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, 2001
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 8, 2001, the registrant had outstanding 10,139,553 shares of
Common Stock.
================================================================================
SIGA TECHNOLOGIES INC.
(A development stage company)
BALANCE SHEET
September 30, December 31,
2001 2000
------------- ------------
Unaudited
ASSETS
Current Assets
Cash and cash equivalents .............................................. $ 1,780,986 $ 1,707,385
Accounts receivable .................................................... 82,282 37,800
Prepaid expenses ....................................................... 138,667 5,644
------------ ------------
Total current assets .................................................. 2,001,935 1,750,829
Equipment, net ......................................................... 806,186 1,027,702
Investments ............................................................ 275,106 275,106
Other assets ........................................................... 171,036 156,556
------------ ------------
Total assets .......................................................... $ 3,254,263 $ 3,210,193
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ....................................................... $ 475,766 $ 209,278
Accrued expenses ....................................................... 323,830 305,912
Capital lease obligations .............................................. 286,132 391,407
Deferred Revenue ...................................................... -- 450,000
------------ ------------
Total current liabilities ............................................. 1,085,728 1,356,597
6% Convertible Debt ................................................... -- 719,561
Accrued Debenture Interest ............................................ -- 80,281
Non current capital lease obligations ................................. -- 129,018
------------ ------------
Total liabilities .................................................. 1,085,728 2,285,457
------------ ------------
Commitments and contingencies ............................................. -- --
Stockholders' equity
Preferred stock ($.0001 par value, 10,000,000 shares authorized,
318,194 issued and outstanding at September 30, 2001) .................. 416,901 --
Common stock ($.0001 par value, 50,000,000 shares authorized,
9,161,102 and 7,471,837 issued and outstanding at September 30, 2001
and December 31, 2000, respectively) ................................. 917 747
Additional paid-in capital ............................................. 27,293,072 23,793,983
Deferred Compensation ................................................. (622,414) (428,425)
Deficit accumulated during the development stage ....................... (24,919,941) (22,441,569)
------------ ------------
Total stockholders' equity ............................................ 2,168,535 924,736
------------ ------------
Total liabilities and stockholders' equity ............................ $ 3,254,263 $ 3,210,193
============ ============
The accompanying notes are an integral part of these financial statements
1
SIGA TECHNOLOGIES INC.
(A development stage company)
STATEMENT OF OPERATIONS
For The Period
December 28,
1995 (Date of
Three months ended Nine months ended Inception) to
September 30, September 30, September 30,
2001 2000 2001 2000 2001
----------- ----------- ------------- ----------- ---------------
Unaudited Unaudited Unaudited Unaudited Unaudited
Revenues
Research and Development Contracts $ 157,500 $ 193,340 $ 1,144,500 $ 364,513 $ 3,272,181
----------- ----------- ----------- ----------- --------------
Operating expenses
General and administrative 1,259,110 1,808,023 1,959,710 3,585,370 14,674,590
Research and development 497,739 876,075 1,357,285 2,030,705 11,633,173
Patent preparation fees (11,046) 20,372 69,892 84,489 1,307,382
Settlement of litigation 97,696
----------- ----------- ----------- ----------- -------------
Total operating expenses 1,745,803 2,704,470 3,386,887 5,700,564 27,712,841
----------- ----------- ----------- ----------- --------------
Operating loss (1,588,303) (2,511,130) (2,242,387) (5,336,051) (24,440,660)
Interest income/(expense) (2,220) (147,095) (235,985) (406,825) (390,350)
Loss on impairment of investment (155,591)
Other Income/Gain on sale of securities -- -- -- -- 66,660
----------- ----------- ----------- ----------- --------------
Net loss (1,590,523) (2,658,225) (2,478,372) (5,742,876) $ (24,919,941)
=========== =========== =========== =========== ==============
Weighted average shares 8,574,094 7,405,356 7,972,269 7,110,351
----------- ----------- ----------- -----------
Net Loss per Share (0.19) (0.36) (0.31) (0.81)
The accompanying notes are an integral part of these financial statements
2
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,
2001 2000 2001
---------------------------- --------------
Unaudited Unaudited Unaudited
Cash flows from operating activities:
Net loss (2,478,371) $(5,742,876) $(24,919,941)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 221,516 268,039 1,172,402
Stock, options & warrant compensation 470,989 1,574,028 2,779,989
Loss on impairment of investment -- -- 155,591
Loss on write-off of capital equipment -- -- 97,969
Amortization of debt discount 232,393 435,580 954,705
Purchase of rights to certain technology -- -- 1,457,458
Realized gain on marketable securities -- -- (66,660)
Non-cash research and development -- -- 500,344
Changes in assets and liabilities:
Accounts receivable (44,482) 2,037 (82,282)
Prepaid expenses and other current assets (133,023) 26,321 (138,667)
Other assets (14,480) (9,554) (171,035)
Accounts payable and accrued expenses 297,704 33,054 812,893
Deferred Revenue (450,000) 342,500 --
Accrued Interest 20,391 56,000 100,672
Deferred Compensation -- -- --
---------------------------- ------------
Net cash used in operating activities (1,877,363) (3,014,871) (17,346,562)
---------------------------- ------------
Cash flows from investing activities:
Capital expenditures -- (98,126) (2,157,253)
Sale (purchase) of investment securities -- -- 66,660
Investment in Open-I-Media -- (170,000) (170,000)
---------------------------- ------------
Net cash flow used in investing activities -- (268,126) (2,260,593)
---------------------------- ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,995,474 2,883,000 19,358,530
Receipts of stock subscriptions outstanding -- -- 1,248
Gross proceeds from sale of convertible debentures -- 1,500,000 1,500,000
Proceeds from exercise of options 189,783 38,155 242,557
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 & leaseback of equipment -- -- 1,139,085
Principal payments on capital lease obligations (234,293) (206,751) (852,953)
---------------------------- ------------
Net cash provided from financing activities 1,950,964 4,214,078 21,388,141
---------------------------- ------------
Net increase in cash and cash equivalents 73,601 931,081 1,780,986
Cash and cash equivalents at beginning of period 1,707,385 1,758,541 --
---------------------------- ------------
Cash and cash equivalents at end of period $ 1,780,986 $ 2,689,622 $ 1,780,986
============================ ============
During the nine months ended September 30, 2001, certain creditors of the
Company converted notes payable into equity in the amount of $1,052,623.
The accompanying notes are an integral part of these financial statements
3
SIGA Technologies, Inc.
NOTES TO THE SEPTEMBER 30, 2001 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, 2000, included in the 2000 Form 10-KSB.
In the opinion of management, the accompanying unaudited financial statements
include all adjustments, consisting of normal adjustments, necessary for a fair
presentation of the results of operations for the interim periods. The results
of operations for the nine months ended September 30, 2001 are not necessarily
indicative of the results of operations to be expected for the full year ending
December 31, 2001.
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 December 31, 2002. The Company does not have commercial biomedical products,
and does not expect to have such for several years, if at all. The Company
believes that it will need additional funds to complete the development of its
biomedical products. Management's plans with regard to these matters include
continued development of its products as well as seeking additional research
support funds and financial arrangements. Although, management continues to
pursue these plans, there is no assurance that the Company will be successful in
obtaining sufficient financing on terms acceptable to the Company. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
2. Recent Pronouncements
Statement of Financial Accounting Standards No. 141 ("FAS 141"), Business
Combinations, requires that the purchase method of accounting be used for all
business combinations for which the date of acquisition is after June 30, 2001,
establishes specific criteria for the recognition of intangible assets
separately from goodwill, and requires unallocated negative goodwill to be
written off immediately as an extraordinary gain (instead of being deferred and
amortized).
Statement of Financial Accounting Standards No. 142 ("FAS 142"), Goodwill and
Other Intangible Assets, addresses the accounting for goodwill and intangible
assets subsequent to their acquisition. FAS 142 requires that goodwill and
indefinite lived intangible assets will no longer be amortized; goodwill will be
tested for impairment at least annually at the reporting unit level; intangible
assets deemed to have an indefinite life will be tested for impairment at least
annually; and the amortization period of intangible assets with finite lives
will no longer be limited to forty years. The provisions of FAS 142 will be
effective for fiscal years beginning after December 31, 2001 and must be applied
prospectively.
The Company will adopt FAS 141 and 142 on January 1, 2002. Management does not
expect such adoption to have a material impact on the Company's financial
statements.
In August 2001, the Financial Accounting Standards Boards issued Statement of
Financial Accounting Standards (FAS) No. 143, "Accounting for Asset Retirement
Obligations," ("SFAS No. 143") which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Statement applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. The effective date
for SFAS No. 143 is for financial statements issued for fiscal years beginning
after June 15, 2002. The Company does not expect that the adoption of the
provisions of FAS 143 will have a material impact on its results of its
operations or financial position.
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets," (SFAS No. 144"), which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144
supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations
- -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". SFAS
No. 144 also amends ARB No. 51, "Consolidated Financial Statements," to
eliminate the exception to consolidation for a subsidiary for which control is
likely to be temporary. The Company does not expect that the adoption of the
provisions of SFAS No. 144 will have material impact on its results of it
operations or financial position.
4
3. Stockholders' Equity
In August 2001, the Company raised gross proceeds of $1,159,500 in a private
placement offering of common stock and warrants to purchase shares of the
Company's common stock. The Company sold 409,636 shares of common stock and
307,226 warrants. The warrants are exercisable at $3.55 per share until
September 30, 2008.
In May 2001, the Company raised gross proceeds of $850,000 in a private offering
of common stock and warrants to purchase shares of the Company's common stock.
The Company sold 425,000 shares of common stock and 425,000 warrants. The
warrants are exercisable at $2.94 and have a term of seven years. The investors
consisted of members of the board of directors, existing investors and new
investors representing 43.4%, 5.9% and 50.8% of the investors in the
transaction, respectively. The Company recorded a charge to earnings in the
amount of $103,040 based upon the difference between the fair value and the
price of the restricted stock for the shares purchased by members of the board
of directors.
In May 2001, subject to approval by the shareholders, the Company granted
3,225,000 options, at an exercise price of $2.50 per share, to the members of
the board of directors. On August 15, upon approval of the grant by the
Company's shareholders, the Company issued the options and recorded a charge to
earnings in the amount of $612,750 representing the difference between the fair
value of the Company's common stock and the options' exercise price on the date
of approval.
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. As of September 30, 2001, all of the
debentures were converted into shares of the Company's preferred or common
stock.
4. Employment Agreements
In June 2001 the Company entered into an employment agreement with an individual
to serve as the Company's President and Chief Executive Officer (the
"Executive"), expiring in June 2003. The agreement provides for an annual salary
of $300,000. In addition the Executive was granted options to purchase 420,000
shares of the Company's common stock at $3.94 per share.
On October 31, 2001, the Company and the Executive entered into a separation and
release agreement under which the Company will pay the Executive $40,000 over a
period through October 5, 2002. Options previously granted to the Executive have
been cancelled.
5. Consulting Agreements
In June 2001, the Company entered into a one year consulting agreement under
which the consultant assists the Company with public relations efforts in Europe
in exchange for 50,000 shares of the Company's restricted common stock. The
restricted stock vests at an equal rate over the period of the agreement. As the
restricted stock vests, the Company will record charges to earnings based upon
the difference between the fair value and the price of the restricted stock.
In June 2001, the Company entered into a consulting agreement, under which the
consultant will provide services to the Company for a three year period
commencing on September 10, 2001. In consideration for the consulting services
the consultant will be paid an annual fee of $50,000 payable quarterly. In
addition, the Company granted the consultant options to purchase 225,000 shares
of common stock at $3.94 per share. On September 10, 2001, ten percent of the
options vested and the remaining shall vest in 36 monthly installments beginning
on October 10, 2001. For the three months ended September 30, 2001, the Company
recorded a charge of $45,000.
6. Subsequent Events
In October 2001, the Company issued and sold 850,000 common shares and 425,000
warrants raising gross proceeds of approximately $2.55 million. The warrants are
exercisable at $3.60 per share of common stock up to October 2006.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our
financial statements and notes to those statements and other financial
information appearing elsewhere in this Quarterly Report. In addition to
historical information, the following discussion and other parts of this
Quarterly Report contain forward-looking information that involves risks and
uncertainties.
Overview
We are a development stage, technology company, whose primary focus is in
biopharmaceutical product development. Since inception in December 1995 our
efforts have been principally devoted to research and development, securing
patent protection, obtaining corporate relationships and raising capital. Since
inception through September 30, 2001, we have sustained cumulative net losses of
$24,919,941, including non-cash charges in the amount of $1,457,458 for the
write-off of research and development expenses associated with the acquisition
of certain technology rights acquired from a third party in exchange for our
common stock and non-cash compensation of $2,779,989. 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, 2001, research and development
expenses amounted to $11,633,173, patent preparation and prosecution expenses
totaled $1,307,382, general and administration expenses amounted to $14,674,590.
From inception through September 30, 2001 revenues from research and development
agreements and government grants totaled $3,272,181.
As of September 30, 2001, we had limited resources, had incurred
cumulative net operating losses of $24,919,941 and expect to incur additional
losses to perform further research and development activities. We do not have
biomedical products which are commercially available, and we do not expect to
have such for several years, if at all. We believe that we will need additional
funds to complete the development of our biomedical products. These
circumstances raise substantial doubt about our ability to continue as a going
concern. Our plans with regard to these matters include continued development of
our products as well as seeking additional research support funds and financial
arrangements. Although we continue to pursue these plans, there is no assurance
that we will be successful in obtaining sufficient financing on terms acceptable
to us. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Our biotechnology operations are run out of our research facility in
Corvallis, Oregon. We continue to seek to fund a major portion of our ongoing
vaccine and antibiotic programs through a combination of government grants,
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. If we are unable to raise needed capital, our
operations will need to be scaled back or discontinued.
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.
6
Results of Operations
Three Months ended September 30, 2001 and September 30, 2000
Revenues from grants and research and development contracts were $157,500
for the three months ended September 30, 2001 compared to $193,340 for the same
period of 2000. During the three months ended September 30, 2001 we received
research payments of $112,500 from Wyeth-Ayerst under the amendment to extend
funding under our research agreement with them through September 30, 2001. We
also recognized revenue from a research agreement with the Ross Products
Division of Abbott Laboratories and Oregon State University for research
performed under a sub-contract with the University. Revenue received in the
three months ended September 30, 2001 was 18.5% lower than the $193,340 received
in the three months ended September 30, 2000. Revenue in the three months ended
September 30, 2000 included $138,340 received under various Small Business
Innovation Research (SBIR) grants, no grant funding was received in the same
period of the current year.
General and administrative expenses decreased approximately 30% for the
three months ended September 30, 2001 to $1,259,110 from $1,808,023 for the
three months ended September 30, 2000. General and administrative expenses for
the three months ended September 30, 2000 included a charge taken to reserve
$250,000 advanced to a third party and non-cash charges of approximately
$744,000 associated with warrant and option grants to consultants and directors.
During the three months ended September 30, 2001, we recognized a charge of
$612,750 to reflect the granting of options to directors with an exercise price
that is less than the fair market value of our shares at the time the option
plan was approved by stockholders. Excluding these charges, general and
administrative expenses declined approximately 20% in the three months ended
September 30, 2001 from the prior year period. The primary reason for the
decrease was the result of a material reduction in general and administrative
payroll resulting primarily from the elimination of staff associated with the
Internet product. The decrease in payroll expense was partially offset by
increased legal fees associated with the "Change in Control" that occurred in
April of 2001.
Research and development expenses declined approximately 43% to $497,739
for the three months ended September 30, 2001 from $876,075 for the three months
ended September 30, 2000. In the three months ended September 30, 200l all
expenses were for our core biotechnology activities. In the three months ended
September 30, 2000, a significant portion of the expenses were incurred in the
development of our Internet product. No comparable activity occured in the three
months ended September 30, 2001.
Patent preparation expense had a credit of $11,046 for the three months
ended September 30, 2001 compared to an expense of $20,372 for the three months
ended September 30, 2000. The credit for the three months ended September 30,
2001 is the result of patent payments made that are to be reimbursed by
Wyeth-Ayerst and Washington University under our agreements with them.
Net interest expense for the three months ended September 30, 2001 was
$2,220 compared to expenses of $147,095 for the three months ended September 30,
2000. The 98.5% decrease in interest expense is the result of the conversion of
the remainder of the $1,500,000 principal amount of the 6% convertible debenture
and accrued interest into equity during the three months ended September 30,
2001. As of September 30, 2000, $1,400,000 of the debenture was outstanding.
Net loss for the three months ended September 30, 2001 was $1,590,523, an
approximate 40% decrease from the $2,685,225 loss incurred for the three months
ended September 30, 2000. The decrease in the loss was primarily the result of
significant reductions in expenses for general and administrative, research and
development and interest as presented in detail above.
7
Nine Months ended September 30, 2001 and September 30, 2000
Revenues from grants and research and development contracts increased to
$1,144,500 for the nine months ended September 30, 2001 compared to $364,513 for
the nine months ended September 30, 2000. The approximate 214% increase is the
result of additional revenue from Wyeth-Ayerst. Upon consummation of an
amendment to extend our agreement with Wyeth-Ayerst through September 30, 2001,
we were able to recognize revenue of $562,500 from payments made to fund
research that had been recorded as deferred revenue prior to signing the
extension. In the nine months ended September 30, 2001, we received a total of
$912,500 from Wyeth-Ayerst for research and milestone payments under our
agreement with them dated July 1997. No revenue from Wyeth-Ayerst was recognized
in the nine months ended September 30, 2000. Revenue for the three months ended
September 30, 2000 was primarily from Phase I SBIR grants and a research payment
under an agreement with the Ross Products Division of Abbott Laboratories.
General and administrative expenses for the nine months ended September
30, 2001 were $1,959,710, a decrease of approximately 45% from the $3,585,370 of
expenses incurred in the nine months ended September 30, 2000. Expenses for the
nine months ended September 30, 2001 include a $612,750 non-cash charge to
reflect the granting of options to directors with an exercise price that is less
than the fair market value of our shares at the time the option plan was
approved by stockholders. The nine months ended September 30, 2000 included
approximately $744,000 of non-cash charges associated with grants of warrants
and options to certain consultants and directors and $511,000 to reserve the
amount advanced to a third party. Excluding these charges, expenses declined
approximately 42%. The reduction in expenses was primarily due to a significant
reduction in administrative payroll resulting from the elimination of staff
associated with the Internet product and a non-cash credit taken for the
cancellation of a portion of a warrant grant to a certain consultant. An
increase in legal expenses associated with the "Change in Control" partially
offset the decrease.
Research and development expenses decreased by approximately 33% to
$1,357,285 for the nine months ended September 30, 2001 from $2,030,705 for the
same period in 2000. The primary reason for the decrease is that in the nine
months ended September 30, 2000 we incurred costs associated with our Internet
product as well as expenses for our core biotechnology activities. In the nine
months ended September 30, 2001 research and development spending was directed
only on our core biotechnology activities and was essentially at the same level
as the prior year period.
Patent preparation expense of $69,892 for the nine months ended September
30, 2001 was approximately 17% lower than the $84,489 incurred for the nine
months ended September 30, 2000. The decrease in spending from the prior year
period is the result of provisions under certain research agreements that
reimburse us for certain patent costs incurred.
Net interest expense for the nine months ended September 30, 2001 was
$235,985 compared to expenses of $406,825 for the nine months ended September
30, 2000. The 42% decrease in interest expense is the result of the conversion
of the remainder of $1,500,000 principal amount of the 6% convertible debenture
and accrued interest during May, June and August of the current year.
Net loss for the nine months ended September 30, 2001 was $2,478,372, an
approximate 57% decrease from the $5,742,876 loss incurred for the nine months
ended September 30, 2000. The decrease in the loss was primarily due to the
increase in revenue recognized from Wyeth-Ayest for research and milestones
achieved, a material reduction in general and administrative expenses, lower
research and development expenses and reduced interest expense as described
above.
8
Liquidity and Capital Resources
As of September 30, 2001, we had $1,780,986 in cash and cash equivalents.
In July of 1997 we entered into a collaborative two year research and license
agreement with Wyeth-Ayerst Laboratories Division of American Home Products.
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. The agreement required 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. On May 11, 2001, we entered into an
amendment to the July 1, 1997 agreement. The amendment extended the term of the
Agreement to September 30, 2001. The extension provides for Wyeth Ayerst to
continue to pay the Company at a rate of $450,000 per year through the term of
the amended agreement. During the term of the agreement as amended, September
30, 1999 through September 30, 2001, we have received $787,500 from Wyeth Ayerst
to support work performed by us under the agreement and $237,000 for achieving a
research milestone. Since the inception of the agreement through September 30,
2001 we have recorded a total of $2,825,000 of revenue from Wyeth-Ayerst. The
agreement to fund additional research has not been extended beyond September 30,
2001.
In May, June and August 2001 holders of the Company's 6% convertible
debentures, consisting of an aggregate principal amount $1,350,000 and $104,165
of accrued interest, agreed to convert the debt and interest into convertible
preferred stock. The converting debenture holders received Series A Preferred
Shares at a conversion price of $1.4375 per share. The preferred shares will
have a cumulative dividend of 6% per annum payable in cash or preferred stock at
the Company's discretion. The shares are convertible into common stock on a one
for one basis. Each holder of preferred stock is entitled to the number of votes
into which the shares of preferred stock are convertible into common stock. In
July 2001 certain holders of the Series A Preferred Shares converted their
preferred shares and cumulative dividends into 626,578 shares of common stock.
In November 2001 a holder of the preferred shares converted a portion of his
preferred shares and accumulated dividends into 15,141 shares of common stock.
On May 8, 2001, we completed a private placement of an aggregate of
425,000 shares of common stock and 425,000 warrants. We received gross proceeds
of $850,000. The warrants have a term of seven years and may exercised at $2.94
per share.
In August 31, 2001, we completed a private placement of an aggregate of
409,636 shares of common stock and 307,226 warrants to purchase common stock.
The warrants may be exercised at $3.55 per share and have a term of seven years.
We received gross proceeds of $1,159,500 from the transaction.
On October 12, 2001, we completed a private placement of an aggregate of
850,000 shares of common stock and 425,000 warrants to purchase common stock.
The warrants have a term of five years and may be exercised at $3.60 per share.
We received net proceeds of approximately $2,371,500 out of the $2,550,000 gross
proceeds from the transaction.
We anticipate that our current resources combined with the proceeds raised
subsequent to the period ended September 30, 2001 will be sufficient to finance
our currently anticipated needs for operating and capital expenditures
approximately through the end of 2002. 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 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.
9
Part II
Other information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds
In July and August 2001, holders of the Company's 6% convertible
debentures, consisting of an aggregate principal amount $100,000 and
approximately $9,353 of accrued interest agreed to convert the debt and accrued
interest into convertible Series "A" Preferred Stock. The converting debenture
holders received preferred shares at a conversion price of $1.4375 per share.
The preferred shares have a cumulative dividend of 6% per annum payable in cash
or preferred stock at our discretion. The shares are convertible into common
stock on a one for one basis. Each holder of preferred stock is entitled to the
number of votes into which the shares of preferred stock are convertible into
common stock. This transaction was exempt from registration pursuant to Section
4 (2) of the Securities Act of 1933, as amended. This transaction was completed
without general solicitation or advertising and was offered only to accredited
investors.
In November 2001 a holder of our Series "A" Preferred Stock converted a
portion of his preferred shares and accumulated dividends into 15,141 shares of
common stock.
On August 31, 2001, we completed a private placement of an aggregate of
409,636 shares of common stock and 307,226 warrants to purchase common stock. We
received gross proceeds of $1,159,500. The warrants have a term of seven years
and may bee exercised at $2.94 per share. This transaction was exempt from
registration pursuant to Section 4 (2) of the Securities Act of 1933, as
amended. This transaction was completed without general solicitation or
advertising and was offered only to accredited investors.
On October 12, 2001, we completed a private placement of an aggregate of
850,000 shares of common stock and warrants to purchase 425,000 shares of common
stock. We received net proceeds of approximately $2,371,500 out the gross
proceeds of $2,550,000. The warrants have a term of five years and may be
exercised at $3.60 per share. This transaction was exempt from registration
pursuant to Section 4 (2) of the Securities Act of 1933, as amended. This
transaction was completed without general solicitation or advertising and was
offered only to accredited investors.
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 August 15, 2001, the following
matters were voted upon:
The following nominees were elected to the Board of Directors
Nominee Votes For Votes Withheld
- ------- --------- --------------
Donald G. Drapkin 4,795,369 10,950
Gabriel M. Cerrone 4,795,369 10,950
Thomas E. Constance 4,795,369 10,950
Mehmet C. Oz 4,795,369 10,950
Eric A Rose 4,795,369 10,950
Michael Weiner 4,795,369 10,950
10
Proposition 2
To ratify the selection of PricewaterhousCoopers LLP as independent
auditors of SIGA Technologies, Inc. for its fiscal year ending December 31,
2001.
Votes For Votes Against Abstain
--------- ------------- -------
4,797,319 7,000 2,000
Proposition 3
To approve the amendment and restatement of Siga's amended 1996 incentive
and non-qualified Stock Option Plan.
Votes For Votes Against Abstain
--------- ------------- -------
4,206,243 153,921 446,155
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
On September 19, 2001 we filed an 8-K regarding the completion of a
private placement of common stock and warrants to purchases common shares.
11
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, 2001 By: /s/ Thomas N. Konatich
------------------------------------
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting Officer and
Financial Officer and Vice
President, Finance)
12