2,747,113 1,844,390
Equipment, net ............................................................. 1,115,752 1,366,362
Investments ................................................................ 430,697 --
Other assets ............................................................... 156,556 147,002
------------ ------------
Total assets ............................................................. $ 4,450,118 $ 3,357,754
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................................... 341,149 248,962
Accrued expenses ........................................................... 44,963 104,096
Deferred revenue ........................................................... 342,500 --
Capital lease obligations .................................................. 307,637 280,092
------------ ------------
Total current liabilities ................................................ 1,036,249 633,150
------------ ------------
Convertible debt, net of discount .......................................... 578,358 --
Accrued interest ........................................................... 56,000 --
Capital lease obligations, net of current portion .......................... 286,128 520,424
------------ ------------
Total noncurrent liabilities ............................................. 920,486 520,424
------------ ------------
Commitments and contingencies .............................................. -- --
Stockholders' equity
Preferred stock ($.0001 par value, 10,000,000 shares authorized,
none issued and outstanding) ............................................. -- --
Common stock ($.0001 par value, 50,000,000 and 25,000,000 shares authorized,
7,453,545 and 6,602,712 issued and outstanding at September 30, 2000
and December 31, 1999, respectively) ..................................... 745 661
Additional paid-in capital ................................................. 23,714,098 16,855,499
Unearned compensation ...................................................... (826,604) --
Deficit accumulated during the development stage ........................... (20,394,856) (14,651,980)
------------ ------------
Total stockholders' equity ............................................... 2,493,383 2,204,180
------------ ------------
Total liabilities and stockholders' equity ............................... $ 4,450,118 $ 3,357,754
============ ============
Balance sheet data at December 31, 1999 was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
The accompanying notes are an integral part of these financial statements
SIGA TECHNOLOGIES INC.
(A development stage company)
STATEMENT OF OPERATIONS
Three months ended
September 30,
2000 1999
----------------------------
(unaudited) (unaudited)
Revenues - Research and development
contracts $ 193,340 $ 147,500
----------------------------
Operating expenses
General and administrative (inclusive of non-cash compensation 1,808,023 551,346
of $744,404, $44,670, $1,003,146, $73,910 and $1,756,294 for the
three and nine months ended September 30, 2000 and 1999,
and the period December 28, 1995 to September 30, 2000, respectively)
Research and development (inclusive of non-cash compensation 876,075 489,180
of $337,805, $0, $570,882, $0, and $602,132 for the three
and nine months ended September 30, 2000 and 1999, and the
period December 28, 1995 to September 30, 2000, respectively)
(including amounts to related parties of $18,750 for each of the three
months ended September 30, 2000 and 1999, and $56,250 for each of the
nine months ended September 30, 2000 and 1999)
Patent preparation fees 20,372 14,472
Settlement of litigation -- --
----------------------------
Total operating expenses 2,704,470 1,054,998
----------------------------
Operating loss (2,511,130) (907,498)
Interest income/(expense) (147,095) 39,267
Net gain on sale of securities -- --
----------------------------
Net loss $ (2,658,225) $ (868,231)
----------------------------
Basic and diluted loss per share $ (0.36) $ (0.13)
============================
Weighted average common shares outstanding used
for basic and diluted loss per share 7,405,356 6,577,712
============================
Other comprehensive income
Unrealized gains on available for sale securities -- --
----------------------------
Comprehensive loss $ 4,747,131 $ 5,709,481
For The Period
December 28,
1995 (Date of
Nine months ended Inception) to
September 30, September 30,
2000 1999 2000
---------------------------- ------------
(unaudited) (unaudited) (unaudited)
Revenues - Research and development
contracts 364,513 372,500 $ 2,009,074
---------------------------- ------------
Operating expenses
General and administrative (inclusive of non-cash compensation 3,585,370 1,607,104 11,448,876
of $744,404, $44,670, $1,003,146, $73,910 and $1,756,294 for the
three and nine months ended September 30, 2000 and 1999,
and the period December 28, 1995 to September 30, 2000, respectively)
Research and development (inclusive of non-cash compensation 2,030,705 1,561,933 9,697,686
of $337,805, $0, $570,882, $0, and $602,132 for the three
and nine months ended September 30, 2000 and 1999, and the
period December 28, 1995 to September 30, 2000, respectively)
(including amounts to related parties of $18,750 for each of the three
months ended September 30, 2000 and 1999, and $56,250 for each of the
nine months ended September 30, 2000 and 1999)
Patent preparation fees 84,489 137,175 1,215,333
Settlement of litigation 97,969
---------------------------- ------------
Total operating expenses 5,700,564 3,306,212 22,459,864
---------------------------- ------------
Operating loss (5,336,051) (2,933,712) (20,450,790)
Interest income/(expense) (406,825) 141,617 (10,726)
Net gain on sale of securities -- 66,660 66,660
---------------------------- ------------
Net loss (5,742,876) (2,725,435) $(20,394,856)
---------------------------- ------------
Basic and diluted loss per share $ (0.81) $ (0.41)
============================
Weighted average common shares outstanding used
for basic and diluted loss per share 7,110,351 6,577,712
============================
Other comprehensive income
Unrealized gains on available for sale securities -- 34,816 --
---------------------------- ------------
Comprehensive loss (5,742,876) 3,887,093 $(20,394,856)
The accompanying notes are an integral part of these financial statements
SIGA TECHNOLOGIES INC.
(A development stage company)
STATEMENT OF CASH FLOWS
For The Period
December 28,
1995 (Date of
Nine Months Ended Inception) to
September 30, September 30, September 30,
2000 1999 2000
-----------------------------------------------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (5,742,876) $ (2,725,435) $(20,394,856)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 268,039 275,866 862,836
Stock, options & warrant compensation 1,574,028 73,910 2,358,426
Loss on write-off of capital equipment -- -- 97,969
Amortization of debt discount 435,580 -- 568,580
Write-off of in-process research and development -- 1,457,458
Realized gain on sale of marketable securities (66,660) (66,660)
Changes in assets and liabilities:
Accounts receivable 2,037 -- (45,533)
Prepaid expenses and other current assets 26,321 110,077 (11,958)
Other assets (9,554) -- (156,556)
Accounts payable and accrued expenses 33,054 (48,974) 386,112
Deferred revenue 342,500 -- 342,500
Accrued interest 56,000 -- 56,000
--------------------------------------------
Net cash used in operating activities (3,014,871) (2,381,216) (14,545,682)
--------------------------------------------
Cash flows from investing activities:
Capital expenditures (98,126) (54,584) (2,157,254)
Sale (purchase) of minority interest -- 66,660
Investment in Open-i Media (170,000) (170,000)
Proceeds from sale of securities 233,696 --
--------------------------------------------
Net cash flow used in investing activities (268,126) 179,112 (2,260,594)
--------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 2,883,000 -- 17,363,056
Receipts of stock subscriptions outstanding -- 1,248
Gross proceeds from sale of convertible debentures 1,500,000 -- 1,500,000
Proceeds from exercise of stock options 38,155 -- 38,155
Net proceeds from sale of warrants 52,174 -- 52,174
Convertible debentures and warrants issuance costs (52,500) -- (52,500)
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 (206,751) (228,685) (545,320)
--------------------------------------------
Net cash provided from financing activities 4,214,078 (228,685) 19,495,898
--------------------------------------------
Net increase in cash and cash equivalents 931,081 (2,430,789) 2,689,622
Cash and cash equivalents at beginning of period 1,758,541 4,966,873 --
--------------------------------------------
Cash and cash equivalents at end of period $ 2,689,622 $ 2,536,084 $ 2,689,622
============================================
The accompanying notes are an integral part of these financial statements
SIGA Technologies, Inc.
NOTES TO THE SEPTEMBER 30, 2000 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, 1999, included in the 1999 Form 10-KSB/A.
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 and nine months ended September 30, 2000 are not
necessarily indicative of the results of operations to be expected for the full
year ending December 31, 2000.
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 end
of June 2001. However, in the event that the Company is unable to raise
additional funds, planned operations will need to be scaled back or
discontinued.
2. Change of Name
In January 2000, at the Annual Meeting of the Company's stockholders, the
shareholders of the Company approved the change of the Company's name from Siga
Pharmaceuticals, Inc., to Siga Technologies, Inc.
3. 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 is in the process of evaluating the
future effect of SAB 101 on the Company's financial statements.
4. 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 which 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
and certain milestone payments. In 1999, a dispute arose between the Company,
the University and a consultant of the University regarding, among other things,
the performance of the parties under the agreements. 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 terminated.
Under the terms of the settlement agreement any payments owed by the Company
under the research collaboration and licensing agreement and any consulting
agreements with the University faculty members were cancelled.
In March 2000 the Company entered into an agreement with the Ross Products
Division of Abbott Laboratories (Ross), under which the Company granted Ross an
exclusive option to negotiate an exclusive license to certain Company technology
and patents, in addition to certain research development services. In exchange
for the research services and the option, Ross is obligated to pay the Company
$120,000 in three installments of $40,000. The first payment of $40,000 was
received during the quarter ended March 31, 2000 and is recognized ratably, over
the expected term of the arrangement. The remaining installments are contingent
upon meeting certain milestones under the agreement and will be recognized as
revenue upon completion and acceptance of such milestones. The first milestone
was met, and payment of $40,000 received, in the quarter ended September 30,
2000. In the nine months ended September 30, 2000, the Company recognized
revenue of $75,000 and deferred the remaining $5,000.
In May and July 2000, the Company received $225,000 and $112,500 respectively
from Wyeth-Ayerst. The Company recorded the entire amount as deferred revenue on
September 30, 2000 and will recognize it as revenue under the terms of an
agreement with Wyeth-Ayerst, once the terms are finalized.
In May, August and September 2000 the Company was awarded three Phase I Small
Business Innovation Research (SBIR) grants from the National Institutes for
Health in the amounts of $26,000, $96,000 and $125,000 respectively. The grants
are for the periods May 3, 2000 to August 31, 2000, August 1, 2000 to January
31, 2001, and September 15, 2000 to March 14, 2001 respectively, and will
support the Company's antibiotic and vaccine development programs.
5. Stockholders' Equity
In January 2000 the shareholders of the Company approved an increase in the
number of authorized shares from 25,000,000 to 50,000,000.
In January 2000 the Company completed a private placement of 6% convertible
debentures at an aggregate principal amount of $1,500,000 and 1,043,478 warrants
to purchase shares of the Company's common stock with a purchase price of $0.05
per warrant (the "January Financing"). The Company received net proceeds of
$1,499,674 from the total $1,552,174 gross proceeds raised. The debentures are
convertible into common stock at $1.4375 per share. Interest at the rate of 6%
per annum is payable on the principal of each convertible debenture in cash or
shares of the Company's common stock, at the discretion of the Company upon
conversion or at maturity. The warrants have a term of five years and are
exercisable at $3.4059 per share. The Company has the right to require the
holder to exercise the warrants within five days under the following
circumstances: (i) a registration statement is effective; and (ii) the closing
bid price for the Company's common stock, for each of any 15 consecutive trading
days is at least 200% of the exercise price of such warrants. If the holder does
not exercise the warrants after notice is given, the unexercised warrants will
expire. In connection with the placement of the debentures and warrants, the
Company recorded debt discount of approximately $1.0 million. Such amount
represents the value of the warrants calculated using the Black-Scholes
valuation model. The discount is amortized over the term of the debentures.
During the three months ended September 30, 2000, the Company recorded interest
expense of $126,376 related to the amortization of such debt discount. In August
2000, debentures with a principal amount of $100,000, along with accrued
interest, were converted into 71,901 shares of the Company's common stock.
In connection with the January Financing, the Company issued warrants to
purchase a total of 275,000 shares of common stock to the placement agent and
the investors' counsel (or their respective designees). These warrants have a
term of five years and are exercisable at $1.45 per share. In connection with
the issuance of such warrants, the Company recorded a deferred charge of
$280,653, which is amortized over the term of the debentures. During the three
months ended June 30, 2000, the Company recorded interest expense of $34,101
related to the deferred charge amortization.
In March 2000 the Company raised gross proceeds of $3,000,000 in a private
offering of common stock and warrants to purchase shares of the Company's common
stock (the "March Financing"). 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 have a term of
three years and are redeemable at $0.01 each by the Company upon meeting certain
conditions. Offering expenses of $117,000 were paid in April 2000.
In connection with the March financing, Siga issued a total of 379,000 warrants
to purchase shares of the Company's common stock to Fahnestock & Co. (the
"Fahnestock Warrants") in consideration for services related to the March
financing. The warrants had an exercise price of $5.00 per share and are
exercisable at any time up until March 28, 2005. In November 2000, the Company
entered into a one year consulting agreement with Fahnestock and Co. under which
the Company will receive marketing, public relations acquisitions and strategic
planning service. In exchange for such services, the Company canceled the
Fahnestock Warrants and reissued them to effectuate an amendment to the exercise
price to $2.00 per share. In connection with such amendment, the Company expects
to record a charge of approximately $270,000 in the three months ended December
31, 2000.
6. Employment Agreements
In January 2000, the Company entered into new employment agreements with its
Chief Executive Officer and its Chairman (the "EVPs"), expiring in January 2005.
The new agreements provide for an annual salary of $250,000, with annual
increases of at least 5%. In addition, both of the EVPs 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 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.
In October 2000, the Company entered into an amended and restated employment
agreements with its Chief Executive Officer, its Chairman and its CFO. Under the
amended agreements, in the event of a change in control, the EVPs and the CFO
will be paid their respective compensation for the remainder of their employment
terms and will receive a tax gross-up payment. In addition, in such event, all
unvested options held by the EVPs and the CFO will become vested and
exercisable. In the event of a merger or consolidation where the holders of the
voting capital stock of the Company immediately prior to the transaction own
less than a majority of the voting capital stock of the surviving entity, the
EVPs will each receive a one time cash payment of 1.5% of the total
consideration received by the Company. In the event of a sale, merger or public
spin-out of any subsidiary or material asset of the Company, the EVPs shall each
receive a fee equal to 1.5% of the value of the Company's shares of the
subsidiary or material asset
In May 2000, the Company and its Vice President for Research entered into an
amendment of the Vice Presidents employment agreement, extending his employment
until December 31, 2002, except that the Company may terminate the agreement
upon 180 days written notice. Under the amendment the employee's title was
changed to Chief Scientific Officer ("CSO"). The CSO was granted options to
purchase 125,000 shares of the Company's common stock at $2.00 per share. The
options vest ratably over the remaining term of the amendment.
7. Consulting Agreements
In August 2000 the Company entered into an agreement with a consultant to
provide the Company with financial consulting, planning, structuring, business
strategy, and public relations services and raising equity capital. The term of
the agreement is for a period of fifteen months with a guarantee of a six-month
retention from August 1, 2000 through February 1, 2001. The consultant was paid
a fee of $40,000 upon signing of the agreement, and will be paid an additional
$40,000 every two months for the term of the agreement unless terminated by the
Company at the end of the initial six month period. The agreement also provides
for the consultant to receive warrants to purchase 500,000 shares of the
Company's common stock. 200,000 warrants with an exercise price of $3.63 per
share vested upon the date of the agreement. Of the remaining 300,000 warrants,
100,000 warrants will vest on May 1, 2001 with an exercise price of $6.50 per
share, 100,000 vest on August 1, 2001 with an exercise price of $7.50 per share
and 100,000 vest on October 1, 2001 with an exercise price of $9.50 per share.
The warrants will become exercisable over a period of five years. Unvested
warrants will terminate in the event the agreement is terminated. During the
quarter ended September 30, 2000, the Company recorded a non-cash charge
associated with such warrants in the amount of $553,683.
In July 2000 the Company entered into an agreement with a consultant to serve as
the Company's public relations agency. The consultant received options to
purchase 75,000 shares of the Company's common stock and will be paid a monthly
retainer of $6,000. 25,000 are exercisable at $5.75 per share, 25,000 at $6.50
per share and 25,000 at $7.50 per share. After an initial four month term, the
Company may terminate the agreement on thirty days notice. During the quarter
ended September 30, 2000, the Company recorded a non-cash charge associated with
such options in the amount of $148,163.
In January 2000 the Company entered into a one year consulting agreement with a
member of its Board of Directors. In exchange for the consulting services, the
Company granted the member of the Board warrants to purchase 50,000 shares of
common stock at an exercise price of $1.00. The warrants vested immediately and
will become exercisable on January 19, 2001. During the quarter ended September
30, 2000, the Company recorded a non-cash charge associated with such warrants
in the amount of $33,288.
In September 1999 the Company entered into a consulting agreement with one of
its directors under which the director provides 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 the grant and the remaining 50,000 vested
in the quarter ended September 30, 2000. The Company recognized non-cash
compensation expense of $108,202 in the nine months ended September 30, 2000
related to such warrants.
8. Product Development Agreement
In March 2000, the Company entered into an agreement with Open-i Media, Inc., a
software and web development company ("the Development Company") for creative
and technical services, and for business strategy consulting. In the six months
ended June 30, 2000, the Company paid $140,000 in cash, and recorded an
additional charge of $25,000 in connection with shares of common stock to be
issued under the agreement. Costs related to this agreement were recognized as
the services performed or upon meeting certain milestones as defined under the
agreement. In July 2000 the Company issued to the Development Company an
additional 62,500 shares of common stock and paid $40,000 in cash for the
completion of the development of the PeerFinder product. The Company recorded
all amounts paid under the development agreement, including the fair value of
shares issued in research and development expenses.
In July 2000 the Company acquired a 12.5% equity position in the Development
Company, Inc. Under the terms of the agreement, the Development Company
received: (i) $170,000 in cash; (ii) 40,336 shares of the Company's common
stock; and (iii) certain assets consisting of the instant messenger product,
PeerFinder and fixed assets with a net book value of $80,697. In addition, the
Company received the right to appoint one director to the Development Company's
board of directors. The Company has accounted for the investment utilizing the
cost method of accounting.
9. Other Agreements
In May 2000 the Company entered into a binding letter of intent (the "Letter")
to acquire Israel-based Hypernix Technologies, Ltd. Under the letter, in the
event that the transaction was consummated, Siga was to issue 3 million shares
of its common stock to the stockholders and certain employees of Hypernix and
assume all of the disclosed liabilities of Hypernix (not to exceed $1,250,000),
with Hypernix's creditors to be paid half in cash and half in common stock of
Siga. Also under the letter, Siga was to lend Hypernix $250,000 per month for up
to five months. This advance was subject to interest at an annual rate of 10%
and was secured by all the assets of Hypernix.
The Company advanced Hypernix $261,000 and $250,000 in May and July 2000,
respectively, under the agreement. On August 10, 2000, the Company terminated
the letter of intent. Siga recorded charges of $261,000 and $250,000 for the
three months ended June 30, 2000 and September 30, 2000 respectively, to reserve
the amounts advanced to Hypernix.
10. Segments
For the period three months ended September 30, 2000, the Company's operations
were principally managed in two business segments: biomedical research and
development, and an Internet initiative. For this period, the Internet segment
had no revenue, and generated operating expenses of approximately $377,000. For
the nine months ended September 30, 2000 the Internet business segment had
operating expenses of approximately $1,018,000. The Internet segment had no
identifiable assets at September 30, 2000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 September 30, 2000, we have sustained cumulative net losses of
$20,394,856, 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 from a third party in exchange for our common
stock. In addition, since inception, non-cash charges of $2,358,426 have been
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 September 30, 2000, research and development
expenses amounted to $9,697,686, patent preparation and prosecution expenses
totaled $1,215,333 and general and administration expenses amounted to
$11,448,876. From inception through September 30, 2000 revenues from research
and development agreements and government grants totaled $2,009,074.
In October of 1999, we entered into an agreement with Open-i Media, Inc.
for the development and acquisition of the source code for a client/server chat
and instant messaging application. In March 2000, we entered into a second
agreement whereby Open-i would provide certain consulting and management
services associated with the development of our instant messenger product.
Through September 30, 2000, we have paid Open-i $400,000 in cash for development
work under the two agreements. In addition, Open-i has received 127,721 shares
of Siga common stock under the terms of our development agreements with them. In
July 2000 we acquired a 12.5% equity position in Open-i. Under the terms of the
agreement, Open-i received: (i) $170,000 in cash; (ii) 40,336 shares of our
common stock; and (iii) certain assets consisting of fixed assets with a net
book value of $80,697 and the instant messenger product, PeerFinder, an instant
messaging tool jointly developed by Siga and Open-i. In May 2000 we entered into
a binding letter of intent to acquire Hypernix Technologies, Ltd. As part of the
letter of intent, we were to lend Hypernix up to $250,000 per month for a period
of up to five months. Under the terms of the agreement we advanced Hypernix
$261,000 in May and $250,000 in July. In August 2000, we terminated the letter
of intent and recorded a charge of $261,000 for the three months ended June 30,
2000 and a charge of $250,000 for the three months ended September 30, 2000 to
reserve the full amount of advances made as of those dates. As of September 30,
2000, we have no further obligations to Hypernix or Open-i. With the transfer of
our ownership of the PeerFinder instant messenger product to Open-i, we do not
anticipate any additional expenditures on our Internet initiative for the
foreseeable future.
We have consolidated our biotechnology assets and operations in 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, corporate partnerships and strategic alliances. While we have
had success in obtaining partners 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.
Results of Operations
Three months ended September 30, 2000 to the three months ended September 30,
1999
Revenues from grants and research and development contracts were $193,340
for the three months ended September 30, 2000 compared to $147,500 for the same
three month period of 1999. The increase in revenues from the 1999 three month
period was approximately 31%. Revenue in the three months ended September 30,
2000 included $138,340 from a number of Phase I Small Business Innovation
Research (SBIR) grants from the National Institutes of Health (NIH) combined
with $55,000 R&D revenue recognized under an agreement with the Ross Products
Division of Abbott Laboratories. Revenues for the three months ended September
30, 1999 included a payment of $112,500 made under an agreement entered into in
July of 1997 with Wyeth-Ayerst, under which we received certain payments for
research and development activities sponsored by Wyeth-Ayerst combined with
payments of $35,000 under SBIR grants. Also, in the three months ended September
30, 2000 we received $112,500 from Wyeth-Ayerst for continued support of our
research efforts, however, pending completion of an agreement with them the
entire amount was recorded as deferred income.
Research and development expenses of $876,075 for the three months ended
September 30, 2000 were approximately 79% greater than the $489,180 of expenses
incurred for the same period in 1999. The increase was largely do to the cost,
in stock and cash, of completing the PeerFinder instant messaging product. This
increase offsets the reduction in spending on our biotechnology activities that
was achieved as the result of materially reduced spending to support activities
with third parties and universities.
General and administrative expenses increased approximately 228% for the
three months ended September 30, 2000 to $1,808,023 from $551,346 for the three
months ended September 30, 1999. The increase was primarily due to non-cash
charges associated with warrant and option grants to consultants and directors
of approximately $744,000 and to the charge of $250,000 taken to reserve the
amount advanced to Hypernix in the three months ended September 30, 2000. Also
adding to the increase in spending was higher legal and accounting costs
associated with the Open-i and Hypernix transactions.
Patent preparation expense of $20,372 for the three months ended September
30, 2000 was approximately 41% higher than the $14,472 incurred for the three
months ending September 30, 1999. The increase in spending is the result of the
timing of these expenses and does not reflect any change in overall patent
activity.
Total operating loss for the three months ended September 30, 2000 was
$2,511,130, a 117% increase from the $907,498 loss incurred for the three months
ended September 30, 1999. The increase in our operating loss is primarily the
result of increased general and administrative expenses associated with the
non-cash compensation expense of warrant and option grants to certain
consultants and directors, the charge taken to reserve the amount advanced to
Hypernix and higher legal and accounting costs. Research and development
expenses incurred to complete the PeerFinder instant messaging product also
increased the loss.
Net interest expense for the three months ended September 30, 2000 was
$147,095 compared to interest income of $39,267 for the three months ended
September 30, 1999. The increase in interest expense is due to the accrual of
interest associated with our sale of $1,500,000 principal amount of 6%
convertible debentures in January of 2000. Further, the lower level of net
interest income is the result of the decrease in the cash available for
investment in the current year period as the funds raised in our September 1997
initial public offering were expended in accordance with our development plan.
Nine months ended September 30, 2000 to the Nine months ended September 30, 1999
Revenues from grants and research and development contracts declined 2.1%
to $364,513 for the nine months ended September 30, 2000 compared to $372,500
for the nine months ended September 30, 1999. Increased revenue from SBIR grants
and milestone R&D payments under an agreement with Abbott Laboratories for the
nine months ended September 30, 2000 was more than offset by the recognition of
no revenue from our agreement with Wyeth-Ayerst. During the nine months ended
September 30, 2000 we received $337,500 from Wyeth-Ayerst to support our
research activities, however, pending completion of a new agreement the entire
amount has been recorded as deferred revenue. Revenue for the nine month period
ended September 30, 1999 was primarily the result of an agreement entered into
in July of 1997 with Wyeth-Ayerst.
Research and development expenses for the nine months ended September 30,
2000 were $2,030,705, 30% more than the $1,561,933 incurred in the nine months
ended September 30, 1999. Higher spending was the result of the costs associated
with the completion of the PeerFinder instant messaging product. This increase
offset the reduction in spending on our biotechnology activities which was
achieved as the result of materially reduced spending to support activities at
third parties and universities.
General and administrative expenses increased approximately 123% for the
nine months ended September 30, 2000 to $3,585,370 from $1,607,104 for the nine
months ended September 30, 1999. The increase in spending was primarily the
result of non-cash compensation expense in the amount of approximately $747,000
associated with the grant of warrants and options to certain consultants and
directors and the charge of $511,000 to reserve the amount advanced to Hypernix
during the current year period. Also contributing to the increase was higher
legal and accounting costs associated with the Open-i and Hypernix transactions.
Patent preparation expense declined to $84,489 for the nine months ended
September 30, 2000 from $137,175 for the nine months ended September 30, 1999.
The decline in spending from the prior year of approximately 38% reflects the
continuing trend to reduce patent costs by focusing on our core
biopharmaceutical technologies and eliminating programs that we believe have
less commercial value.
Total operating loss for the nine months ended September 30, 2000 was
$5,336,051 an approximate 82% increase from the $2,933,712 loss incurred for the
nine months ended September 30, 1999. The increased loss was primarily due to
the non-cash compensation expense associated with warrants granted to certain
consultants and directors and the charge taken to reserve the funds advanced to
Hypernix. Also contributing to the increase in operating loss was the increase
in general and administrative expenses associated with our transactions with
Open-i and Hypernix and higher research and development expenses resulting from
the completion of the PeerFinder instant messaging product.
Net interest expense for the nine months ended September 30, 2000 was
$406,825 compared to interest income of $141,617 for the nine months ended
September 30, 1999. The increase in interest expense is due to the accrual of
interest associated with our sale of $1,500,000 principal amount of 6%
convertible debentures in January of 2000. Further, the lower level of net
interest income is the result of the decrease in the cash available for
investment in the current year period as the funds raised in our September 1997
initial public offering were expended in accordance with our development plan.
We recorded a net gain of $66,660 for the nine months ended September 30,
1999 from the sale of certain securities held for investment purposes. No such
income was received in the nine months ended September 30, 2000.
Liquidity and Capital Resources
As of September 30, 2000 we had $2,689,622 in cash and cash equivalents.
In July of 1997 we entered into a collaborative two year research and license
agreement with Wyeth-Ayerst. Under the terms of the agreement, we have 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 us for the
development of the licensed technologies for a period of two years from the
effective date of the agreement, in return for payments to Siga. Through
September 30, 2000 we have received a total of $1,800,000 from Wyeth-Ayerst. In
July and October of 1999 we were awarded SBIR grants from the NIH. The grant
received in July was for a six month program for a total of $109,072. As of
September 30, 2000 we had received the full amount of the grant. The October
grant was a twelve month program for a total of $293,466. As of September 30,
2000 the total amount of the grant had been invoiced. In May and August 2000 we
were awarded two Phase I SBIR grants from the National Institutes for Health in
the amounts of $26,000 and $96,163, respectively. As of September 30, 2000 the
total award of $26,000 from the May grant had been received and $32,892 has been
invoiced from the August grant. The remaining $63,271 from the August grant will
be received by February 1, 2001. In September we were awarded an additional
grant from the NIH for $125,000 to support certain research activities for a six
month period. As of September 30, 2000 we had recorded a receivable of $10,144
under the grant.
In January of 2000 we completed a private placement of 6% convertible
debentures at an aggregate principal amount if $1,500,000 and 1,043,478 warrants
to purchase shares of the Company's common stock with a purchase price of $0.05
per warrant. We received net proceeds of $1,499,674 from the total $1,552,174
gross proceeds raised. The debentures are convertible into common stock at
$1.4375 per share. Interest at the rate of 6% per annum is payable on the
principal of each convertible debenture in cash or shares of Siga's common
stock, at our discretion upon conversion or at maturity. During the three months
ended September 30, 2000, $100,000 principal amount of the debenture and the
accrued interest was converted into our common stock. The warrants have a term
of five years and are exercisable at $3.4059 per share. We have the right to
require the holder to exercise the warrants within five days under the following
circumstances: (i) a registration statement is effective; and (ii) the closing
bid price for our common stock, for each of any 15 consecutive trading days is
at least 200% of the exercise price of such warrants. If the holder does not
exercise the warrants after notice is given, the unexercised warrants will
expire. In connection with this transaction, we issued warrants to purchase a
total of 275,000 shares of common stock to the placement agent and the
investor's counsel (or their respective designees). These warrants have a term
of five years and are exercisable at $1.45 per share.
In March 2000 we entered into an Agreement with the Ross Products Division
of Abbott Laboratories (Ross). The Agreement grants Ross an exclusive option to
negotiate an exclusive license to certain Siga technology and patents in
addition to certain research development services. In exchange for research
services and the Option, Ross is obligated to pay us $120,000 in three
installments of $40,000. The first payment of $40,000 was received during the
quarter ended March 31, 2000. The remaining installments are contingent upon
certain milestones under the agreement. In the nine months ended September 30,
2000, we recognized revenue of $75,000.
On March 28, 2000 we completed a private placement of an aggregate of
600,000 shares of common stock and 450,000 warrants. We received net proceeds of
$2,883,000 from the total gross proceeds of $3,000,000. The warrants have a term
of three years; 210,000 warrants are exercisable at $5.00 per share, 120,000 are
exercisable at $6.375 per share and 120,000 are exercisable at $6.90 per share.
The warrants have a term of three years and are redeemable at $0.01 each, by us
upon meeting certain conditions.
In May 2000 we entered into a binding letter of intent to acquire
Israel-based Hypernix Technologies, Ltd. Hypernix is the developer of Gooey, an
integrated roving communication platform. If the transaction was consummated, we
would have issued 3 million shares of our common stock to the stockholders and
certain employees of Hypernix and assume all of the disclosed liabilities of
Hypernix (not to exceed $1,250,000), with Hypernix's creditors to be paid half
in cash and half in our common stock. Also, we were to lend Hypernix $250,000
per month for up to five months. This advance is subject to interest at an
annual rate of 10% and is secured by all the assets of Hypernix. We advanced
Hypernix $261,000 and $250,000 in May and July respectively, under the
agreement. In August we terminated the letter of intent. We recorded a charge of
$261,000 for the three months ended June 30, 2000 and $250,000 for the three
months ended September 30, 2000 to reserve the advances made to Hypernix.
In July 2000 we acquired a 12.5% equity position in Open-i Media, Inc.
Under the terms of the agreement, Open-i received: (i) $170,000 in cash; (ii)
40,336 shares of our common stock; and (iii) certain fixed assets with a net
book value of $80,697, and the instant messenger product, PeerFinder, an instant
messaging tool jointly developed by Siga and Open-i.
In July 2000 we entered into an agreement with Global Impact
Communications, Inc.(GIC). GIC will serve as our public relations agency. GIC
received options to purchase 75,000 shares of our common stock and they will
receive a monthly retainer of $6,000. Twenty five thousand options are
exercisable at $5.75 per share, 25,000 at $6.50 per share and 25,000 at $7.50
per share.
In August 2000 we entered into an agreement with The Kriegsman Group for
them to render advice and assistance with respect to financial consulting ,
planning, structuring, business strategy, public relations and raising equity
capital. The term of the agreement is for a period of fifteen months with a
guarantee of a six-month retention from August 1, 2000 through February 1, 2001.
We paid Kriegsman a fee of $40,000 upon signing of the agreement, and will pay
them an additional $40,000 every two months for the term of the agreement. The
agreement also grants Kriegsman a warrant to purchase 500,000 shares of our
common stock with 200,000 warrants vesting upon the date of the agreement with
an exercise price of $3.63 per share. Of the remaining 300,000 warrants, 100,000
warrants will vest on May 1, 2001 with an exercise price of $6.50 per share,
100,000 vest on August 1, 2001 with an exercise price of $7.50 per share and
100,00 vest on October 1, 2001 with an exercise price of $9.50 per share. As of
September 30, 2000 we have paid them $40,000 under the agreement.
In October 2000 we received $112,500 from Wyeth-Ayerst to further support
our research and development on the programs begun under our July 1997 agreement
with Wyeth-Ayerst.
In November 2000 we entered into a one year consulting agreement with
Fahnestock and Co. under which we will receive, marketing, public relations,
acquisitions and strategic planning services. In exchange for such services we
cancelled the warrants we gave them in connection with the March 2000 equity
financing, and reissued them, amending the exercise price of the warrants to
$2.00 per share. In connection with the amendment, we expect to record a charge
of approximately $270,000 in the three months ended December 31, 2000.
We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
through the second quarter of 2001. 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, on commercially reasonable terms. If we are unable to
raise additional capital when needed, we may be forced to curtail certain
activities and programs or possibly cease operations altogether.
Our working capital and capital requirements will depend upon numerous
factors, including progress of the development of our Internet business
activities and the success of the products in the market, 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.
PART II
Item 1. Legal Proceedings - None
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
At our Annual Meeting of Stockholders held on November 1, 2000, the following
matters were voted upon:
The following nominees were elected to the Board of Directors
Nominee For Number of Votes Against Abstained
- ------- --- ----------------------- ---------
Judson A. Cooper 5,925,991 12,840 0
Eric I. Richman 5,925,991 12,840 0
Thomas N. Lanier 5,925,991 12,840 0
Jeffrey Rubin 5,925,991 12,840 0
Joshua D. Schein 5,925,991 12,840 0
The Stockholder's voted to ratify the selection of PriceWaterhouse Coopers LLP
as independent auditors of SIGA Technologies, Inc. for its fiscal year ending
December 31, 2000.
For Number of Votes Against Abstained
--- ----------------------- ---------
5,928,491 7,340 3,000
The Stockholders voted to amend our 1996 Incentive and Non-Qualified Stock
Option Plan increasing the number of shares authorized for issuance by 1,000,000
shares from 1,500,000 to 2,500,000.
For Number of Votes Against Abstained
--- ----------------------- ---------
2,290,025 70,130 1,600
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Schedule (EDGAR version only)
(b) Reports on Form 8-K - None
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: November 14, 2000 By: /s/ Thomas N. Konatich
--------------------------
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting and
Financial Officer and Vice
President, Finance)
5
9-mos
DEC-31-2000
JAN-01-2000
SEP-30-2000
2,689,622
0
0
0
0
2,747,113
1,925,316
809,564
4,450,118
1,036,249
0
0
0
745
23,714,098
4,450,118
0
364,513
0
0
5,700,564
0
0
(5,742,876)
0
(5,742,876)
0
0
0
(5,742,876)
(0.81)
(0.81)
