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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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, 2002
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3864870
(State or other jurisdiction of (IRS Employer Id. No.)
incorporation or organization)
420 Lexington Avenue, Suite 601 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-B 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-KSB or any amendment to
this Form 10-KSB. |_|.
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,
2003 as reported on the Nasdaq SmallCap Market was approximately $16,268,778. As
of March 20 , 2002 the registrant had outstanding 13,226,649 shares of common
stock. For the year ended December 31, 2002 SIGA had revenues of $344,450.
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SIGA Technologies, Inc.
Form 10-KSB
Table of Contents
Part I Page No.
Item 1 Business........................................................... 1
Item 2 Properties......................................................... 14
Item 3 Legal Proceedings.................................................. 14
Item 4 Submission of Matters to a Vote of Security Holders................ 14
Part II
Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters............................................................ 15
Item 6 Management's Discussion and Analysis for Financial Condition
and Results of Operations.......................................... 18
Item 7 Financial Statements and Supplementary Data........................ 29
Item 8 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 30
Part III
Item 9 Directors and Executive Officers of the Registrant................. 31
Item 10 Executive Compensation............................................. 33
Item 11 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters ................................... 35
Item 12 Certain Relationships and Related Transactions..................... 38
Part IV
Item 13 Exhibits, Lists and Reports on Form 8-K............................ 39
Item 14 Controls and Procedures............................................ 44
Item 15 Principal Accountant Fees and Services............................. 44
Signatures.................................................................. 45
PART I
Item 1. Business
Certain statements in this Annual Report on Form 10-KSB, including certain
statements contained in "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words or phrases "can be," "expects," "may affect," "may depend," "believes,"
"estimate," "project" and similar words and phrases are intended to identify
such forward-looking statements. Such forward-looking statements are subject to
various known and unknown risks and uncertainties and SIGA cautions you that any
forward-looking information provided by or on behalf of SIGA is not a guarantee
of future performance. SIGA's actual results could differ materially from those
anticipated by such forward-looking statements due to a number of factors, some
of which are beyond SIGA's control, including (i) the volatile and competitive
nature of the biotechnology industry, (ii) changes in domestic and foreign
economic and market conditions, and (iii) the effect of federal, state and
foreign regulation on SIGA's businesses. All such forward-looking statements are
current only as of the date on which such statements were made. SIGA does not
undertake any obligation to publicly update any forward-looking statement to
reflect events or circumstances after the date on which any such statement is
made or to reflect the occurrence of unanticipated events.
SIGA Technologies, Inc. is referred to throughout this report as "SIGA,"
"the Company," "we" or "us."
Introduction
SIGA is a development stage biotechnology company incorporated in Delaware
on December 9, 1996. We aim to discover, develop and commercialize vaccines,
antibiotics and novel anti-infectives for serious infectious diseases. Our lead
vaccine candidate is for the prevention of group A streptococcal pharyngitis or
"strep throat." We are developing a technology for the mucosal delivery of our
vaccines which may allow those vaccines to activate the immune system at the
mucus lined surfaces of the body -- the mouth, the nose, the lungs and the
gastrointestinal and urogenital tracts -- the sites of entry for most infectious
agents. We focus our anti-infectives program on the increasingly serious problem
of drug resistance. These programs are designed to block the ability of bacteria
to attach to human tissue, the first step in the infection process.
Technology
Vaccine Technologies: Mucosal Immunity and Vaccine Delivery
Using proprietary technology licensed from The Rockefeller University
("Rockefeller"), SIGA is developing certain commensal bacteria ("commensals") as
a means to deliver mucosal vaccines. Commensals are harmless bacteria that
naturally inhabit the body's surfaces with different commensals inhabiting
different surfaces, particularly the mucosal surfaces. Our vaccine candidates
use genetically engineered commensals to deliver antigens for a variety of
pathogens to the mucosal immune system. When administered, the genetically
engineered commensals colonize the mucosal surface and replicate. By activating
a local mucosal immune response, our vaccine candidates are designed to prevent
infection and disease at the earliest possible stage. By comparison, most
conventional vaccines are designed to act after infection has already occurred.
Our commensal vaccine candidates use Gram-positive bacteria. Rockefeller
scientists have identified a protein region that is used by Gram-positive
bacteria to anchor proteins to their surfaces. We are using the proprietary
technology licensed from Rockefeller to combine antigens from a wide range of
infectious organisms, both viral and bacterial, with the surface protein anchor
region of a variety of commensal organisms. By combining a specific antigen with
a specific commensal, vaccines may be tailored to both the target pathogen and
its mucosal point of entry.
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To target an immune response to a particular mucosal surface, a commensal
vaccine would employ a commensal organism that naturally inhabits that surface.
For example, vaccines targeting sexually transmitted diseases might employ
Lactobacillus acidophilus, a commensal colonizing the female urogenital tract.
Vaccines targeting gastrointestinal diseases could employ Lactobacillus casei, a
commensal colonizing the gastrointestinal tract. We have conducted initial
experiments using Streptococcus gordonii ("S. gordonii"), a commensal that
colonizes the oral cavity and which may be used in vaccines targeting pathogens
that enter through the upper respiratory tract, such as the influenza virus.
By using an antigen unique to a given pathogen, the technology may
potentially be applied to any infectious agent that enters the body through a
mucosal surface. Our founding scientists have expressed and anchored a variety
of viral and bacterial antigens on the outside of S. gordonii, including the M6
protein from group A streptococcus, a group of organisms that causes a range of
diseases, including strep throat, necrotizing fasciitis, impetigo and scarlet
fever. In addition, proteins from other infectious agents, such as HIV and human
papilloma virus have also been expressed using this system. We believe this
technology will enable the expression of most antigens regardless of size or
shape. In animal studies, we have shown that the administration of a genetically
engineered S. gordonii vaccine prototype induces both a local mucosal immune
response and a systemic immune response.
We believe that mucosal vaccines developed using our proprietary commensal
delivery technology could provide a number of advantages, including:
o More complete protection than conventional vaccines: Mucosal
vaccines in general may be more effective than conventional
parenteral vaccines, due to mucosal vaccines' ability to produce
both a systemic and local (mucosal) immune response.
o Safety advantage over other live vectors: A number of bacterial
pathogens have been genetically rendered less infectious, or
attenuated, for use as live vaccine vectors. Commensals, by virtue
of their substantially harmless nature, may offer a safer delivery
vehicle without fear of genetic reversion to the infectious state
inherent in attenuated pathogens.
o Non-injection administration: Oral, nasal, rectal or vaginal
administration of the vaccine eliminates the need for painful
injections with their potential adverse reactions.
o Potential for combined vaccine delivery: The Children's Vaccine
Initiative, a world wide effort to improve vaccination of children
sponsored by the World Health Organization (WHO), has called for the
development of combined vaccines, specifically to reduce the number
of needle sticks per child, by combining several vaccines into one
injection, thereby increasing compliance and decreasing disease. We
believe our commensal delivery technology can be an effective method
of delivery of multi-component vaccines within a single commensal
organism that address multiple diseases or diseases caused by
multiple strains of an infectious agent.
o Eliminating need for refrigeration: One of the problems confronting
the effective delivery of parenteral vaccines is the need for
refrigeration at all stages prior to injection. The stability of the
commensal organisms in a freeze-dried state would, for the most
part, eliminate the need for special climate conditions, a critical
consideration, especially for the delivery of vaccines in developing
countries.
o Low cost production: By using a live bacterial vector, extensive
downstream processing is eliminated, leading to considerable cost
savings in the production of the vaccine. The potential for
eliminating the need for refrigeration would add considerably to
these savings by reducing the costs inherent in refrigeration for
vaccine delivery.
Anti-Infectives Technology: Prevention of Attachment and Infectivity
The bacterial infectious process generally includes three steps:
colonization, invasion and disease. The adherence of bacteria to a host's
surface is crucial to establishing colonization. Bacteria adhere through a
number of mechanisms, but generally by using highly specialized surface
structures which, in turn, bind to specific structures or molecules on the
host's cells or, as discussed below, to inanimate objects residing in the host.
Once adhered,
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many bacteria will invade the host's cells and either establish residence or
continue invasion into deeper tissues. During any of these stages, the invading
bacteria can cause the outward manifestations of disease, in some cases through
the production and release of toxin molecules. The severity of disease, while
dependent on a large combination of factors, is often the result of the ability
of the bacteria to persist in the host. These bacteria accomplish this
persistence by using surface molecules which can alter the host's nonspecific
mechanisms or its highly specific immune responses to clear or destroy the
organisms.
Unlike conventional antibiotics, as discussed above, our anti-infectives
approaches aim to block the ability of pathogenic bacteria to attach to and
colonize human tissue, thereby preventing infection at its earliest stage. Our
scientific strategy is to inhibit the expression of bacterial surface proteins
required for bacterial infectivity. We believe that this approach has promise in
the areas of hospital-acquired drug-resistant infections and a broad range of
other diseases caused by bacteria.
Many special surface proteins used by bacteria to infect the host are
anchored in the bacterial cell wall. Scientists at Rockefeller University have
identified an amino acid sequence and related enzyme, a selective protease, that
are essential for anchoring proteins to the surface of most Gram-positive
bacteria. Published information indicates that this amino acid sequence is
shared by more than 50 different surface proteins found on a variety of
Gram-positive bacteria. This commonality suggests that this protease represents
a promising target for the development of a new class of antibiotic products for
the treatment of a wide range of infectious diseases. Experiments by our
founding scientists have shown that without this sequence, proteins cannot
become anchored to the bacterial surface and thus the bacteria are no longer
capable of attachment, colonization or infection. Such "disarmed" bacteria
should be readily cleared by the body's immune system. Our drug discovery
strategy is to use a combination of structure-based drug design and high
throughput screening procedures to identify compounds that inhibit the protease,
thereby blocking the anchoring process. If successful, this strategy should
provide relief from many Gram-positive bacterial infections, but may prove
particularly important in combating diseases caused by the emerging antibiotic
resistance of the Gram-positive organisms S. aureus, Streptococcus pneumoniae,
and the enterococci.
In contrast to the above program, which focuses on Gram-positive bacteria,
our pilicide program, based upon initial research performed at Washington
University, focuses on a number of new and novel targets all of which impact on
the ability of Gram-negative bacteria to assemble adhesive pili on their
surfaces. Pili are proteins on the surfaces of Gram-negative bacteria -- such as
E. coli, salmonella, and shigella -- that are required for the attachment of the
bacteria to human tissue, the first step in the infection process. This research
program is based upon the well-characterized interaction between a periplasmic
protein -- a chaperone -- and the protein subunits required to form pili. In
addition to describing the process by which chaperones and pili subunits
interact, we have developed the assay systems necessary to screen for potential
therapeutic compounds, and have provided an initial basis for selecting novel
antibiotics that work by interfering with the pili adhesion mechanism.
Surface Protein Expression System ("SPEX")
The ability to overproduce many bacterial and human proteins has been made
possible through the use of recombinant DNA technology. The introduction of DNA
molecules into E. coli has been the method of choice to express a variety of
gene products, because of this bacteria's rapid reproduction and well-understood
genetics. Yet despite the development of many efficient E. coli-based gene
expression systems, the most important concern continues to be associated with
subsequent purification of the product. Recombinant proteins produced in this
manner do not readily cross E. coli's outer membrane, and as a result, proteins
must be purified from the bacterial cytoplasm or periplasmic space. Purification
of proteins from these cellular compartments can be very difficult. Frequently
encountered problems include low product yields, contamination with potentially
toxic cellular material (i.e., endotoxin) and the formation of large amounts of
partially folded polypeptide chains in non-active aggregates termed inclusion
bodies.
To overcome these problems, we have taken advantage of our knowledge of
Gram-positive bacterial protein expression and anchoring pathways. This pathway
has evolved to handle the transport of surface proteins that vary widely in
size, structure and function. Modifying the approach used to create commensal
mucosal vaccines, we have
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developed methods which, instead of anchoring the foreign protein to the surface
of the recombinant Gram-positive bacteria, result in it being secreted into the
surrounding medium in a manner which is readily amenable to simple batch
purification. We believe the advantages of this approach include the ease and
lower cost of Gram-positive bacterial growth, the likelihood that secreted
recombinant proteins will be folded properly, and the ability to purify
recombinant proteins from the culture medium without having to disrupt the
bacterial cells and liberating cellular contaminants. Gram-positive bacteria may
be grown simply in scales from those required for laboratory research up to
commercial mass production.
Product Candidates and Market Potential
Mucosal Vaccines
Development of our mucosal vaccine candidates involves: (i) identifying a
suitable immunizing antigen from a pathogen; (ii) selecting a commensal that
naturally colonizes the mucosal point of entry for that pathogen; and (iii)
genetically engineering the commensal to express the antigen on its surface for
subsequent delivery to the target population.
Strep Throat Vaccine Candidate. Until the age of 15, many children suffer
recurrent strep throat infections. Up to three percent of ineffectively treated
strep throat cases progress to rheumatic fever, a debilitating heart disease,
which worsens with each succeeding streptococcal infection. Since the advent of
penicillin therapy, rheumatic fever in the United States has experienced a
dramatic decline. However, in the last decade, rheumatic fever has experienced a
resurgence in the United States. Part of the reason for this is the latent
presence of this organism in children who do not display symptoms of a sore
throat, and, therefore, remain untreated and at risk for development of
rheumatic fever. Based on data from the Centers for Disease Control and
Prevention, there are five to 10 million cases of pharyngitis due to group A
streptococcus in the United States each year. There are over 32 million children
in the principal age group targeted by us for vaccination. Worldwide, it is
estimated that one percent of all school age children in the developing world
have rheumatic heart disease. Additionally, despite the relative ease of
treating strep throat with antibiotics, the specter of antibiotic resistance is
always present. In fact, resistance to erythromycin, the second line antibiotic
in patients allergic to penicillin, has appeared in a number of cases.
We believe that the reason no vaccine for strep throat has been developed
is because of problems associated with identifying an antigen that is common to
the more than 120 different serotypes of group A streptococcus, the bacterium
that causes the disease. We have licensed from Rockefeller a proprietary antigen
which is common to most types of group A streptococcus, including types that
have been associated with rheumatic fever. When this antigen was orally
administered to animals, it was shown to provide protection against multiple
types of group A streptococcal infection. Using this antigen, we are seeking to
develop a mucosal vaccine for strep throat.
Our strep throat vaccine candidate expresses the strep throat antigen on
the surface of the commensal S. gordonii, which lives on the surface of the
teeth and gums. Pre-clinical research in mice and rabbits has established the
ability of this vaccine candidate to colonize and induce both a local and
systemic immune response. We are collaborating with the National Institutes of
Health ("NIH") and the University of Maryland Center for Vaccine Development on
the clinical development of this vaccine candidate. In cooperation with the NIH
we filed an Investigational New Drug Application ("IND") with the United States
Food and Drug Administration (the "FDA") in December 1997. The first stage of
these clinical trials, using the commensal delivery system without the strep
throat antigen, were completed at the University of Maryland in 2000. The study
showed the commensal delivery system to be well-tolerated and that it
spontaneously eradicated or was easily eradicated by conventional antibiotics. A
second clinical trial of the commensal delivery system without the strep throat
antigen was initiated in 2000 at the University of Maryland. The study was
completed in January 2002 and the results corroborated the results of the
earlier study regarding tolerance and spontaneous eradication.
In the U.S. there are about 19 million children aged 2 to 6 years who
could be candidates to receive such a vaccine at the time of its introduction
and then around 4 million babies born each year to be protected. Assuming a
charge of $25 per dose and three doses needed for protection, there could be a
potential market for a strep throat
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vaccine of $1.4 billion to immunize the entire U.S. population of 2 to 6 year
olds and, thereafter, $300 million per year to maintain immunization in new
births.
STD Vaccine Candidates. One of the great challenges in vaccine research
remains the development of effective vaccines to prevent sexually transmitted
diseases ("STDs"). Two principal pathogens that are transmitted via this route
are chlamydia, the most common bacterial STD, and Neisseria, the causative agent
of gonorrhea. To date, a great deal of effort has been expended, without
appreciable success, to develop effective injectable prophylactic vaccines
versus these pathogens. Given that both of these pathogens enter the host
through the mucosa, we believe that induction of a vigorous mucosal response to
certain bacterial antigens may protect against acquisition of the initial
infection. To test this hypothesis, we have expressed newly discovered antigens
from these pathogens in our proprietary mucosal vaccine delivery system. These
live genetically engineered vaccines will be delivered to animals and tested for
local and systemic immune response induction, and whether these responses can
block subsequent bacterial infections. We have licensed technology from Oregon
State University and Washington University in support of our chlamydia and
Neisseria programs, respectively. In February 2000 we entered into an option
agreement with the Ross Products Division of Abbott Laboratories ("Ross"), which
will provide funding for further development of an STD vaccine product. The
research program was completed in late 2001 and a report has been sent to Ross.
Following review of the data, the agreement was extended to allow for an
additional set of experiments to be conducted.
Chlamydia is the leading sexually transmitted disease in the U.S., with an
estimated 4 million cases occurring annually. Up to $2.4 billion is spent
annually on the treatment of infections from this pathogen, with the greatest
percentage of this cost directed toward the therapy of chlamydial infection in
women. Vaginal infection with C. trachomatis can progress to pelvic inflammatory
disease, resulting in infertility, or may result in ectopic pregnancies. In
addition, new evidence has linked C. trachomatis infection with an increased
incidence of cervical cancer.
The target population for STD vaccines is likely to be 12 - 18 years of
age. There are currently 27.5 million such individuals in the U.S., with around
4 million entering this age group annually. Once again, assuming $25 per dose
and three doses to complete immunization, there could be a potential market for
a C. trachomatis vaccine of $2 billion to immunize the entire U.S. population of
12 to 18 year olds and, thereafter, $300 million per year to maintain
immunization in those entering this age group.
Mucosal Vaccine Delivery System
We are developing our proprietary mucosal vaccine delivery system, which
is a component of our vaccine program, for license to other vaccine developers.
Our commensal vaccine candidates utilize Gram-positive bacteria to deliver
antigens. We are using proprietary technology to anchor antigens from a wide
range of infectious organisms, both viral and bacterial, to the surface protein
anchor region of a variety of commensal organisms. By combining a specific
antigen with a specific commensal, we believe that vaccines can be tailored to
both the target pathogen and its mucosal point of entry.
We have developed several genetic methods for recombining foreign
sequences into the genome of Gram-positive bacteria at a number of non-essential
sites. Various parameters have been tested and optimized to improve the level of
foreign protein expression and its immunogenicity. In pre-clinical studies,
genetically engineered commensals have been implanted into the oral cavities of
several animal species with no observed deleterious effects. The introduced
vaccine strains have taken up residence for prolonged periods of time and induce
both a local mucosal (IgA) as well as a systemic immune response (IgG and
T-cell).
We have completed two early stage clinical evaluations of our mucosal
vaccine delivery system based on the commensal bacterium, S. gordonii. These
clinical studies were designed to test the safety of the formulation, to monitor
the extent and duration of colonization of the nasal and oral cavities and to
determine if the delivery system could be eradicated at the end of the study
with a regimen of conventional antibiotics. A total of 47 volunteers between the
ages of 18 and 40 completed the first study, performed in the United Kingdom, in
which S. gordonii was delivered to the nasal passage and oral cavity. A total of
60 volunteers completed a second study which was
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conducted at the University of Maryland as part of our strep throat vaccine
program as described above. The results of the studies indicated the delivery
system was well-tolerated and that the delivery system spontaneously eradicated
or was easily eradicated by conventional antibiotics. The ongoing clinical
studies at the University of Maryland are also designed to evaluate S. gordonii
as a commensal bacterial delivery system for our vaccine targeting strep throat.
Experiments are currently underway to optimize and test the vaccine formulation
prior to initiating Phase I human trials with the recombinant commensal vector
based vaccine.
Anti-Infectives
Our anti-infectives program is targeted principally toward drug-resistant
bacteria and hospital-acquired infections. According to estimates from the
Centers for Disease Control, approximately two million hospital-acquired
infections occur each year in the United States.
Our anti-infectives approaches aim to block the ability of bacteria to
attach to and colonize human tissue, thereby blocking infection at the first
stage in the infection process. By comparison, antibiotics available today act
by interfering with either the structure or the metabolism of a bacterial cell,
affecting its ability to survive and to reproduce. No currently available
antibiotics target the attachment of a bacterium to its target tissue. We
believe that, by preventing attachment, the bacteria should be readily cleared
by the body's immune system.
Gram-Positive Antibiotic Technology. Our lead anti-infectives program is
based on a novel target for antibiotic therapy. Our founding scientists have
identified an enzyme, a selective protease, used by most Gram-positive bacteria
to anchor certain proteins to the bacterial cell wall. These surface proteins
are the means by which certain bacteria recognize, adhere to and colonize
specific tissue. Our strategy is to develop protease inhibitors as novel
antibiotics. We believe protease inhibitors will have wide applicability to
Gram-positive bacteria in general, including antibiotic resistant staphylococcus
and a broad range of serious infectious diseases including meningitis and
respiratory tract infections. In 1997, we entered into a collaborative research
and license agreement with Wyeth to identify and develop protease inhibitors as
novel antibiotics. In the first quarter of 2001, we received a milestone payment
from Wyeth for delivery of the first quantities of protease for screening, and
high-throughput screening for protease inhibitors was initiated. In connection
with our effort on this program we have entered into a license agreement with
the University of California at Los Angeles for certain technology that may be
incorporated into our development of products for Wyeth. High throughput
screening of compound libraries has been completed and lead compounds are
currently being evaluated in the laboratory.
Gram-Negative Antibiotic Technology. In 1998 we entered into a set of
technology transfer and related agreements with MedImmune, Inc., Astra AB and
The Washington University, St. Louis ("Washington University"), pursuant to
which we acquired rights to certain Gram-negative antibiotic targets, products,
screens and services developed at Washington University. In February 2000, we
ended our collaborative research and development relationship with Washington
University on this technology. (See "Collaborative Research and Licenses"). We
maintain a non-exclusive license to technology acquired through these related
agreements. We are using this technology in the development of antibiotics
against Gram-negative pathogens. These bacteria use structures called pili to
adhere to target tissue, and we plan to exploit the assembly and export of these
essential infective structures as novel anti-infective targets. We continue to
work on enhancing the intellectual property that we jointly share with
Washington University.
Broad-Spectrum Antibiotic Technology. An initial host response to pathogen
invasion is the release of oxygen radicals, such as superoxide anions and
hydrogen peroxide. The DegP protease is a first-line defense against these toxic
compounds, which are lethal to invading pathogens, and is a demonstrated
virulence factor for several important Gram-negative pathogens: Salmonella
typhimurium, Salmonella typhi, Brucella melitensis and Yersinia enterocolitica.
In all of these pathogens it was demonstrated that organisms lacking a
functional DegP protease were compromised for virulence and showed an increased
sensitivity to oxidative stress. It was also recently demonstrated that in
Pseudomonas aeruginosa conversion to mucoidy, the so-called CF phenotype
involves two DegP homologues.
Our scientists recently demonstrated that the DegP protease is conserved
in most important Gram-positive pathogens, including S. pyogenes, S. pneumoniae,
S. mutans and S. aureus. Moreover, our investigators have shown
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a conservation of function of this important protease in Gram-positive pathogens
and believe that DegP represents a true broad-spectrum anti-infective
development target. Our research has uncovered a virulence-associated target of
the DegP protease that will be used to design an assay for high-throughput
screening for the identification of lead inhibitors of this potentially
important anti-infective target.
There are currently more than 100 million prescriptions written for
antibiotics annually in the U.S. and we estimate the worldwide market for
antibiotics to be more than $26 billion. Although our products are too early in
development to make accurate assessments of how well they might compete, if
successfully developed and marketed against other products currently existing or
in development at this time, the successful capture of even a relatively small
global market share could lead to a large dollar volume of sales.
Biological Defense Program. The U.S. government's budget for the fiscal
year beginning October 1, 2002 proposed a $1.5 billion increase in federal
spending on bioterrorism related research and infrastructure which will bring
total spending in this area to more than $1.7 billion. One of the major concerns
is smallpox -- although declared extinct in 1980 by the World Health
Organization, there is a threat that a rogue nation or a terrorist group may
have an illegal inventory of the virus that causes smallpox. The only legal
inventories of the virus are held under extremely tight security at the Centers
For Disease Control in Atlanta, Georgia and at a laboratory in Russia. As a
result of this threat, the U.S. government has announced its intent to make
significant expenditures on finding a way to counteract the virus if turned
loose by terrorists or on a battlefield.
We believe that two recent events have made this area a particularly
attractive business opportunity. First, the federal government has committed
approximately $9 billion of new money to support research on biowarfare defense
in the upcoming year. Second, the FDA has amended its regulations, effective
June 30, 2002, so that certain new drug and biological products used to reduce
or prevent the toxicity of chemical, biological, radiological, or nuclear
substances may be approved for use in humans based on evidence of effectiveness
derived only from appropriate animal studies and any additional supporting data.
We believe that this change could make it possible for us to have potential
products in animal models within six months and approved for sale within two
years if the program is successful. Our Chief Scientific Officer, Dennis Hruby
has over 20 years experience working on smallpox-related research and has been
leading a SIGA/Oregon State University consortium working on an antiviral drug
development project for the past two years.
SIGA Biological Warfare Defense Product Portfolio
Bacterial Commensal Vectors: Our scientists have developed methods that
allow essentially any gene sequence to be expressed in GRAS gram-positive
bacteria, with the foreign protein being displayed on the surface of the live
recombinant organisms. Since these organisms are inexpensive to grow and are
very stable, this technology affords the possibility of rapidly producing live
recombinant vaccines against any variety of biological agent that might be
encountered such as Bacillus anthracis (anthrax) or smallpox.
Surface Protein Expression (SPEX) System: Our scientists have harnessed
the protein expression pathways of gram-positive bacteria and turned them into
protein productions factories. Using our proprietary SPEX system, we can produce
foreign proteins at high levels in the laboratory for use in subunit vaccine
formulations. Furthermore, we can envision engineering these bacteria to
colonize the mucosal surfaces of soldiers and/or civilians and secrete
anti-toxins that protect against aerosolized botulism toxin.
Antibiotics: To combat the problems associated with emerging antibiotic
resistance, SIGA scientists are developing drugs designed to hit a new target -
the bacterial adhesion organelles. Specifically, by using novel enzymes required
for the transport and/or assembly of the proteins and structures that bacteria
require for adhesion or colonization, we are developing new classes of broad
spectrum antibiotics. This may prove invaluable in providing prompt treatment to
individuals encountering an unknown bacterial pathogen in the air or food
supply.
Anti-Smallpox Drugs: While deliberate introduction of any pathogenic
agent would be devastating, the one that holds, we believe, the greatest
potential for harming the general U.S. population is smallpox. At present
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there is no effective drug with which to treat or prevent smallpox infections.
To address this serious risk, our scientists have identified two key smallpox
proteinases and are using their expertise in the design of proteinase inhibitors
to attempt to develop an effective antiviral drug that could treat a smallpox
infection.
The market potential for our biological warfare defense products has
not been quantified as yet beyond the potential to obtain a share of the
approximately $9 billion the federal government is committing to support
research in the coming year. The government's purchase of approximately $800
million worth of smallpox vaccines to have an inventory on hand if needed is
evidence of such market potential.
Veterinary Vaccines
One application of our technology is the development of live vaccines that
are delivered to a specific mucosal niche where they can colonize and thereby
present antigen to the immune system and produce local immunity at the site
where the corresponding pathogen may attempt to enter. Since the proprietary
expression pathway that we use is conserved in essentially all Gram-positive
bacteria, this should allow the same strategy to be employed in the development
of veterinary vaccines. A commensal bacterium can be isolated from the mucosa of
the target species, engineered to express a desired antigen and then
reintroduced to the species in order to produce immunity against subsequent
infection by the corresponding pathogen. Examples of potential targets for this
technology in the area of animal health include prevention of salmonid
aquaculture disease problems or canine papilloma virus infections.
Veterinary Program. We believe our vaccine and anti-infectives
technologies also provide opportunities to develop biopharmaceutical products
for the veterinary health care market. Based on sales of the major companies in
the veterinary market, we estimate the world wide veterinary market to have been
approximately $4 billion in 2001. In the U.S. alone, there are 120 million cats
and dogs, 2 million horses, 100 million cattle, 56 million hogs and 8 million
sheep and goats. We are in discussions with a number of potential strategic
partners to undertake collaborative development agreements in this field. To
date, we have not concluded any agreements with these potential strategic
partners. In April 2002 we executed a proof-of-concept research agreement with
one of the major vaccine providers to test our commensal vector technology. This
project has been completed and the partner company is currently evaluating the
data.
Surface Protein Expression System
Our proprietary SPEX system uses the protein export and anchoring pathway
of Gram-positive bacteria as a means to facilitate the production and
purification of biopharmaceutical proteins. We have developed vectors which
allow foreign genes to be inserted into the chromosome of Gram-positive bacteria
in a manner such that the encoded protein is synthesized, transported to the
cell surface and secreted into the medium. This system has been used to produce
milligram quantities of soluble antigenically authentic protein that can be
easily purified from the culture medium by affinity chromatography. We have
recently used the SPEX system to obtain large quantities of pure M protein
subunit antigen for preclinical studies. We believe this technology can be
extended to a variety of different antigens and enzymes.
We have commenced yield optimization and process validation of this
system. This program is designed to transfer the method from a laboratory scale
environment to a commercial production facility. Our business strategy is to
license this technology on a non-exclusive basis for a broad range of
applications.
Collaborative Research and Licenses
We have entered into the following license agreements and collaborative
research arrangements:
Rockefeller University. In accordance with an exclusive worldwide license
agreement with Rockefeller, we have obtained the right and license to make, use
and sell mucosal vaccines based on gram-positive organisms and products for the
therapy, prevention and diagnosis of diseases caused by streptococcus,
staphylococcus and other organisms. The license covers two issued U.S. patents
and one issued European patent, as well as 11 pending U.S.
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patent applications and corresponding foreign patent applications. The issued
United States patents expire in 2005 and 2014, respectively. The agreement
generally requires us to pay royalties on sales of products developed from the
licensed technologies and fees on revenues from sublicensees, where applicable,
and we are responsible for certain milestone payments and for the costs of
filing and prosecuting patent applications. The primary potential products from
this collaboration are the strep vaccine and the broad spectrum antibiotic.
Under the agreement, we paid the university approximately $850,000 to support
research at Rockefeller. The agreement to fund research has ended and no
payments have been made to the university since the year ended December 31,
1999. Under the agreement we are obligated to pay Rockefeller a royalty on net
sales by SIGA at rates between 2.5% and 5% depending on product and amount of
sales. On sales by any sub-licensee, we will pay Rockefeller a royalty of 15% of
anything we receive. The term of the agreement is for the duration of the
patents licensed. At the end of that period, we have the right to continue to
practice the then existing technical information as a fully paid, perpetual
license.
Oregon State University. Oregon State University ("OSU") is also a party
to our license agreement with Rockefeller whereby we have obtained the right and
license to make, use and sell products for the therapy, prevention and diagnosis
of diseases caused by streptococcus. Pursuant to a separate research support
agreement with OSU, we provided funding for sponsored research through December
31, 1999, with exclusive license rights to all inventions and discoveries
resulting from this research. At this time, no additional funding is
contemplated under this agreement, however we retain the exclusive licensing
rights to the inventions and discoveries that may arise from this collaboration.
During 1999, we acquired an option to enter into a license with OSU in
which we will acquire the rights to certain technology pertaining to the
potential development of a chlamydia vaccine. In February 2000, we exercised our
option and pursuant to an exclusive license agreement dated March 2000, we have
made payments to OSU of approximately $25,000 as part of our obligation under
the option.
In September 2000, we entered into a subcontract with OSU. The contract is
for a project which is targeted towards developing novel antiviral drugs capable
of preventing disease and pathology for smallpox in the event this pathogen were
to be used as an agent of bioterrorism. The project is being funded by a grant
from the NIH. The basic virology aspects of the project will be conducted at OSU
and the drug development will be performed by us under the subcontract. The
budget for the subcontract work will be negotiated on a year by year basis with
OSU depending on progress of the program and funding available. In the year
ended December 31, 2001 we recognized revenue of $15,000. On October 5, 2001 the
agreement was extended through August 31, 2002. For the period ended December
31, 2002 we recognized $75,000 in revenue. The agreement was extended again
through August 31, 2003. The sub-contract is on a year to year renewal. Through
December 31, 2002 we have received a total of $90,000 under the agreement.
Wyeth. We have entered into a collaborative research and license agreement
with Wyeth in connection with the discovery and development of anti-infectives
for the treatment of gram-positive bacterial infections. Pursuant to the
agreement, Wyeth provided funding for a joint research and development program,
subject to certain milestones, through September 30, 1999 and is responsible for
additional milestone payments. In May 2001, we entered into an amendment to the
July 1, 1997 agreement. The amendment extended the term of the original
agreement to September 30, 2001. The extension provided for Wyeth to continue to
pay us at a rate of $450,000 per year through the term of the amended agreement.
During the term of the agreement as amended, we received $787,500 from Wyeth to
support work performed by SIGA under the agreement and $237,500 for achieving a
research milestone. For the year ended December 31, 2001 we recognized revenue
of $1,025,000. The agreement to fund additional research was not extended beyond
September 30, 2001.
Wyeth is obligated to make milestone payments to us as any product
developed progresses through the FDA approval process. For product developed we
could receive up to approximately $13 million in milestone payments for approval
of the product in the U.S. and Japan. We would also receive royalty payments of
2% on the first $300,000 of cumulative licensed product sales, 4% on annual
sales up to $100 million, 6% on annual sales between $100 million and $250
million and 8% on annual sales above $250 million. The license will expire on
the earlier of 10 years or the last to expire issued patent. Wyeth has the right
to terminate the agreement early, on ninety days written notice. If terminated
early, all rights granted to Wyeth revert to SIGA except with respect to any
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compound identified by Wyeth as of the date of termination and subject to the
milestone and royalty obligations of the agreement.
National Institutes of Health. We have entered into a clinical trials
agreement with the NIH pursuant to which the NIH, with our cooperation, will
conduct clinical trials of our strep throat vaccine candidate. The agreement
will fund trials through Phase II of the FDA approval process. To date, two
Phase I clinical trials have been conducted for the strep vaccine delivery
system. We are working to optimize and test the vaccine formulation prior to
initiating Phase I clinical trials with the recombinant commensal vector based
vaccine. The agreement may be terminated unilaterally by the parties upon sixty
days prior notice. If terminated we will receive copies of all data, reports and
other information related to the trials and any unused vaccine.
In May, August and September 2000, we were awarded three Phase I Small
Business Innovation Research ("SBIR") grants from the NIH in the amounts of
$26,000, $96,000 and $125,000 respectively. The grants were 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 supported our antibiotic and
vaccine development programs. In June 2002 we received a Phase II SBIR grant for
approximately $865,000. The grant was for the two year period beginning June, 1,
2002 and ending May 31, 2004. For the years ending December 31, 2002, 2001 and
2000, we have recognized revenue from grants of $270,000, $64,500 and $182,643,
respectively.
As part of our operational strategy we routinely submit grants to the
NIH. There is no assurance that we will receive additional grants
Washington University. In February 1998, we entered into a research
collaboration and worldwide license agreement with Washington University
pursuant to which we obtained the right and license to make, use and sell
antibiotic products based on gram-negative technology for all human and
veterinary diagnostic and therapeutic uses. The license covered five pending
United States patent applications and corresponding foreign patent applications.
The agreement generally required us to pay royalties on sales of products
developed from the licensed technologies and fees on revenues from sublicensees,
where applicable, and we were responsible for certain milestone payments and for
the costs of filing and prosecuting patent applications. Pursuant to the
agreement, we agreed to provide funding to Washington University for sponsored
research through February 6, 2001, with exclusive license rights to all
inventions and discoveries resulting from this research. During 1999, a dispute
arose between the parties regarding their respective performance under the
agreement. In February 2000, the parties reached a settlement agreement and
mutual release of their obligations under the research collaboration agreement.
Under the terms of the settlement, we are released from any further payments to
Washington University and have disclaimed any rights to the patents licensed
under the original agreement. As part of the settlement agreement, we entered
into a non-exclusive license to certain patents covered in the original
agreement. SIGA and Washington University will share equally the responsibility
for the administration and the expenses for the prosecution of patent
applications and /or patents in the agreement. The collaboration is for the
gram-negative product opportunity. We will receive licensing revenue from
Washington University that derive from the commercialization of products covered
by patent rights of the agreement. The royalty will be 20% of the first $400,000
received and 10% of the next $1,000,000 received with a total payment of
licensing revenues to us not to exceed $500,000.
Abbott Laboratories. 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 was obligated to pay us
$120,000 in three installments of $40,000. The first payment of $40,000 was
received in March 2000 and was recognized ratably, over the 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 we received
an additional payment of $40,000 in the quarter ended September 30, 2000. During
the years ended December 31, 2001 and 2000, we recognized revenue in the amount
of $45,000 and $80,000, respectively. The development agreement was for the
sexually transmitted disease product opportunity. Work under the agreement has
been completed and no revenue was recognized in 2002. Ross is currently
evaluating whether it will go forward with a
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license. If Ross does not exercise the option to negotiate a license with us,
all rights to the technology and possible products revert to SIGA.
Regents of the University of California. In December 2000, we entered into
an exclusive license agreement and a sponsored research agreement with the
Regents of the University of California ("Regents"). Under the license agreement
we obtained rights for the exclusive commercial development, use and sale of
products related to certain inventions in exchange for a non-refundable license
issuance fee of $15,000 and an annual maintenance fee of $10,000. As of December
31, 2001 we have made payments of approximately $25,000 under the license In the
event that we sub-license the license, we must pay Regents 15% of all royalty
payments made to SIGA. Under the agreement, we will also pay Regents 15% of all
royalties received from Wyeth. The agreement applies to the gram positive
product opportunity and our collaborative agreement with Wyeth. The term of the
agreement is until the expiration of the last-to-expire patent licensed under
this agreement. The agreement may be terminated by Regents if we default on any
of our obligations, the agreement with Wyeth is terminated and a substitute
agreement is not entered into or if we give notice that we do not intend to make
product from the licensed technology.
TransTech Pharma, Inc. In October 2002, we entered into a drug discovery
collaboration agreement. Under the agreement, SIGA and TransTech will
collaborate on the discovery, optimization and development of lead compounds to
therapeutic agents. The costs of development will be shared. SIGA and TransTech
would share revenues generated from licensing and profits from any
commercialized product sales. The agreement will be in effect until terminated
by the parties or upon cessation of research or sales of all products developed
under the agreement. If the agreement is terminated, relinquished or expires for
any reason certain rights and benefits will survive the termination. Obligations
not expressly indicated to survive the agreement will terminate with the
agreement. No revenues were recognized in 2002 from this collaboration.
Intellectual Property and Proprietary Rights
Protection of our proprietary compounds and technology is essential to our
business. Our policy is to seek, when appropriate, protection for our lead
compounds and certain other proprietary technology by filing patent applications
in the United States and other countries. We have licensed the rights to seven
issued United States patents and two issued European patents. These patents have
varying lives and they are related to the technology licensed from Rockefeller
University for the strep and gram positive products. We have three additional
patent applications in the U.S. and three applications in Europe relating to
this technology. We are joint owner with Washington University of four issued
patents in the U.S. and one in Europe. In addition, there are seven co-owned
patent applications in the U.S. and one in Europe. These patents are for the
technology used for the gram-negative product opportunities. We are also
exclusive owner of two U.S. patents and three U.S. patent applications.
Furthermore, there are three U.S. patent applications and two European
applications. These patents relate to our DegP product opportunities.
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Licensed from Co-owned with
Rockefeller Washington Owned by
PATENTS Univ. Univ. SIGA
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U.S. 7 4 2
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Europe 2 1
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Japan 4
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Australia 6 1
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Canada 3
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Mexico 1
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APPLICATIONS
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U.S. 3 7 3
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Europe 3 2
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Japan 2 1 2
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Canada 5 1 2
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Hungary 1
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China 1
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Korea 1
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New Zeland 1
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Australia 2
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We also rely upon trade secret protection for our confidential and
proprietary information. No assurance can be given that other companies will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or that we can
meaningfully protect our trade secrets.
Government Regulation
Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
biopharmaceutical products that we may develop. The nature and the extent to
which such regulations may apply to us will vary depending on the nature of any
such products. Virtually all of our potential biopharmaceutical products will
require regulatory approval by governmental agencies prior to commercialization.
In particular, human therapeutic products are subject to rigorous pre-clinical
and clinical testing and other approval procedures by the FDA and similar health
authorities in foreign countries. Various federal statutes and regulations also
govern or influence the manufacturing, safety, labeling, storage, record keeping
and marketing of such products. The process of obtaining these approvals and the
subsequent compliance with appropriate federal and foreign statutes and
regulations requires the expenditure of substantial resources.
In order to test clinically, produce and market products for diagnostic or
therapeutic use, a company must comply with mandatory procedures and safety
standards established by the FDA and comparable agencies in foreign countries.
Before beginning human clinical testing of a potential new drug, a company must
file an IND and receive clearance from the FDA. This application is a summary of
the pre-clinical studies that were conducted to characterize the drug, including
toxicity and safety studies, as well as an in-depth discussion of the human
clinical studies that are being proposed.
- 12 -
The pre-marketing program required for approval by the FDA of a new drug
typically involves a time-consuming and costly three-phase process. In Phase I,
trials are conducted with a small number of patients to determine the early
safety profile, the pattern of drug distribution and metabolism. In Phase II,
trials are conducted with small groups of patients afflicted with a target
disease in order to determine preliminary efficacy, optimal dosages and expanded
evidence of safety. In Phase III, large scale, multi-center comparative trials
are conducted with patients afflicted with a target disease in order to provide
enough data for statistical proof of efficacy and safety required by the FDA and
others.
The FDA closely monitors the progress of each of the three phases of
clinical testing and may, in its discretion, reevaluate, alter, suspend or
terminate the testing based on the data that have been accumulated to that point
and its assessment of the risk/benefit ratio to the patient. Estimates of the
total time required for carrying out such clinical testing vary between two and
ten years. Upon completion of such clinical testing, a company typically submits
a New Drug Application ("NDA") or Product License Application ("PLA") to the FDA
that summarizes the results and observations of the drug during the clinical
testing. Based on its review of the NDA or PLA, the FDA will decide whether to
approve the drug. This review process can be quite lengthy, and approval for the
production and marketing of a new pharmaceutical product can require a number of
years and substantial funding; there can be no assurance that any approvals will
be granted on a timely basis, if at all.
Once the product is approved for sale, FDA regulations govern the
production process and marketing activities, and a post-marketing testing and
surveillance program may be required to monitor continuously a product's usage
and its effects. Product approvals may be withdrawn if compliance with
regulatory standards is not maintained. Other countries in which any products
developed by us may be marketed could impose a similar regulatory process.
Commercialization of animal health products can be accomplished more
rapidly than human health products. Unlike the human market, potential vaccine
or therapeutic products can be tested directly on the target animal as soon as
the product leaves the research laboratory. The data collected in these trials
is submitted to the U.S. Department of Agriculture for review and eventual
product approval.
Competition
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. Our competitors include
most of the major pharmaceutical companies, which have financial, technical and
marketing resources significantly greater than ours. Biotechnology and other
pharmaceutical competitors include Cubist Pharmaceuticals, Inc., Corixa
Corporation, Microcide Pharmaceuticals, Inc., ID Vaccines Ltd., Actinova PLC,
and Antex Biologics, Inc. Academic institutions, governmental agencies and other
public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on their
own or through joint venture. There can be no assurance that our competitors
will not succeed in developing products that are more effective or less costly
than any which are being developed by us or which would render our technology
and future products obsolete and noncompetitive.
Human Resources and Facilities
As of March 20, 2003 we had 17 full time employees. None of our employees
are covered by a collective bargaining agreement and we consider our employee
relations to be good.
Availability of Reports and Other Information
Our website is www.sigatechnologies.com. We make available on this
website, free of charge, our annual, quarterly and current reports and other
documents filed by us with the Securities and Exchange Commission as soon as
reasonably practicable after the filing date.
- 13 -
Item 2. Properties
Our headquarters are located in New York City and our research and
development facilities are located in Corvallis, Oregon. In New York, we lease
approximately 1,600 square feet under a lease that expires in November 2007. In
Corvallis, we lease approximately 10,000 square feet under a lease that expires
in December 2004.
Item 3. Legal Proceedings
SIGA is not a party, nor is its property the subject of, any pending legal
proceedings other than routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
At our Annual Meeting of Stockholders held on December 10, 2002, our
stockholders re-elected to our board each member of our board of directors and
ratified our selection of independent auditors:
The following nominees were elected to our board of directors upon the
following votes:
Nominee Votes For Votes Against Abstained
- ------- --------- ------------- ---------
Donald G. Drapkin 7,514,929 0 7,890
Gabriel M. Cerrone 7,514,929 0 7,890
Thomas E. Constance 7,514,929 0 7,890
Mehmet C. Oz 7,410,613 0 112,206
Eric A. Rose 7,514,929 0 7,890
Michael Weiner 7,410,613 0 112,206
Our stockholders ratified the selection of PricewaterhouseCoopers LLP as
our independent auditors for the fiscal year ending December 31, 2002 by casting
7,508,629 votes in favor of this proposal, 12,150 votes against the proposal and
2,040 abstained.
- 14 -
Part II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
Price Range of Common Stock
Our common stock has been traded on the Nasdaq SmallCap Market since
September 9, 1997 and trades under the symbol "SIGA." Prior to that time there
was no public market for our common stock. The following table sets forth, for
the periods indicated, the high and low closing sales prices for the common
stock, as reported on the Nasdaq SmallCap Market.
Price Range
2001 High Low
------ ------
First Quarter $4.09 $1.65
Second Quarter $4.24 $1.75
Third Quarter $4.05 $2.29
Fourth Quarter $4.00 $2.03
2002 High Low
------ ------
First Quarter $2.85 $2.10
Second Quarter $2.53 $1.05
Third Quarter $1.39 $0.81
Fourth Quarter $1.87 $0.71
As of March 20, 2003, the closing bid price of our common stock was $1.23
per share. There were 96 holders of record as of March 20, 2003. We believe that
the number of beneficial owners of our common stock is substantially greater
than the number of record holders, because a large portion of common stock is
held in broker "street names."
We have paid no dividends on our common stock and we do not expect to pay
cash dividends in the foreseeable future. We are not under any contractual
restriction as to our present or future ability to pay dividends. We currently
intend to retain any future earnings to finance the growth and development of
our business.
Recent Sales of Unregistered Securities
All of the following sales of unregistered securities were made without
registration under the Securities Act in reliance upon the exemption from
registration afforded under Section 4(6) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder. Accordingly, the transfer of the securities
are subject to substantial restrictions. Securities were only purchased by
"Accredited Investors" as that term is defined under Rule 501 of Regulation D.
Proceeds from the offerings were used for general working capital purposes.
In December 2002 and January 2003, we completed a private placement of 34
units consisting of 1.7 million shares of common stock to a group of private
investors. The gross proceeds from the offering were $1,865,000 with net
proceeds to SIGA of approximately $1,682,000.
- 15 -
In October 2002, we completed a private placement of units consisting of
an aggregate of 1,037,500 shares of common stock and warrants to purchase
518,750 shares of common stock at an exercise price of $2.25 per share to a
group of private investors. The offering yielded net proceeds of approximately
$935,000.
In October 2001, we raised gross proceeds of $2.55 million in a private
offering of common stock and warrants to purchase our common stock. We sold
850,000 shares of common stock and 425,000 warrants. These warrants are
exercisable at $3.60 and have a term of seven years. In connection with the
offering we issued 100,000 warrants to purchase shares of the our common stock
to consultants. The consultants' warrants are exercisable at a price of $3.60
and have a term of five years. The fair value of the warrants on the date of
grant was approximately $221,300.
In August 2001, we raised gross proceeds of $1,159,500 in a private
offering of 409,636 shares of common stock and 307,226 warrants to purchase
shares of our common stock. The warrants are exercisable at $3.55 per share and
have a term of seven years.
In May 2001, we raised gross proceeds of $850,000 in a private offering of
common stock and warrants to purchase shares of our common stock. We 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, at that time, 43.4%, 5.9% and 50.8% of the investors in the
transaction, respectively. We recorded a charge to earnings in the amount of
$103,040 representing the intrinsic value of the restricted stock purchased by
members of the board of directors.
In March 2000, we entered into an agreement to sell 600,000 shares of our
common stock and 450,000 warrants to acquire shares of our common stock (the
"March Financing") for gross proceeds of $3,000,000. Of the warrants issued,
210,000, 120,000 and 120,000 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 SIGA upon meeting certain conditions. Offering expenses of
$117,000 were paid in April 2000. At December 31, 2002, all 450,000 warrants
were outstanding.
In connection with the March Financing, we issued a total of 379,000
warrants to purchase shares of the our 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 until March 28, 2005. 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 service.
In exchange for such services, we 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, we recorded a charge of approximately $270,000
in the year ended December 31, 2000.
In January 2000 we 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 our common stock with a purchase price of $0.05 per
warrant (the "January Financing"). 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 was
payable on the principal of each convertible debenture in cash or shares of our
common stock, at the our discretion upon conversion or at maturity. The warrants
have a term of five years and are exercisable at $3.4059 per share.
SIGA has the right to require the holder to exercise the January Financing
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. The warrants are
exercisable for a period of five years.
In connection with the placement of the debentures and warrants in January
2000, we recorded debt discount of approximately $1.0 million. Such amount
represents the value of the warrants calculated using the
- 16 -
Black-Scholes valuation model. The discount is amortized over the term of the
debentures. Additionally, during the years ended December 31, 2001 and 2000, we
recorded interest expense of $232,393 and $589,312 respectively, related to the
amortization of such debt discount. In 2001 and 2000, debentures with a
principal amount of $1,375,000 and $108,664, respectively, along with accrued
interest, were converted into 1,011,593 and 108,884 shares of the Company's
preferred and common stock, respectively.
In connection with the January financing, we 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 was amortized over the term of the debentures.
Holders of the Series A Convertible Preferred Stock are entitled to (i)
cumulative dividends at the annual rate of 6% payable when and if declared by
our board of directors; (ii) in the event of liquidation of SIGA, each holder is
entitled to receive $1.4375 per share (subject to certain adjustment) plus all
accrued but unpaid dividends; (iii) convert each share of Series A to a number
of fully paid and non-assessable shares of common stock as calculated by
dividing $1.4375 by the Series A Conversion Price (shall initially be $1.4375);
and (iv) vote with the holders of other classes of shares on an as converted
basis.
As of December 31, 2001, all of the debentures were converted into shares
of the Company's common stock.
Recent Developments
In December 2002, we entered into a contract with the U.S. Army to develop
a drug to treat Smallpox. The effective date of the contract is January 1, 2003.
The contract is for a period of four years for a total of approximately $1.6
million. Payment over the term of the agreement will be approximately $400,000
per year.
In February 2003, we entered into a market contract with the Four Star
Group. Four Star will work on our behalf to obtain additional government
contracts and grants. Under the contract, we make certain cash payments for
their services and, if they are successful in obtaining new government funding,
they will receive warrants to purchase shares of our stock. The number of
warrants they can receive will depend on the amount of any contract and grant
funding they obtain. We have the right to cancel the agreement after six months.
In March 2003, we entered into a non-binding letter of intent to acquire
substantially all of the assets of Plexus Vaccines, Inc. ("Plexus"). The
transaction is subject to certain conditions, including, without limitation, the
completion of due diligence and the negotiation and execution of definitive
agreements. As part of the agreement, we have pursuant to a promissory note made
a loan to Plexus in the amount of $50,000. If the transaction is not completed
by November 30, 2003 or if certain other events occur the loan plus accrued
interest is to be repaid to SIGA.
- 17 -
Item 6. 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 Annual Report. In addition to historical
information, the following discussion and other parts of this Annual Report
contain forward-looking information that involves risks and uncertainties.
Overview
We are a development stage biotechnology company, whose primary focus is
on 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 December 31, 2002, we have sustained cumulative net losses of
$29,531,402, 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. In addition, a non-cash charge of $2,996,784 was 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 December 31, 2002, research and development
expenses amounted to $13,775,444, patent preparation and prosecution expenses
totaled $1,459,454, general and administration expenses amounted to $17,221,915.
From inception through December 31, 2002 revenues from research and development
agreements and government grants totaled $3,631,631.
Since inception, SIGA has had limited resources, has incurred cumulative
net operating losses of $29,531,402 and expects to incur additional losses to
perform further research and development activities. We do not have commercial
biomedical products, and we do not expect to have such for several years, if at
all. We believe that we will need additional funds to complete the development
of our biomedical products. Our plans with regard to these matters include
continued development of our products as well as seeking additional research
support funds and financial arrangements. Although we continue to pursue these
plans, there is no assurance that we will be successful in obtaining sufficient
financing on terms acceptable to us. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty. Management
believes it has sufficient funds to support operations through the first quarter
of 2004.
Our biotechnology operations are run out of our research facility in
Corvallis, Oregon. We continue to seek to fund a major portion of our ongoing
vaccine and antibiotic programs through a combination of government grants and
strategic alliances. While we have had success in obtaining strategic alliances
and grants, no assurance can be given that we will continue to be successful in
obtaining funds from these sources. Until additional relationships are
established, we expect to continue to incur significant research and development
costs and costs associated with the manufacturing of product for use in clinical
trials and pre-clinical testing. It is expected that general and administrative
costs, including patent and regulatory costs, necessary to support clinical
trials and research and development will continue to be significant in the
future.
To date, we have not marketed, or generated revenues from the commercial
sale of any products. Our biopharmaceutical product candidates are not expected
to be commercially available for several years, if at all. Accordingly, we
expect to incur operating losses for the foreseeable future. There can be no
assurance that we will ever achieve profitable operations.
Significant Accounting Policies
Financial Reporting Release No. 60, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 2 of the Notes to the Financial Statements include a
summary of the significant accounting policies and methods used in the
preparation of our Financial Statements. The following is a brief discussion of
the more significant accounting policies and methods used by us. In addition,
Financial Reporting Release No. 61 was released by the SEC to require all
companies to
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include a discussion to address, among other things, liquidity, off-balance
sheet arrangements, contractual obligations and commercial commitments.
Revenue Recognition
The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), as
amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and
determinable; and (4) collectibility is reasonably assured. Under the provisions
of SAB 101 the Company recognizes revenue from government research grants,
contract research and development and progress payments as services are
performed, provided a contractual arrangement exists, the contract price is
fixed or determinable, and the collection of the resulting receivable is
probable. Milestones, which generally are related to substantial scientific or
technical achievement, are recognized in revenue when the milestone is
accomplished.
Valuation of Investments
We periodically review the carrying value of our investments for continued
appropriateness. This review is based upon our projections of anticipated future
cash flows. While we believe that our estimates of future cash flows are
reasonable, different assumptions regarding such cash flows could materially
affect our evaluations.
Off-Balance Sheet Arrangements
SIGA does not have any significant off-balance sheet arrangements.
Results of Operations
Twelve Months ended December 31, 2002 and December 31, 2001.
Revenues from grants and research and development contracts were $344,450
for the twelve months ended December 31, 2002 compared to $1,159,500 for the
same period of 2001, an approximate 70% decrease. Revenue for the twelve months
ended December 31, 2001 included recognition of $562,500 from payments made by
Wyeth that had been made to fund research in prior periods and were recorded as
deferred revenue pending signing of a contract extension. In total, $1,025,000
of revenue recorded for the twelve months ended December 31, 2001 was received
from Wyeth. For the twelve months ended December 31, 2002 revenue was comprised
primarily of approximately $270,000 from a Phase II Small Business Innovation
Research ("SBIR") grant and $75,000 received under a sub-contract with Oregon
State University. In December 2002, we entered into a contract with the U.S.
Army to develop a drug to treat Smallpox. The contract is a four year agreement
for approximately $1.6 million with an average annual payment to us of
approximately $400,000. The contract became effective on January 1, 2003.
General and administrative expenses for the twelve months ended December
31, 2002 were $1,838,470, a decrease of approximately 28% from an expense of
$2,570,869 for the twelve months ended December 31, 2001. Included in the
expenses for the twelve months ended December 31, 2001 was a non-cash charge of
$612,750 to reflect the granting of options to directors with an exercise price
that was less than the fair market value of our shares at the time of the grant.
Excluding these charges, general and administrative expenses for the twelve
months ended December 31, 2002 were approximately $120,000 less than the same
period of the prior year. Payroll expenses declined by 52.1% as a result of
reduction of executive management staff, professional fees were approximately
31% higher in the twelve months ended December 31, 2002 compared to the same
period of 2001 due to the charges incurred as the result of a potential merger.
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Research and development expenses increased approximately 2% to $1,766,368
for the twelve months ended December 31, 2002 from $1,733,188 for the same
period in 2001. There were no significant changes in the pattern of expenses
between the two twelve month periods. All of our product programs are in the
early stage of development except for the strep vaccine which is in Phase I
clinical trial. At this stage of development, we can not make estimates of the
potential cost for any program to be completed or the time it will take to
complete the project. We do not track the costs of each product program except
for portions of the development program that is being funded by NIH grants. The
risk of completion of any program is high risk because of the long lead time to
program completion and uncertainty of the costs. Net cash inflows from any
products developed from these programs is at least two to three years away.
However, we could receive additional grants, contracts or technology licenses in
the short-term. The potential cash and timing is not known and we can not be
certain if they will ever occur.
Patent preparation expense for the twelve months ended December 31, 2002
were $104,700 compared to $117,264 for the twelve months ended December 31,
2001. The $12,564 or approximate 11% decrease does not reflect any significant
change in our patent preparation activities.
Total operating loss for the twelve months ended December 31, 2002 was
$3,365,088 an approximate 3% increase from the $3,261,821 loss incurred for the
twelve months ended December 31, 2001. The increase in the loss is the result of
lower revenue recognition in the 2002 period, offset by the reduction in
operating expenses.
Net interest income was $34,061 for the twelve months ended December 31,
2002 compared to interest expense of $192,679 for the twelve months ended
December 31, 2001. The improvement is a result of the conversion of the
remainder of the $1,500,000 principle amount of the 6% convertible debenture and
accrued interest during the twelve months ended December 31, 2001.
During the twelve months ended December 31, 2001 the company recorded a
charge of $275,106 for the impairment of an investment associated with its
interest in Open-i Media.
Quarterly Results of Operations
The following table sets forth selected unaudited quarterly statements of
operations data, in dollar amounts and as percentages of net revenue, for the
four quarters ended December 31, 2001 and for the four quarters ended December
31, 2002. This information has been prepared substantially on the same basis as
the audited financial statements appearing elsewhere in this annual statement,
and all necessary adjustments, consisting only of normal recurring adjustments,
have been included in the amounts stated below to present fairly the unaudited
quarterly results of operations data. The quarterly data should be read with our
financial statement and then noted to those statements appearing elsewhere in
the annual statement.
2001
($ in 000's) Q1 Q2 Q3 Q4
-------- -------- -------- --------
Revenue $ 305 $ 683 $ 158 $ 15
G&A $ 65 $ 635 $ 1,259 $ 611
% of Revenue 21% 93% 797% 4,073%
R&D $ 431 $ 429 $ 498 $ 376
% of Revenue 141% 63% 315% 2,507%
Patent Prep. Costs $ 18 $ 63 $ (11) $ 47
% of Revenue 6% 9% (7)% 313%
Operating Loss $ 209 $ 445 $ 1,588 $ 1,019
% of Revenue 69% 65% 1,005% 6,793%
Net Loss $ 368 $ 520 $ 1,591 $ 1,251
% of Revenue 121% 76% 1,007% 8,340%
Basic and
diluted loss
per share (0.05) (0.07) (0.19) (0.13)
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2002
($ in 000's) Q1 Q2 Q3 Q4
-------- -------- -------- --------
Revenue $ 0 $ 139 $ 90 $ 115
G&A $ 341 $ 668 $ 273 $ 556
% of Revenue NA 480% 305% 483%
R&D $ 357 $ 414 $ 424 $ 571
% of Revenue NA 297% 472% 497%
Patent Prep. Costs $ 27 $ 18 $ 27 $ 33
% of Revenue NA 13% 30% 29%
Operating Loss $ 725 $ 961 $ 634 $ 1,045
% of Revenue NA 689% 704% 909%
Net Loss $ 712 $ 951 $ 630 $ 1,038
% of Revenue NA 683% 700% 902%
Basic and
diluted loss
per share (0.07) (0.09) (0.06) (0.10)
Liquidity and Capital Resources
As of December 31, 2002 we had $2,069,004 in cash and cash equivalents. In
addition, we had stock subscriptions outstanding of $791,940 from a private
placement of our common shares that closed in December 2002 and January 2003.
In March 2002, we signed a non-binding letter of intent to acquire all of
the outstanding shares of Allergy Therapeutics (Holdings) Limited in a stock for
stock transaction. In July 2002, the letter of intent was terminated due to
changes in market conditions. We incurred approximately $600,000 of expenses in
connection with this contemplated transaction. Approximately $200,000 of these
expenses remains unpaid.
In June 2002, we received an SBIR grant from the NIH. The grant is for
approximately $865,000 to support research over a two year period. Of the total
grant, approximately $521,000 has been allotted for work to be performed in the
first twelve months of the grant. During the twelve months ended December 31,
2002, we recorded revenue in the amount of $270,000.
In December 2002, we were awarded an initial U.S. government contract with
the U.S. Army to develop an effective Smallpox antiviral drug. The total
estimated revenue under the contract is $1.6 million for the periods January 1,
2003 to May 31, 2007.
In October 2002, we entered into a collaborative research agreement with
TransTech Pharma, Inc. for the discovery and treatment of human diseases. Under
the terms of the agreement, Trans Tech and SIGA have agreed to contribute their
respective services and products and share in equal costs of specified research
projects. In consideration of the services performed by Trans Tech and use of
its proprietary technology, we granted an exclusive, fully-paid,
nontransferable, nonsublicenseable, limited license to use existing rights to
patents and technologies. We will share equally in the ownership of compounds
and related intellectual property derived from such research efforts.
In December 2002, we raised gross proceeds of $1.865 million in a private
offering of common stock and warrants to purchase our common stock. We sold
1,700,000 shares of common stock in this offering. In connection with the
offering we issued 171,216 warrants to purchase shares of our common stock to
consultants. The warrants are initially exercisable at a price of $1.65 per
share and have a term of five years. The fair value of the warrants on the date
of grant was approximately $188,970. We received net proceeds from the offering
of $891,000 prior to December 31, 2002 and net proceeds of $791,940 after
December 31, 2002.
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In October 2002, we raised gross proceeds of $1.04 million in a private
offering of common stock and warrants to purchase our common stock. We sold
1,037,500 shares of common stock and 518,750 warrants. These warrants are
initially exercisable at $2.25 per share and have a term of five years. We
received net proceeds of approximately $935,000. In connection with the offering
we issued another 103,750 warrants to purchase shares of our common stock to
consultants. The consultants' warrants are initially exercisable at a price of
$1.50 per share and have a term of five years.
In March 2003 we entered into a non-binding letter of intent to acquire
substantially all of the assets of Plexus Vaccines, Inc. ("Plexus"). The
transaction is subject to certain conditions, including, without limitation, the
completion of due diligence and the negotiation and execution of definitive
agreements. As part of the agreement, we have pursuant to a promissory note made
a loan to Plexus in the amount of $50,000. If the transaction is not completed
by November 30, 2003 or if certain other events occur the loan plus accrued
interest is to be repaid to SIGA.
We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
through the first quarter of 2004. In addition, we will attempt to generate
additional working capital through a combination of collaborative agreements,
strategic alliances, research grants, equity and debt financing. However, no
assurance can be provided that additional capital will be obtained through these
sources or, if obtained, will be on commercially reasonable terms.
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.
SIGA leases certain facilities and office space under operating leases.
Minimum future rental commitments under operating leases having noncancellable
lease terms are $164,115 $173,821 and $66,982 for the years ending December 31,
2003, 2004 and 2005, respectively. Future minimum leases payments for equipment
under capital leases amount to $11,326 for the year ended December 31, 2003.
Risk Factors That May Affect Results of Operations and Financial Condition
This report contains forward-looking statements and other prospective
information relating to future events. These forward-looking statements and
other information are subject to risks and uncertainties that could cause our
actual results to differ materially from our historical results or currently
anticipated results including the following:
We have incurred operating losses since our inception and expect to incur
net losses and negative cash flow for the foreseeable future. We incurred net
losses of $3.3 million and $3.7 million for the years ended December 31, 2002
and 2001, respectively. As of December 31, 2002 and December 31, 2001, our
accumulated deficit was $29.5 million and $26.2 million, respectively. We expect
to continue to incur significant operating expenditures. However we do not
foresee significant capital expenditures in the near future. We will need to
generate significant revenues to achieve and maintain profitability. SIGA
currently has sufficient operation capital to finance its operations through
approximately the first quarter of 2004. Our annual operating needs vary from
year to year depending upon the amount of revenue generated through grants and
licenses. We do not expect a significant change from our current cash burn rate
which is generally consistent throughout the year in the next fiscal year.
We cannot guarantee that we will achieve sufficient revenues for
profitability. Even if we do achieve profitability, we cannot guarantee that we
can sustain or increase profitability on a quarterly or annual basis in the
future. If revenues grow slower than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, then our business,
results of operations and financial condition will be materially and adversely
affected. Because our strategy includes acquisitions of other businesses,
acquisition expenses and any cash used to make these acquisitions will reduce
our available cash.
Our business will suffer if we are unable to raise additional equity
funding. We continue to be dependent on our ability to raise money in the equity
markets. There is no guarantee that we will continue to be successful in raising
such funds. If we are unable to raise additional equity funds, we may be forced
to discontinue or cease certain operations.
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Our stock price is, and we expect it to remain, volatile, which could
limit investors' ability to sell stock at a profit. The volatile price of our
stock makes it difficult for investors to predict the value of their investment,
to sell shares at a profit at any given time, or to plan purchases and sales in
advance. A variety of factors may affect the market price of our common stock.
These include, but are not limited to:
o publicity regarding actual or potential clinical results relating to
products under development by our competitors or us;
o delay or failure in initiating, completing or analyzing pre-clinical
or clinical trials or the unsatisfactory design or results of these
trials;
o achievement or rejection of regulatory approvals by our competitors
or us;
o announcements of technological innovations or new commercial
products by our competitors or us;
o developments concerning proprietary rights, including patents;
o developments concerning our collaborations;
o regulatory developments in the United States and foreign countries;
o economic or other crises and other external factors;
o period-to-period fluctuations in our revenues and other results of
operations;
o changes in financial estimates by securities analysts; and
o sales of our common stock.
Additionally, because there is not a high volume of trading in our stock,
any information about SIGA in the media may result in significant volatility in
our stock price.
We will not be able to control many of these factors, and we believe that
period-to-period comparisons of our financial results will not necessarily be
indicative of our future performance.
In addition, the stock market in general, and the market for biotechnology
companies in particular, has experienced extreme price and volume fluctuations
that may have been unrelated or disproportionate to the operating performance of
individual companies. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our operating performance.
The following table presents the high and low bid range of our stock for
the past two years.
Bid Range
2001 High Low
------ ------
First Quarter $4.88 $1.62
Second Quarter $4.48 $1.62
Third Quarter $4.05 $2.24
Fourth Quarter $5.21 $1.91
2002 High Low
------ ------
First Quarter $2.89 $2.01
Second Quarter $2.63 $0.81
Third Quarter $1.39 $0.65
Fourth Quarter $2.15 $0.65
We are in various stages of product development and there can be no
assurance of successful commercialization. In general, our research and
development programs are at an early stage of development. The
- 23 -
strep vaccine program is in Phase I clinical trials. All other programs are in
the pre-clinical stage of development. Our biological warfare defense products
do not need human clinical trials for approval by the FDA. We will need to
perform two animal models and provide safety data for a product to be approved.
Our other products will be subject to the approval guidelines under FDA
regulatory requirements which include a number of phases of testing in humans.
The FDA has not approved any of our biopharmaceutical product candidates.
Any drug candidates developed by us will require significant additional research
and development efforts, including extensive pre-clinical and clinical testing
and regulatory approval, prior to commercial sale. We cannot be sure our
approach to drug discovery will be effective or will result in the development
of any drug. We cannot expect that any drugs resulting from our research and
development efforts will be commercially available for many years, if at all.
We have limited experience in conducting pre-clinical testing and clinical
trials. Even if we receive initially positive pre-clinical or clinical results,
such results do not mean that similar results will be obtained in the later
stages of drug development, such as additional pre-clinical testing or human
clinical trials. All of our potential drug candidates are prone to the risks of
failure inherent in pharmaceutical product development, including the
possibility that none of our drug candidates will or can:
o be safe, non-toxic and effective;
o otherwise meet applicable regulatory standards;
o receive the necessary regulatory approvals;
o develop into commercially viable drugs;
o be manufactured or produced economically and on a large scale;
o be successfully marketed;
o be reimbursed by government and private insurers; and
o achieve customer acceptance.
In addition, third parties may preclude us from marketing our drugs
through enforcement of their proprietary rights, or third parties may succeed in
marketing equivalent or superior drug products. Our failure to develop safe,
commercially viable drugs would have a material adverse effect on our business,
financial condition and results of operations.
Most of our immediately foreseeable future revenues are contingent upon
collaborative and license agreements and we may not achieve sufficient revenues
from these agreements to attain profitability. Until and unless we successfully
make a product, our ability to generate revenues will largely depend on our
ability to enter into additional collaborative and license agreements with third
parties and maintain the agreements we currently have in place. We will receive
little or no revenues under our collaborative agreements if our collaborators'
research, development or marketing efforts are unsuccessful, or if our
agreements are terminated early. Additionally, if we do not enter into new
collaborative agreements, we will not receive future revenues from new sources.
Our future revenue is substantially dependent on the continuing grant and
contract work being performed for the NIH which expires in May 2004 and the U.S.
Army which expires at the end of December 2007. These agreements are for
specific work to be performed under the agreements and could only be cancelled
for non-performance.
Several factors will affect our future receipt of revenues from
collaborative arrangements, including the amount of time and effort expended by
our collaborators, the timing of the identification of useful drug targets and
the timing of the discovery and development of drug candidates. Under our
existing agreements, we may not earn significant milestone payments until our
collaborators have advanced products into clinical testing, which may not occur
for many years, if at all.
- 24 -
We may not find sufficient acquisition candidates to implement our
business strategy. As part of our business strategy we expect to enter into
business combinations and acquisitions. We compete for acquisition candidates
with other entities, some of which have greater financial and other resources
than we have. Increased competition for acquisition candidates may make fewer
acquisition candidates available to us and may cause acquisitions to be made on
less attractive terms, such as higher purchase prices. Acquisition costs may
increase to levels that are beyond our financial capability or that would
adversely affect our results of operations and financial condition. Our ability
to make acquisitions will depend in part on the relative attractiveness of
shares of our common stock as consideration for potential acquisition
candidates. This attractiveness may depend largely on the relative market price,
our ability to register common stock and capital appreciation prospects of our
common stock. If the market price of our common stock were to decline materially
over a prolonged period of time, our acquisition program could be materially
adversely affected.
We may face limitations on our ability to attract suitable acquisition
opportunities or to integrate additional acquired businesses and the failure to
consummate an acquisition may significantly drain our resources. As part of our
business strategy we expect to enter into business combinations and
acquisitions. Some of these transactions could be material in size and scope.
While we will continually be searching for additional acquisition opportunities,
we may not be successful in identifying suitable acquisitions. We compete for
acquisition candidates with other entities, some of which have greater financial
and other resources than we have. Increased competition for acquisition
candidates may make fewer acquisition candidates available to us and may cause
acquisitions to be made on less attractive terms, such as higher purchase
prices. Acquisition costs may increase to levels that are beyond our financial
capability or that would adversely affect our results of operations and
financial condition. Our ability to make acquisitions will depend in part on the
relative attractiveness of shares of our common stock as consideration for
potential acquisition candidates. This attractiveness may depend largely on the
relative market price, our ability to register common stock and capital
appreciation prospects of our common stock. If the market price of our common
stock were to decline materially over a prolonged period of time, our
acquisition program could be materially adversely affected. Failure to making an
acquisition will limit our ability to grow, but will not be central to our
continued existence. Costs associated with failed acquisitions, such as our
plans to merge with Allergy Therapeutics and Hypernix, may result in significant
operating costs that may need to be financed from operations or from additional
equity capital. The total costs associated with the failed acquisition of
Allergy Therapeutics were approximately $625,000, of which approximately
$200,000 remain unpaid. The costs were associated with professional fees for
attorneys and accountants. Additionally, there was significant time spent by our
management in the contemplated transaction. The proposed Hypernix transaction
resulted in expenses of $511,000 for advances made to them. We recovered
approximately $85,000 from them.
We may not be able to consummate potential acquisitions or an acquisition
may not enhance our business or may decrease rather than increase our earnings.
In the future, we may issue additional securities in connection with one or more
acquisitions, which may dilute our existing shareholders. Future acquisitions
could also divert substantial management time and result in short term
reductions in earnings or special transaction or other charges. In addition, we
cannot guarantee that we will be able to successfully integrate the businesses
that we may acquire into our existing business. Our shareholders may not have
the opportunity to review, vote on or evaluate future acquisitions.
The biopharmaceutical market in which we compete and will compete is
highly competitive. The biopharmaceutical industry is characterized by rapid and
significant technological change. Our success will depend on our ability to
develop and apply our technologies in the design and development of our product
candidates and to establish and maintain a market for our product candidates.
There also are many companies, both public and private, including major
pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions engaged in developing
pharmaceutical and biotechnology products. Many of these companies have
substantially greater financial, technical, research and development, and human
resources than us. Competitors may develop products or other technologies that
are more effective than any that are being developed by us or may obtain FDA
approval for products more rapidly than us. If we commence commercial sales of
products, we still must compete in the manufacturing and marketing of such
products, areas in which we have no experience. Many of these companies also
have manufacturing facilities and established marketing capabilities that would
enable such companies to market competing products through existing channels of
distribution. Two companies with similar profiles are VaxGen, Inc. which is
developing vaccines against anthrax, Smallpox and HIV/AIDS; and Avant
Immunotherapeutics, Inc. which has vaccine programs for agents of biological
warfare.
- 25 -
Because we must obtain regulatory clearance to test and market our
products in the United States, we cannot predict whether or when we will be
permitted to commercialize our products. A pharmaceutical product cannot be
marketed in the U.S. until it has completed rigorous pre-clinical testing and
clinical trials and an extensive regulatory clearance process implemented by the
FDA. Pharmaceutical products typically take many years to satisfy regulatory
requirements and require the expenditure of substantial resources depending on
the type, complexity and novelty of the product.
Before commencing clinical trials in humans, we must submit and receive
clearance from the FDA by means of an Investigational New Drug ("IND")
application. Institutional review boards and the FDA oversee clinical trials and
such trials:
o must be conducted in conformance with the FDA's good laboratory
practice regulations;
o must meet requirements for institutional review board oversight;
o must meet requirements for informed consent;
o must meet requirements for good clinical and manufacturing
practices;
o are subject to continuing FDA oversight;
o may require large numbers of test subjects; and
o may be suspended by us or the FDA at any time if it is believed that
the subjects participating in these trials are being exposed to
unacceptable health risks or if the FDA finds deficiencies in the
IND application or the conduct of these trials.
Before receiving FDA clearance to market a product, we must demonstrate
that the product is safe and effective on the patient population that will be
treated. Data we obtain from preclinical and clinical activities are susceptible
to varying interpretations that could delay, limit or prevent regulatory
clearances. Additionally, we have limited experience in conducting and managing
the clinical trials and manufacturing processes necessary to obtain regulatory
clearance.
If regulatory clearance of a product is granted, this clearance will be
limited only to those states and conditions for which the product is
demonstrated through clinical trials to be safe and efficacious. We cannot
ensure that any compound developed by us, alone or with others, will prove to be
safe and efficacious in clinical trials and will meet all of the applicable
regulatory requirements needed to receive marketing clearance.
If our technologies or those of our collaborators are alleged or found to
infringe the patents or proprietary rights of others, we may be sued or have to
license those rights from others on unfavorable terms. Our commercial success
will depend significantly on our ability to operate without infringing the
patents and proprietary rights of third parties. Our technologies, along with
our licensors' and our collaborators' technologies, may infringe the patents or
proprietary rights of others. If there is an adverse outcome in litigation or an
interference to determine priority or other proceeding in a court or patent
office, then we, or our collaborators an licensors, could be subjected to
significant liabilities, required be license disputed rights from or to other
parties and/or required to cease using a technology necessary to carry out
research, development and commercialization. At present we are unaware of any or
potential infringement claims against our patent portfolio.
The costs to establish the validity of patents, to defend against patent
infringement claims of others and to assert infringement claims against others
can be expensive and time consuming, even if the outcome is favorable. An
outcome of any patent prosecution or litigation that is unfavorable to us or one
of our licensors or collaborators may have a material adverse effect on us. We
could incur substantial costs if we are required to defend ourselves in patent
suits brought by third parties, if we participate in patent suits brought
against or initiated by our licensors or collaborators or if we initiate such
suits. We may not have sufficient funds or resources in the event of litigation.
Additionally, we may not prevail in any such action.
- 26 -
Any conflicts resulting from third-party patent applications and patents
could significantly reduce the coverage of the patents owned, optioned by or
licensed to us or our collaborators and limit our ability or that of our
collaborators to obtain meaningful patent protection. If patents are issued to
third parties that contain competitive or conflicting claims, we, our licensors
or our collaborators may be legally prohibited from researching, developing or
commercializing of potential products or be required to obtain licenses to these
patents or to develop or obtain alternative technology. We, our licensors and/or
our collaborators may be legally prohibited from using patented technology, may
not be able to obtain any license to the patents and technologies of third
parties on acceptable terms, if at all, or may not be able to obtain or develop
alternative technologies.
In addition, like many biopharmaceutical companies, we may from time to
time hire scientific personnel formerly employed by other companies involved in
one or more areas similar to the activities conducted by us. We and/or these
individuals may be subject to allegations of trade secret misappropriation or
other similar claims as a result of their prior affiliations.
Our ability to compete may decrease if we do not adequately protect our
intellectual property rights. Our commercial success will depend in part on our
and our collaborators' ability to obtain and maintain patent protection for our
proprietary technologies, drug targets and potential products and to effectively
preserve our trade secrets. Because of the substantial length of time and
expense associated with bringing potential products through the development and
regulatory clearance processes to reach the marketplace, the pharmaceutical
industry places considerable importance on obtaining patent and trade secret
protection. The patent positions of pharmaceutical and biotechnology companies
can be highly uncertain and involve complex legal and factual questions. No
consistent policy regarding the breadth of claims allowed in biotechnology
patents has emerged to date. Accordingly, we cannot predict the type and breadth
of claims allowed in these patents.
We also rely on copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities. In an effort to maintain
the confidentiality and ownership of trade secrets and proprietary information,
we require our employees, consultants and some collaborators to execute
confidentiality and invention assignment agreements upon commencement of a
relationship with us. These agreements may not provide meaningful protection for
our trade secrets, confidential information or inventions in the event of
unauthorized use or disclosure of such information, and adequate remedies may
not exist in the event of such unauthorized use or disclosure.
We may have difficulty managing our growth. We expect to experience growth
in the number of our employees and the scope of our operations. This growth has
placed, and may continue to place, a significant strain on our management and
operations. Our ability to manage this growth will depend upon our ability to
broaden our management team and our ability to attract, hire and retain skilled
employees. Our success will also depend on the ability of our officers and key
employees to continue to implement and improve our operational and other systems
and to hire, train and manage our employees.
We depend on a key employee in a competitive market for skilled personnel.
We are highly dependent on a principal member of our scientific staff. The loss
of his services would have a material adverse effect on our business. We
currently have an employment agreement with the individual who we consider to be
a "key employee." We do not maintain a key person life insurance policy on the
life of any employee.
Dr. Dennis E. Hruby, our Chief Scientific Officer is employed under a
contract that is in force through December 31, 2005.
Our future success also will depend in part on the continued service of
our key scientific, software, bioinformatics and management personnel and our
ability to identify, hire and retain additional personnel, including customer
service, marketing and sales staff. We experience intense competition for
qualified personnel. We may not be able to continue to attract and retain
personnel necessary to develop our business.
Our activities involve hazardous materials and may subject us to
environmental regulatory liabilities. Our biopharmaceutical research and
development involves the controlled use of hazardous and radioactive materials
- 27 -
and biological waste. We are subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
these materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of these materials comply with legally
prescribed standards, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of an accident, we could
be held liable for damages, and this liability could exceed our resources. The
research and development activities of our company do not produce any unusual
hazardous products. We do use small amounts of 32P, 35S and 3H, which are stored
used and disposed of in accordance with Nuclear Regulatory Commission ("NRC ")
regulations. We maintain liability insurance in the amount of approximately
$3,000,000 and we believe this should be sufficient to cover any contingent
losses.
We believe that we are in compliance in all material respects with
applicable environmental laws and regulations and currently do not expect to
make material additional capital expenditures for environmental control
facilities in the near term. However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.
Our potential products may not be acceptable in the market or eligible for
third party reimbursement resulting in a negative impact on our future financial
results. Any products successfully developed by us or our collaborative partners
may not achieve market acceptance. The antibiotic products which we are
attempting to develop will compete with a number of well-established traditional
antibiotic drugs manufactured and marketed by major pharmaceutical companies.
The degree of market acceptance of any of our products will depend on a number
of factors, including:
o the establishment and demonstration in the medical community of the
clinical efficacy and safety of such products,
o the potential advantage of such products over existing treatment
methods, and
o reimbursement policies of government and third-party payors.
Physicians, patients or the medical community in general may not accept or
utilize any products that we or our collaborative partners may develop. Our
ability to receive revenues and income with respect to drugs, if any, developed
through the use of our technology will depend, in part, upon the extent to which
reimbursement for the cost of such drugs will be available from third-party
payors, such as government health administration authorities, private health
care insurers, health maintenance organizations, pharmacy benefits management
companies and other organizations. Third-party payors are increasingly disputing
the prices charged for pharmaceutical products. If third-party reimbursement was
not available or sufficient to allow profitable price levels to be maintained
for drugs developed by us or our collaborative partners, it could adversely
affect our business.
If our products harm people, we may experience product liability claims
that may not be covered by insurance. We face an inherent business risk of
exposure to potential product liability claims in the event that drugs we
develop are alleged to cause adverse effects on patients. Such risk exists for
products being tested in human clinical trials, as well as products that receive
regulatory approval for commercial sale. We may seek to obtain product liability
insurance with respect to drugs we and/or or our collaborative partners develop.
However, we may not be able to obtain such insurance. Even if such insurance is
obtainable, it may not be available at a reasonable cost or in a sufficient
amount to protect us against liability.
We may be required to perform additional clinical trials or change the
labeling of our products if we or others identify side effects after our
products are on the market, which could harm sales of the affected products. If
we or others identify side effects after any of our products, if any, after they
are on the market, or if manufacturing problems occur:
o regulatory approval may be withdrawn;
o reformulation of our products, additional clinical trials, changes
in labeling of our products may be required;
- 28 -
o changes to or re-approvals of our manufacturing facilities may be
required;
o sales of the affected products may drop significantly;
o our reputation in the marketplace may suffer; and
o lawsuits, including class action suits, may be brought against us.
Any of the above occurrences could harm or prevent sales of the affected
products or could increase the costs and expenses of commercializing and
marketing these products.
Difficult Manufacturing Requirements. The manufacture of genetically
engineered commensals is a time-consuming and complex process. Our management
believes that we have the ability to acquire or produce quantities of
genetically engineered commensals sufficient to support our present needs for
research and our projected needs for our initial clinical development programs.
However, we believe that improvements in our manufacturing technology will be
required to enable us to meet the volume and cost requirements needed for
certain commercial applications of commensal products. Products based on
commensals have never been manufactured on a commercial scale. The manufacture
of all of our products will be subject to current GMP requirements prescribed by
the FDA or other standards prescribed by the appropriate regulatory agency in
the country of use. There can be no assurance that we will be able to
manufacture products, or have products manufactured for us, in a timely fashion
at acceptable quality and prices, that we or third party manufacturers can
comply with GMP or that we or third party manufacturers will be able to
manufacture an adequate supply of product.
Health care reform and controls on health care spending may limit the
price we charge for any products and the amounts thereof that we can sell. The
U.S. federal government and private insurers have considered ways to change, and
have changed, the manner in which health care services are provided in the U.S.
Potential approaches and changes in recent years include controls on health care
spending and the creation of large purchasing groups. In the future, the U.S.
government may institute further controls and limits on Medicare and Medicaid
spending. These controls and limits might affect the payments we could collect
from sales of any products. Uncertainties regarding future health care reform
and private market practices could adversely affect our ability to sell any
products profitably in the U.S. At present, we do not foresee any changes in FDA
regulatory policies that would adversely effect our development programs.
The future issuance of preferred stock may adversely effect the rights of
the holders of our common stock. Our certificate of incorporation allows our
Board of Directors to issue up to 10,000,000 shares of preferred stock and to
fix the voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of these shares without any further vote or action
by the stockholders. The rights of the holders of common stock will be subject
to, and could be adversely affected by, the rights of the holders of any
preferred stock that we may issue in the future. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting
stock, thereby delaying, deferring or preventing a change in control.
Concentration of ownership of our capital stock could delay or prevent
change of control. Our directors, executive officers and principal stockholders
beneficially own a significant percentage of our common stock and preferred
stock. They also have, through the exercise or conversion of certain securities,
the right to acquire additional common stock. As a result, these stockholders,
if acting together, have the ability to significantly influence the outcome of
corporate actions requiring shareholder approval. Additionally, this
concentration of ownership may have the effect of delaying or preventing a
change in control of SIGA. At December 31, 2002, Directors, Officers and
principal stockholders beneficially own approximately 37% of the our stock.
Item 7. Financial Statements and Supplementary Data
The financial statements required by Item 7 are included in this Annual
Report beginning on Page F-1.
- 29 -
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
- 30 -
PART III
Item 9. Directors and Executive Officers of the Registrant
Name Age Position
- ----- ---- --------
Donald G. Drapkin 55 Chairman of the Board
Thomas N. Konatich 57 Acting Chief Executive Officer, Chief
Financial Officer, Secretary
and Treasurer
Dennis E. Hruby, Ph.D. 51 Chief Scientific Officer
Gabriel M. Cerrone 31 Director
Thomas E. Constance 66 Director
Mehmet C. Oz, M.D. 41 Director
Eric A. Rose, M.D. 51 Director
Michael Weiner, M.D. 56 Director
Donald G. Drapkin has served as Chairman of the Board and a Director of
SIGA since April 19, 2001. Mr. Drapkin has been a Director and Vice Chairman of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987.
Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm
of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Drapkin is also a Director of
the following corporations which file reports pursuant to the Securities
Exchange Act of 1934: Anthracite Capital, Inc., BlackRock Asset Investors, The
Molson Companies Limited, Panavision, Inc., Playboy.com, Inc., Playboy
Enterprises, Inc., Revlon Consumer Products Corporation, Revlon Inc., and the
Warnaco Group, Inc. Mr. Drapkin is a Director of American Lawyer Media, Inc.,
Pharmacore, Inc., and TransTech Pharma, Inc. and WeddingChannel.com.
Thomas N. Konatich has served as Vice President, Chief Financial Officer
and Treasurer since April 1, 1998. He was named Secretary of SIGA on June 29,
2001 and has been our Acting Chief Executive Officer since October 5, 2001. From
November 1996 through March 1998, Mr. Konatich served as Chief Financial Officer
and a Director of Innapharma, Inc., a privately held pharmaceutical development
company. From 1993 through November 1996, Mr. Konatich served as Vice President
and Chief Financial Officer of Seragen, Inc., a publicly traded
biopharmaceutical development company. From 1988 to 1993, he was Treasurer of
Ohmicron Corporation, a venture capital financed environmental biotechnology
firm. Mr. Konatich has an MBA from the Columbia Graduate School of Business.
Dennis F. Hruby, Ph.D. has served as Vice-President - Chief Scientific
Officer since June 2000. From April 1, 1997 through June 2000 Dr. Hruby was our
Vice President of Research. From January 1996 through March 1997, Dr. Hruby
served as a senior scientific advisor to SIGA. Dr. Hruby is a Professor of
Microbiology at Oregon State University, and from 1990 to 1993 was Director of
the Molecular and Cellular Biology Program and Associate Director of the Center
for Gene Research and Biotechnology. Dr. Hruby specializes in virology and cell
biology research, and the use of viral and bacterial vectors to produce
recombinant vaccines. He is a member of the American Society of Virology, the
American Society for Microbiology and a fellow of the American Academy of
Microbiology. Dr. Hruby received a Ph.D. in microbiology from the University of
Colorado Medical Center and a B.S. in microbiology from Oregon State University.
Gabriel M. Cerrone has served as a Director of SIGA since April 19, 2001.
Mr. Cerrone has been Senior Vice President of Investments of Fahnestock & Co.,
Inc., a financial services firm, since March 1999. From March 1998 to March
1999, Mr. Cerrone was Managing Director of Investments at Barington Capital,
L.P., a merchant bank, and, from June 1994 to February 1998, he was Senior Vice
President of Investments at Blair & Company, a financial services firm focusing
on microcap companies. Mr. Cerrone is a Director of the following privately-held
companies: Callisto Pharmaceuticals, Inc. and Macro Holdings, LLC. He is also
the sole general
- 31 -
partner of Panetta Partners, Ltd., a firm which acts as an investor in, and
consultant to, primarily emerging technology companies. Mr. Cerrone is a 1994
graduate of New York University's Stern School of Business.
Thomas E. Constance has served as a Director of SIGA since April 19, 2001.
Mr. Constance is Chairman and, since 1994, a partner of Kramer Levin Naftalis &
Frankel LLP, a law firm in New York City. Mr. Constance is a Director of the
following corporations which file reports pursuant to the Securities Exchange
Act of 1934: Uniroyal Technology Corporation and Kroll Inc. Mr. Constance is
also a Director of Callisto Pharmaceuticals, Inc., a privately-held company. Mr.
Constance serves as a Trustee of the M.D. Sass Foundation and St. Vincent's
Services. He also serves on the Advisory Board of Barington Capital, L.P.
Mehmet C. Oz, M.D. has served as a Director of SIGA since April 19, 2001.
Dr. Oz has been a Cardiac Surgeon at Columbia University Presbyterian Hospital
since 1993 and an Associate Professor of Surgery there since July 2000. Dr. Oz
directs the following programs at Columbia University Presbyterian Hospital: the
Cardiovascular Institute, the complementary medicine program, the clinical
profusion program and clinical trials of new surgical technology. Dr. Oz
received his undergraduate degree from Harvard University in 1982, and, in 1986,
he received a joint M.D./M.B.A. degree from the University of Pennsylvania
Medical School and the Wharton School of Business.
Eric A. Rose, M.D. has served as a Director of SIGA since April 19, 2001.
From April 19, 2001 until June 21, 2001, Dr. Rose served as Interim Chief
Executive Officer of SIGA. Dr. Rose is currently Chairman of the Department of
Surgery and Surgeon-in-Chief of the Columbia Presbyterian Center of New York
Presbyterian Hospital, a position he has held since August 1994. Dr. Rose is a
past President of the International Society for Heart and Lung Transplantation.
Dr. Rose was recently appointed as Morris & Rose Milstein Professor of Surgery
at Columbia University's College of Physicians and Surgeons' Department of
Surgery. Dr. Rose is also a Director of Nexell Therapeutics Inc. (f/k/a VimRx).
Dr. Rose is a graduate of both Columbia College and Columbia University College
of Physicians & Surgeons.
Michael Weiner, M.D. has served as a Director of SIGA since April 19,
2001. Dr. Weiner has been a Professor of Pediatrics at Columbia University
College of Physicians and Surgeons since 1996. Dr. Weiner is also the Director
of Pediatric Oncology at New York Presbyterian Hospital. Dr. Weiner was formerly
a Director of Nexell Therapeutics, Inc. (f/k/a VimRx) from March 1996 to
February 1999. Dr. Weiner is a 1972 graduate of the New York State Health
Sciences Center at Syracuse, and he was a post graduate student at New York
University and Johns Hopkins University.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) reports that they file.
Based solely upon review of the copies of such reports furnished to the
Company and written representations from certain of the Company's executive
officers and directors that no other such reports were required, the Company
believes that during the fiscal year ended December 31, 2002 all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with on a timely basis, except that
Mr. Konatich belatedly filed in March 2003 a Form 5 due in January 2003.
- 32 -
Item 10. Executive Compensation
The following table sets forth the total compensation paid or accrued for
the years ended December 31, 2002, 2001 and 2000 for each person who acted as
SIGA's Chief Executive Officer at any time during the year ended December 31,
2002 and its most highly compensated executive officers, other than its Chief
Executive Officer, whose salary and bonus for the fiscal year ended December 31,
2002 were in excess of $100,000 each.
Summary Compensation Table
Annual Compensation
---------------------------------------------------
Long-Term
Compensation
Other Annual Securities
Compensation Underlying Options
------------ ------------------
Name and Principal Position Year Salary ($) ($) (#)
- --------------------------- ---- ---------- ----- -------
Thomas N. Konatich, 2002 188,333 -- 200,000
Chief Financial Officer and Acting CEO 2001 177,542 -- --
2000 170,000 -- 100,000
Dennis E. Hruby 2002 195,000 -- 300,000
Chief Scientific Officer 2001 196,055 -- --
2000 170,000 -- 125,000
- ----------
Option Grants for the Year Ended December 31, 2002
The following table sets forth grants of stock options during the year
ended December 31, 2002 to anyone who served as Chief Executive Officer during
the year. The exercise price at the time of the grant was equal to or above the
fair market value at the time of the grant.
Common Stock % of Total
Underlying Options Granted Exercise Expiration
Name Options Granted to Employees Price Per Share Date
- ----- --------------- --------------- --------------- ----------
Thomas N. Konatich 200,000 25.7% $ 2.50 11/15/12
Dennis E. Hruby 300,000 38.6% $ 2.50 10/15/12
- ----------
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table provides certain summary information concerning stock
options held as of December 31, 2002 by SIGA's Chief Executive Officer and its
two most highly compensated executive officers, other than its Chief Executive
Officer. No options were exercised during fiscal 2002 by any of the officers.
Value of Unexercised
Number of Securities Underlying In-The-Money Options
Unexercised Options # at Fiscal Year-End ($) (1)
---------------------------------- -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----- ----------- ------------- ----------- -------------
Thomas N. Konatich 288,750 106,250 0 0
Dennis Hruby 250,000 225,000 0 0
(1) Based upon the closing price on December 31, 2002 as reported on the
Nasdaq SmallCap Market and the exercise price per option.
Stock Option Plan
As of January 1, 1996, we adopted our 1996 Incentive and Non-Qualified
Stock Option Plan. An amendment and restatement of such plan, as amended, was
adopted on May 3, 2001 and was further refined by the Board of Directors
- 33 -
on June 29, 2001 (the "Plan"). The Plan was approved by our stockholders at an
annual meeting on August 15, 2001. Stock options may be granted to key
employees, consultants and outside directors pursuant to the Plan.
The Plan is administered by a committee (the "Committee") comprised of
disinterested directors. The Committee determines persons to be granted stock
options, the amount of stock options to be granted to each such person, and the
terms and conditions of any stock options as permitted under the Plan. The
members of the Committee are Mehmet C. Oz, M.D. and Michael Weiner, M.D.
Both Incentive Options and Nonqualified Options may be granted under the
Plan. An Incentive Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Any Incentive Option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the shares on
the date on which such option is granted. With respect to an Incentive Option
granted to an employee who owns more than 10% of the total combined voting stock
of SIGA or of any parent or subsidiary of SIGA, the exercise price for such
option must be at least 110% of the fair market value of the shares subject to
the option on the date the option is granted.
The Plan, as amended, provides for the granting of options to purchase
7,500,000 shares of common stock, of which 5,807,561 options were outstanding as
of December 31, 2002.
During the fiscal years ending December 31, 2002, 2001 and 2000, the named
Directors and Officers of SIGA received log-term incentive compensation under
the Plan as shown in the following table.
- ----------------------------------------------------------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Stock Price Based Plans
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Performance or
Number of Shares, Other Period Until
Units or Other Rights Maturation of Threshold Target Maximum
Name (#) Payout ($ or #) ($ or #) ($ or #)
- ----------------------------------------------------------------------------------------------------------------------------------
Donald G. Drapkin 1,125,000 8/15/11 0 0 0
Thomas N. Konatich 300,000 11/15/12 0 0 0
Gabriel Cerrone 1,075,000 8/15/11 0 0 0
Thomas E. Constance 225,000 8/15/11 0 0 0
Mehmet C. Oz, M.D 100,000 8/15/11 0 0 0
Eric A. Rose, M.D. 600,000 8/15/11 0 0 0
Michael Weiner, M.D. 100,000 8/15/11 0 0 0
Dennis E. Hruby 300,000 10/15/12 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
- 34 -
Employment Contracts and Directors Compensation
Employment Contracts
Thomas N. Konatich, SIGA's Vice President, Chief Financial Officer,
Secretary, Treasurer and Acting Chief Executive Officer, is employed by SIGA
under an employment agreement dated April 1, 1998, as amended on January 19,
2000, as amended and restated on October 6, 2000, as amended as of January 31,
2002 and as amended on November 5, 2002. This Agreement expires on September 30,
2004 and is cancellable by SIGA only for cause, as defined in the agreement. Mr.
Konatich receives an annual base salary of $210,000. He received options to
purchase 95,000 shares of common stock, at $4.44 on April 1, 1998. The options
vested on a pro rata basis on the first, second, third and fourth anniversaries
of the agreement. On January 19, 2000, he received an additional grant to
purchase 100,000 shares at an exercise price of $2.00 per share. These options
vest on a pro rata basis each quarter through January 19, 2002. On January 31,
2002, Mr. Konatich was granted an "Incentive Stock Option" to purchase 50,000
shares at an exercise price of $3.94 per share. Such options vest in eight equal
quarterly installments beginning on April 20, 2002. On November 5, 2002, Mr.
Konatich was granted an Incentive Stock Option to purchase 150,000 shares at an
exercise price of $2.50 per share. 75,000 of these options vested immediately
and 75,000 options vest on September 1, 2003. Mr. Konatich is also eligible to
receive additional stock options and bonuses at the discretion of the Board of
Directors.
Dr. Dennis Hruby, Chief Scientific Officer ("CSO"), is employed by SIGA
under an employment agreement dated January, 1, 1998, as amended on June 16,
2000, as amended on January 31, 2002, as amended on October 3, 2002. This
Agreement expires on December 31, 2005, except that SIGA may terminate the
agreement upon 180 days written notice. Dr. Hruby receives a base salary of
$210,000 per year. Dr. Hruby received options to purchase 10,000 shares of
common stock at an exercise price of $5.00 per share on April 1, 1997 and 40,000
shares of common stock at an exercise price of $4.63 per share on April 1, 1998.
The options became exercisable on a pro rata basis on the first, second, third
and fourth anniversaries of the agreement. Dr. Hruby is eligible to receive
additional stock options and bonuses at the discretion of the Board of
Directors. Under the June 16, 2000 amendment, Dr. Hruby was granted options to
purchase 125,000 shares of SIGA's common stock at $2.00 per share. The options
vest ratably over the remaining term of the amendment. The January 31, 2002
amendment changed the terms of the lock-up agreed to in the June 16, 2000
amendment to the employment agreement limiting Hruby's ability to sell SIGA
stock. On January 31, 2002 Dr. Hruby was granted and "Incentive Stock Option" to
purchase 50,000 shares at an exercise price of $3.94 per share. Such options
vest in four equal annual installments beginning on August 15, 2002. As part of
the most recent amendment, Dr. Hruby was granted an option to purchase 300,000
shares of common stock. Options with respect to 75,000 shares vested upon the
signing of the amendment and an additional 75,000 shares shall vest on a pro
rata basis on September 1 of each 2003, 2004 and 2005. The options have an
exercise price of $2.50 per share. As part of the amended agreement, Dr. Hruby
surrendered his option to purchase up to 50,000 shares of common stock of SIGA
at an exercise price of $3.94 that he was granted under an earlier amendment.
Directors' Compensation
SIGA does not pay fees to its directors, nor does it reimburse its
directors for expenses incurred.
Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholders Matters
The following tables set forth certain information regarding the
beneficial ownership of SIGA's voting securities as of December 31, 2002 of (i)
each person known to SIGA to beneficially own more than 5% of the applicable
class of voting securities, (ii) each director and director nominee of SIGA,
(iii) each Named Officer, and (iv) all directors and officers of SIGA as a
group. As of March 13, 2003, a total of 13,226,649 shares of common stock and a
total of 410,760 shares of Series A preferred stock were outstanding. Each share
of common stock and
- 35 -
Series A preferred stock is entitled to one vote on matters on which common
stockholders are eligible to vote. The column entitled "Percentage of Total
Voting Stock" shows the percentage of total voting stock beneficially owned by
each listed party.
Ownership of Common Stock
Percentage of Percentage of
Name and Address of Amount of Beneficial Common Stock Total Voting
Beneficial Owner (1) Ownership (2) Outstanding Stock Outstanding
- -------------------- ------------- ----------- -----------------
Beneficial Holders
Judson Cooper 1,152,117(3) 8.5% 8.2%
Howard Gittis
35 East 62nd Street
New York, NY 10021 1,005,902(4) 7.6% 7.4%
Panetta Partners, Ltd.(5)
265 E. 66th St. Suite 16G
New York, NY 10021 790,472(6) 5.8% 5.7%
Joshua D. Schein 1,178,517(3) 8.7% 8.4%
Officers and Directors
Thomas N. Konatich 395,000(7) 3.0% 2.9%
Dennis E. Hruby 475,000(7) 3.6% 3.5%
Donald G. Drapkin
35 East 62nd Street
New York, NY 10021 2,855,058(8)(9)(10) 19.1% 18.6%
Gabriel M. Cerrone(5)
265E. 66th Street, Suite 16G
New York, NY 10021 1,926,972(6)(11) 13.2% 12.8%
Thomas E. Constance
919 Third Avenue, 41st Floor
New York, NY 10022 253,467(12) 1.9% 1.9%
Mehmet C. Oz, M.D
177 Fort Washington Ave
New York, NY 10032 125,000(13) 1.0% 0.9%
Eric A. Rose, M.D
122 East 78th Street
New York, NY 10021 790,090(14) 5.8% 5.6%
Michael Weiner, M.D
161 Fort Washington Ave
New York, NY 10032 125,000(13) 1.0% 0.9%
All Officers and Directors as a
group (eight persons) 6,945,587(15) 37.1% 36.3%
- ----------
* Less than 1%
(1) Unless otherwise indicated the address of each beneficial owner identified
is 420 Lexington Avenue, Suite 601, New York, NY 10170.
(2) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire
within 60 days after such date. For purposes of computing the percentage
of outstanding shares held by each person or group of persons named above
on a given date, any security which such person or persons has the right
to acquire within 60 days after such
- 36 -
date is deemed to be outstanding for the purpose of computing the
percentage ownership of such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person.
(3) The amounts in the table for each of Mr. Cooper and Dr. Schein includes
options to purchase 700,001 shares of common stock owned directly and
beneficial ownership of options to purchase 12,500 shares of common stock,
held by Prism Ventures LLC, an entity jointly owned by Mr. Cooper and Dr.
Schein.
(4) Includes 260,178 shares issuable upon exercise of a warrant.
(5) Mr. Cerrone, as the sole general partner of Panetta Partners, Ltd., may be
deemed to beneficially own the shares owned by Panetta Partners, Ltd.
(6) Includes 649,388 shares issuable upon exercise of warrants.
(7) Messrs. Konatich and Hruby own no shares of common stock. All shares
listed as beneficially owned by Messrs. Konatich and Hruby are shares
issuable upon exercise of stock options.
(8) Includes 1,125,000 shares of common stock issuable upon exercise of
options and 30,500 shares issuable upon exercise of warrant.
(9) Mr. Drapkin has entered into a management restructuring agreement,
pursuant to which he has been granted proxies giving him voting power over
an aggregate of 905,632 shares of common stock, included in the figures in
the above table.
(10) Mr. Drapkin holds, inter alia, a warrant (an "Investor Warrant") to
purchase 347,826 shares of common stock. However, the Investor Warrant
provides that, with certain limited exceptions, it is not exercisable if,
as a result of such exercise, the number of shares of common stock
beneficially owned by Mr. Drapkin and his affiliates (other than shares of
common stock which may be deemed beneficially owned through the ownership
of the unexercised portion of such Investor Warrant) would exceed 9.99% of
the outstanding shares of common stock. As a result of the restrictions
described in the immediately preceding sentence and the other securities
which Mr. Drapkin may be deemed beneficially to own, Mr. Drapkin's
Investor Warrant is not presently exercisable. If not for the 9.99% limit,
Mr. Drapkin could be deemed to beneficially own 3,202,884 shares of common
stock, or 19.9% of the outstanding shares of common stock and 19.4% of the
total shares of voting stock outstanding.
(11) Includes 790,472 shares held by and issuable upon exercise of warrants
held by Panetta Partners and 1,075,000 shares issuable upon exercise of
options.
(12) Includes 12,200 shares issuable upon exercise of warrants and 225,000
shares of common stock issuable upon exercise of options.
(13) Includes 12,500 shares issuable upon exercise of warrants and 100,000
shares issuable upon exercise of options.
(14) Includes 88,610 shares issuable upon exercise of warrants and 600,000
shares of common stock issuable upon exercise of options.
(15) See footnotes (5), (6), (7), (8), (9), (10), (11), (12), (13) and (14).
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan
information with respect to both equity compensation plans approved by security
holders and equity compensation plans not approved by security holders as of
December 31, 2002
Number of securities
Number of securities to remaining available for future
be issued upon Weighted-average issuance
exercise of outstanding exercise price of under equity compensation plans
options, warrants and outstanding options, (excluding securities
rights warrants and rights reflected in column (a))
Plan category (a) (b) (c)
- ------------- ----------------------- ----------------- -------------------------------
Equity compensation plans approved
by security holders (1) .......... 5,807,561 $2.52 1,480,314
Equity compensation plans not
approved by security holders ...... 250,000 $2.00 0
Total .............................. 6,057,561 $2.50 1,480,314
- 37 -
(1) SIGA Technologies, Inc., Amended and Restated 1996 Incentive and
Non-Qualified Stock Option Plan
Item 12. Certain Relationships and Related Transactions
Thomas E. Constance, a director of SIGA, is Chairman of Kramer Levin
Naftalis & Frankel LLP, a law firm in New York City, which SIGA retained to
provide legal services during fiscal year 2001.
Donald G. Drapkin, Chairman of the Board of Directors of SIGA, is also a
director with TransTech Pharma, Inc., a company with which we have a
collaborative agreement.
- 38 -
PART IV
Item 13. Exhibits, Material Agreements and Reports on Form 8-K
3(a) Restated Articles of Incorporation of the Company (Incorporated by
reference to Form S-3 Registration Statement of the Company dated May
10, 2000 (No. 333-36682)).
3(b) Bylaws of the Company (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
3(c) Certificate of Designations of Series and Determination of Rights and
Preferences of Series A Convertible Preferred Stock of the Company
dated July 2, 2001 (Filed herewith).
4(a) Form of Common Stock Certificate (Incorporated by reference to Form
SB-2 Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(b) Warrant Agreement dated as of September 15, 1996 between the Company
and Vincent A. Fischetti (1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(c) Warrant Agreement dated as of November 18, 1996 between the Company
and David de Weese (1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
4(d) Registration Rights Agreement between the Company and MedImmune, Inc.,
dated as of February 10, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1997).
4(e) Warrant Agreement between the Company and Stefan Capital, dated
September 9, 1999 (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999).
10(a) License and Research Support Agreement between the Company and The
Rockefeller University, dated as of January 31, 1996; and Amendment to
License and Research Support Agreement between the Company and The
Rockefeller University, dated as of October 1, 1996(2) (Incorporated
by reference to Form SB-2 Registration Statement of the Company dated
March 10, 1997 (No. 333-23037)).
10(b) Research Agreement between the Company and Emory University, dated as
of January 31, 1996(2) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(c) Research Support Agreement between the Company and Oregon State
University, dated as of January 31, 1996(2) (Incorporated by reference
to Form SB-2 Registration Statement of the Company dated March 10,
1997 (No. 333-23037)). Letter Agreement dated as of March 5, 1999 to
continue the Research Support Agreement. (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1999).
10(d) Option Agreement between the Company and Oregon State University,
dated as of November 30, 1999 and related Amendments to the Agreement
(Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999).
- 39 -
10(e) Amended and Restated Employment Agreement between the Company and Dr.
Joshua D. Schein, dated as of October 6, 2000 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000).
10(f) Amended and Restated Employment Agreement between the Company and
Judson A. Cooper, dated as of October 6, 2000 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000).
10(g) Employment Agreement between the Company and Dr. Kevin F. Jones, dated
as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(h) Employment Agreement between the Company and David de Weese, dated as
of November 18, 1996(1) (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(i) Consulting Agreement between the Company and CSO Ventures LLC, dated
as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(j) Consulting Agreement between the Company and Dr. Vincent A. Fischetti,
dated as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(k) Consulting Agreement between the Company and Dr. Dennis Hruby, dated
as of January 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(l) Letter Agreement between the Company and Dr. Vincent A. Fischetti,
dated as of March 1, 1996 (Incorporated by reference to Form SB-2
Registration Statement of the Company dated March 10, 1997 (No.
333-23037)).
10(m) Employment Agreement between the Company and Dr. Dennis Hruby, dated
as of April 1, 1997 (Incorporated by reference to Amendment No. 1 to
Form SB-2 Registration Statement of the Company dated July 11, 1997
(No. 333-23037)).
10(n) Clinical Trials Agreement between the Company and National Institute
of Allergy and Infectious Diseases, dated as of July 1, 1997
(Incorporated by reference to Amendment No. 1 to Form SB-2
Registration Statement of the Company dated July 11, 1997 (No.
333-23037)).
10(o) Research Agreement between the Company and The Research Foundation of
State University of New York, dated as of July 1, 1997(2)
(Incorporated by reference to Amendment No. 1 to Form SB-2
Registration Statement of the Company dated July 11, 1997 (No.
333-23037)).
10(p) Collaborative Research and License Agreement between the Company and
Wyeth, dated as of July 1, 1997(2) (Incorporated by reference to
Amendment No. 3 to Form SB-2 Registration Statement of the Company
dated September 2, 1997 (No. 333-23037)).
10(q) Collaborative Evaluation Agreement between the Company and Chiron
Corporation, dated as of July 1, 1997 (Incorporated by reference to
Amendment No. 1 to Form SB-2 Registration Statement of the Company
dated July 11, 1997 (No. 333-23037)).
- 40 -
10(r) Consulting Agreement between the Company and Dr. Scott Hultgren, dated
as of July 9, 1997 (Incorporated by reference to Amendment No. 1 to
Form SB-2 Registration Statement of the Company dated July 11, 1997
(No. 333-23037)).
10(s) Letter of Intent between the Company and MedImmune, Inc., dated as of
July 10, 1997 (Incorporated by reference to Amendment No. 1 to Form
SB-2 Registration Statement of the Company dated July 11, 1997 (No.
333-23037)).
10(t) Research Collaboration and License Agreement between the Company and
The Washington University, dated as of February 6, 1998 (2).
(Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997).
10(u) Settlement Agreement and Mutual Release between the Company and The
Washington University, dated as of February 17, 2000 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999).
10(v) Technology Transfer Agreement between the Company and MedImmune, Inc.,
dated as of February 10, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1997).
10(w) Employment Agreement between the Company and Dr. Dennis Hruby, dated
as of January 1, 1998. (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997).
Amendment to the Agreement, dated as of October 15, 1999 (Incorporated
by reference to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999). Amendment to the Agreement dated as of
June 12, 2000).
10(x) Employment Agreement between the Company and Dr. Walter Flamenbaum,
dated as of February 1, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1997).
10(y) Employment Agreement between the Company and Thomas Konatich, dated as
of April 1, 1998. (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997). Extension
and Amendment of the Agreement, dated as of January 19, 2000
(Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999). Amendment and
Restatement of the Agreement, dated as of October 6, 2000
(Incorporated by reference to the Company's Annual Report on Form
10-KSB for the year ended December 31, 2000).
10(z) Consulting Agreement between the Company and Prism Ventures LLC, dated
as of January 15, 1998. (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997).
10(aa) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated June 21, 1999 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999).
10(bb) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated September 27, 1999 (Incorporated
by reference to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999).
10(cc) Software Application Development Services Agreement between the
Company and Open-i Media, Inc., dated October 15, 1999 (Incorporated
by reference to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999).
- 41 -
10(dd) Media Development Agreement Services Agreement between the Company and
Open-i Media, Inc., dated March 15, 2000 (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1999).
10(ee) Option Agreement between the Company and Ross Products Division of
Abbott Laboratories, dated February 28, 2000 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999).
10(ff) Consulting Agreement between the Company and Stefan Capital, dated
September 9, 1999 (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999).
10(gg) Stock Purchase Agreement between the Company and MedImmune, Inc.,
dated as of February 10, 1998. (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1997).
10(hh) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated May 3, 2000. (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000).
10(ii) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated August 1, 2000. (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000).
10(jj) Small Business Innovation Research Grant to the Company by the
National Institutes for Health, dated August 21, 2000. (Incorporated
by reference to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2000).
10(kk) Stock Purchase Agreement between the Company and Open-i Media, Inc.
dated July 7, 2000. (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2000).
10(ll) Agreement between the Company and Oregon State University for the
Company to provide contract research services to the University dated
September 24, 2000. (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2000).
10(mm) Agreement between the Company and Maxygen, Inc. dated October 17,
2000. (Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2000).
10(nn) License and Research Agreements between the Company and the Regents of
the University of California dated December 6, 2000. (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000).
10(oo) Research Agreement between the Company and the University of Maryland
dated January 3, 2001) (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000).
10(pp) Amended and Restated 1996 Incentive and Non-Qualified Stock Option
Plan dated August 15, 2001 (Incorporated by reference to the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2001).
10(qq) Letter Agreement among the Company, Donald G. Drapkin, Gabriel
Cerrone, Thomas E. Constance, Eric A. Rose, Judson A. Cooper and
Joshua D. Schein dated March 30, 2001 (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 2001).
- 42 -
10(rr) Separation Agreement between the Company and Joshua D. Schein dated as
of March 30, 2001 (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001).
10(ss) Separation Agreement between the Company and Judson A. Cooper dated as
of March 30, 2001 (Incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2001).
10(tt) Employment Agreement between the Company and Philip Sussman dated June
22, 2001 (Incorporated by reference to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2001).
10(uu) Amendment to Employment Agreement between the Company and Dr. Dennis
Hruby dated as of January 31, 2002 (Incorporated by reference to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
2001).
10(vv) Amendment and Waiver to Employment Agreement between the Company and
Thomas Konatich dated as of January 31, 2002 (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2001).
10(ww) Small Business Innovation Grant to the Company from the National
Institutes of Health dated May 17, 2002 (filed herewith).
10(xx) Research and License Agreement between the Company and TransTech
Pharma, Inc. dated October 1, 2002 (filed herewith).
10(yy) Amendment to Employment Agreement between the Company and Denis Hruby
dated October 1, 2002 (filed herewith).
10(zz) Retainer Agreement between the Company and Saggi Captial, Inc.,
dated November 1, 2002 (filed herewith).
10(aaa) Retainer Agreement between the Company and Bridge Ventures, Inc.,
dated November 1, 2002 (filed herewith).
10(bbb) Amendment to Employment Agreement between the Company and Thomas N.
Konatich, dated November 5, 2002 (filed herewith).
10(ccc) Contract between the Company and the Department of the US Army dated
December 12, 2002 (filed herewith).
10(ddd) Contract between the Company and Four Star Group dated February 5,
2003 (filed herewith).
23.1 Consent of Independent Accountants.
99.1 Certification pursuant to U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
- ----------
(1) These agreements were entered into prior to the reverse split of the
Company's Common Stock and, therefore, do not reflect such reverse split.
(2) Confidential information is omitted and identified by an * and filed
separately with the SEC with a request for Confidential Treatment.(b)
Reports on Form 8-K
On October 10, 2002, we filed with the SEC a report on Form 8-K stating
that, on October 4, 2002, we raised approximately $930,000 through a
private placement of our common stock.
- 43 -
Item 14 Controls and Procedures
Within 90 days prior to the filing date of this Annual Report on Form
10-K, the Company's management, including the Acting Chief Executive Officer,
Chief Financial Officer, carried out an evaluation of the effectiveness of the
Company's disclosure controls and procedures as defined in Exchange Act Rule
13a-14. Based upon that evaluation, the Acting Chief Executive Officer and Chief
Financial Officer has concluded that the Company's current disclosure controls
and procedures are effective. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of the evaluation by the Acting Chief
Executive Officer and Chief Financial Officer.
The design of any system of controls and procedures is based in part upon
certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.
Item 15 Principal Accountant Fees and Services
Current Year
Audit Fees
PricewaterhouseCoopers LLP billed SIGA $101,580 in the aggregate, for
professional services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended December 31, 2002, and the reviews of the
interim financial statements included in SIGA's form 10-QSB filed during the
year ended December 31, 2002.
Audit Related Fees
PricewaterhouseCoopers LLP billed SIGA $255,690 in the aggregate for
assurance and related services primarily with regard to the acquisition of
Allergy Therapeutics Holdings Ltd. rendered by them during the fiscal year ended
December 31, 2002.
Prior Year Proxy
Audit Fees
PricewaterhouseCoopers LLP billed SIGA $105,000 in the aggregate, for
professional services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended December 31, 2001, and the reviews of the
interim financial statements included in SIGA's form 10-QSB filed during the
year ended December 31, 2001.
All Other Fees
PricewaterhouseCoopers LLP billed SIGA $30,870 in the aggregate, for all
other services rendered by them (other than those covered above under "Audit
Fees") during the fiscal year ended December 31, 2001.
- 44 -
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: March 31, 2003 By: /s/ Thomas N. Konatich
------------------------------
Thomas N. Konatich
Chief Financial Officer & Acting
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
- --------- -------- ----
/s/ Donald G. Drapkin Chairman of the Board March 31, 2003
- -------------------------------------
Donald G. Drapkin
/s/ Thomas N. Konatich Acting Chief Executive Officer, March 31, 2003
- ------------------------------------- Chief Financial Officer and Secretary
Thomas N. Konatich
/s/ Gabriel M. Cerrone Director March 31, 2003
- -------------------------------------
Gabriel M. Cerrone
/s/ Thomas E. Constance Director March 31, 2003
- -------------------------------------
Thomas E. Constance
/s/ Mehmet C. Oz, M.D. Director March 31, 2003
- -------------------------------------
Mehmet C. Oz, M.D.
/s/ Eric A. Rose Director March 31, 2003
- -------------------------------------
Eric A. Rose, M.D.
/s/ Michael Weiner Director March 31, 2003
- -------------------------------------
Michael Weiner, M.D.
- 45 -
CERTIFICATION
I, Thomas N. Konatich, certify that:
1. I have reviewed this annual report on Form 10-KSB of SIGA
Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this annual report;
3. Based on my knowledge, the financial statements and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this annual report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and I have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Thomas N. Konatich
-------------------------------
Thomas N. Konatich
Acting Chief Executive Officer
and Chief Financial Officer
March 31, 2003
SIGA Technologies, Inc.
(A development stage company)
Financial Statements
December 31, 2002 and 2001
SIGA Technologies, Inc.
(A development stage company)
Index to Financial Statements
- --------------------------------------------------------------------------------
Report of Independent Accountants F-2
Balance Sheets as of December 31, 2002 and 2001 F-3
Statement of Operations for the years ended December 31, 2002 and
2001, and for the period from inception through December 31, 2002 F-4
Statement of Changes in Stockholders' Equity for the period
from inception through December 31, 2002 F-5
Statement of Cash Flows for the years ended December 31, 2002 and
2001, and for the period from inception through December 31, 2002 F-8
Notes to Financial Statements F-9
F-1
Report of Independent Accountants
To the Board of Directors and Stockholders
of SIGA Technologies, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, of cash flows and of changes in stockholders' equity (deficit)
present fairly, in all material respects, the financial position of SIGA
Technologies, Inc. (a development stage company) at December 31, 2002 and 2001,
and the results of its operations and cash flows for the years ended December
31, 2002 and 2001, and for the period from December 28, 1995 ("Inception")
through December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America. 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 audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America 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 our opinion.
\s\PricewaterhouseCoopers LLP
- -----------------------------
New York, New York
February 14, 2003
F-2
SIGA Technologies, Inc.
(A development stage company)
Balance Sheets
- --------------------------------------------------------------------------------
December 31,
2002 2001
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 2,069,004 $ 3,148,160
Accounts receivable 60,151 55,000
Prepaid expenses 104,227 153,416
------------ ------------
Total current assets 2,233,382 3,356,576
Equipment, net 432,442 703,239
Other assets 164,168 147,873
------------ ------------
Total assets $ 2,829,992 $ 4,207,688
============ ============
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 461,146 $ 210,391
Accrued expenses and other 184,554 263,616
Capital lease obligations 11,206 192,196
------------ ------------
Total liabilities 656,906 666,203
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
authorized, 410,760 and 379,294 issued and outstanding at
December 31, 2002 and 2001, respectively) 443,674 398,441
Common stock ($.0001 par value, 50,000,000 shares authorized,
12,902,053 and 10,139,553 issued and outstanding at December 31,
2002 and 2001, respectively) 1,293 1,016
Additional paid-in capital 32,051,461 29,348,786
Stock subscriptions outstanding (791,940) --
Deferred compensation -- (35,583)
Deficit accumulated during the development stage (29,531,402) (26,171,175)
------------ ------------
Total stockholders' equity 2,173,086 3,541,485
------------ ------------
Total liabilities and stockholders' equity $ 2,829,992 $ 4,207,688
============ ============
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,
1995 (Date of
Year Ended December 31, Inception) to
---------------------------- December 31,
2002 2001 2002
Revenues:
Research and development contracts $ 344,450 $ 1,159,500 $ 3,631,631
------------ ------------ ------------
Operating expenses:
General and administrative 1,838,470 2,570,869 17,221,915
Research and development (including amounts to
related parties of $59,000, $104,000, and $547,581
for the years ended December 31, 2002 and
2001, and for the period from the date of inception 1,766,368 1,733,188 13,775,444
to December 31, 2002)
Patent preparation fees 104,700 117,264 1,459,454
------------ ------------ ------------
Total operating expenses 3,709,538 4,421,321 32,456,813
------------ ------------ ------------
Operating loss (3,365,088) (3,261,821) (28,825,182)
Interest income/(expense) 34,061 (192,679) (312,983)
Loss on impairment of investment -- (275,106) (430,697)
Other income/gain on sale of securities -- -- 66,660
------------ ------------ ------------
Net loss (3,331,027) (3,729,606) (29,502,202)
Deemed dividend related to beneficial conversion feature 29,200 -- 29,200
------------ ------------ ------------
Net loss applicable to common shareholders $ (3,360,227) -- $(29,531,402)
============ ============ ============
Basic and diluted loss per share $ (.32) $ (.44)
------------ ------------
Weighted average common shares outstanding
used for basic and diluted loss per share 10,450,529 8,499,961
============ ============
Comprehensive loss:
Net loss $ (3,331,027) $ (3,729,606) $(29,502,202)
------------ ------------ ------------
Total comprehensive loss $ (3,331,027) $ (3,729,606) $(29,502,202)
============ ============ ============
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)
- --------------------------------------------------------------------------------
Series A
Convertible
Preferred Stock Common Stock Additional
------------------------ ----------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- --------- -----------
Issuance of common stock at inception $ $ 2,079,170 $ 208 $ 1,040
Net loss -- -- --
----------- ----------- ----------- --------- -----------
Balances at December 31, 1995 -- 2,079,170 208 1,040
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 -- -- --
Issuance of compensatory options and warrants -- -- 367,461
Net loss -- -- --
----------- ----------- ----------- --------- -----------
Balances at December 31, 1996 -- 3,367,182 337 2,668,819
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 -- -- --
----------- ----------- ----------- --------- -----------
Balance at December 31, 1997 -- 6,242,182 624 15,049,723
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 -- -- --
----------- ----------- ----------- --------- -----------
Balance at December 31, 1998 -- 6,577,712 658 16,697,424
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
----------- ----------- ----------- --------- -----------
Balance at December 31, 1999 -- 6,602,712 661 16,855,499
----------- ----------- ----------- --------- -----------
Deficit
Accumulated
Stock During the
Deferred Subscriptions Development
Compensation Outstanding Stage
------------- ------------ -------------
Issuance of common stock at inception $ (1,248)
Net loss -- -- $ (1,000)
------------- ------------ -------------
Balances at December 31, 1995 -- (1,248) (1,000)
Net proceeds from issuance and sale of common stock ($1.50 per share) -- --
Net proceeds from issuance and sale of common stock ($3.00 per share) --
Receipt of stock subscriptions outstanding 1,248 --
Issuance of compensatory options and warrants -- --
Net loss -- -- (2,268,176)
------------- ------------ -------------
Balances at December 31, 1996 -- -- (2,269,176)
Net proceeds from issuance and sale of common stock ($5.00 per share)
Issuance of warrants with bridge notes -- --
Stock option and warrant compensation -- --
Net loss -- -- (2,194,638)
------------- ------------ -------------
Balance at December 31, 1997 -- -- (4,463,814)
Issuance of common stock to acquire third party's
right to certain technology ($4.34 per share)
Issuance of compensatory options and warrants -- --
Stock option and warrant compensation -- --
Unrealized losses on available for sale securities -- --
Net loss -- -- (6,551,666)
------------- ------------ -------------
Balance at December 31, 1998 -- -- (11,015,480)
Issuance of common stock for software development ($1.25 per share)
Issuance of compensatory common stock, options and warrants
Stock option and warrant compensation
Unrealized gains on available for sale securities
Net loss (3,636,500)
------------- ------------ -------------
Balance at December 31, 1999 -- -- (14,651,980)
------------- ------------ -------------
Unrealized
Gains (Losses) Total
on Available Stockholders'
for Sale of 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
------------- ------------
(Continued)
F-5
SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
- --------------------------------------------------------------------------------
Series A
Convertible
Preferred Stock Common Stock Additional
------------------------ ----------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- --------- -----------
Net proceeds from exercising of stock options $ 19,875 $ 2 $ 52,772
Net proceeds from the issuance of common stock ($5.0 per share) 600,000 60 2,882,940
Issuance of common stock in connection with software development 102,721 10 500,334
Issuance of common shares in connection with acquisition of 12.5%
equity interest in a private company 40,336 4 179,996
Issuance of common shares upon conversion of debentures 90,193 9 49,246
Warrants granted in connection with the issuance of debentures 1,320,170
Issuance of compensatory options and warrants to non-employees 1,218,145
Issuance of compensatory options to employees 278,750
Stock options and warrants compensation related to services received
from non-employees 185,876
Amortization of deferred compensation
Issuance of shares in exchange for services 16,000 1 (1)
Amendment of warrants issued to a non-employee for services 270,256
Net loss
----------- ----------- ----------- --------- -----------
Balance at December 31, 2000 7,471,837 747 23,793,983
----------- ----------- ----------- --------- -----------
Issuance of preferred stock upon conversion of debentures 1,011,593 1,036,707
Common stock issued upon conversion of preferred series A stock (632,299) (638,266) 641,719 64 651,735
Net proceeds from issuance of common stock ($2.00 to $3.00 per share 1,684,636 169 4,356,801
Issuance of common shares upon conversion of stock options 167,250 17 196,846
Issuance of common shares upon exercising of warrants 70,000 7 159,613
Issuance of restricted common stock to non-employee 50,000 5 77,328
Issuance of common shares upon cashless warrant exercise 35,640 4 (4)
Issuance of common stock upon conversion of debentures 18,471 3 15,916
Issuance of compensatory stock options to the board of directors 612,750
Cancellation of warrants issued to consultant (783,598)
Compensation charge relating to common stock issued below
fair value market 103,040
Compensation charge relating to modification of options to acquire
common shares 72,660
Amortization of deferred compensation
Stock options issued to non-employee 79,054
Warrants issued to a non-employee 28,318
Forfeiture of options issued to a director (15,656)
Net loss
----------- ----------- ----------- --------- -----------
Balance at December 31, 2001 379,294 398,441 10,139,553 1,016 29,348,786
Deficit
Accumulated
Stock During the
Deferred Subscriptions Development
Compensation Outstanding Stage
------------- ------------ -------------
Net proceeds from exercising of stock options
Net proceeds from the issuance of common stock ($5.0 per share)
Issuance of common stock in connection with software development
Issuance of common shares in connection with acquisition of 12.5%
equity interest in a private company
Issuance of common shares upon conversion of debentures
Warrants granted in connection with the issuance of debentures
Issuance of compensatory options and warrants to non-employees $ (1,218,145)
Issuance of compensatory options to employees (278,750)
Stock options and warrants compensation related to services received
from non-employees
Amortization of deferred compensation 1,068,470
Issuance of shares in exchange for services
Amendment of warrants issued to a non-employee for services
Net loss $ (7,789,589)
------------- ------------ -------------
Balance at December 31, 2000 (428,425) -- (22,441,569)
------------- ------------ -------------
Issuance of preferred stock upon conversion of debentures
Common stock issued upon conversion of preferred series A stock
Net proceeds from issuance of common stock ($2.00 to $3.00 per share
Issuance of common shares upon conversion of stock options
Issuance of common shares upon exercising of warrants
Issuance of restricted common stock to non-employee
Issuance of common shares upon cashless warrant exercise
Issuance of common stock upon conversion of debentures
Issuance of compensatory stock options to the board of directors
Cancellation of warrants issued to consultant 248,713
Compensation charge relating to common stock issued below
fair value market
Compensation charge relating to modification of options to acquire
common shares
Amortization of deferred compensation 121,389
Stock options issued to non-employee
Warrants issued to a non-employee 7,084
Forfeiture of options issued to a director 15,656
Net loss (3,729,606)
------------- ------------ -------------
Balance at December 31, 2001 (35,583) -- (26,171,175)
Unrealized
Gains (Losses) Total
on Available Stockholders'
for Sale of Equity
Securities (Deficit)
-------------- ------------
Net proceeds from exercising of stock options $ 52,774
Net proceeds from the issuance of common stock ($5.0 per share) 2,883,000
Issuance of common stock in connection with software development 500,344
Issuance of common shares in connection with acquisition of 12.5% --
equity interest in a private company 180,000
Issuance of common shares upon conversion of debentures 49,255
Warrants granted in connection with the issuance of debentures 1,320,170
Issuance of compensatory options and warrants to non-employees --
Issuance of compensatory options to employees --
Stock options and warrants compensation related to services received
from non-employees 185,876
Amortization of deferred compensation 1,068,470
Issuance of shares in exchange for services --
Amendment of warrants issued to a non-employee for services 270,256
Net loss (7,789,589)
Balance at December 31, 2000 -- 924,736
Issuance of preferred stock upon conversion of debentures 1,036,707
Common stock issued upon conversion of preferred series A stock 13,533
Net proceeds from issuance of common stock ($2.00 to $3.00 per share 4,356,970
Issuance of common shares upon conversion of stock options 196,863
Issuance of common shares upon exercising of warrants 159,620
Issuance of restricted common stock to non-employee 77,333
Issuance of common shares upon cashless warrant exercise --
Issuance of common stock upon conversion of debentures 15,919
Issuance of compensatory stock options to the board of directors 612,750
Cancellation of warrants issued to consultant (534,885)
Compensation charge relating to common stock issued below
fair value market 103,040
Compensation charge relating to modification of options to acquire
common shares 72,660
Amortization of deferred compensation 121,389
Stock options issued to non-employee 79,054
Warrants issued to a non-employee 35,402
Forfeiture of options issued to a director --
Net loss (3,729,606)
--
------------- ------------
Balance at December 31, 2001 -- 3,541,485
(Continued)
F-6
SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
- --------------------------------------------------------------------------------
Series A
Convertible
Preferred Stock Common Stock Additional
------------------------ ----------------------- Paid-in
Shares Amount Shares Amount Capital
----------- ----------- ----------- --------- -----------
Net proceeds from issuance of common stock
($1.00 to $1.09 per share) 2,737,500 274 2,559,924
Issuance of common shares upon exercise of stock options 25,000 3 28,093
Issuance of preferred stock to settle dividends payable 31,466 45,233
Amortization of deferred compensation
Stock options issued to non-employee 85,458
Deemed dividend related to beneficial conversion feature 29,200
Net loss
----------- ----------- ----------- --------- -----------
Balance at December 31, 2002 410,760 $ 443,674 12,902,053 $ 1,293 $32,051,461
=========== =========== =========== ========= ===========
Deficit
Accumulated
Stock During the
Deferred Subscriptions Development
Compensation Outstanding Stage
------------- ------------ -------------
Net proceeds from issuance of common stock
($1.00 to $1.09 per share) (791,940)
Issuance of common shares upon exercise of stock options
Issuance of preferred stock to settle dividends payable
Amortization of deferred compensation 35,583
Stock options issued to non-employee
Deemed dividend related to beneficial conversion feature (29,200)
Net loss (3,331,027)
------------- ------------ -------------
Balance at December 31, 2002 $ -- $ (791,940) $ (29,531,402)
============= ============ =============
Unrealized
Gains (Losses) Total
on Available Stockholders'
for Sale of Equity
Securities (Deficit)
-------------- ------------
Net proceeds from issuance of common stock
($1.00 to $1.09 per share) 1,768,258
Issuance of common shares upon exercise of stock options 28,096
Issuance of preferred stock to settle dividends payable 45,233
Amortization of deferred compensation 35,583
Stock options issued to non-employee 85,458
Deemed dividend related to beneficial conversion feature --
Net loss (3,331,027)
------------- ------------
Balance at December 31, 2002 $ -- $ 2,173,086
============= ============
The accompanying notes are an integral part of these financial statements.
F-7
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,
2002 2001 2002
Cash flows from operating activities:
Net loss $ (3,331,027) $ (3,729,606) $(29,502,202)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 317,032 324,463 1,592,381
Stock, options and warrant compensation 121,041 566,743 2,996,784
Loss on impairment of investment -- 275,106 430,697
Loss on write-off of capital equipment -- -- 97,969
Amortization of debt discount -- 232,393 954,705
Write-off of in-process research and development -- -- 1,457,458
Realized gain on sale of marketable securities -- -- (66,660)
Non-cash research and development -- -- 500,344
Changes in assets and liabilities:
Accounts receivable (5,151) (17,200) (60,151)
Prepaid expenses and other current assets 49,189 (147,772) (104,227)
Other assets (16,295) 8,683 (164,167)
Accounts payable and accrued expenses 216,926 (477,649) 704,465
Accrued interest -- 20,390 100,672
------------ ------------ ------------
Net cash used in operating activities (2,648,285) (2,944,449) (21,061,932)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (46,235) -- (2,203,489)
Sale (purchase) of investment securities -- -- 66,660
Investment in Open-I-Media -- -- (170,000)
------------ ------------ ------------
Net cash flow used in investing activities (46,235) -- (2,306,829)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock 1,768,258 4,356,970 23,488,284
Receipts of stock subscriptions outstanding -- -- 1,248
Gross proceeds from sale of convertible debentures -- 1,500,000
Proceeds from exercise of stock options and
warrants to acquire common stock 28,096 356,483 437,353
Net proceeds from sale of warrants -- 52,174
Convertible debentures and warrant issuance costs -- (52,500)
Proceeds from bridge notes -- 1,000,000
Repayments of bridge notes -- (1,000,000)
Proceeds from sale and leaseback of equipment -- 1,139,085
Principal payments on capital lease obligations (180,990) (328,229) (1,127,879)
------------ ------------ ------------
Net cash provided from financing activities 1,615,364 4,385,224 25,437,765
------------ ------------ ------------
Net increase in cash and cash equivalents (1,079,156) 1,440,775 2,069,004
Cash and cash equivalents at beginning of period 3,148,160 1,707,385 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 2,069,004 $ 3,148,160 $ 2,069,004
============ ============ ============
Supplemental disclosure of non-cash
investing and financing activities:
Fixed assets exchanged in acquisition $ -- $ -- $ 80,697
============ ============ ============
Fair value of common shares exchanged in acquisition $ -- $ -- $ 180,000
============ ============ ============
Notes payable converted into equity $ -- $ 1,375,000 $ 1,500,000
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-8
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
1. Organization and Basis of Presentation
Organization
SIGA Technologies, Inc. ("SIGA" or the "Company") was 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.
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 on a basis which
assumes that the Company will continue as a going concern and which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. Since inception the
Company has incurred cumulative net losses of $29,502,202 and expects to
incur additional losses to perform further research and development
activities. The Company does not have commercial biomedical products and
management 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.
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.
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 applies the guidance provided by Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements ("SAB 101"). Under the
provisions of SAB 101 the Company recognizes revenue from government
research grants, contract research and development and progress payments
as services are performed, provided a contractual
F-9
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
arrangement exists, the contract price is fixed or determinable, and the
collection of the resulting receivable is probable. In situations where
the Company receives payment in advance of the performance of services,
such amounts are deferred and recognized as revenue as the related
services are performed. Non-refundable fees are recognized as revenue over
the term of the arrangement or based on the percentage of costs incurs to
date, estimated costs to complete and total expected contract revenue.
Milestones, which generally are related to substantial scientific or
technical achievements are recognized in income when the milestone is
accomplished.
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 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
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 operating results.
At December 31, 2002 and 2001, 410,760 and 379,294 shares, respectively,
of the Company's Series A convertible preferred stock have been excluded
from the computation of diluted loss per shares as they are anti-dilutive.
At December 31, 2002 and 2001, outstanding options to purchase 5,807,561
and 5,139,811 shares, respectively, of the Company's common stock 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. At
December 31, 2002 and 2001, outstanding warrants to purchase 4,675,144 and
4,231,428 shares, respectively, of the Company's common stock, with
exercise prices ranging from $1.00 to $8.25 have been excluded from the
computation of diluted loss per share as they are anti-dilutive.
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. Significant estimates include the value of options and
warrants granted by the Company. Actual results could differ from those
estimates.
F-10
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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 (FAS)
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). As
provided for by FAS 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, ("APB 25")"Accounting for
Stock Issued to Employees." Accordingly, compensation expense has been
recognized to the extent of employee 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 FAS
123.
Had compensation cost for stock options granted been determined based upon
the fair value at the grant date for awards, consistent with the
methodology prescribed under FAS 123, the Company's net loss and net loss
per share would have been as follows:
12 Months Ended
December 31,
2002 2001
Net loss, as reported ($ 3,360,227) ($ 3,729,606)
============ ============
Add: Stock-based employee compensation expense
recorded under APB No. 25 35,583 121,389
Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects (153,882) (7,163,483)
------------ ------------
Pro forma net loss ($ 3,478,526) ($10,771,700)
============ ============
Net loss per share:
Basic-as reported ($ 0.32) ($ 0.44)
============ ============
Basic-pro forma ($ 0.33) ($ 1.27)
============ ============
The fair value of the options granted to employees during 2002 and 2001
ranged from $0.09 to $2.08 on the date of the respective grant using the
Black-Scholes option-pricing model. The following weighted-average
assumptions were used for 2002: no dividend yield, expected volatility of
100%, risk free interest rates of 2.87%-4.50% and an expected term of 3 to
5 years.
F-11
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
The following weighted-average assumptions were used for 2001: no dividend
yield, expected volatility of 100%, risk free interest rates of
3.85%-4.74%, and an expected term of 3 to 5 years.
Reclassifications
Certain prior year amounts have been reclassified to conform to current
year presentation. The impact of these changes is not material and did not
affect net loss.
Recent pronouncements
In 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (FAS) No. 148 "Accounting for
Stock-Based Compensation - Transition and Disclosure an amendment of FASB
Statement No. 123" ("FAS 148"). This Statement amends Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), to provide alternative methods of transition
for an entity that voluntarily changes to the fair value based method of
accounting for stock-based employee compensation. It also amends the
disclosure provisions of that FAS 123 to require prominent disclosure
about the effects on reported net income of an entity's accounting policy
decisions with respect to stock-based employee compensation. Finally, this
Statement amends APB Opinion No. 28, "Interim Financial Reporting", to
require disclosure about those effects in interim financial information.
The Company adopted the disclosure provisions of FAS 148.
In July 2002, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" ("FAS 146"). FAS 146 addresses the recognition, measurement
and reporting of costs associated with exit or disposal activities that
are currently accounted for pursuant to Emerging Issues Task Force Issue
No. 94-3, Liabilities Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity. Under FAS 146, such
liabilities, with the exception of certain one-time termination benefits,
will be recognized and measured initially at their fair value in the
period in which the liability is incurred. FAS 146 is effective for fiscal
years beginning after December 15, 2002.
F-12
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
3. Equipment
Equipment consisted of the following at December 31, 2002 and 2001:
Laboratory equipment $ 896,862 $ 862,005
Leasehold improvements 627,849 618,315
Computer equipment 155,204 153,360
Furniture and fixtures 291,637 291,637
----------- -----------
1,971,552 1,925,317
Less - Accumulated depreciation (1,539,110) (1,222,078)
----------- -----------
Equipment, net $ 432,442 $ 703,239
=========== ===========
Depreciation expense for the years ended December 31, 2002 and 2001 was
$317,032 and $324,463, respectively.
At December 31, 2002 and 2001, 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 $684,400, $117,000 and
$190,829, respectively, at December 31, 2002, and $538,300, $78,000 and
$149,171, respectively, at December 31, 2001.
4. Stockholders' Equity
At December 31, 2002, the Company's authorized share capital consisted of
60,000,000 shares, of which 50,000,000 are designated common shares and
10,000,000 are designated preferred shares. The Company's Board of
Directors is authorized to issue preferred shares in series with rights,
privileges and qualifications of each series determined by the Board.
Private Placement Offerings
2002 Placements
In December 2002, the Company raised gross proceeds of $1.865 million in a
private offering of common stock and warrants to purchase the Company's
common stock. The Company sold 1,700,000 shares of common stock. In
connection with the offering the Company issued 171,216 warrants to
purchase shares of the Company's common stock to placement agents. The
warrants are exercisable at a price of $1.65 and have a term of five
years. The fair value of the warrants on the date of grant was
approximately $188,970. The Company received net proceeds of $891,000
prior to December 31, 2002 and net proceeds of $791,940 after December 31,
2002. As such, as of December 31, 2002, the Company has recorded a
subscription receivable of $791,940.
In October 2002, the Company raised gross proceeds of $1.04 million in a
private offering of common stock and warrants to purchase the Company's
common stock. The Company sold 1,037,500 shares of common stock and
518,750 warrants. The warrants are exercisable at $2.25
F-13
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
and have a term of five years. In connection with the offering the Company
issued 103,750 warrants to purchase shares of the Company's common stock
to placement agents. The warrants are exercisable at a price of $1.50 and
have a term of five years. The fair value of the warrants attributable to
consultants on the date of grant was approximately $64,670.
Years 2001 and Prior
In October 2001, the Company raised gross proceeds of $2.55 million in a
private offering of common stock and warrants to purchase the Company's
common stock. The Company sold 850,000 shares of common stock and 425,000
warrants. The warrants are exercisable at $3.60 and have a term of seven
years. In connection with the offering the Company issued 100,000 warrants
to purchase shares of the Company's common stock to consultants. The
warrants are exercisable at a price of $3.60 and have a term of five
years. The fair value of the warrants on the date of grant was
approximately $221,300.
In August 2001, the Company raised gross proceeds of $1,159,500 in a
private offering of 409,636 shares of common stock and 307,226 warrants to
purchase shares of the Company's common stock. The warrants are
exercisable at $3.55 per share and have a term of seven years.
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 representing the intrinsic
value of the restricted stock purchased by members of the board of
directors.
In March 2000 the Company entered into an agreement to sell 600,000 shares
of the Company's common stock and 450,000 warrants to acquire shares of
the Company's common stock (the "March Financing") for gross proceeds of
$3,000,000. Of the warrants issued, 210,000, 120,000 and 120,000 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. At December 31, 2002, all 450,000 warrants were outstanding.
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 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 recorded a charge of
approximately $270,000 in the year ended December 31, 2000.
F-14
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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 was 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. The warrants are exercisable for a
period of five years.
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. Additionally, during the years ended December 31, 2001 and
2000, the Company recorded interest expense of $232,393 and $589,312
respectively, related to the amortization of such debt discount. In 2001
and 2000, debentures with a principal amount of $1,375,000 and $108,664,
respectively, along with accrued interest, were converted into 1,011,593
and 108,884 shares of the Company's preferred and common stock,
respectively.
In connection with the January 2000 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 was amortized over the term of the
debentures.
Holders of the Series A Convertible Preferred Stock are entitled to (i)
cumulative dividends at the annual rate of 6% payable when and if declared
by the Company's board of directors; (ii) in the event of liquidation of
the Company, each holder is entitled to receive $1.4375 per share (subject
to certain adjustment) plus all accrued but unpaid dividends; (iii)
convert each share of Series A to a number of fully paid and
non-assessable shares of common stock as calculated by dividing $1.4375 by
the Series A Conversion Price (shall initially be $1.4375); and (iv) vote
with the holders of other classes of shares on an as converted basis.
As of December 31, 2001, all of the debentures were converted into shares
of the Company's preferred or common stock.
In November 1999, 16,000 shares of the Company's common stock were issued
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 issued
the shares in 2000.
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
F-15
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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
1996 Incentive and Non-Qualified Stock Option Plan
In January 1996, the Company implemented its 1996 Incentive and
Non-Qualified Stock Option Plan (the "Plan"). The Plan as amended provided
for the granting of up to 7,500,000 shares of the Company's common stock
to employees, consultants and outside directors of the Company. 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 completion of each year of service subsequent to the grant.
Transactions under the Plan are summarized as follows:
Weighted
Average
Number of Exercise
Shares Price
Outstanding at January 1, 2001 2,167,061 $2.26
Granted 3,660,000 2.67
Forfeited (500,125) 3.60
Exercised (187,125) 1.26
---------- -----
Outstanding at December 31, 2001 5,139,811 2.50
Granted 777,750 2.66
Forfeited (85,000) 3.80
Exercised (25,000) 1.13
---------- -----
Total outstanding at December 31, 2002 5,807,561 $2.52
========== =====
Options available for future grant at December 31, 2002 1,480,314
Weighted average fair value of options granted during 2002 $ 0.71
Weighted average fair value of options granted during 2001 $ 1.84
F-16
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
The following table summarizes information about options outstanding at
December 31, 2002:
Weighted Number
Number Average Weighted Exercisable Weighted
Outstanding Remaining Average at Average
December 31, Contractual Exercise December 31, Exercise
2002 Life (Years) Price 2002 Price
$ 1.00 10,000 6.86 1.00 10,000 1.00
1.13 300,000 6.81 1.13 300,000 1.13
1.50 167,084 8.48 1.50 36,528 1.50
2.00 - 2.75 4,842,250 8.12 2.38 4,531,625 2.38
3.94 - 5.50 488,227 5.99 4.55 416,894 4.66
-------------- --------------
5,807,561 5,295,047
============== ==============
The following tables summarize information about warrants outstanding at
December 31, 2002:
Number of Weighted Average Expiration
Warrants Exercise Price Dates
Outstanding at January 1, 2001 3,694,202 $ 4.04
------
Granted 1,257,226 3.37 05/31/08 - 10/15/08
Exercised (120,000) 1.85
Canceled / Expired (600,000) 6.43
--------- ------
Outstanding at December 31, 2001 4,231,428 3.61
Granted 793,716 2.03 09/30/07 - 12/31/07
Canceled / Expired (350,000) 7.32
---------
Outstanding at December 31, 2002 4,675,144 $3.06
--------- ------
Number
of Warrants Exercise
Outstanding Price
100,000 1.00
679,966 1.45 - 1.65
877,750 2.00 - 2.25
2,551,212 2.94 - 3.63
226,216 4.63 - 5.00
240,000 6.38 - 6.90
----------------
4,675,144
----------------
F-17
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
2002 Grants
At December 31, 2002, options granted outside of the plan included 125,000
options granted to an employee and 125,000 options granted to consultants.
In September 2002, the Company entered into a four-month consulting
agreement under which the consultant assists the Company with public
relations efforts in the United States of America and Europe in exchange
for a monthly retainer of $3,500 for the four-month term and 50,000 fully
vested options to purchase shares of the Company's common stock. Of the
amount of fully vested options, 25,000 shares have an exercise price of
$1.50 per share and 25,000 shares have an exercise price of $1.75. Upon
grant, the Company recorded a $31,618 stock compensation charge to
operations based upon the fair value of the options.
In April 2002, in connection with an existing consulting agreement, the
Company granted a consultant an option to purchase 15,000 shares of the
Company's common stock under the Plan. Upon grant, the Company recorded a
$10,269 stock compensation charge to operations based upon the fair value
of the option.
Years 2001 and Prior
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. During the year ended
December 31, 2001, the Company has recorded stock compensation charges to
earnings in the amount of $77,333.
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 new board of directors. Subsequent to the approval by the
shareholders the Company recorded charges to earnings in the amount of
$612,750 based upon the difference between the fair market value and the
exercise price of the options.
In July 2000, the Company entered into an agreement with a consultant to
serve as the Company's public relations agent. The consultant is paid a
monthly retainer of $6,000 and received options to purchase 75,000 shares
of the Company's common stock: 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 year ended December 31, 2000, the Company recorded a
non-cash charge associated with such options in the amount of $160,314.
The options were vested and exercisable at December 31, 2000. No charge
was recorded for the year ended December 31, 2001.
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,
has been 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
F-18
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
incurred under the agreement amounted to $75,000 and $75,000 for the years
ended December 31, 2000 and 1999, respectively. In June 2001, the Company
entered into an amended consulting agreement with the scientist under
which the scientist will provide services to the Company for a three year
period commencing on September 10, 2001. In consideration for the
consulting services the scientist will be paid an annual fee of $50,000
payable quarterly. In addition, the Company granted the scientist 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 years ended December 31, 2002 and 2001, the Company recorded a charge
of $58,904 and $79,000, respectively. In September 2002, the Company and
the consultant terminated their arrangement and all unvested options were
forfeited.
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. Under the provisions of the agreement, the
consultant received 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 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 become exercisable over a period of five years.
Unvested warrants terminate in the event the agreement is terminated.
During the year ended December 31, 2000, the Company recorded a non-cash
charge associated with such warrants in the amount of $645,786. In January
2001 the Company and the consultant terminated their arrangement. In
addition to the cancellation of 300,000 unvested warrants, the consultant
agreed to return 150,000 of its vested warrants to the Company. In
connection with the cancellation and return of the vested warrants, the
Company recorded a non-cash benefit of $535,000 in the results of its
operations for the year ended December 31, 2001.
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 became exercisable on January 19, 2001. During the
year ended December 31, 2001 and December 31, 2000, the Company recorded a
non-cash charge associated with such warrants in the amount of $35,402 and
$134,598, respectively.
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 were exercisable on the date of grant and
the remaining 50,000 on the first anniversary of the consulting agreement.
The warrants must be exercised on or prior to September 9, 2004. The
Company recognized non-cash compensation expense of $108,202 and $46,848
for the years ended December 31, 2000 and 1999, respectively, based upon
the fair value of such warrants. All the warrants were vested and
exercisable at December 31, 2000.
F-19
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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 options have a term of five
years. The Company recognized non-cash compensation expense of $41,424 and
$58,480 for the years ended December 31, 2000 and 1999, 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 in connection with an operating lease. The Company recognized a
non-cash charge 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. These warrants expire on November 18,
2006. Upon termination of the employment agreement on April 21, 1998,
230,508 unvested warrants were surrendered to the Company. 230,508 of the
warrants are still outstanding at December 31, 2002.
5. Related Parties
Employment agreements
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 paid an annual minimum compensation of $225,000, and were
granted a minimum of 16,666 options to purchase shares of the Company's
common stock per annum. The Company incurred $450,000 of expense for the
year ended December 31, 1999 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, which
expire in ten years. 37,500 options vested immediately, 75,000 vested in
November 2000, and the remaining 37,500 vested in November 2001.
In January 2000, the Company entered into new employment agreements with
its 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 Company's 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
F-20
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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.
On March 30, 2001, the Company, its EVPs and certain investors (the
"Investors") in the Company entered into an agreement under which the
EVP's agreed to resign from SIGA and use their best efforts to cause each
of the current directors of SIGA to resign. Under the agreement, certain
Investors were to be appointed as Chairman of the Board and as Chief
Executive Officer. In addition, as prescribed in the agreement, the
amended employment agreement entered into by the Company and the EVPs in
October 2000 was terminated with no cost to the Company, the vesting of
37,500 options granted to the EVPs was accelerated, exercise terms were
extended and the EVPs are entitled to certain benefits until April 2003.
In addition, each of the parties to the agreement have agreed to lock up
their respective shares of common stock and options of SIGA for 24 months
subject to certain release provisions. In connection with the amendment of
the terms of the EVP's options, the Company recorded a non-cash charge of
$73,000 in the year ended December 31, 2001.
In January 2000, the Company amended its employment agreement with its
CFO, 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 and a tax gross-up payment. 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 and a tax
gross-up payment.
In January 2002, the Company and its Chief Financial Officer ("CFO")
entered into an amendment to the CFO's employment agreement, extending his
employment until December 31, 2002. In November 2002, the employment
agreement was amended and extended until September 30, 2004. Under the
amended agreement, compensation is set at an annual minimum base salary of
$210,000 and options of 150,000 were granted under the Plan at an exercise
price of $2.50 per share. Of such grant, 75,000 shares vested immediately
and 75,000 shares will vest on September 1, 2003.
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. During the year ended
F-21
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
December 31, 2001 and 2000, the Company recorded non-cash compensation
charges of $112,168 and $130,999 related to these options, respectively.
In October 2002, the employment agreement was amended and extended until
December 31, 2005. Under the amended agreement, compensation is set at an
annual minimum base salary of $210,000 and options of 300,000 shares were
granted at an exercise price of $2.50. Upon such grant, the CSO was
required to surrender 50,000 shares granted under a previous grant with an
exercise price of $3.94. Under the new grant, 75,000 shares vested
immediately and 75,000 shares will vest on September 1, 2003, 2004 and
2005, respectively, pursuant to the Plan. As such, 50,000 options are
considered variable options under APB 25 as replacement awards for the
options surrendered. For the year ended December 31, 2002, there was no
stock compensation charge as the fair value of the options was below the
exercise price.
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. As of December 31,
2001, the VPs were no longer with the Company. The employees forfeited
12,500 and 100,000 unvested options at December 31, 2001 and 2000,
respectively.
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. In October 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.
6. Income Taxes
The Company has incurred losses since inception, which have generated net
operating loss carryforwards of approximately $19,356,114 and $16,575,000,
respectively, at December 31, 2002 and 2001 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, 2002 and 2001 of
approximately $11,143,534 and $9,811,000, 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, 2002 and 2001, 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.
F-22
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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 October 2002, the Company entered into a collaborative research
agreement with Trans Tech Pharma, Inc. (Trans Tech), a related party, for
the discovery and treatment of human diseases. Under the terms of the
agreement, Trans Tech and the Company have agreed to contribute each of
their respective services and share in equal costs of specified research
projects. In consideration of the services performed by Trans Tech and use
of its proprietary technology, SIGA grants an exclusive, fully-paid,
nontransferable, nonsublicenseable, limited license to use existing rights
to patents and technologies. Both parties will share equally in the
ownership of compounds and related intellectual property derived from such
research efforts.
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, the Company recognized $337,500 in revenue related to this
agreement. In 2000, the Company received $450,000 from the Collaborator.
The Company recorded the entire amount as deferred revenue on December 31,
2000 and recognized it in its results of operations upon the signing of an
amendment to the agreement in May 2001. In addition, for the year ended
December 31, 2001, the Company recorded $575,000 in revenue relating to
the agreement of which $237,500 reflected a milestone payment. The
sponsorship of the research at SIGA ended in September 2001. Research and
development efforts continue at Wyeth, however, the remaining contractual
milestones have not been reached as of December 31, 2002.
9. License and Research Agreements
In December 2002, the Company announced that it was awarded an initial
U.S. Government contract with the U.S. Army to develop an effective
smallpox antiviral drug. The total estimated revenue under the contract is
$1.6 million for the periods January 1, 2003 to May 31, 2007.
F-23
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
In May 2002 the Company announced that it was awarded a Phase II research
grant for a total of $865,000. The grant will support the Company's
antibiotic development program. The grant was awarded by the Small
Business Innovation Research Program of the National Institutes of Health.
The Company will receive $529,359 over the twelve month period beginning
June 1, 2002 and an additional $335,698 over the twelve month period
beginning June 1, 2003. For the twelve months ended December 31, 2002, the
Company received approximately $270,000 from this grant.
On December 6, 2000 the company entered into an exclusive license
agreement and a sponsored research agreement with the Regents of the
University of California (the "Regents"). Under the license agreement the
Company obtained rights for the exclusive commercial development, use and
sale of products related to certain inventions in exchange for a
non-refundable license issuance fee of $15,000 and an annual maintenance
fee of $10,000. In the event that the Company sub-leases the license, it
shall pay Regents 15% of all royalty payments made to SIGA. Under the
agreement, SIGA is required to pay Regents 15% of all funds received from
Wyeth-Ayesrt and a minimum annual amount of $250,000 for the continued
development of the inventions for a period of three years. Under the
sponsored research agreement SIGA was required to provide the Regents with
funding in the total amount of $300,000 over a period of two years to
support certain research. In September 2001 the sponsored research
agreement was terminated. The Company recorded total research and
development charges in the amount of $52,500 for the year ended December
31, 2000, related to the two agreements.
In February 2001, the Company entered into a subcontract agreement with
the Oregon State University. Under the agreement, the Oregon State
University subcontracted to SIGA certain duties it has under a grant
received from the National Institute of Health for the development of
Proxvirus Proteinase Inhibitors. The term of the original agreement lapses
on August 31, 2001. The agreement has been extended through August 31,
2003. During the year ended December 31, 2002, the Company recognized
revenue in the amount of $75,000.
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 was obligated to pay the Company $120,000 in three
installments of $40,000. The first payment of $40,000 was received in
March 2000 and is being 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 the Company received an additional payment of $40,000 in the
quarter ended September 30, 2000. During the years ended December 31, 2001
and 2000, the Company recognized revenue in the amount of $45,000 and
$80,000, respectively. The Company has not entered into any new research
agreements with Ross in 2002.
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.
F-24
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
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. For
the years ending December 31, 2000 and 1999 the Company had recognized
revenue from the two grants of $220,457 and $182,061, 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 Company was to acquire and the Development
Company was to develop, the source code for a client/server chat and
instant messaging application. In March 2000, the Company entered into an
agreement with the Development Company for creative and technical
services, and for business strategy consulting in exchange for $280,000 in
cash and 13,605 shares of the Company's common stock.
During the year ended December 31, 2000 the Company recognized charges of
$180,000 and $500,334 associated with cash paid and 102,721 shares of the
Company's common stock, respectively, paid and granted under the
agreements. Costs related to this agreement were recognized as the
services were performed or upon meeting certain milestones as defined
under the agreements. The Company recorded all amounts paid under the
development agreements, 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. 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. At December 31,
2002 and 2001, the Company reassessed the value of its investment in
Open-I. The Company reviewed certain events and changes in circumstances
indicating that the carrying amount of the investment in Open-I may not be
recoverable in its entirety. In 2000, management elected to reduce the
carrying amount of its investment to reflect its recoverable value as of
the year-end and recorded an impairment charge of $156,000. At December
31, 2001, management reviewed all available information and as a result of
its analysis determined that the carrying value of its investment should
be written off.
11. Other Agreements
In March 2002, the Company entered into a non-binding Letter of Intent
(the "Letter") to acquire all of the outstanding shares of Allergy
Therapeutics Holdings Ltd. ("Allergy"). Under the terms of the letter,
SIGA was to issue shares to the Allergy Stockholders that would result in
47.5% ownership to each of the former shareholders of SIGA and former
shareholders of Allergy of the outstanding common stock, on a fully
diluted basis. As part of the transaction, Elan Pharma International
Limited ("Elan") was to enter into an exclusive license for certain
technology with SIGA in exchange for 5% of the Company's common stock on a
fully diluted basis. In July 2002,
F-25
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
the Company announced the termination of the Letter to acquire all the
shares of Holdings due to unfavorable market conditions that existed at
the time of the termination. The Company incurred approximately $600,000
of expenses in connection with this contemplated transaction, of which
approximately $200,000 were still outstanding as of December 31, 2002.
In May 2000, the Company entered into a letter of intent (the "Letter") to
acquire Hypernix Technologies, Ltd, an Israel-based entity. 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 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 collateralized 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. In March 2001, the Company received a payment from Hypernix in
the amount of $84,375.
12. Segments
Since the announcement in September 1999 that the Company intended to
pursue an Internet initiative, the Company operated its Internet
initiative as a separate segment. The Internet segment generated operating
expenses of approximately $1,018,000 during 2000 and has no identifiable
assets at December 31, 2002 and 2001. At December 31, 2002 and 2001 the
Company has no internet related operations.
13. 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,
2003 $164,115
2004 173,821
2005 66,982
2006 68,321
2007 and thereafter 75,505
--------
Total $548,744
========
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 with
terms of 42 months ending December 1, 2001, January 1,
F-26
SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
2002 and February 1, 2002, respectively. At the end of the respective
leases, the Company renewed terms for an additional 12 months requiring
minimum monthly payments of $6,167, $4,818 and $3,254, respectively. The
Company has an option to purchase the equipment up to 15% of the original
cost at the end of the renewal lease terms.
Future minimum lease payments for assets under capital leases at December
31, 2002 are as follows:
Year ended December 31, 2003:
$11,326
-------
Total Minimum Payments 11,326
Less: amounts representing interest 120
-------
Present value of future minimum lease payments 11,206
Less current portion of capital lease obligations 11,206
-------
Capital lease obligations, net current portion $ --
=======
14. Subsequent Events
On February 5, 2003, the Company entered into a 12-month consulting
agreement in the amount of $249,420 to provide marketing research support.
Upon being awarded research contracts in excess of $2.0 million from such
support, the Company is obligated to issue 400,000 fully vested warrants
at an exercise price of $1.32 with an expiration of 3 years. Upon renewal
of the agreement, the Company is required to issue an additional 100,000
warrants with an exercise price set at the date of the renewal with an
expiration of 3 years. The Company has the right to terminate the
agreement after six months.
F-27
Exhibit 10(ww)
*****************************NOTICE OF GRANT AWARD*****************************
SMALL BUSINESS INNOVATION RESEARCH PROG Issue Date: 05/17/2002
Department of Health and Human Services
National Institutes Of Health
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
*******************************************************************************
Grant Number: 2 R44 A146828-02
Principal Investigator: HRUBY, DENNIS E MD
Project Title: DegP Proteinase Inhibitors: Novel Anti-Infectives
KONATICH, THOMAS
CHIEF FINANCIAL OFFICER
SIGA TECHNOLOGIES, INC
420 LEXINGTON AVE, SUITE 620
NEW YORK, NY 10170
UNITED STATES
Budget Period: 06/01/2002 - 05/31/2003
Project Period: 08/01/2000 - 05/31/2004
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of
$529,359 (see "Award Calculation" in Section I) to SIGA TECHNOLOGIES, INC. in
support of the above referenced project. This award is pursuant to the authority
of 42 USC 241 42 CFR PART 52 15 USC 638 and is subject to terms and conditions
referenced below.
Acceptance of this award including the Terms and Conditions is acknowledged by
the grantee when funds are drawn down or otherwise obtained from the grant
payment system.
Award recipients are responsible for reporting inventions derived or reduced to
practice in the performance of work under this grant. Rights to inventions vest
with the grantee organization provided certain requirements are met and there is
acknowledgement of NIH support. In addition, recipients must ensure that patent
and license activities are consistent with their responsibility to make unique
research resources developed under this award available to the scientific
community, in accordance with NIH policy. For additional information, please
visit http://www.iedison.gov.
If you have any questions about this award, please contact the individual(s)
referenced in the information below.
Sincerely yours,
/s/ Theresa Mercogliano
- -----------------------
Theresa Mercogliano
Grants Management Officer
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
See additional information below
SECTION I - AWARD DATA - 2 R44 AI46828-02
AWARD CALCULATION (U.S. Dollars):
Salaries and Wages $75,695
Personnel Costs $75,695
Equipment $105,265
Supplies $23,128
Consortium/Contractual Cost $212,730
Federal Direct Costs $416,818
Federal F&A Costs $100,036
APPROVED BUDGET $516,854
Fee $ 12,505
TOTAL FEDERAL AWARD AMOUNT $529,359
529,359
Recommended future year total cost support, subject to the availability of funds
and satisfactory progress of the project, is as follows.
03 $335,698
FISCAL INFORMATION:
CFDA Number: 93.856
EIN: ll33864870Al
Document Number: R4AI46828B
IC/ CAN / FY2002 / FY2003
AI/8425730 / 529,359 / 335,698
NIH ADMINISTRATIVE DATA:
PCC: M36 / OC: 4l.4B /Processed: MERCOGL 020514 0940
SECTION II - PAYMENT/HOTLINE INFORMATION - 2 R44 A146828-02
For Payment and HHS Office of Inspector General Hotline Information, see the NIH
Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III - TERMS AND CONDITIONS - 2 R44 A146828-02
This award is based on the application submitted to, and as approved by,
the NIH on the above-titled project and is subject to the terms and conditions
incorporated either directly or by reference in the following:
a. The grant program legislation and program regulation cited in this Notice of
Grant Award.
b. The restrictions on the expenditure of federal funds in appropriations acts,
to the extent those restrictions are pertinent to the award.
c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.
d. The NIH Grants Policy Statement, including addenda in effect as of the
beginning date of the budget period.
e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.
(see NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
for certain references cited above.)
An unobligated balance may be carried over into the next budget period without
Grants Management Officer prior approval.
This grant is subject to Streamlined Noncompeting Award Procedures (SNAP).
Treatment of Program Income:
Additional Costs
The NIAID is pleased that investigators are submitting investigator-initiated
applications to conduct exciting and important clinical research on the wide
variety of infectious diseases and infectious agents of interest to the Division
of Microbiology and Infectious Diseases. The NIAID supports clinical trials and
research through grants, such as the application that you have submitted, as
well as other funding mechanisms. The NIAID also has oversight responsibilities
to ensure compliance with government regulations and facilitate the safety of
participants in these studies. To assist us in this process, any funded
applications for clinical trials will contain within the Notice of Grant Award,
a clear outline of your responsibilities. Acceptance of the competing grant
award, as referenced above, will constitute agreement with these additional
Terms of Award. http://www.niaid.nih.gov/ncn/pdf/clinterm.pdf
Briefly, as a condition of award and before the initiation of any/each planned
clinical study, you are required to submit to your program officer the following
information:
a) A copy of the protocol
b) The proposed informed consent form. You may want to use the model developed
by the NCI (URL:
http://cancertrials.nci.nih.gov/researchers/safeguards/consent/template.html)
c) A plan for monitoring the safety of study subjects
d) A plan for serious adverse event reporting, if applicable
Division staff members are available to assist with various aspects of protocol
development, particularly in the areas of informed consent, site monitoring, and
adverse events monitoring methods. We also welcome pre-enrollment meetings to
discuss details of the study.
If we can be of further assistance, please contact your Program Administrator or
your Grants Management Officer, their names are listed below.
PAYMENT INFORMATION: The awardee organization will receive information and forms
from the Payment Management System of the Department of Health and Human
Services regarding requests for cash, manners of payment, and associated
reporting requirements. Payment may be made on a cost-reimbursement or advance
basis. Cost reimbursements may be requested monthly, quarterly, or at other
periodic intervals. Advance payments may be requested on a monthly basis only.
The telephone number for the Payment Management System Office is (301) 443-1660.
The total fixed fee for your Phase II project is $20,436 and is included in the
maximum allowable total costs. This fee is incrementally funded proportionately
for each budget period. $12,505 are allotted for payment of fixed fee for the
budget period covered by this Notice of Grant Award. Additional funds for the
remainder of the total fixed fee are intended to be allotted by a future
Notice(s) of Grant Award, and is reflected in the future year total cost
commitment base on this Notice of Grant Award. Unless and until such future
Notice(s) of Grant Award is (are) issued, the Government will not be obligated
to reimburse the grantee organization for more than the funds currently allotted
for payment of the fixed fee. An adjustment of the fee will be made in the event
the grant is terminated or future support is withheld. The fee allotted under
this Notice of Grant Award is to be drawn down from the BBS Payment System in
increments proportionate to the draw down of funds for costs.
When purchasing equipment or products under this SBIR award, the grantee shall
use only American-made items whenever possible.
Intellectual property rights: Normally, the awardee organization retains the
principal worldwide patent rights to any invention developed with United States
Government support. Under Title 37 Code of Federal Regulations Part 401, the
Government receives a royalty-free license for its use, reserves the right to
require the patent holder to license others in certain circumstances, and
requires that anyone exclusively licensed to sell the invention in the United
States must normally manufacture it substantially in the United States.
Rights and obligations related to inventions created or reduced to practice as a
result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These
inventions must be reported to the Extramural Invention Reporting and Technology
Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750, Bethesda, MD
20892-7750, (301) 435-1986. For additional
information, access the NIH link on the Interagency Edison web site
(www.iedison.gov) which includes an electronic invention reporting system,
reference information and the text to 37 CFR 401.
To the extent authorized by 35 U.S.C., Section 205, the Government will not make
public any information disclosing an NIH-supported invention for a 4-year period
to allow the awardee organization a reasonable time to file a patent
application, nor will the Government release any information that is part of
that patent application.
Allowable costs conducted by for-profit organizations will be determined by
applying the cost principles of Contracts with Commercial Organizations set
forth in 48 CFR, Subpart 31.2.
Marissa A Miller, Program Official
Phone: 301-496-7728 Email: mm459k@nih.gov
Theresa Mercogliano, Grants Specialist
SPREADSHEET
GRANT NUMBER: 2 R44 A146828-02
P.1.: HRUBY, DENNIS E
INSTITUTION: SIGA TECHNOLOGIES, INC.
YEAR 02 YEAR 03
======= =======
Salaries and Wages 75,695 92,213
Personnel Costs 75,695 92,213
Equipment 105,265
Supplies 23,128 52,115
Consortium/Contractual Cost 212,730 120,000
TOTAL FEDERAL DC 416,818 264,328
TOTAL FEDERAL F&A 100,036 63,439
TOTAL COST 516,854 327,767
YEAR 02 YEAR 03
======= =======
F&A Cost Rate 1 24.00% 24.00%
F&A Cost Base 1 416,818 264,328
F&A Costs 1 100,036 63,439
FEE 12,505 7,931
Exhibit 10(xx)
RESEARCH AND LICENSE AGREEMENT
This Research and License Agreement (this "Agreement"), made as of October
l, 2002 (the "Effective Date"), between SIGA Technologies Inc., a corporation
organized under the laws of Delaware and having a place of business at 4575 SW
Research Way, Suite 320, Corvallis, Oregon 97333 (herein referred to as "Siga")
and TransTech Pharma, Inc., a corporation organized under the laws of Delaware
and having a place of business at 4170 Mendenhall Oaks Parkway, Suite 110, High
Point, North Carolina 27265 (herein referred to as "TransTech") (Siga and
TransTech are each a "Party" and, collectively, the "Parties").
Recitals:
TransTech has developed, owns or controls rights to certain drug discovery
technology and intellectual property relating to designing, synthesizing,
testing and optimizing clinical drug candidates and Compounds.
Siga has developed, owns or controls rights to certain drug discovery
technology and intellectual property relating to biological targets.
Siga and TransTech desire to collaborate on the discovery, identification,
optimization and development of Compounds for the treatment of human diseases.
NOW, THEREFORE, in consideration of the premises recited above and the
covenants and obligations set forth below, and intending to be legally bound,
the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" means, with respect to any Party, any Person that
controls, is controlled by or is under common control with such Party. A Person
shall be regarded as in control of another entity if it owns or directly or
indirectly controls at least fifty (50%) of the voting stock or other ownership
interest of the other entity (or alternatively, with respect to foreign
entities, if it owns the maximum such ownership interest permitted by law), or
if it possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the entity or the power to elect or
appoint at least fifty (50%) of the members of the governing body of the entity.
1.2 "Business Day" means any weekday that is not a federal holiday.
1.3 "Code" shall have the meaning set forth in Section 11.3.
1.4 "Compound" is to be understood in its broadest possible sense to
encompass all types of chemical, biological or biochemical structures and
substances composed of two or more elements. Merely to illustrate the breadth of
this definition and not by way of limitation, "Compound" includes each and every
type of structure or substance composed of two or more elements of biological or
pharmaceutical interest; small and large molecules, macromolecules
Page 1 of 23
and assemblies; saccharides, carbohydrates, lipids, peptides, polypeptides,
proteins, amino and nucleic acids, derivatives of any of the foregoing and
chemical and physical combinations thereof; cell compounds, products and by
products, including without limitation antibodies, hormones and enzymes; and
various other modulators of biological activity.
1.5 "Confidential Information" means all proprietary, non-public
information and materials disclosed by one Party to the other that have or could
have commercial value or other utility in a Party's business, the unauthorized
disclosure of which could be detrimental to the disclosing Party's interests,
and which a Party takes reasonable efforts to keep confidential, without
limitation, Inventions, trade secrets, Know-How, data and materials provided by
the Parties or otherwise developed under this Agreement, research, technical,
development, manufacturing, commercialization, financial, personnel and other
business information and plans, whether in oral, written, graphic or electronic
form.
1.6 "Confidentiality Exception" shall have the meaning set forth in
Section 8.1.
1.7 "Derived" means obtained, developed, created, synthesized, designed,
derived or resulting from, based upon or otherwise generated (whether directly
or indirectly, or in whole or in part).
1.8 "Disclosing Party" shall have the meaning set forth in Section 8.1.
1.9 "Effective Date" shall have the meaning set forth in the preamble.
1.10 "Intellectual Property" means all of the following or their legal
equivalent or counterpart in any jurisdiction throughout the world: (i)
Inventions, patents, patent applications, patent disclosures and Patent Rights;
(ii) trademarks, service marks, trade dress, trade names, corporate names, logos
and Internet domain names; (iii) copyrights and copyrightable works; (iv)
registrations and applications for registration for any of the foregoing; and
(v) trade secrets, Know-How and Confidential and proprietary Information.
1.11 "Invention" means any finding, discovery, development, addition,
improvement, modification, formulation or change, whether patentable or not,
that is conceived, reduced to practice, developed, made or controlled by either
Party or both Parties under this Agreement.
1.12 "Integrated Compound Libraries" means libraries of Compounds, but not
including TTProbes(TM), synthesized by TransTech in a lead identification
process using TransTech Technology.
1.13 "Know-How" means trade secrets, and other unpatented technical and/or
proprietary information, data, specifications, plans, drawings, designs,
blueprints, formulae, processes and other similar items and materials. For the
avoidance of doubt, Know-How does not include Patent Rights.
1.14 "Ownership Share" shall have the meaning set forth in Section 6.2.1.
Page 2 of 23
1.15 "Patent Rights" means the rights and interests in and to all issued
patents and pending patent applications in any country, including, without
limitation, all provisional applications, substitutions, continuations,
continuations-in-part, divisions, and renewals, all letters patent granted
thereon, and all patents-of-addition, reissues, reexaminations and extensions or
restorations by existing or future extension or restoration mechanisms.
1.16 "Person" means any individual, firm, corporation, partnership,
limited liability company, trust, unincorporated organization or other entity or
a government agency or political subdivision thereto, and shall include any
successor (by merger or otherwise) of such Person.
1.17 "Product" means a drug product having Regulatory Approval comprising
at least one Program Compound.
1.18 "Program" means the collaborative scientific activities undertaken by
the Parties during the Program Term.
1.19 "Program Compound" means any Compound developed during the Program
displaying (a) biological activity of lOOnM IC50 or greater at a Screening
Target and (b) significant in vivo efficacy in an appropriate disease model at
oral doses less than 10mg/kg; provided, however, that "Program Compounds" shall
not include any TTProbes(TM).
1.20 "Program Director" means a research executive appointed by each Party
to serve as such Party's principal coordinator and liaison for the
collaboration. The Program Director appointed by Siga is referred to as the
"Siga Program Director," and the Program Director appointed by TransTech is
referred to as the "TransTech Program Director."
1.21 "Program Intellectual Property" means all Intellectual Property
relating to Program Compounds. In no event, however, shall Program Intellectual
Property include either (a) TransTech Technology or (b) Siga Technology or (c)
TTProbes(TM) or (d) Compounds in Integrated Compound Libraries that are not
themselves Program Compounds.
1.22 "Program Term" means that period of the Program beginning upon the
date the first Statement of Work is executed by the Parties and expiring on the
termination of all Research Projects.
1.23 "Project Group" means a group (as further described in Section 2.3.2)
responsible for developing a particular Research Project plan, recommending
allocation of resources to the Steering Committee, developing timelines,
milestones and all day-to-day activities associated with the execution of such
Research Project plan.
1.24 "Publication" shall have the meaning set forth in Section 8.2.3.
1.25 "Receiving Party" shall have the meaning set forth in Section 8.1.
1.26 "Regulatory Approval" means the technical, medical and scientific
licenses, registrations, authorizations and approvals (including, without
limitation, approvals of Biologics License Applications, supplements and
amendments, pre- and post- approvals, pricing and third-
Page 3 of 23
party reimbursement approvals, and labeling approvals) of any national,
supra-national, regional, state or local regulatory agency, department, bureau,
commission, council or other governmental entity, necessary for the commercial
manufacture, distribution, marketing, promotion, offer for sale, use, import,
export and sale of any drug product with respect to any portion of the
Territory.
1.27 "Research Project" means all research activity related to a single
Screening Target, as detailed in an applicable Statement of Work.
1.28 "Screening Targets" means molecular targets selected for use by the
Parties in connection with Research Projects pursuant to Section 3.2.
1.29 "Siga Know-How" means, collectively, all Know-How (other than
TransTech Know-How) embodied in the Siga Technology.
1.30 "Siga Patent Rights" means, collectively, all Patent Rights (other
than TransTech Patent Rights) that embody, but only to the extent they embody,
Siga Technology.
1.31 "Siga Technology" means, collectively, (a) all Screening Targets
proprietary to Siga, including but not limited to the proprietary Screening
Targets set forth in Exhibit B, and all uses thereof; (b) all proprietary or
confidential materials and information of Siga that it delivers or discloses to
TransTech under the Program or in the course of a Research Project and all uses
thereof; (c) all uses of the Screening Targets that are Derived from the
activities under this Agreement; (d) all information and materials (other than
TransTech Technology) specifically regarding the foregoing (and all tangible and
intangible embodiments thereof) that is delivered or disclosed by Siga to
TransTech or is Derived from the activities under this Agreement and all uses
thereof; and (e) Inventions owned solely by Siga. All Siga Technology that does
not fall within the scope of a Confidentiality Exception shall be Confidential
Information of Siga.
1.32 "Statement of Work" means each statement in the form attached as
Exhibit A, and forming a part hereof, which shall be prepared and executed
jointly by the parties from time to time and each of which is specific to a
particular Research Project.
1.33 "Steering Committee" shall have the meaning set forth in Section
2.1.1.
1.34 "Territory" means worldwide.
1.35 "Third Party" means a Person other than Siga, TransTech and their
respective Affiliates.
1.36 "TransTech Know-How" means, collectively, all Know-How (other than
Siga Know-How and Program Intellectual Property) embodied in the TransTech
Technology.
1.37 "TransTech Patent Rights" means, collectively, all Patent Rights
(other than Siga Patent Rights and Program Intellectual Property) that embody,
and only to the extent they embody, the TransTech Technology.
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1.38 "TransTech Technology" means, collectively, (a) the TransTech
Technology Platform and all uses thereof, (b) TTPredict(TM) and all uses
thereof; (c) TTProbes(TM) and all uses thereof, (d) TTPScreen(TM) and all uses
thereof, (e) Inventions owned solely by TransTech; (f) all proprietary or
confidential materials and information of TransTech (other than materials or
information Derived under the Program or any Research Project) which are
required to be delivered or disclosed by TransTech to Siga under the Program or
any Research Project and all uses thereof, (g) all materials (other than the
Siga Technology and the Program Intellectual Property) Derived from any of the
foregoing and all uses thereof, and (h) all information (other than the Siga
Technology and the Program Intellectual Property) specifically regarding the
foregoing (and all tangible and intangible embodiments thereof) that is
disclosed by TransTech to Siga, or Derived from the activities under this
Agreement. All TransTech Technology that does not fall within the scope of a
Confidentiality Exception shall be Confidential Information of TransTech.
1.39 "TransTech Technology Platform" means TransTech's proprietary
information system consisting of advanced databases and search tools.
1.40 "TTPredict(TM)" means proprietary and customized tools for protein
structure determination, ligand binding site discovery, efficient in silico
screening, efficient compound ranking, scoring and enumeration of Compounds
against biological targets.
1.41 "TTProbes(TM)" means compound libraries consisting of Compounds
especially designed by TransTech for lead identification.
1.42 "TTPScreen(TM)" means proprietary and customized software and
hardware tools for the high throughput multi-well microplate pipetting,
screening, data capturing and analysis of Compounds against various biological
targets.
ARTICLE 2
MANAGEMENT OF RESEARCH PROJECTS AND THE PROGRAM
2.1 Steering Committee.
2.1.1 Composition. The Parties shall establish a joint management
committee (the "Steering Committee"), comprised of three (3) representatives of
Siga (including the Siga Program Director) and three (3) representatives of
TransTech (including the TransTech Program Director). Each Party shall make its
initial designation of its representatives as soon as practicable and may
replace its representatives at any time upon prior notice to the other Party.
Each Party shall use reasonable efforts to cause its representatives to attend
the meetings of the Steering Committee. If a representative of a Party is unable
to attend a meeting, such Party may designate an alternate to attend such
meeting in place of the absent representative. In addition, each Party may, at
its discretion, invite non-voting employees, and, with the consent of the other
Party, in its discretion, outside consultants or scientific advisors, to attend
the meetings of the Steering Committee in order to, among other things, review
and discuss the Program and the Research Projects.
Page 5 of 23
2.1.2 Responsibilities. The Steering Committee shall oversee and
supervise the overall performance of the Program and shall:
(a) review and approve the efforts of the Parties in the conduct of
the Program and the Research Projects;
(b) review and approve amendments to each Statement of Work;
(c) reallocate resources within a Research Project;
(d) establish the Project Groups for each Research Project;
(e) address such other matters as either Party may bring before the
Steering Committee;
(1) attempt to resolve any dispute relating to this Agreement that
may arise between the Parties; and
(g) oversee reasonable and customary efforts to conduct intellectual
property clearances required for the Program Compounds and evaluate the
proprietary or novel nature of any Program Compound.
2.1.3 Frequency of Meetings. The Steering Committee shall meet
within forty-five (45) days after the Effective Date and, thereafter, at least
semi-annually during the course of the Program Term. Either Party may convene a
special meeting of the Steering Committee on fifteen (15) days written notice to
the other Party, which notice may be waived by the other Party.
2.1.4 Place of Meetings and Agenda. The location of such meetings of
the Steering Committee shall alternate between Siga's principal place of
business and TransTech's principal place of business, or as otherwise agreed by
the Parties. Meetings may be held by telephonic, video or Internet conferencing,
so long as all participants can speak to, be heard by and hear all other
participants. In consultation with the other Party's Program Director, the host
of such meetings shall prepare an agenda and deliver the same to the other Party
no later than five (5) Business Days before each meeting of the Steering
Committee.
2.2 Decision Making. A meeting of the Steering Committee shall have
achieved a quorum only if two representatives of the Steering Committee from
each Party are present at such meeting. Any decision made by the Steering
Committee without a quorum shall be null and void, unless subsequently ratified
by a quorum of the Steering Committee. Each Party shall have one vote on the
Steering Committee. Both Parties must vote in the affirmative to allow the
Steering Committee to take any action that requires the vote of the Steering
Committee. If a Project Group is unable to reach unanimous agreement on any
matter, such matter shall be referred to the Steering Committee. If the Steering
Committee is unable to reach unanimous agreement, the disputed issue will be
referred to a senior management representative from each Party, who shall
promptly meet and endeavor in good faith to resolve such matter in a timely
manner and should these representatives not resolve said issue within seven (7)
Business Days of such referral, the issue will be decided by TransTech.
Page 6 of 23
2.3 Management of Collaboration.
2.3.1 Program Directors. Siga and TransTech shall each appoint a
Program Director prior to the Effective Date. During the Program Term, each
Party shall have the right, after consultation with the other Party, to
designate a different Program Director. The Program Directors shall jointly
oversee the conduct of the Program, shall report to the Steering Committee and
shall be responsible for recommending to the Steering Committee any change to
the Program or to any Research Project, after consultation with the appropriate
Project Group.
2.3.2 Project Groups. A separate Project Group shall be established
by the Steering Committee to administer under its direction each specific
Research Project. Each Project Group shall be comprised of representatives of
each Party. Each Project Group shall have one leader from each Party, who shall
be responsible for coordination with each other and with the Program Directors.
The members of each Project Group shall communicate on a regular basis and, at
least quarterly, shall meet to review the progress of the Research Project for
which such Project Group is responsible and to make appropriate recommendations
to the Steering Committee related to such Research Project. Each Project Group
will develop a communication plan, subject to review by and approval of the
Steering Committee, which shall outline a regular Project Group meeting
schedule, a timeline for distribution of minutes of Project Group meetings,
e-mail interactions, video conference schedules, frequency of reports, and a
distribution list.
2.3.3 Dispute Resolution of the Program Directors. The Program
Directors shall decide matters appropriate to the scope of their
responsibilities on a consensus basis. In the event that the Program Directors
are unable to reach agreement on any matter within fifteen (15) days after the
matter is first considered by them, either Program Director may refer the issue
to the Steering Committee for resolution in accordance with Section 2.2.
2.4 Minutes. The host of each meeting, either Steering Committee or
Project Group, shall prepare minutes of each such meeting, including attaching
copies of all data and reports presented at the meeting, and shall provide such
minutes to the other for approval within fifteen (15) Business Days after such
meeting or as soon thereafter as may be practicable. The other Party shall have
ten (10) Business Days from receipt of the draft minutes to either propose
revisions or provide a good faith estimate of the earliest practicable date when
any proposed revisions shall be available. If neither is received in ten (10)
Business Days, then the drafter may presume that the minutes are considered
final. The Program Directors shall sign all final minutes.
ARTICLE 3
SELECTION OF SCREENING TARGETS; STATEMENTS OF WORK
3.1 Collaboration. The purpose of this Agreement is for TransTech and Siga
to collaborate in performing at least one (1) Research Project in screening for
and discovering Program Compounds that modulate Screening Targets. Research
Projects shall be set forth in a Statement of Work, as outlined herein.
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3.2 Selection of Screening Targets. For each Research Project, the Parties
shall select a Screening Target from the targets described in Exhibit B.
3.3 Statements of Work. Before initiation of any work on a Research
Project, a Statement of Work will be jointly prepared and executed by the
Parties. Each Statement of Work will be governed by all of the provisions and
rights and obligations of each Party as set forth in this Agreement. Each
Statement of Work shall (a) identify the specifics of any Research Project, (b)
describe all major responsibilities and activities of each of the Parties and
the field of potential applications to be covered during the Research Project,
and (c) be more fully described in the form of Exhibit A. The Parties hereby
agree to implement the first Statement of Work within sixty (60) days after the
Effective Date. In the event of a conflict between the terms and conditions of
this Agreement and a Statement of Work, the terms and conditions of this
Agreement shall prevail.
3.4 Equipment, Facilities and Personnel. Each Party shall provide the
necessary personnel, facilities, equipment and supplies required to perform its
activities set forth in this Agreement and in each Statement of Work. Each Party
warrants and represents that it will exercise reasonable efforts to have the
facilities, professional, technical and clerical staff, experience and expertise
in sufficient quality and quantity to perform such Party's activities set forth
in this Agreement and in each Statement of Work in a timely and professional
manner.
3.5 Non-compete. It is understood and agreed that neither Party shall,
alone or in collaboration with a Third Party, pursue research programs during
the Program Term that would compete directly with the collaborative activities
set forth in this Agreement or in any Statement of Work.
ARTICLE 4
RESPONSIBILITIES
4.1 TransTech Responsibilities. TransTech will contribute services for
each Research Project in accordance with the specific tasks contained in the
applicable Statement of Work, including, but not limited to, the following:
4.1.1 Screen such of TransTech's existing Compound libraries
(including, where appropriate, TTProbes(TM) and Integrated Compound Libraries)
as may be available for lead Compounds, including through the use of high
throughput screening;
4.1.2 Design, synthesize and screen new Compound libraries,
including Integrated Compound Libraries directed towards Screening Targets,
based on Compounds and chemical scaffolds from TransTech, including through the
use of high throughput screening;
4.1.3 Optimize lead Compounds towards criteria for Program
Compounds; and
4.1.4 Identify organizations to contact with respect to the further
optimization of potential drug candidates, the conduct of pre-clinical and
clinical studies, the obtaining of Regulatory Approval and the manufacturing,
distribution and marketing of Products.
Page 8 of 23
4.2 Siga Responsibilities. Siga will contribute services for each Research
Project in accordance with the specific tasks contained in the applicable
Statement of Work, including, but not limited to, the following:
4.2.1 Take appropriate steps to insure the availability of selected
Screening Targets and related primary assays;
4.2.2 Conduct secondary bacterial inhibition screens; and
4.2.3 Provide appropriate in vitro or in vivo efficacy studies,
except to the extent such work may be outsourced as provided in Section 7.1.
4.3 Special Reports. Each Party shall promptly report to the other Party
any significant or material development, problem or issue as it arises.
4.4 High Standards; Compliance with Laws. Each Party will use
scientifically reasonable efforts to ensure that all information provided by one
Party to the other Party pursuant to this Agreement is accurate in accordance
with scientifically accepted standards. Each Party shall also comply with all
current governmental regulatory requirements as appropriate to the activities
set forth in this Agreement and in each applicable Statement of Work and all
other applicable national, federal, state and local laws and regulations.
4.5 Inspections. Upon not less than ten (10) Business Days prior written
notice, each Party shall have the right to have its Program Director and no more
than two other representatives inspect, at the investigating Parties sole
expense, no more than once per calendar year, the facilities and records
relating to any Research Project of the other Party and any Third Party
conducting any portion of the activities set forth in this Agreement or pursuant
to any Statement of Work on behalf of a Party, and to discuss the screening of
the Screening Targets and development of the Program Compounds with the
appropriate technical and business personnel and consultants of the other Party,
provided that such inspections shall be during normal business hours and shall
not unreasonably interrupt the operations of such Party or Third Party(ies)
acting on behalf of such Party.
ARTICLE 5
RECORD KEEPING
5.1 Laboratory Notebooks. All work conducted by or on behalf of either
Party in the course of performing the Program shall be completely and accurately
recorded, in sufficient detail and in good scientific manner, in laboratory
notebooks kept separately from the other research and development activities of
such Party or Third Party(ies) acting on behalf of such Party.
5.2 Policies for Maintaining Records; Assignments of Inventions. In order
to protect applicable Patent Rights in any invention conceived or reduced to
practice during or as a result of the Program and in the Program Intellectual
Property and the Program Compounds, the Parties shall require their employees or
Third Party(ies) acting on their behalves to record and maintain all data and
information developed for the Research Projects hereunder during the Program in
Page 9 of 23
such a manner as to enable the Party holding such Patent Rights to use such
records to establish the earliest date of invention and/or diligence to
reduction to practice. At a minimum, the policy shall require such individuals
to record all Inventions generated by them in standard laboratory notebooks,
which are dated and corroborated by non-inventors on a regular, contemporaneous
basis. The policy shall also require all employees or Third Party(ies) engaged
in the Program to assign all Intellectual Property conceived or reduced to
practice in connection therewith to the appropriate Party, and each Party shall
ensure that each such employee or Third Party(ies) acting on its behalf has
signed such an agreement before the applicable Statement of Work is begun.
ARTICLE 6
LICENSES AND INTELLECTUAL PROPERTY RIGHTS
6.1 License Grant by Siga. Subject to the terms and conditions of this
Agreement, during the Program Term, Siga hereby grants to TransTech (a) a
exclusive, fully-paid, nontransferable, nonsublicenseable, limited license to
use the Siga Patent Rights, Siga Know-How, and Siga Technology to perform the
obligations and responsibilities allocated to TransTech under the Research
Projects, (b) to the extent the Parties claim in any patent application directed
to the Program Compounds a genus that claims Compounds in addition to the
Program Compounds, an exclusive, fully-paid license to use such Compounds other
than Program Compounds for any purpose and (c) after the expiry of the Program
Term, if active development of a Program Compound has ceased, an exclusive,
fully-paid license to use such Program Compounds for any purpose. Except as
expressly provided above, TransTech shall not use the Siga Patent Rights, Siga
Know-How or Siga Technology for any other purpose and Siga reserves all rights
in the Siga Patent Rights, Siga Know-How and Siga Technology and no license is
granted to TransTech, expressly or by implication, to any other Siga
Intellectual Property by virtue of this Agreement.
6.2 Program Intellectual Property and Program Compounds.
6.2.1 Ownership. If a Program Compound relates to a Screening Target
that is Siga Technology, each Party shall have an undivided one-half (1/2)
interest in such Program Compound and all related Program Intellectual Property,
regardless of whether such is invented, discovered or developed by one or both
Parties. If a Program Compound does not so relate, then Siga shall have an
undivided 25% interest and TransTech shall have an undivided 75% interest. The
applicable ownership ratio shall be known in this Agreement as the "Ownership
Share". The Parties will execute all documents necessary to effectuate such
ownership.
6.2.2 Product Registrations. Except as provided in ARTICLE 7, the
Parties shall jointly obtain and maintain, and share according to the Ownership
Share in the cost and expense for, all permits, licenses, authorizations and
registrations for any country and for any local sovereignty, state, county,
parish, municipality, or other local governmental entity that are necessary for
the development, import, export, manufacture, distribution and/or sale of
Products.
6.3 Prosecution and Maintenance of Patent Rights.
Page 10 of 23
6.3.1 Management of Prosecution and Maintenance. Siga shall have an
outside law firm mutually acceptable to both Parties prepare, file, prosecute
and maintain Patent Rights claiming Inventions that are part of Program
Intellectual Property. The Steering Committee shall determine which
jurisdictions to file and maintain Patent Rights in. If Siga fails to have a
mutually acceptable outside law firm prepare, file, prosecute or maintain Patent
Rights covering any such Invention(s) after notice from TransTech with time to
cure, then TransTech shall have the right to assume responsibility for the
preparation, filing, prosecution, and maintenance of Patent Rights in any such
Invention(s). All costs incurred by the Parties in carrying out patent
preparation, filing, prosecution and maintenance of Patent Rights for such
Inventions shall be borne by the Parties according to the Ownership Share.
6.3.2 Cooperation. Each Party shall cooperate with the other with
respect to the preparation, filing, prosecution, maintenance and extension
recordation of Patent Rights pursuant to this Section 6.3, including, without
limitation, the execution of all such documents and instruments and the
performance of such acts as may be reasonably necessary in order to permit the
other Party to continue any preparation, filing, prosecution, maintenance or
extension recordation of Patent Rights that such Party has elected not to
pursue, as provided for in Section 6.4.
6.3.3 Siga Patent Rights. Siga shall be solely responsible for the
prosecution, maintenance and enforcement of Siga Patent Rights in all countries.
All costs associated with these activities shall be borne by Siga.
6.3.4 TransTech Patent Rights. TransTech shall be solely responsible
for the prosecution, maintenance and enforcement of TransTech Patent Rights in
all countries. All costs associated with these activities shall be borne by
TransTech.
6.4 Third-Party Infringement.
6.4.1 Reasonable Action. Except as provided in Section 6.4.2 with
respect to commencing infringement litigation, TransTech and Siga shall take
commercially reasonable actions to protect the Patent Rights relating to Program
Intellectual Property from infringement and to protect such Patent Rights from
unauthorized use, when, from its own knowledge or upon notice from the other
Party, the Party with knowledge or receiving notice becomes aware of the
reasonable probability that such infringement or unauthorized use exists. In
addition, each Party shall promptly apprise the other Party of any suspected or
actual infringement of any other proprietary right with respect to the Products
or Program Compounds, or any unfair or unlawful competitive practices being
practiced by a Third Party in connection with the Products or Program Compound
of which it becomes aware.
6.4.2 Infringement Actions. Each Party shall have the right (but not
the obligation) to petition the Steering Committee to authorize the Parties to
institute a suit or other appropriate action upon becoming aware of any
infringement of the Program Compounds or Program Intellectual Property.
Page 11 of 23
6.4.3 Costs. The Parties shall share according to the Ownership
Share in the payment of all out-of-pocket costs incurred in connection with any
action, litigation or proceeding described in this Section 6.4, including,
without limitation, the fees and expenses of counsel and experts. Each Party
shall bear its internal costs, regardless of the relative contributions of the
Parties.
6.4.4 Recoveries. Any recovery obtained by any Party as a result of
any proceeding described in this Section 6.4 shall be applied in the following
order of priority:
(a) first, to reimburse each Party for all litigation costs in
connection with such proceeding paid by that Party and not otherwise recovered
(on a pro rata basis based on each Party's respective litigation costs, to the
extent the recovery was less than all such litigation costs), including without
limitation documented internal costs; and
(b) second, the remainder of the recovery shall be shared
according to the Ownership Share.
6.4.5 Cooperation; Settlements. In the event that either Siga or
TransTech takes action pursuant to Section 6.4.2, the other Party shall
cooperate with the Party so acting to the extent reasonably possible, including
the joining of suit if desirable. Neither Party shall settle or compromise any
claim or proceeding relating to Patent Rights for Program Intellectual Property
without obtaining the prior written consent of the other Party, such consent not
to be unreasonably withheld or delayed.
6.5 Patent Term Extensions. The Parties shall cooperate, if necessary and
appropriate, in gaining patent term extensions wherever applicable to Patent
Rights covering Products. The Parties shall share equally in all costs connected
with all filings for such extensions.
6.6 No Additional Obligation. Nothing in this Agreement shall create any
obligation on the part of either Party to obtain Patent Rights, to enforce any
Intellectual Property against infringement by Third Parties or bear any expense
of the other Party with respect to Intellectual Property that is not Program
Intellectual Property.
ARTICLE 7
OUTSOURCING AND THIRD-PARTY LICENSING
7.1 Outsourcing. The Parties shall coordinate the procurement of
outsourced drug candidate optimization, pre-clinical and clinical testing,
regulatory approval, manufacturing, distribution and marketing services with
respect to Program Compounds and Products, working with the candidates
identified by TransTech pursuant to Section 4.1.4. Siga shall provide all data
and information necessary for a potential outsourcing provider to evaluate a
request to provide such services, and shall cooperate with any selected
provider. To the extent that any out-of-pocket payment shall be necessary to
obtain such outsourced services, the Parties shall bear such costs equally. Any
disagreement concerning the use of such outsourced services, or whether to
proceed with any such service, shall be resolved using the procedures set forth
in Section 2.2.
Page 12 of 23
7.2 Third-Party Licensing. The Parties may obtain any or all of the
outsourced services set forth in Section 7.1 through a license of Program
Intellectual Property to a Third Party. The Parties shall negotiate and execute
a license on behalf of the Parties with any appropriate Third Party ready,
willing and able to provide any such service. Any and all revenue derived from
any such license, including without limitation technology access fees, milestone
payments and royalties on sales, shall be shared by the Parties according to the
Ownership Share. Notwithstanding any other provision of this Agreement, the
Parties may share all or any portion of this Agreement with any licensee or
potential licensee that shall sign a confidentiality agreement in form and
substance reasonably acceptable to the other Party.
7.3 Option to Develop. In the event that either Siga or TransTech, but not
both, decide to continue development of Program Intellectual Property, any
Program Compound or any Product, and the result of invoking the procedures of
Section 2.2 is that such development need not continue, the parties will enter
into good-faith negotiations with respect to an agreement defining the terms and
conditions under which the continuing Party may pursue unilateral development,
taking into account the relative contributions of the parties through the date
of cessation of joint development and the costs likely to be incurred in future
development If the Parties are unable to reach agreement within sixty (60) days
of the commencement of such negotiations, then this Agreement will terminate
within the meaning of ARTICLE 11. After any such termination, and
notwithstanding any contrary provision of ARTICLE 11, Siga shall retain all
rights with respect to its proprietary biological targets, and TransTech shall
retain all rights with respect to any Program Compound or Product developed
during the term of this Agreement.
ARTICLE 8
CONFIDENTIAL INFORMATION
8.1 Confidentiality Obligations. Subject to Sections 8.3, 8.4 and 12.11,
for the term of this Agreement and for five (5) years thereafter, either Party
that receives Confidential Information (a "Receiving Party") from the other
Party (a "Disclosing Party") shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose (except as
expressly permitted hereunder) any Confidential Information furnished to it by
the Disclosing Party pursuant to this Agreement, except to the extent that it
can be established by the Receiving Party that such Confidential Information:
(a) was already known to the Receiving Party, other than under an obligation of
confidentiality from the Disclosing Party; (b) was generally available to the
public or otherwise part of the public domain at the time of its disclosure to
the Receiving Party; (c) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the Receiving Party in breach of this Agreement; (d) was
subsequently lawfully disclosed to the Receiving Party by a Third Party; (e) can
be shown by written records to have been independently developed by the
Receiving Party without reference to the Confidential Information received from
the Disclosing Party and without breach of any of the provisions of this
Agreement; or (f) is information that the Disclosing Party has specifically
agreed in writing that the Receiving Party may disclose (each of (a)-(f), a
"Confidentiality Exception"). The obligations of confidentiality and non-use set
forth in this Section 8.1 shall also apply to biological material, chemical
compounds and associated information thereto (including without
Page 13 of 23
limitation Know-How) disclosed by one Party to the other prior to or during the
term of this Agreement.
8.2 Further Obligations.
8.2.1 Each Party shall inform its employees and consultants who
receive Confidential Information of the other Party of the obligations of
confidentiality specified in Section 8.1 and all such Persons shall be bound by
the terms of confidentiality set forth therein.
8.2.2 The existence and the terms and conditions of this Agreement,
to the extent that the Parties have not specifically agreed to disclose them
pursuant to Section 8.3, shall be treated by each Party as Confidential
Information of the other Party.
8.2.3 Permitted Disclosures. The Receiving Party may disclose
Confidential Information in summary form to those directors, officers, managers,
agents, consultants and employees of the Receiving Party that have a
demonstrable need to know the Confidential Information for purposes of this
Agreement. Notwithstanding anything to the contrary herein, either Party may,
upon the advice of its counsel and without the prior consent of the other Party,
disclose or publish Confidential Information, the name or the trademarks of the
other Party or information concerning the Agreement as required by law,
governmental regulation, court order or alternative dispute resolution process;
provided, however, that in such case the Receiving Party shall as soon as
practicable give notice to the Disclosing Party so that the Disclosing Party may
seek a protective order or other remedy from an appropriate court or tribunal.
In any event, the Receiving Party shall disclose only that portion of the
Confidential Information that, in the opinion of its legal counsel, is legally
required to be disclosed and will exercise reasonable efforts to ensure that any
such information so disclosed will be accorded confidential treatment by said
court or tribunal.
8.3 Publication. In no event shall either Party publish any Confidential
Information of the other Party, except for publications and presentations (each,
a "Publication") for the advancement of science disseminated in accordance with
this Section 8.3. With respect to testing and screening activities conducted by
the Parties pursuant to this Agreement and any activities performed pursuant to
a Statement of Work, the Parties may publish or present their results and
activities for the advancement of science; provided, however, that prior to
making any Publication relating to the results of such activities, the
publishing Party shall provide to the other Party a copy of any proposed written
Publication or a detailed written description of any proposed oral Publication
at least sixty (60) days prior to submission or publication thereof. Neither
Party shall submit a Publication without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed. It is the
publishing Party's obligation to identify and remove, and the other Party's
right to identify and have removed, Confidential Information or other
information contained in a Publication prior to its submission to any outside
entity other than Confidential Information that is the subject of a published
Patent application. At least thirty (30) days prior to the publishing Party's
planned date to submit an article to any outside entity for review, the other
Party may identify any information in such Publication it considers as
Confidential Information. Such information shall be removed from the proposed
Publication prior to its submission to any such outside entity. The
non-publishing
Page 14 of 23
Party may, in its sole discretion, delay the disclosure of any Publication until
a Patent application, on any Invention disclosed in such Publication, is filed
and published. If the non-publishing Party fails to object to such Publication
within such thirty (30) day pre-submission time period, the non-publishing Party
shall be deemed to have consented to such Publication.
ARTICLE 9
REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1 Authority. Each Party represents and warrants that as of the Effective
Date it has the full right, power and authority to enter into this Agreement and
grant the licenses hereunder, and that this Agreement has been duly executed by
such Party and constitutes a legal, valid and binding obligation of such Party,
enforceable in accordance with its terms.
9.2 No Conflicts. Each Party represents and warrants that the execution,
delivery and performance of this Agreement do not conflict with, or constitute a
breach or default under any of its charter or organizational documents, any law,
order, judgment or governmental rule or regulation applicable to it, or any
material agreement, contract, commitment or instrument to which it is a party.
9.3 Commercially Reasonable Efforts. Each Party represents and warrants
that it will use good faith, commercially reasonable and diligent efforts to
further, consistent with this Agreement and with sound business judgment, the
development of Products and to perform the activities for which it is
responsible under the Program.
9.4 Intellectual Property. Each Party represents and warrants to the other
that, as of the Effective Date:
9.4.1 It has no actual knowledge of any claim made against it
asserting the invalidity, misuse, non-registerability, non-enforceability or
non-infringement of any of its Intellectual Property that is a subject of this
Agreement or challenging its right to use or ownership of any of such
Intellectual Property or making any adverse claim of ownership thereof;
9.4.2 It has no actual knowledge of any pending or threatened claim
or litigation alleging that its activities to date relating to the Intellectual
Property that is the subject of this Agreement have violated, or by conducting
its business as currently proposed to be conducted hereunder would violate, the
Intellectual Property rights of any Third Party; and
9.4.3 Each of the Party's respective employees, agents, consultants,
Affiliates, subcontractors and sublicensees who are involved with the Program is
or will be subject to confidentiality obligations and has executed agreements or
will execute agreements assigning all inventions and developments related to any
of the foregoing to either Siga or TransTech.
9.4.4 Its work has not been part of a governmental funding
relationship that would result in any Intellectual Property right with respect
to any Program Compound or the Program Intellectual Property residing in the
National Institutes of Health or other agency or the U.S. or other governmental
authority, and that the licenses it grants under this Agreement are not
Page 15 of 23
subject to overriding obligations to the US. government as set forth in 35
U.S.C. ss. 200-212 of the United States Code, as amended, or any similar
obligation of any governmental authority or under the laws of any other country.
9.4.5 Except as otherwise provided herein, during the term of this
Agreement it will not grant rights to any Third Party with respect to the
research, development, use, manufacture, marketing, sale or distribution of
Program Compounds or Products in the Territory.
9.5 Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, THE PARTIES MAKE NO REPRESENTATION AND EXTEND NO WARRANTY OF ANY KIND,
EITHER EXPRESS OR IMPLIED, AND PARTICULARLY NO REPRESENTATION OR WARRANTY THAT
PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED, WILL HAVE
COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification. Each Party shall indemnify, defend and hold harmless
the other Party, its Affiliates and their agents, employees, officers and
directors and successors and assignors from and against any and all liability,
damage, loss, cost or expense (including reasonable attorneys' fees) arising out
of any Third Party claim arising out of or related to a material breach by the
indemnifying party or any allegation that Siga Technology or TransTech
Technology infringes any Third Party intellectual property rights or negligence
or intentional misconduct of employees, contractors and consultants its
sublicensees or subcontractors of any of its covenants, representations or
warranties set forth in this Agreement or in any confidentiality agreement. The
recipient of any claim desiring to invoke this Section 10.1 shall promptly
notify its indemnitor of the existence and circumstances of any such claim,
shall cooperate in the defense of any such claim and shall not settle any such
claim without the consent of the indemnitor (such consent not to be unreasonably
withheld or delayed) without waiving its indemnity. The Steering Committee shall
be responsible for control of any defense action.
10.2 No Consequential Damages. NEITHER PARTY WILL BE LIABLE FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR THE
EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION, LOST PROFITS
ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY
NOTICE OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT NOTHING ACTUALLY PAID TO A THIRD
PARTY IN SETTLEMENT OR SATISFACTION OF ANY CLAIM SHALL BE DEEMED SUBJECT TO THIS
SECTION 10.2.
10.3 Insurance Proceeds. Any indemnification hereunder shall be made net
of any insurance proceeds recovered by the indemnified Party; provided, however,
that if, following the payment to the indemnified Party of any amount under this
ARTICLE 10, such indemnified Party recovers any insurance proceeds in respect of
the claim for which such indemnification payment was made, the indemnified Party
shall promptly pay an amount equal to the amount of
Page 16 of 23
such proceeds (but not exceeding the amount of such indemnification payment),
less the costs of collection, to the indemnifying Party.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement shall commence upon the Effective Date and,
unless extended by mutual written agreement of the Parties or terminated earlier
by such agreement or as provided hereunder, shall expire upon the agreed
cessation of development of all Program Compounds and the cessation of sales of
all Products.
11.2 Breach. The failure by either Party to comply with any of the
material obligations contained in this Agreement shall entitle the non-breaching
Party to give written notice to have the default cured. If such default is not
cured within sixty (60) days after the receipt of such written notice, or
diligent steps are not taken to cure if by its nature such default could not be
cured within sixty (60) days, the notifying Party shall be entitled, without
prejudice to any of its other rights conferred on it by this Agreement, and in
addition to any other remedy that may be available to it by law, pursuant to
this Agreement or otherwise, to terminate this Agreement; provided, however,
that in the case of a failure to pay any amount due hereunder, such breach may
be the basis of termination fourteen (14) Business Days following the date of
such notice, unless cured before the end of such notice period.
11.3 Insolvency or Bankruptcy. Either Party may, in addition to any other
remedy available by law or in equity, terminate this Agreement by written notice
to the other Party in the event such other Party shall have become insolvent or
bankrupt, or shall have an assignment for the benefit of its creditors, or there
shall have been appointed a trustee or receiver of such other Party or for all
or a substantial part of its property or any case or proceeding shall have been
commenced or other action taken by or against such other Party in bankruptcy or
seeking reorganization, liquidation, dissolution, winding-up, arrangement or
readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereafter
in effect, immediately, or there shall have been issued a warrant of attachment,
execution, restraint or similar process against any substantial part of the
property of such other Party, and any such event shall have continued for sixty
(60) days without either being dismissed, bonded or discharged. Both Party's
rights under this Agreement shall include, without limitation, those rights
afforded by 11 U.S.C. s.365(n) of the United States Bankruptcy Code (the
"Code") and any successor thereto, if applicable. If any bankruptcy trustee of
either Party, or such Party, as a debtor or debtor-in-possession, shall reject
this Agreement under 11 U.S.C. s.365(n) of the Code, the other Party may elect
to retain its rights licensed from such Party hereunder (and any other
supplementary agreement hereto) for the duration of this Agreement and avail
itself of all rights and remedies to the full extent contemplated by this
Agreement and 11 U.S.C. s.365(n) of the Code, and any other relevant law.
11.4 Termination for Severe Safety Reasons. Either Party shall have the
right to terminate this Agreement with respect to a particular Program Compound
or Product upon thirty (30) days written notice to the other Party if
non-clinical or clinical evidence about such Program Compound or Product
demonstrates a sufficiently serious adverse risk/benefit profile that further
Page 17 of 23
development or commercialization of such Program Compound or Products would be
permanently suspended by a regulatory authority or other authority of competent
jurisdiction.
11.5 No Diminution in Rights. The provisions under which this Agreement
may be terminated shall be in addition to any and all other legal or equitable
remedies that either Party may have for the enforcement of any and all terms
hereof, and do not in any way limit any other legal remedy such Party may have.
11.6 Effects of Termination.
11.6.1 Terminating Party's Rights. Upon termination of this
Agreement by either Party pursuant to Section 11.2 or 11.3, in addition to any
other right that the terminating Party may have at law or in equity:
(a) Any and all licenses granted to the terminating Party
under this Agreement shall remain in full force and effect as necessary to
enable the terminating Party to continue any Research Project initiated or
contemplated under this Agreement;
(b) The other Party shall be deemed to have assigned to the
terminating Party all rights the other Party has or may have to the Program
Compounds and Program Intellectual Property, including without limitation all
rights to develop, commercialize and obtain future, unaccrued payments with
respect to Program Compounds or Products;
(c) The other Party shall, at its sole expense, promptly make
available to the terminating Party copies of all data, reports, records and
materials, including, without limitation, all Program Compounds and Program
Intellectual Property, relating to the Program and return to the terminating
Party, or destroy at such Party's request, all relevant records and materials in
its possession or control containing Confidential Information of the terminating
Party; and
(d) The terminating Party may revoke any and all licenses
granted by it under this Agreement.
11.6.2 Accrued Obligations. Termination, relinquishment or
expiration of this Agreement for any reason shall be without prejudice to any
right that shall have accrued to the benefit of any Party prior to such
termination, relinquishment or expiration. Such termination, relinquishment or
expiration shall not relieve either Party from obligations that are expressly
indicated to survive termination or expiration of this Agreement. All
obligations not expressly indicated to survive termination or expiration of this
Agreement shall terminate upon the termination or expiration of this Agreement.
11.6.3 Survival. In addition to the provisions that survive by
implementation of this Section 11.6, all of the Parties' rights and obligations
under, and/or the provisions contained in, Sections 6.1 and 6.2 and Articles 8,
9, 10, 11 and 12 shall survive termination of this Agreement.
Page 18 of 23
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement; Amendment. This Agreement (including Exhibits A and
B) constitutes and contains the entire understanding and agreement of the
Parties respecting the subject matter of this Agreement and supersedes any and
all prior or contemporaneous negotiations, correspondence, understandings and
agreements between the Parties, whether oral or written, regarding such subject
matter. Any amendment or modification to this Agreement shall be made in writing
and signed by the Parties.
12.2 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
12.3 Binding Effect. This Agreement and the rights granted herein shall be
binding upon and shall inure to the benefit of Siga, TransTech and their
successors and permitted assigns.
12.4 Assignment. Neither Party may assign this Agreement without the prior
written consent of the other Party; provided, however, that either Party may
assign this Agreement without the prior written consent of the other Party in
connection with the sale or transfer of substantially all of its assets that
relate to this Agreement, or in the event of its merger or consolidation or
change of control or similar transaction, or to a wholly-owned Affiliate of such
Party, and as long as any permitted assignee shall assume all obligations of its
assignor under this Agreement. Any assignment in contravention of this Section
12.4 shall be void.
12.5 No Implied License. No right to any patent, know-how, technical
information or other Intellectual Property, other than as explicitly identified
herein, is granted or deemed granted by this Agreement.
12.6 Exports. The Parties acknowledge that the export of technical data,
materials or products is subject to the exporting Party receiving any necessary
export licenses and that the Parties cannot be responsible for any delay
attributable to export controls that is beyond the reasonable control of either
Party. Neither Party shall export or re-export, directly or indirectly, any
information, technical data, the direct product of such data, sample or
equipment received or generated under this Agreement in violation of any
governmental regulations that may be applicable. The Parties shall obtain
similar covenants from their Affiliates, sublicensees and contractors with
respect to the subject matter of this Section.
12.7 No Waiver. No waiver, modification or amendment of any provision of
this Agreement shall be valid or effective unless made in writing and signed by
a duly authorized officer of such Party. The failure of a Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition.
12.8 Independent Contractors. The Parties are independent contractors
under this Agreement. Nothing contained in this Agreement is intended nor is to
be construed so as to
Page 19 of 23
constitute Siga or TransTech as mutual agents, partners or joint venturers with
respect to this Agreement or any transactions contemplated thereby. Except as
expressly provided in this Agreement, neither Party shall have any express or
implied right or authority to assume or create any obligation on behalf of or in
the name of the other Party or to bind the other Party to any other contract,
agreement or undertaking with any Third Party.
12.9 Force Majeure. Non-performance of either Party shall be excused to
the extent that performance is rendered impossible by strike, fire, flood,
governmental acts, acts of war or terrorism or any other similar reason where
failure to perform is beyond the reasonable control of and is not caused by the
negligence of the non-performing Party.
12.10 Notices and Deliveries. Any formal notice, request, delivery,
approval or consent required or permitted to be given under this Agreement shall
be in writing and shall be deemed to have been sufficiently given when it is
received, whether delivered in person, transmitted by facsimile with
contemporaneous confirmation, or delivery by registered letter (or its
equivalent) or delivery by certified overnight courier service, to the Party to
which it is directed at its address shown below or such other address as such
Party shall have last given by notice to the other Parties.
if to Siga, to:
Dennis E. Hruby
Chief Scientific Officer
SIGA Technologies, Inc.
4575 SW Research Way-- Suite 230
Corvallis, OR 97333
Fax: (541) 753-9999
with a copy to:
Thomas E. Constance, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Fax: (212) 715-8000
if to TransTech, to:
Adnan M.M. Mjalli, Ph.D.
President and CEO
TransTech Pharma, Inc.
4170 Mendenhall Oaks Parkway, Suite 110
High Point, NC 27265
Fax: (336) 841-0333
Page 20 of 23
12.11 Public Announcements. The Parties will agree upon the timing and
content of any initial press release or other public communication relating to
this Agreement and the transactions contemplated herein.
12.12 Headings. The captions to the sections and articles in this
Agreement are not a part of this Agreement, and are included merely for
convenience of reference only and shall not affect its meaning or
interpretation.
12.13 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision, so long as the Agreement, taking into account said voided
provision(s), continues to provide the Parties with the same practical economic
benefits as the Agreement containing said voided provision(s) did on the
Effective Date. If, after taking into account said voided provision(s), the
Parties are unable to realize the practical economic benefit contemplated on the
Effective Date, the Parties shall negotiate in good faith to amend this
Agreement to reestablish the practical economic benefit provided the Parties on
the Effective Date.
12.14 Applicable Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without reference to its
conflicts of laws provisions. The parties irrevocably consent to the
jurisdiction of the state and federal courts located in Delaware.
12.15 Counterparts. This Agreement may be executed in counterparts, or
facsimile versions, each of which shall be deemed to be an original, and both of
which together shall be deemed to be one and the same agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers as of the Effective Date, each copy
of which shall for all purposes be deemed to be an original.
TRANSTECH PHARMA, INC.
By:/s/ Adnan M.M. Mjalli, Ph.D.
----------------------------------------
Name: Adnan M.M. Mjalli, Ph.D.
Title: President and Chief Executive Officer
SIGA TECHNOLOGIES, INC.
By:/s/ Tom Konatich
----------------------------------------
Name: Tom Konatich
Title: CFO/Acting CEO
Page 21 of 23
Exhibit A
Statement of Work
This Statement of Work is a part of the Research and License Agreement
between TransTech Pharma, Inc. ("TransTech") and SIGA Technologies, Inc.
("Siga") dated September , 2002 (the "Agreement"). All work to be performed
under this Statement of Work is subject to the terms and conditions of the
Agreement and no Statement of Work shall have full force and effect under the
Agreement unless all portions of such Statement of Work are completed and
executed in duplicate by both Parties.
1. Description of the Research Project, including the identity of the Screening
Target, criteria for display of biological activity against such Screening
Target, potential Program Compounds involved and the desired outcome:
2. The Research Project shall begin on .
3. Criteria for Program Compound:
4. The animal model(s) appropriate for the Research Project, including animal
efficacy model and identification of clinically viable route of administration:
5. Special responsibilities or activities of the Parties for this Program:
Dated this day of , 200 .
For Trans Tech Pharma, Inc. For SIGA Technologies, Inc.
By:________________________ By:___________________________
Title:_____________________ Title:________________________
Page 22 OF 23
Exhibit B
Proprietary Screening Targets of SIGA Technologies, Inc.
All biological agents covered by any of the following:
Pap D Compounds and Pharmaceutical Compounds for the Treatment or
Prophylaxis of Bacterial Infections, US Patent Application Serial No
08/640,877, US & PCT No. 6,420127
DegP Periplasmic Protease, A New Anti-infective Target and an
in-vitro Assay for DegP Protease Functions, US Patent Application
Serial No 60/140,990 US & PCT No. 6,306619
B-Lactam-like Chaperone Inhibitors, US Patent Application Serial No
60/075,264.
DegP Protease: Cleave Site Identification and Proteolysis of a
Natural Target in E. Coli, US Patent Application Serial No
60/330/855.
Screening Method for Orthopoxvirus Antiviral, US Patent Application
Serial No 60/345,646.
Page 23 of 23
Exhibit 10(yy)
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT (this "Amendment No.
4"), dated as of October 1, 2002 (the "Effective Date of Amendment No. 4"),
between SIGA Technologies, Inc., a Delaware corporation (the "Corporation"), and
Dr. Dennis E. Hruby ("Hruby"), amends and waives certain provisions of the
Employment Agreement, dated as of January 1, 1998, as amended by the Amendment,
dated as of October 18, 1999, Amendment No. 2, dated as of June 13, 2000, and
Amendment No. 3, dated as of January 31, 2002, between the Corporation and Hruby
(the "Existing Agreement"). Capitalized terms used but not defined herein shall
have the respective meanings assigned to them in the Existing Agreement.
WHEREAS, under the Existing Agreement, the Initial Term ends on
December 31, 2002; and
WHEREAS, the Corporation and Hruby desire to amend the Existing
Agreement as provided in this Amendment No. 4.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned, intending legally to be bound, hereby agree as
follows:
1. Section 2 of the Existing Agreement (referenced as "Paragraph 1"
in the Amendment No. 2, dated as of June 13, 2000) shall be amended to read in
its entirety as follows:
2. Employment for Term. The Corporation hereby employs Hruby
and Hruby hereby accepts employment with the Corporation for the period
beginning on the date of this Agreement and ending December 31, 2005 (the
"Initial Term"), or upon the earlier termination of the Term pursuant to
Section 7. The foregoing notwithstanding, the Corporation shall have the
right to terminate Hruby's employment under the Agreement upon 1 year
written notice and such termination will be treated as Termination with
Cause pursuant to Section 8 of this Agreement. The termination of Hruby's
employment under this Agreement shall end the Term but shall not terminate
Hruby's or the Corporation's other agreements in this Agreement, except as
otherwise provided herein.
2. Section 4(a) of the Existing Agreement shall be amended to add
the following sentence at the end thereof:
From and after the closing date of the Corporation's financing
contemplated by that certain Private Placement Memorandum, dated July 24,
2002 relating to the sale by the Corporation of certain units consisting
of Common Stock and Warrants to purchase Common Stock, the Base Salary
shall be not less than $210,000 per annum, and the Corporation shall make
the appropriate adjustments to its payroll.
3. Subsection 4(d) of the Existing Agreement shall be deleted, be of
no further force and effect, and be replaced by the following:
(d) 2002 Stock Option Grant. Hruby shall be granted (the "A4 Option
Grant") an option to purchase a total of 300,000 shares of Common Stock of
the Corporation at an exercise price of $2.50 per share, which shall vest
with respect to 75,000 shares immediately and with respect to an
additional 75,000 shares on September 1 of each of 2003, 2004 and 2005,
pursuant to a Stock Option Grant Agreement in substantially the form
attached hereto as Exhibit A4A. Simultaneously with the A4 Option Grant,
Hruby shall surrender to the Corporation the Incentive Stock Option Grant
Agreement, dated as of January 31, 2002, with respect to an option to
purchase up to 50,000 shares of Common Stock of the Corporation at an
exercise price of $3.94 per share (the "January Option"); and the
Corporation shall cancel the January Option.
4. Section 4 of the Existing Agreement shall be amended to add a
Subsection (e) that reads as follows:
(e) Other and Additional Compensation. The preceding sections
establish the minimum compensation during the Term and shall not preclude
the Board from awarding Hruby a higher salary or any bonuses or stock
options in the discretion of the Board during the Term at any time,
provided that, from and after the Effective Date of Amendment No. 4, any
bonus amount awarded Hruby in the discretion of the Board shall not exceed
30% of Hruby's annual salary.
5. Subsection 8(d) of the Existing Agreement shall be amended to
read in its entirety as follows:
(d) Change of Control Payment. The provision of this Subsection 8(d)
set forth the terms of an agreement reached between Hruby and the
Corporation regarding Hruby's rights and obligations upon the occurrence
of a "Change in Control" (as hereinafter defined) of the Corporation.
These provisions are intended to assure and encourage in advance Hruby's
continued attention and dedication to his assigned duties and his
objectivity during the pendency and after the occurrence of any such
Change in Control. These provisions shall apply in lieu of, and expressly
supersede, the provisions of Subsection 8(c) if Kruby's employment is
terminated or Notice of Termination is given ninety (90) days prior to or
within twelve (12) months after the occurrence of an event constituting a
Change in Control.
(i) Escrow. Within ten (10) days after the occurrence of the first
event constituting a Change in Control (irrespective of whether Hruby has
actual knowledge of such event), the Corporation shall place immediately
negotiable funds in escrow in an amount equal to the lesser of (A) Hruby's
salary and all other amounts due hereunder for the remainder of the Term,
plus such additional amount as equals the "Gross Up Payment" (as
hereinafter defined) thereon (the "Change of Control Amount") and (B) the
amount of Hruby's annual base salary at such time. Such escrow shall be
conducted pursuant to a standard escrow agreement among the Corporation,
Hruby and an independent escrow agent providing for the timely payment to
Hruby of the amounts hold in such escrow in the event Hruby becomes
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entitled thereto under the applicable provisions of this Agreement (the
"Escrow Arrangement"). The Escrow Arrangement shall be maintained until
the earlier of (A) twelve months and one day after the occurrence o(pound)
an event constituting a Change in Control or (B) the payment to Hruby of
all sums escrowed.
(ii) Change in Control. If, within 90 days prior to, or within
eighteen (18) months after the occurrence of an event constituting a
Change in Control, Hruby's employment is terminated or a Notice of
Termination is given for any reason other than (A) his death, (B) his
Disability, or (C) by Hruby, then such termination shall be deemed to be a
"Termination Due to Change in Control (herein so called), in which event
the Corporation shall pay Hruby, in a lump sum, on or prior to the fifth
(5th) day following the date of termination of the Term:
(A) an amount equal to the Change of Control Amount (including
any Gross Up Payment); and
(B) Hruby's accrued and unpaid base salary.
(iii) Stock Option Floor. Upon the occurrence of the first event
constituting a Change in Control, all stock options and other stock-based
grants to Hruby by the Corporation shall, irrespective of any provisions
of his option agreements, immediately and irrevocably vest and become
exercisable as of the date of such first event whereupon, at any time
during the Option Term as defined in the option agreements, Hruby or his
estate may by five (5) days' advance written notice given to the
Corporation, and irrespective of whether Hruby is then employed by the
Corporation or then living, and solely at the election of Hruby or his
estate, require the Corporation to:
(A) within thirty (30) days of a request by Hruby or his
estate file and cause to become effective a Form S-8 (or other
appropriate form) with the Securities and Exchange Commission
("SEC') registering for resale all shares underlying stock
options granted to Hruby and outstanding with all fees and
expenses of such filing being paid by the Corporation; or
(B) allow Hruby to exercise all or any part of such Stock
Options at the option prices therefor specified in the grant
of the Stock Options,
(iv) Gross Up Payment.
(A) Excess Parachute Payment. If Hruby incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue
Code of 1986 (the "Code") on "Excess Parachute Payments"
within the meaning of Section 28OG(b)(1) of the
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Code, the Corporation will pay to Hruby an amount (the "Gross
Up Payment") such that the net amount retained by Hruby, after
deduction of any Excise Tax on both the Excess Parachute
Payment and any federal, state and local income tax (together
with penalties and interest) as well as the Excise Tax upon
the payment provided for by this Subparagraph 8(d)(iv)(A),
will be equal to the Change of Control Amount.
(B) Applicable Rates. For purposes of determining the amount
of the Gross Up Payment, Hruby will be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross Up Payment is
to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality where
taxes thereon are lawfully due, net of the maximum reduction
(if any) in federal income taxes that could be obtained from
deduction of deductible state and local taxes.
(C) Determination of Gross Up Payment Amount. The
determination of whether the Excise Tax is payable and the
amount thereof will be based upon the opinion of tax counsel
selected by Hruby and reasonably approved by the Corporation,
which approval will not be unreasonably withheld or delayed.
If such opinion is not finally accepted by the Internal
Revenue Service (or state and local taxing authorities), then
appropriate adjustments to the Excise Tax will be computed and
additional Gross Up Payments will be made in the manner
provided by this Paragraph 8(d)(iv).
(D) Payment. The Corporation will pay the estimated amount of
the Gross Up Payment in cash to Hruby at the time specified in
this Agreement. Hruby and the Corporation agree to reasonably
cooperate in the determination of the actual amount of the
Gross Up Payment. Further, Hruby and the Corporation agree to
make such adjustments to the estimated amount of the Gross Up
Payment as may be necessary to equal the actual amount of the
Gross Up Payment, which in the case of the Corporation will
refer to refunds of prior overpayments by the Corporation and
in the case of Hruby will refer to additional payments to
Hruby to make up for prior underpayments.
(v) Definitions. For purposes of this paragraph 8, the following
terms shall have the following meanings:
(A) "Change in Control" shall mean any of the following:
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(1) the acquisition by any individual, entity, or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) (the "Acquiring Person"), other than the Corporation, or
any of its Subsidiaries or any Excluded Group (as defined
herein), of beneficial ownership (within the meaning of Rule
l3d-3 promulgated under the Exchange Act) of 35% or more of
the combined voting power or economic interests of the then
outstanding voting securities of the Corporation entitled to
vote generally in the election of directors; provided however,
that any transfer from any director or executive officer
listed in the Company's Form 10-KSB for the year ended
December 31, 2001 under "Security Ownership of Certain
Beneficial Owners" (the "Excluded Group") will not result in a
Change in Control if such transfer was part of a series of
related transactions the effect of which, absent the transfer
to such Acquiring Person by the Excluded Group, would not have
resulted in the acquisition by such Acquiring Person of 35% or
more of the combined voting power or economic interests of the
then outstanding voting securities; or
(2) during any period of 12 consecutive months after the Effective
Date of Amendment No. 4, the individuals who at the beginning
of any such 12-month period constituted a majority of the
Directors (the "Incumbent Non-Investor Majority") cease for
any reason to constitute at least a majority of such
Directors; provided that (i) any individual becoming a
director whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of the
stockholders having the right to designate such director and
(ii) any director whose election to the Board or whose
nomination for election by the stockholders of the Corporation
was approved by the requisite vote of directors entitled to
vote on such election or nomination in accordance with the
Restated Certificate of Incorporation of the Corporation,
shall, in each such case, be considered as though such
individual were a member of the Incumbent Non-Investor
Majority, but excluding, as a member of the Incumbent
Non-Investor Majority, any such individual whose initial
assumption of office, is in connection with an actual or
threatened election contest relating to the election of the
directors of the Corporation (as such terms are used in Rule
14a-2 of Regulation 14A promulgated under the Exchange
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Act) and further excluding any person who is an affiliate or
associate of an Acquiring Person having acquired within the
preceding 12 months, or proposing to acquire, beneficial
ownership of 25% or more of the combined voting power of the
then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors; or
(3) the approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the respective beneficial owners of the
voting securities of the Corporation immediately prior to such
reorganization, merger, or consolidation do not, following
such reorganization, merger, or consolidation, beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of.
the Corporation resulting from such reorganization, merger, or
consolidation; or
(4) the sale or other disposition of assets representing 50% or
more of the assets of the Corporation in one transaction or
series of related transactions not initiated or commenced by
any person within the Excluded Group; or
(5) a "Fundamental Change in Business" as hereinafter defined; or
(6) a "Hostile Takeover" as hereinafter defined is declared.
(B) "Fundamental Change in Business" shall mean that the
Corporation, at any time, no longer spends at least fifty percent
(50%) of its annual budget on activities related to biotechnology or
pharmaceuticals.
(C) "Hostile Takeover" shall mean any Change in Control which at
any time is declared by at least a majority of the Board, directly
or indirectly, to be hostile or not in the best interests of the
Corporation, or in which an attempt is made (irrespective of whether
successful) to wrest control away from the incumbent management of
the Corporation and, with respect to which, the Board makes efforts
to resist.
-6-
(vi) Satisfactory Alternative. Notwithstanding anything to the
contrary herein, Hruby shall have no rights and the Corporation shall have
no obligation under this Subsection 8(d) with respect to a Termination Due
to Change in Control if, prior to or simultaneously with such Termination
Due to Change in Control, Hruby is offered employment within 50 miles of
Albany Oregon by another business at a level of compensation equal to or
greater than his compensation hereunder.
6. The Existing Agreement shall be amended to add an Exhibit A4A
thereto in the form of Exhibit A4A hereto.
7. Any event occurring prior to the Effective Date of Amendment No.
4 that would otherwise constitute a Change of Control shall not be deemed a
Change of Control for purposes of the Agreement.
8. Neither the amendments set forth in this Amendment No. 4, nor any
event that took place prior to the Effective Date of Amendment No. 4, shall be
deemed to constitute a breach of the Existing Agreement by the Corporation.
[Signature page follows immediately.]
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 4 as of October 1, 2002.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
------------------------------------
Name: Thomas N. Konatich
Title: Acting Chief Executive
Officer, Chief Financial Officer
and Secretary
/s/ Dennis E. Hruby
----------------------------------------
Dr. Dennis E. Hruby
-8-
EXHIBIT A4A
SIGA TECHNOLOGIES, INC.
Incentive Stock Option Agreement
Granting Date: _______ __, ____
To: Dr. Dennis E. Hruby
We are pleased to notify you that SIGA TECHNOLOGIES, INC., a
Delaware corporation (the "Company") has granted to you (the "Holder") an
incentive stock option (the "Option") under the Company's Amended and Restated
1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") to purchase all
or any part of an aggregate of 300,000 shares of Common Stock of the Company
(the "Optioned Shares"), subject to the terms and conditions of this Agreement.
1. Vesting, Term and Exercise of Option. Subject to the provisions
of this Agreement, this Option may be exercised for up to the number of vested
Optioned Shares (subject to adjustment as provided in Section 6 hereof) by you
on or prior to the tenth anniversary of the Granting Date ("Last Exercise Date")
at an initial exercise price (the "Exercise Price") of $2.50 per share (subject
to adjustment as provided in Section 6 hereof) and all as subject to Plan and
this Agreement. The Holder may exercise this Option according to the following
vesting schedule: this Option shall be immediately exerciseable with respect to
75,000 Optioned Shares; this Option shall cumulatively vest with respect to
75,000 shares on each of September 1, 2003, September 1, 2004 and September 1,
2005. Any portion of the Option that you do not exercise shall accumulate and
can be exercised by you any time prior to the Last Exercise Date. You may not
exercise your Option to purchase a fractional share or fewer than 100 shares,
and you may only exercise your Option by purchasing shares in increments of 100
shares unless the remaining shares purchasable are less than 100 shares.
This Option may be exercised by delivering to the Secretary of the
Company (i) a written Notice of Intention to Exercise in the form attached
hereto as Appendix A signed by you and specifying the number of Optioned Shares
you desire to purchase, (ii) payment, in full, of the Exercise Price for all
such Optioned Shares in cash, certified check, surrender of shares of Common
Stock of the Company having a value equal to the exercise price of the Optioned
Shares as to which you are exercising this Option, provided that such
surrendered shares, if previously acquired by exercise of a Company stock
option, have been held by you at least six months prior to their surrender, or
by means of a brokered cashless exercise. As a holder of an option, you shall
have the rights of a shareholder with respect to the Optioned Shares only after
they shall have been issued to you upon the exercise of this Option. Subject to
the terms and provisions of this Agreement and the Plan, the Company shall use
its best efforts to cause the Optioned Shares to be issued as promptly as
practicable after receipt of your Notice of Intention to Exercise.
2. Non-transferability of Option. This Option shall not be
transferable and may be exercised during your lifetime only by you. Any
purported transfer or assignment of this Option shall be void and of no effect,
and shall give the Company the right to terminate this Option as of the date of
such purported transfer or assignment. No transfer of an Option by will or by
the laws of descent and distribution shall be effective unless the Company shall
have been furnished with
written notice thereof, and such other evidence as the Company may deem
necessary to establish the validity of the transfer and conditions of the
Option, and to establish compliance with any laws or regulations pertaining
thereto.
3. Certain Rights and Restrictions With Respect to Common Stock. The
Optioned Shares which you may acquire upon the exercise of this Option will not
be registered under the Securities Act of 1933, as amended, or under state
securities laws and the resale by you of such Optioned Shares will, therefore,
be restricted. You will be unable to transfer such Optioned Shares without
either registration under such Act and compliance with applicable state
securities laws or the availability of an exemption therefrom. Accordingly, you
represent and warrant to the Company that all shares of Common Stock you may
acquire upon the exercise of this Option will be acquired by you for your own
account for investment and that you will not sell or otherwise dispose of any
such shares except in compliance with all applicable federal and state
securities laws. The Company may place a legend to such effect upon each
certificate representing Optioned Shares acquired by you upon the exercise of
this Option.
4. Disputes. Any dispute which may arise under or as a result of or
pursuant to this Agreement shall be finally and conclusively determined in good
faith by the Board of Directors of the Company in its sole discretion, and such
determination shall be binding upon all parties.
5. Termination of Status.
(a) This Option is a separate incentive and not in lieu of salary or
other compensation. The Optioned Shares do not vest you with any right to
employment with the Company, nor is the Company's right to terminate your
employment in any way restricted by this Agreement. Subject to the following
provisions of this Section 5, the Option will terminate upon and will not be
exercisable after termination of your employment with the Company ("Employment
Termination Date"). If your employment with the Company is terminated for any
reason other than death or disability, this Option may not be exercised after
the earlier of (i) ninety (90) days from the Employment Termination Date or (ii)
the Expiration Date, and may not be exercised for more than the number of
Optioned Shares purchasable under Section 1 on the Employment Termination Date.
(b) If you die while this Option is exercisable, or within a period
of three months after the Employment Termination Date, the Option may be
exercised by the duly authorized executor of your last will or by the duly
authorized administrator of your estate, but may not be exercised after the
earlier of (i) one year from the date of your death or (ii) the Expiration Date,
and may not be exercised for more than the number of Optioned Shares purchasable
under Section 1 on the date of your death.
(c) If your employment is terminated as a result of your permanent
disability, this Option may not be exercised after the earlier of (i) one year
from the Employment Termination Date, or (ii) the Expiration Date, and may not
be exercised for more than the number of Optioned Shares purchasable under
Section 1 on the Employment Termination Date. If you die after the date your
employment is terminated under the provisions of this Section 5(c) but before
the Expiration Date, the provisions of Section 5(b) above shall apply.
A - 2
Permanent disability shall mean a disability described in Section
422(c)(6) of the Code. The existence of a Disability shall be determined by the
Committee in its absolute discretion.
6. Adjustments to Exercise Price and Number of Securities. If the
Company shall at any time subdivide or combine the outstanding shares of Common
Stock, or similar corporate events the Exercise Price and the number of shares
subject to the Option shall be appropriately adjusted.
7. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of this Option, such number
of shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of this Option and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as this Option shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Option to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock may then be
listed and/or quoted on NASDAQ.
8. Forfeiture of Option Gains. If at any time within one year after
the exercise of all or any portion of the Option the Committee determines that
the Company has been materially harmed by you, which harm either (a) results in
your being terminated for Cause or (b) results from your engaging in any
activity determined by the Committee, in its sole discretion, to be in
competition with any activity of the Company, or otherwise inimical, contrary or
harmful to the interests of the Company (including, but not limited to,
violating any non-competition or similar agreements entered into with the
Company or otherwise accepting employment with or serving as a consultant,
adviser or in any other capacity to an entity that is in competition with or
acting against the interests of the Company), then upon notice from the Company
to you any gain ("Gain") realized by you upon exercising such Option shall be
paid by you to the Company. For purposes of this Section 8, such Gain shall be
the excess of the Fair Market Value of the shares of Company Stock obtained
through such exercise as of the date of option exercise over the purchase price
of such shares. The Company shall have the right to offset such Gain against any
amounts otherwise owed to you by the Company (including, but not limited to
wages, vacation pay, or pursuant to any benefit plan or other compensatory
arrangement).
9. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Option, to the address of
the Holder as shown on the books of the Company; or
A - 3
(b) If to the Company, to 420 Lexington Avenue, Suite 620, New York,
NY 10017, or to such other address as the Company may designate by notice to the
Holders.
10. Supplements and Amendments. The Company and the Holder may from
time to time supplement or amend this Agreement in any respect, provided,
however, that no amendment may adversely affect your rights hereunder without
your written consent.
11. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder and
their respective successors and assigns hereunder.
12. Governing Law. This Agreement shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of the State of New York without giving
effect to the rules of the State of New York governing the conflicts of laws.
13. Entire Agreement; Modification. This Agreement contains the
entire understanding between the parties hereto with respect to the subject
matter hereof.
14. Severabilitv. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
15. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
16. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
registered Holder of this Option any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company and the Holder.
17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
[Signature page follows immediately]
A - 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be dully executed, as of the day and year first written.
SIGA TECHNOLOGIES, INC.
By: /s/Thomas N. Konatich
------------------------------------
Name: Thomas N. Konatich
Title: Acting Chief Executive
Officer, Chief Financial
Officer and Secretary
/s/ Dennis E. Hruby
----------------------------------------
Dr. Dennis E. Hruby
A - 5
Appendix A
NOTICE OF INTENTION TO EXERCISE STOCK OPTIONS
The undersigned grantee of a SIGA Technologies, Inc. Stock Option Agreement
dated as of ______________________ to purchase _________ shares of SIGA
Technologies, Inc. common stock hereby gives notice of his or her intention to
exercise the Stock Option (or a portion thereof) and elects to purchase shares
of SIGA Technologies, Inc. common stock.
Shares should be issued in the name of the undersigned and should be sent to the
undersigned at:
________________________________
________________________________
________________________________
________________________________
Dated this _____ day of ________________.
Social Security Number: ________________
Name: _________________________________
________________________________________
Signature
INSTRUCTIONS: The exercise of these Stock Options is effective on the date the
Company has received all of (1) this Notice of Intention to Exercise Stock
Options, and (2) payment in full in cash of the exercise price for all shares
being purchased pursuant to this Notice.
A - 6
Exhibit 10(zz)
Retainer Agreement
This will certify that SIGA Technologies, Inc. ("SIGA") has agreed to engage
Saggi Capital Corp. ("Saggi") as its investor relations liaison for a program of
financial communications and investor relations. This is a personal services
Agreement and cannot be assigned or delegated, by either party, without the
prior written consent of the party to be charged with such assignment or
delegation, and any unauthorized assignments shall be null and void without
effect and shall immediately terminate this Agreement.
The fee for the 24 month period of the agreement, commencing on November 1, 2002
will be $10,000 per month, plus all direct and indirect expenses relating to
this Agreement and/or the services to be provided.
Saggi shall act as investor relations counsel to SIGA and will perform the
services enumerated below:
o Analysis of SIGA's business and industry, following which a
comprehensive fact sheet that summarizes SIGA's corporate and
financial profile will be created, for distribution to investment
professionals and the press.
o Develop a complete financial public relations program designed to
broaden recognition of SIGA in the financial community in the U.S.
and abroad.
o Counsel SIGA in its overall relationship with the financial
community through consultation with its management
o Preparation, together with SIGA management, of presentation material
for meetings with the investment community.
o Meet with the financial community on behalf of SIGA, surveying key
analysts, brokers and institutional investors throughout the
country.
o Arrange meetings between management and members of the financial
community, including individual meetings, informal group meetings
and formal presentations.
o Review SIGA's transfer sheets to identify holdings and identify
regional and institutional strengths.
o Establish a mailing list for SIGA, maintain and update the list.
Payment
Invoices will include all out of pocket expenses incurred by Saggi on behalf of
SIGA for that month, plus the monthly fee payable. All invoices are to be paid
within 15 days of receipt.
Term
This agreement shall commence on November 1, 2002 and shall continue for a
period of 24 months.
Out of Pocket Expenses
SIGA and Saggi will place a cap on expenses each month to a figure mutually
agreed on which amount will be based upon Saggi's experience and SIGA's needs.
SIGA shall reimburse Saggi as to any and all expenses incurred and expenditures
made on behalf of SIGA. These expenses include, but are not limited to, the
following:
Telephone, photocopying, postage for releases and postage for and postage for
inquiries, messenger service, clipping service, maintaining mailing lists,
information retrieval service, monitoring advisory service, all production costs
for printing releases including the paper, envelopes, folding, insertion, and
delivery to the post office, all travel and entertainment expenses, and all
meeting expenses including rental of audio/visual equipment. No individual
expenses over five hundred dollars ($500.00) will be expended without first
notifying the client.
APPROVAL
SIGA shall have the right to approve all stockholder communications, press
releases and other materials prepared on its behalf.
TERMINATION EXPENSES
All unpaid bills must be paid in full at the time of termination. Termination of
this Agreement shall not relieve the Client to pay all amounts accrued prior to
such termination and shall not limit Saggi from pursuing other remedies which
may be available to it.
LEGAL RECOURSE
Any dispute(s) or claim(s) with respect to this Agreement or the performance of
any obligations there under, shall be settled by arbitration and commenced and
adjudicated under the rules then obtaining of the American Arbitration
Association. The arbitration shall be conducted before a panel of three (3)
arbitrators, one selected by each of the parties and the third selected by the
other two. The arbitrators in any arbitration proceeding to enforce this
Agreement shall allocate the reasonable attorney's fees, among one or both
parties in such proportion as the arbitrators shall determine represents each
parties liability hereunder. The decision of the arbitrator shall be final and
binding and may be entered into any court having proper jurisdiction to obtain a
judgement for the prevailing party. In any proceeding to enforce an arbitration
award, the prevailing party in such proceeding shall have the right to collect
from the non-prevailing party, it's reasonable fees and expenses incurred in
enforcing the arbitration award (including, without limitation, reasonable
attorney's fee).
CONFIDENTIALITY
1. Saggi shall keep in strictest confidence, all privileged information
relating to this Agreement which may be acquired in connection with
or as a result of this Agreement. During the existence of this
project, and for a period of three (3) years thereafter, Saggi shall
not communicate, divulge, disclose, disseminate or use any of such
privileged information which has been designated SIGA as proprietary
property, without prior written consent of SIGA.
Before any of Saggi's officers, directors, consultants and employees
who are allowed access to any information which is confidential
under the terms and provisions thereof, shall be permitted to view
such information, Saggi shall require such officers, directors,
consultants and employees to sign non-disclosure agreements which
embody the provisions of this paragraph.
2. Proprietary information does not include information in the public
domain through no breach of this Agreement by the other party, or
which the revealing party has obtained through a third party through
no breach of this Agreement.
3. Saggi shall keep any confidential information it receives from SIGA
in confidence in accordance with the terms of this agreement.
4. Saggi shall only use Confidential Information for the purposes of
performing its obligations under this Agreement.
5. Saggi shall use reasonable care to prevent use of disclosure of the
Confidential Information, and no less stringent degree of care to
avoid disclosure or use of such Confidential that it employs with
respect to its own Confidential Information which it does not wish
to be disseminated, published or disclosed.
6. Confidential information shall not include any information which
(a) is already known to Saggi at the time of disclosure
through lawful channels of communication; or
(b) is or became publicly known through no wrongful act of
Saggi, or
(c) is rightfully received from a third party without
similar restrictions and without breach of this
Agreement; or
(d) is approved for release by written authorization from
SIGA.
7. In the event that Saggi becomes legally compelled, for any reason
whatsoever, to disclose any of the Confidential Information, Saggi
shall provide SIGA with prompt prior written notice at any such
requirement Saggi agrees to furnish only that portion of
Confidential Information which it is required to.
8. To the extent SIGA discloses Confidential Information to Saggi, SIGA
agrees to reduce the oral Confidential Information to writing and
deliver same to Saggi within fifteen (15) days of such oral
disclosure, referencing the place and date of oral disclosure was
made, and including therein a detailed description of the
Confidential Information actually disclosed.
9. All copies of Confidential Information delivered by SIGA to Saggi
pursuant to this Agreement whether imprinted, magnetic, optical or
other tangible or mechanically reproducible form, shall remain the
property of SIGA, and all such Confidential Information together
with any copies thereof, shall be promptly returned to SIGA upon
written request, or destroyed at SIGA's option following the
termination or expiration of this Agreement.
All notices, requests, demands, and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party (including, without limitation,
service by nationally recognized overnight courier service) to whom notice is to
be given, or on the third day after mailing to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, at the
address set forth below, or on the date of service if delivered by facsimile to
that facsimile number set forth below which facsimile is confirmed within three
(3) days by deposit of a copy of such notice in certified mail, return receipt
requested, postage prepaid at the address set forth below. Any party may change
its address for the purposes of this paragraph by giving the other parties
written notice of the new address in the manner set forth above.
To SIGA: SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, NY 10170
Attention: Thomas N. Konatich
Chief Financial Officer
Telephone: 212-672-9100
To Saggi: Saggi Capital Corp.
9 Prospect Hill Road Ext.
Pine Plains, NY 12567
(518) 398-7830
SAGGI CAPITAL CORP.
/s/ Sharon Will
- ---------------------------
By:
11/1/2002
Date
SIGA TECHNOLOGIES, INC.
/s/ Thomas N. Konatich
- ---------------------------
Thomas N. Konatich
Chief Financial Officer
11/1/2002
Date:
Exhibit 10(aaa)
Retainer Agreement
This will certify that SIGA Technologies, Inc. ("SIGA") has agreed to engage
Bridge Ventures, Inc. ("Bridge") as its strategic planner. This is a personal
services Agreement and cannot be assigned or delegated, by either party, without
the prior written consent of the party to be charged with such assignment or
delegation, and any unauthorized assignments shall be null and void without
effect and shall immediately terminate this Agreement.
Payment
In exchange for its services as Strategic Planner, SIGA shall grant Bridge
warrants to purchase 250,000 shares of its common stock, .0001 par value. The
warrants may be exercised for a period of 60 months from their date of grant and
they will have an exercise price of $2.00 per share. The warrants will have a
cashless exercise provision.
Term
This agreement shall commence on November 1, 2002 and shall continue for a
period of 60 months.
LEGAL RECOURSE
Any dispute(s) or claim(s) with respect to this Agreement or the performance of
any obligations there under, shall be settled by arbitration and commenced and
adjudicated under the rules then obtaining of the American Arbitration
Association. The arbitration shall be conducted before a panel of three (3)
arbitrators, one selected by each of the parties and the third selected by the
other two. The arbitrators in any arbitration proceeding to enforce this
Agreement shall allocate the reasonable attorney's fees, among one or both
parties in such proportion as the arbitrators shall determine represents each
parties liability hereunder. The decision of the arbitrator shall be final and
binding and may be entered into any court having proper jurisdiction to obtain a
judgement for the prevailing party. In any proceeding to enforce an arbitration
award, the prevailing party in such proceeding shall have the right to collect
from the non-prevailing party, it's reasonable fees and expenses incurred in
enforcing the arbitration award (including, without limitation, reasonable
attorney's fee).
CONFIDENTIALITY
1. Bridge shall keep in strictest confidence, all privileged
information relating to this Agreement which may be acquired in
connection with or as a result of this Agreement. During the
existence of this project, and for a period of three (3) years
thereafter, Bridge shall not communicate, divulge, disclose,
disseminate or use any of such privileged information which has been
designated SIGA as proprietary property, without prior written
consent of SIGA.
Before any of Bridge officers, directors, consultants and employees
who are allowed access to any information which is confidential
under the terms and provisions thereof, shall be permitted to view
such information, Bridge shall require such officers, directors,
consultants and employees to sign non-disclosure agreements which
embody the provisions of this paragraph.
2. Proprietary information does not include information in the public
domain through no breach of this Agreement by the other party, or
which the revealing party has obtained through a third party through
no breach of this Agreement.
3. Bridge shall keep any confidential information it receives from SIGA
in confidence in accordance with the terms of this agreement.
4. Bridge shall only use Confidential Information for the purposes of
performing its obligations under this Agreement.
5. Bridge shall use reasonable care to prevent use of disclosure of the
Confidential Information, and no less stringent degree of care to
avoid disclosure or use of such Confidential that it employs with
respect to its own Confidential Information which it does not wish
to be disseminated, published or disclosed.
6. Confidential information shall not include any information which
(a) is already known to Bridge at the time of disclosure
through lawful channels of communication; or
(b) is or became publicly known through no wrongful act of
Bridge, or
(c) is rightfully received from a third party without
similar restrictions and without breach of this
Agreement; or
(d) is approved for release by written authorization from
SIGA.
7. In the event that Bridge becomes legally compelled, for any reason
whatsoever, to disclose any of the Confidential Information, Bridge
shall provide SIGA with prompt prior written notice at any such
requirement Bridge agrees to furnish only that portion of
Confidential Information which it is required to.
8. To the extent SIGA discloses Confidential Information to Bridge,
SIGA agrees to reduce the oral Confidential Information to writing
and deliver same to Bridge within fifteen (15) days of such oral
disclosure, referencing the place and date of oral disclosure was
made, and including therein a detailed description of the
Confidential Information actually disclosed.
9. All copies of Confidential Information delivered by SIGA to Bridge
pursuant to this Agreement whether imprinted, magnetic, optical or
other tangible or mechanically reproducible form, shall remain the
property of SIGA, and all such Confidential Information together
with any copies thereof, shall be promptly returned to SIGA upon
written request, or destroyed at SIGA's option following the
termination or expiration of this Agreement.
All notices, requests, demands, and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on the party (including, without limitation,
service by nationally recognized overnight courier service) to whom notice is to
be given, or on the third day after mailing to the party to whom notice is to be
given, by certified mail, return receipt requested, postage prepaid, at the
address set forth below, or on the date of service if delivered by facsimile to
that facsimile number set forth below which facsimile is confirmed within three
(3) days by deposit of a copy of such notice in certified mail, return receipt
requested, postage prepaid at the address set forth below. Any party may change
its address for the purposes of this paragraph by giving the other parties
written notice of the new address in the manner set forth above.
To SIGA: SIGA Technologies, Inc.
420 Lexington Avenue, Suite 620
New York, NY 10170
Attention: Thomas N. Konatich
Chief Financial Officer
Telephone: 212-672-9100
To Bridge: Bridge Ventures, Inc.
1241 Gulf of Mexico Drive
Longboat Key, Fl 34228
(941) 387-8388
BRIDGE VENTURES, INC.
/s/ Harris Freedman
- ------------------------
By:
Nov. 1, 2002
- ------------------------
Date:
SIGA TECHNOLOGIES, INC.
/s/ Thomas N. Konatich
- ------------------------
Thomas N. Konatich
Chief Financial Officer
Nov. 1, 2002
- ------------------------
Date:
Exhibit 10(bbb)
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (this "Amendment No. 2"),
dated as of Nov 5, 20O2 (the "Effective Date of Amendment No. 2"), between SIGA
Technologies, Inc., a Delaware corporation (the "Corporation"), and Thomas N.
Konatich ("Konatich"), amends and waives certain provisions of the Amended and
Restated Employment Agreement, dated as of October 6, 2000, between the
Corporation and Konatich, as amended by the Amendment and Waiver, dated as of
January 31, 2002, (collectively, the "Existing Agreement"). Capitalized terms
used but not defined herein shall have the respective meanings assigned to them
in the Existing Agreement.
WHEREAS, under the Existing Agreement, the Initial Term ends on
December 31, 2002; and
WHEREAS, the Corporation and Konatich desire to amend the Existing
Agreement as provided in this Amendment No. 2.
NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned, intending legally to be bound, hereby agree
as follows:
1. Section 1 of the Existing Agreement shall be amended to read in
its entirety as follows:
1. Employment for Term. The Corporation hereby employs
Konatich and Konatich hereby accepts employment with the Corporation
for the period beginning on January 19,2000 and ending September 30,
2004 (the "Initial Term"), or upon the earlier termination of the
Term pursuant to Section 6. The termination of Konatich's employment
under this Agreement shall end the Term but shall not terminate
Konatich's or the Corporation's other agreements in this Agreement,
except as otherwise provided herein.
2. Section 3(a) of the Existing Agreement shall be amended to add
the following sentence at the end thereof:
From and after the closing date of the Corporation's financing
contemplated by that certain Private Placement Memorandum, dated
July 24, 2002 relating to the sale by the Corporation of certain
units consisting of Common Stock and Warrants to purchase Common
Stock, the Base Salary shall be not less than $210,000 per annum,
and the Corporation shall make the appropriate adjustments to its
payroll.
3. Section 3(b) of the Existing Agreement shall be amended to add
the following sentence to the end thereof:
-1-
75,000 shares immediately and with respect to the remaining 75,000 shares
on September 1, 2003, pursuant to a Stock Option Grant Agreement in
substantially the form attached hereto as Exhibit A2A.
4. The Existing Agreement shall be amended to add an Exhibit A2A
thereto in the form of Exhibit A2A hereto.
5. Any event occurring prior to the Effective Date of Amendment No.
2 that would otherwise constitute a Change of Control shall not be deemed
a Change of Control for purposes of the Agreement.
6. Neither the amendments set forth in this Amendment No. 2, nor any
event that took place prior to the Effective Date of Amendment No. 2,
shall be deemed to constitute a breach of the Existing Agreement by the
Corporation.
(Signature page follows immediately]
-2-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of Nov 5, 2002.
SIGA TECHNOLOGIES, INC.
By: /s/ Donald G. Drapkin
----------------------------
Name: Donald G. Drapkin
Title: Chairman of the Board
/s/ Thomas N. Konatich
- -------------------------------
Thomas N. Konatich
-3-
Exhibit 10(ccc)
- --------------------------------------------------------------------------------
AWARD/CONTRACT 1. THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350) 1 20
- --------------------------------------------------------------------------------
2. CONTRACT (Proc. Inst. Ident.) NO. 3. EFFECTIVE DATE
DAMD17-03-C-0040 01 Jan 2003
- --------------------------------------------------------------------------------
4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
W23RYX-2331-N643
- --------------------------------------------------------------------------------
5. ISSUED BY CODE DAMD17 6. ADMINISTERED BY CODE
---------- (If other than Item 5.) ------
USA MED RESEARCH ACQ ACTIVITY
DIRECTOR 820 CHANDLER STREET See Item 5
FORT DETRICK MD 21702-5014
- --------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR 8. DELIVERY
(No., street, city, country, state |_| FOB ORIGIN |X| OTHER (See below)
and zip code) ----------------------------------------
9. DISCOUNT FOR PROMPT PAYMENT
SIGA TECHNOLOGIES INC.
DENNIS E. HRUBY, PH.D. Net 30 Days
4575 SW RESEARCH WAY
SUITE 230 ----------------------------------------
CORVALLIS OR 97333 10. SUBMIT INVOICES 1 ITEM
(4 copies unless
otherwise specified) Block 12
- ----------------------------------------TO THE ADDRESS
CODE 1V4X4 FACILITY CODE SHOWN IN:
- --------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE HQ0345
---------- ------
USA MED RESEARCH AND MATERIELCOM DEFENSE FINANCE AND ACCOUNTING SERVICE
ACQUILINE TEST A DFAS-SA/FPA 500 MCCULLOUGH AVENUE
COMMANDER USAMRMC ATTN:MCMR-RMI-S PHONE: 888-478-5636
BLDG 504XX SAN ANTONIO TX 78215-2100
FORT DETRICK MD 21702
- --------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN 14. ACCOUNTING AND APPROPRIATION DATA
FULL AND OPEN COMPETITION:
|_| 10 U.S.C. 2304(c)( ) See Schedule
|_| 41 U.S.C. 253(c)( )
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- ------------------------------------------------------------------------------------------------------
SEE SCHEDULE
- ------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $1,640,883.00
- ------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- --------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGE(S)
- --------------------------------------------------------------------------------
PART 1 - THE SCHEDULE
- --------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1
- --------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 2
- --------------------------------------------------------------------------------
X C DESCRIPTION/SPECS./WORK STATEMENT 3 - 9
- --------------------------------------------------------------------------------
D PACKAGING AND MARKING
- --------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 10
- --------------------------------------------------------------------------------
X F DELIVERIES OR PERFORMANCE 11 - 15
- --------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 16 - 17
- --------------------------------------------------------------------------------
H SPECIAL CONTRACT REQUIREMENTS
- --------------------------------------------------------------------------------
PART II - CONTRACT CLAUSES
- --------------------------------------------------------------------------------
X I CONTRACT CLAUSES 18 - 20
- --------------------------------------------------------------------------------
PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
- --------------------------------------------------------------------------------
J LIST OF ATTACHMENTS
- --------------------------------------------------------------------------------
PART IV - REPRESENTATIONS AND INSTRUCTIONS
- --------------------------------------------------------------------------------
K REPRESENTATIONS, CERTIFICATIONS AND
OTHER STATEMENTS OF OFFERORS
- --------------------------------------------------------------------------------
L INSTRS., CONDS., AND NOTICES TO OFFERORS
- --------------------------------------------------------------------------------
M EVALUATION FACTORS FOR AWARD
- --------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- --------------------------------------------------------------------------------
17. |_| CONTRACTOR'S NEGOTIATED AGREEMENT Contractor is required to sign this
document and return copies to issuing office.) Contractor agrees to furnish
and deliver all items or perform all the services set forth or otherwise
identified above and on any continuation sheets for the consideration stated
herein. The rights and obligations of the parties to this contract shall be
subject to and governed by the following documents: (a) this award/contract,
(b) the solicitation, if any, and (c) such provisions, representations,
certifications, and specifications, as are attached or incorporated by reference
herein.
(Attachments are listed herein.)
- --------------------------------------------------------------------------------
18. |_| AWARD (Contractor is not required to sign this document.) Your offer
on Solicitation Number ________________ including the additions or changes made
by you which additions or changes are set forth in full above, is hereby
accepted as to the items listed above and on any continuation sheets. This award
consummates the contract which consists of the following documents: (a) the
Government's solicitation and your offer, and (b) this award/contract. No
further contractual document is necessary.
- --------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER 20A. NAME AND TITLE OF CONTRACTING
(Type or print) OFFICER
PATRICIA K. NELSON/CONTRACTING OFFICER
TEL: 301-619-2702
EMAIL: patricia.nelson@amedd.army.mi
- --------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED
BY _____________________________________
(Signature of person authorized to sign)
- --------------------------------------------------------------------------------
20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY /s/ Patricia K. Nelson 12-Dec-2002
--------------------------------------
(Signature of Contracting Officer)
- --------------------------------------------------------------------------------
NSN 7540-01-152-8069 26-107 STANDARD FORM 26 (REV. 4-85)
PREVIOUS EDITION UNUSABLE GPO 1985 O - 469-794 Prescribed by GSA
FAR (48 CFR) 53.214(a)
DAMD17-03-C-0040
Page 2 of 20
Section B - Supplies or Services and Prices
ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
001
COST
Research Proposal entitled, "SmallPox Antiviral Drug"
PURCHASE REQUEST NUMBER: W23RYX-2331-N643
ESTIMATED COST $1,640,883.00
ACRN AA Funded Amount $364,642.00
FOB: Destination
DAMD17-03-C-0040
Page 3 of 20
Section C - Description and Specifications
STATEMENT OF WORK
The contractor shall furnish the necessary equipment, personnel, facilities, and
supplies necessary to conduct studies on the research proposal entitled,
"Smallpox AntiViral Drug" in accordance with Section C, the contractor's
statement of work on pages 4-5 of the research proposal dated 15 May 2002 and
the revised budget dated 22 November 2002, which are incorporated herein by
reference.
TERM OF CONTRACT: 1 January 2003-31 May 2007 (Research to be completed by 31
December 2006).
AMOUNT ALLOTTED TO CONTRACT TO DATE: $364,642
TOTAL AMOUNT OF CONTRACT: $1,640,883
PRINCIPAL INVESTIGATOR: Dr. Dennis E. Hruby
TYPE OF CONTRACT: Cost Price Contract
CLAUSES INCORPORATED BY FULL TEXT
REPRESENTATIONS AND CERTIFICATIONS (MAR 1999) (USAMRAA)
The representations, certifications, and other statements submitted by the
contractor, dated 22 November 2002, are incorporated herein by reference.
PRINCIPAL INVESTIGATOR (MAR 1999) (USAMRAA)
The Principal Investigator for this contract is Dennis R. Hruby. This individual
shall be continuously responsible for the conduct of the research project. The
contractor shall obtain the Contracting Officer's approval to change the
Principal Investigator or to continue the research work during a continuous
period in excess of three months without the participation of an approved
Principal Investigator. This contract is based on the Principal Investigator
devoting 10% of effort to the project over the term of the contract. The
contractor shall advise the Contracting Officer if the Principal Investigator
will, or plans to, devote substantially less effort to the work than estimated
in the contractor's proposal. A curriculum vitae shall be provided for
professional associates added to the research project or substituted during the
course of work.
USE OF TECHNICAL REFERENCE FACILITY (MAR 1999) (USAMRAA)
The contractor agrees to use, to the extent practical, the technical reference
facilities of the Defense Technical Information Center, 8725 John J. Kingman
Road, Suite 0944, Fort Belvoir, VA 22060-6218 for the purpose of surveying
existing knowledge and avoiding needless duplication of scientific and
engineering effort and the expenditure thereby represented. All other sources,
whether or not Government controlled, shall be consulted for the same purpose.
DAMD17-03-C-0040
Page 4 of 20
INVESTIGATING AND REPORTING POSSIBLE SCIENTIFIC MISCONDUCT (MAR 1999) (USAMRAA)
a. "Misconduct" or "Misconduct in Science" is defined as fabrication,
falsification, plagiarism, or other practices that seriously deviate from those
that are commonly accepted within the scientific community for proposing,
conducting or reporting research. It does not include honest error or honest
differences in interpretations or judgments of data.
b. Contractors shall foster a research environment that prevents misconduct in
all research and that deals forthrightly with possible misconduct associated
with research for which U.S. Army Medical Research and Materiel Command funds
have been provided or requested.
c. The contractor agrees to:
(1) Establish and keep current an administrative process to review, investigate,
and report allegations of misconduct in science in connection with research
conducted by the contractor,
(2) Comply with its own administrative process;
(3) Inform its scientific and administrative staff of the policies and
procedures and the importance of compliance with those policies and procedures;
(4) Take immediate and appropriate action as soon as misconduct on the part of
employees or persons within the organization's control is suspected or alleged;
and
(5) Report to the Administrative Contracting Officer (ACO) a decision to
initiate an investigation into possible scientific misconduct.
d. The contractor is responsible for notifying the ACO of appropriate action
taken if at any stage of an inquiry or investigation any of the following
conditions exist:
(1) An immediate health hazard is involved;
(2) There is an immediate need to protect Federal funds or equipment;
(3) A probability exists that the alleged incident will be reported publicly; or
(4) There is a reasonable indication of possible criminal violation.
EMERGENCY COORDINATION AND REPORTING (BDRP) (MAR 1999) (USAMRAA)
a. The contractor shall review the Emergency Response Plan/Safety Program Plan
annually, during the month of July, in consultation with each participating
external support agency. The Emergency Response Plan shall be formally revised,
where necessary, to incorporate current emergency support requirements. The
revised Emergency Response Plan (with the agreements for emergency support as
appendices) shall be formalized in writing. A copy of the revision shall be
retained in your organizational safety office.
b. The contractor shall submit a letter report documenting the outcome of the
annual review of its Emergency Response Plan. The report shall include the dates
of the annual review and coordination, and shall identify and describe all
provisions that represent changes to the initial Emergency Response Plan or the
previous year's annual report. The report shall be submitted no later than
August 1 of each year, beginning with the first August during the performance of
your contract.
c. All reports identified in this provision shall be submitted to the following
address:
U.S. Army Medical Research and Materiel Command
ATTN: MCMR-RCQ-S
504 Scott Street
Fort Detrick, Maryland 21702-5012
ETIOLOGIC AGENTS--BIOLOGICAL DEFENSE RESEARCH PROGRAM (MAR 1999) (USAMRAA)
a. For purpose of this contract etiologic agent--biological defense program is
defined as: any viable microorganism, or its toxin which causes or may cause
human disease, including those agents listed in 42 CFR 723 of the Department of
Health and Human Services regulations, and any agent of biological origin that
poses a degree of
DAMD17-03-C-0040
Page 5 of 20
hazard to those agents and is further identified by the U.S. Army as a threat
agent. The contractor shall comply with the following when working with
etiologic agents:
1. 29 Code of Federal Regulations 1910
2. Occupational Health Standards, and the U.S. Department of Health and Human
Services (DHHS)
3. DHHS Publication No. 93-8395, Biosafety in Microbiological and Biomedical
Laboratories, 1993, as amended
4. 32 CFR 626 Biological Defense Safety Program
5. 32 CFR 627 Biological Defense Safety Program b. Etiologic agents shall be
packaged, labeled, shipped, and transported in accordance with applicable
Federal, state and local laws and regulations, to include:
1. 42 CFR 72 (Interstate Shipment of Etiologic Agents)
2. 49 CFR 172 and 173 (Department of Transportation)
3. 9 CFR 122 (USDA Restricted Animal Pathogens)
4. International Air Transport Association Dangerous Goods Regulations.
5. The United States Postal Service shall not be used for transportation of BDRP
activities involving etiologic agents.
CONTRACTOR SAFETY AND REPORTING (BDRP) (MAR 1999) (USAMRAA)
a. The contractor shall operate under established safety programs for all
biosafety levels of work as identified in the Safety Program Plan, which is
incorporated in this contract. These safety programs shall ensure that
personnel, facilities, and the environment are protected from accidents and
hazardous exposures.
b. The contractor shall conduct this contract work under established operating
procedures which ensure that all individuals who have access to areas for
storage, handling, and disposal of etiologic agents are trained and are
thoroughly familiar with safety requirements. Such procedures shall assure full
compliance with the regulatory standards cited above.
c. The contractor shall conduct an inspection and report the results of all
required biosafety inspections for all Research, Development, Test, or
Evaluation work in accordance with the below listed timeframes. As a minimum the
safety inspections shall address those factors identified in the Safety Program
Plan.
1. For Biosafety Level (BL) 1 and 2:
Time Inspector
Preaward Government designated Biosafety
Officer
Quarterly First line supervisor
Annual Contractor safety personnel
2. For Biosafety Level (BL) 3:
Time Inspector
Preaward Government designated Biosafety
Officer
Monthly First line supervisor
Annual Government designated Bisafety
Officer
3. For Biosafety Level (BL) 4:
Time Inspector
Preaward Government designated Biosafety
Officer
Monthly First line supervisor
Semiannual Government designated Biosafety
Officer
4. Copies of all biosafety inspection reports will be
DAMD17-03-C-0040
Page 6 of 20
distributed as follows:
Original:
In the contractor's records (Retained for at least three years)
One copy to the following:
U.S. Army Medical Research and Materiel Command
ATTN: MCMR-RCQ-S
504 Scott Street
Fort Detrick, Maryland 21702-5012
U.S. Army Medical Research and Materiel Command
ATTN: MCMR-PLD
504 Scott Street
Fort Detrick, Maryland 21702-5012
U.S. Army Medical Research Acquisition Activity
ATTN: MCMR-AAA
820 Chandler Street
Fort Detrick, Maryland 21702-5014
PROHIBITION OF USE OF HUMAN SUBJECTS (NOV 2000) (USAMRAA)
Notwithstanding any other provisions contained in this award or incorporated by
reference herein, the contractor is expressly forbidden to use or subcontract
for the use of human subjects in any manner whatsoever. In the performance of
this award, the contractor agrees not to come into contact with, use or employ,
or subcontract for the use or employ of any human subjects for research,
experimentation, tests or other treatment under the scope of work as set out in
the award
USE OF LABORATORY ANIMALS (CONUS)(MAR 2002) (USAMRAA)
a. The contractor or its subcontractors, are authorized to conduct
research under this award involving laboratory animals for the following
protocols:
Protocol entitled, "Smallpox Antiviral Drug" submItted by Dr. Dennis Hruby
for the use of mice,
b. ANIMAL WELFARE
(1) For those facilities that are required to do so by federal law, the
contractor shall register its research facility with the Secretary of
Agriculture in accordance with 7 U.S.C. 2136 and 9 CFR, Subchapter A, Part 2,
Subpart C, and Section 2.30.
(2) The contractor shall acquire regulated animals only from dealers
licensed by the Secretary of Agriculture under 7 U.S.C. 2133 and 9 CFR,
Subchapter A, Part 2, Subpart A, Sections 2.1 through 2.11, or from sources that
are exempt from licensing under those sections.
(3) The contractor agrees that the care and use of animals will conform
DAMD17-03-C-0040
Page 7 of 20
with the pertinent laws of the United States and regulations of the Department
of Agriculture (see 7 U.S.C. 2131 et.seq. and 9 CFR Subchapter A, Parts I
through 4), and that the research will adhere to the principles set forth in the
Guide for Care and Use of Laboratory Animals, National Research Council, 1996.
(4) The Contracting Officer may immediately suspend, in whole or in part,
work and further payments under this award for failure to comply with the
requirements of paragraphs (1) through (3) of this clause.
(a) The suspension will stay in effect until the contractor complies
with the requirements.
(b) Failure to complete corrective action within the time specified
by the Contracting Officer may result in termination of this award and removal
of the contractor's name from the list of facilities approved for funding.
(5) The contractor may request registration of its facility and a current
listing of licensed dealers from the Regional Office of the Animal and Plant
Health Inspection Service (APHIS), United States Department of Agriculture
(USDA), for the region in which its research facility is located. The location
of the appropriate APHIS regional office, as well as information concerning this
program may be obtained by contacting the Senior Staff Officer, Animal Care
Staff, USDA/APHIS, Animal Care, 4700 River Road, Unit 84, Riverdale, MD
20737-1234 (Phone number 301-734-4981 or email ace@usda.gov).
(6) The contractor shall include this clause, including this paragraph
(6), in all subcontracts/subawards involving research of live vertebrate
animals.
c. POST-AWARD OVERSIGHT OF THE USE OF LABORATORY ANIMALS
Post-award oversight of the use of laboratory animals shall be the
responsibility of the contractor's Animal Care and Use Committee (ACUC). The
Principal Investigator will notify the Contracting Officer in writing of any
significant changes to the proposed use of animals which was the basis for
award. These changes must be approved by the contractor's ACUC and the USAMRMC.
In addition, the ACUC shall immediately notify the Contracting Officer of any
violations of law, or regulation involving animal care, or of changes in the
facility's accreditation status by the Association for the Assessment and
Accreditation of Laboratory Animal Care, International (AAALAC).
d. ANIMAL USE REPORTING
(1) The contractor shall annually prepare and electronically submit the
U.S. Army Medical Research and Materiel Command Animal Use Report detailing the
use of animals in the research and development sponsored by the Army. The web
site containing information for electronic submission of this report may be
found at http://www.usamraa.army.mil.
(2) A letter with additional instructions concerning use of the electronic
web site will be mailed at the end of the fiscal year. The reporting period
shall be each Federal Fiscal Year, i.e., 01 October through 30 September, and
the report shall be electronically received by the U.S. Army Medical Research
and Materiel Command no later than 1 December of that year.
(3) For awards with expiration dates prior to 30 September, instructions
for submission of the final animal use report may be found at
http://www.usamraa.army.mil.
(4) The contractor shall also furnish a copy of the most recent USDA
Inspection Report. This report can be submitted via fax or mail to:
DAMD17-03-C-0040
Page 8 of 20
Commander
U.S. Army Medical Research & Materiel Command
ATTN: MCMR-RCQ-AR
504 Scott Street
Fort Detrick MD 21702-5012
FAX: (301) 619-4165
(5) The contractor is responsible for ensuring that a separate U.S.
Army Medical Research and Materiel Command Animal Use Report and USDA Inspection
Report be submitted for any subcontract/subaward facility).
PROHIBITION OF USE OF HUMAN ANATOMICAL SUBSTANCES (NOV 2000) (USAMRAA)
Notwithstanding any other provisions contained in this award or incorporated by
reference herein, the contractor is expressly forbidden to use or subcontract
for the use of human anatomical substances in any manner whatsoever. In the
performance of this award, the contractor agrees not to come into contact with,
use or employ, or subcontract for the use or employ of any human anatomical
substances for research, experimentation, tests or other treatment under the
scope of work as set out in the award.
REPORTS, MANUSCRIPTS AND PUBLIC RELEASES (MAR 1999) (USAMRAA)
a. Contractors are encouraged to publish results of research supported by
USAMRMC in appropriate media forum. Any publication, report or public release,
which may create a statutory bar to the issuance of a patent on any subject
invention, shall be coordinated with appropriate patent counsel.
b. Manuscripts intended for publication in any media shall be submitted to the
COR, simultaneously with submission for publication. Review of such manuscripts
is for comment to the Principal Investigator, not for approval or disapproval.
Courtesy copies of the reprint shall be forwarded to the COR, even though
publication may be subsequent to the expiration of the contract.
c. The contractor shall notify the Contracting Officer of planned news releases,
planned publicity, advertising material concerning contract work, and planned
presentations to scientific meetings prior to public release. This is not
intended to restrict dissemination of research information but to allow the U.S.
Army Medical Research and Materiel Command (USAMRMC) advance notice in order to
adequately respond to inquiries.
d. Manuscripts, reports, public releases and abstracts, which appear in
professional journals, media and programs, shall include the following
statements:
(1) "This work is supported by the U.S. Army Medical Research and Materiel
Command under Contract No. DAMD17-03-C-40."
(2) "The views, opinions and/or findings contained in this report are those of
the author(s) and should not be construed as an official Department of the Army
position, policy or decision unless so designated by other documentation."
(3) "In conducting research using animals, the investigator(s) adhered to the
"Guide for the Care and Use of Laboratory Animals," prepared by the Committee on
Care and Use of Laboratory Animals of the Institute of Laboratory Animal
Resources, National Research Council (NIH Publication No. 86-23, Revised 1985)."
(4) "In the conduct of research where humans are the subjects, the
investigator(s) adhered to the policies regarding the protection of human
subjects as prescribed by 45 CFR 46 and 32 CFR 219 (Protection of Human
Subjects)."
DAMD17-03-C-0040
Page 9 of 20
(5) In conducting work involving the use of recombinant DNA the investigator(s)
adhered to Guidelines for Research Involving Recombinant DNA Molecules; Notice,
Federal Register, July 5, 1994, Volume 59, Number 127.
DAMD17-03-C-0040
Page 10 of 20
Section E - Inspection and Acceptance
CLAUSES INCORPORATED BY REFERENCE
52.246-8 Inspection Of Research And Development Cost MAY 2001
Reimbursement
DAMD17-03-C-0040
Page 11 of 20
Section F - Deliveries or Performance
PERFORMANCE
a. The period of performance for this contract is 1 January 2003 through
31 May 2007 (Research ends 31 December 2006). The research required by the
statement of work in Section C shall be conducted during the period 1 Jan 2003
through 31 December 2006. The additional month is to allow sufficient time to
complete the final reports.
CLAUSES INCORPORATED BY REFERENCE
52.242-15 Stop-Work Order AUG 1989
52.247-34 F.O.B. Destination NOV 1991
REPORTING REQUIREMENT
QUARTERLY REPORTS FORMAT (OCT 1992) (USAMRAA)
a. Quarterly reports are the most immediate and direct contact between the
Principal Investigator (PI) and the Contracting Officer's Representative (COR).
The reports provide the means for keeping this Command advised of developments
and problems as the contract effort proceeds. The quarterly reports also provide
a measure against which decisions on release of funding and on requests for
supplements are made.
b. Quarterly reports shall be submitted for each three-month period of the
contract beginning with the effective date of the contract. This requirement
includes all three-month periods of the contract.
c. Copies of each report shall be submitted in the quantities indicated to the
addresses shown below within fifteen (15) days after the end of each quarter.
Internal Government distribution will be made by those offices.
(1) Two (2) copies of the report to:
U.S.Army Medical Research Institute for Infectious Diseases (USAMRIID)
ATTN: Dr. Jay Hooper
1425 Porter Street
Fort Detrick, MD 21702
(2) Three (3) copies of the report to:
Commander
U.S. Army Medical Research and Materiel Command
ATTN: MCMR-RMI-S
504 Scott Street
Fort Detrick, MD 21702-5012
(3) One (1) copy of the report to:
Director
U. S. Army Medical Research Acquisition Activity (USAMRAA)
ATTN: MCMR-AAA-A
820 Chandler Street
Fort Detrick, MD 21702-5014
DAMD17-03-C-0040
Page 12 of 20
d. Photocopies of the blank Quarterly report sample shown on the following page
shall serve as the format. Each item of the report format shall be completed or
addressed.
DAMD17-03-C-0040
Page 13 of 20
Quarterly Report Format
1. Contract No.__________________________ 2. Report Date _________________
3. Reporting period from ________________ to _____________________________
4. PI____________________________________ 5. Telephone No. _______________
6. Institution__________________________________________________________________
7. Project Title: ______________________________________________________________
________________________________________________________________________________
8. Current staff, with percent effort of each on project.
________________________________% _____________________________%
________________________________% _____________________________%
9. Contract expenditures to date (as applicable):
This Qtr/Cumulative
Personnel______________________________/_____________________________
Travel_________________________________/_____________________________
Fringe Benefits________________________/_____________________________
Equipment______________________________/_____________________________
Supplies_______________________________/________________ Other__________________
This Qtr/Cumulative
Subtotal_______________________________/_____________________________
Indirect Costs_________________________/_____________________________
Fee____________________________________/_____________________________
Total:_________________________________/________________________ ____
10. Comments on administrative and logistical matters.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
11. Use additional page(s), as necessary, to describe scientific progress for
the quarter in terms of the tasks or objectives listed in the statement of work
for this contract. Explain deviations where this isn't possible. Include data
where possible.
12. Use additional page(s) to present a brief statement of plans or milestones
for the next quarter.
DAMD17-03-C-0040
Page 14 of 20
RESEARCH TECHNICAL REPORTING REQUIREMENTS (NOV 2000) (USAMRAA)
Format Requirements for Annual/Final Reports
a. Annual reports must provide a complete summary of the research
accomplishments to date with respect to the approved Statement of Work. Journal
articles can be substituted for detailed descriptions of specific aspects of the
research, but the original articles must be attached to the report as an
appendix and appropriately referenced in the text. The importance of the report
to decisions relating to continued support of the research can not be
overemphasized. A report shall be submitted within 30 calendar days of the
anniversary date of the award (a final report will be submitted upon completion
of the research (last year of the award)).
b. A final report summarizing the entire research effort, citing data in
the annual reports and appended publications shall be submitted at the end of
the award performance period. The final report will provide a complete reporting
of the research findings. Journal publications can be substituted for detailed
descriptions of specific aspects of the research, but an original copy of each
publication must be attached as an appendix and appropriately referenced in the
text. All final reports must include a bibliography of all publications and
meeting abstracts and a list of personnel (not salaries) receiving pay from the
research effort.
c. Although there is no page limitation for the reports, each report shall
be of sufficient length to provide a thorough description of the accomplishments
with respect to the approved Statement of Work. Submission of an original and
two copies of the report are required. Reports shall be forwarded to:
Commander
U.S. Army Medical Research and Materiel Command
ATTN: MCMR-RMI-S
504 Scott Street Fort Detrick,
Maryland 21702-5012
d. All reports shall have the following elements in this order: front
cover, Standard Form (SF 298), table of contents, introduction, body, key
research accomplishments, reportable outcomes, conclusions, references, and
appendices. Pages shall be consecutively numbered throughout the report. DO NOT
RENUMBER PAGES IN THE APPENDICES BUT DO INCLUDE THE APPENDICES IN THE PAGE COUNT
IN BLOCK 15 ON THE SF 298. Mark all pages of the report which contain
proprietary or unpublished data that should be protected. DO NOT USE THE WORD
"CONFIDENTIAL" WHEN MARKING DOCUMENTS. Indicate in your letter accompanying the
report that the report contains proprietary or unpublished data, and that the
distribution statement should indicate the limitations of the report.
FRONT COVER: Sample front cover provided at http://mrmc-www.army.mil. The
Accession Document (AD) Number should remain blank.
STANDARD FORM 298: Sample SF 298 provided at http://mrmc-www.army.mil. Go to
site index and click on Research Reports and click on SF298 for a copy. The
abstract in Block 13 must state the purpose, scope, major findings and be an
up-to-date report of the progress in terms of results and significance. Subject
terms are keywords that may have previously assigned to the proposal abstract or
are keywords that may be significant to the research. The number of pages shall
include all pages that have printed data (including the front cover, SF 298,
table of contents, and all appendices). Please count pages carefully to ensure
legibility and that there are no missing pages as this delays processing of
reports. Page numbers should be typed: please do not hand number pages.
TABLE OF CONTENTS: Sample table of contents provided at
http://mrmc-www.army.mil.
INTRODUCTION: Narrative that briefly (one paragraph) describes the subject,
purpose and scope of the research.
DAMD17-03-C-0040
Page 15 of 20
BODY: This section of the report shall describe the research accomplishments
associated with each task outlined in the approved Statement of Work. Data
presentation shall be comprehensive in providing a complete record of the
research findings for the period of the report. Appended publications and/or
presentations may be substituted for detailed descriptions but must be
referenced in the body of the report. If applicable, for each task outlined in
the Statement of Work, reference appended publications and/or presentations for
details of result findings and tables and/or figures. The report shall include
negative as well as positive findings. Include problems in accomplishing any of
the tasks. Statistical tests of significance shall be applied to all data
whenever possible. Figures and graphs referenced in the text may be embedded in
the text or appended. Figures and graphs can also be referenced in the text and
appended to a publication. Recommended changes or future work to better address
the research topic may also be included, although changes to the original
Statement of Work must be approved by the Grants Officer. This approval must be
obtained prior to initiating any change to the original Statement of Work.
KEY RESEARCH ACCOMPLISHMENTS: Bulleted list of key research accomplishments
emanating from this research.
REPORTABLE OUTCOMES: Provide a list of reportable outcomes that have resulted
from this research to include:
manuscripts, abstracts, presentations; patents and
licenses applied for and/or issued; degrees obtained
that are supported by this award; development of
cell lines, tissue or serum repositories; infomatics
such as databases and animal models, etc.; funding
applied for based on work supported by this award;
employment or research opportunities applied for
and/or received based on experience/training
supported by this award.
CONCLUSIONS: Summarize the results to include the Importance and/or implications
of the completed research and when necessary, recommend changes on future work
to better address the problem. A "so what section" which evaluates the knowledge
as a scientific or medical product shall also be included in the conclusion of
the report.
REFERENCES: List all references pertinent to the report using a standard journal
format (i.e. format used in Science, Military Medicine, etc.).
APPENDICES: Attach all appendices that contain information that supplements,
clarifies or supports the text. Examples include original copies of journal
articles, reprints of manuscripts and abstracts, a curriculum vitae, patent
applications, study questionnaires, and surveys, etc.
BINDING: Because all reports are entered into the Department of Defense
Technical Reports database collection and are microfiched, it is recommended
that all reports be bound by stapling the pages together in the upper left hand
corner. All original reports shall be legible and contain original
photos/illustrations. Figures shall include figure legends and be clearly marked
with figure numbers.
DAMD17-03-C-0040
Page 16 of 20
Section G - Contract Administration Data
ACCOUNTING AND APPROPRIATION DATA
AA: 97204002601074811930603384BPO255YP1FFKAW23RYX2331N643FFKAP1018064
AMOUNT: $364,642.00
CLAUSES INCORPORATED BY FULL TEXT
INCREMENTAL FUNDING (MAR 1999) (USAMRAA)
a. It is estimated that the total cost to the Government for the full
performance of this contract for the period 1 January 2003 to 31 May 2007 will
be $1,640,883.00 There have been funds allotted for reimbursement of allowable
costs, and applicable fee, incurred in the performance of this contract in the
amount of only $364,642.00. It is estimated that such funded amount shall be
sufficient to cover allowable expenses for the period 1 Jan 2003 to 31 Dec 2004.
The amount of the funds currently allotted may be increased by the Contracting
Officer without further concurrence of the contractor. It is estimated that the
remaining funds will be made available in accordance with the following
schedule:
Amount On or about
$413,424 1 January 2004
$436,376 1 January 2005
$426,441 1 January 2006
b. Pending the availability of additional funds, performance by the contractor
shall be governed by the contract clause entitled "Limitation of Funds", FAR
52.232-22.
VOUCHERS (MAR 1999) (USAMRAA)
a. The Contractor shall submit an original and one copy of public vouchers (SF
1034) not less frequently than monthly to U.S. Army Medical Research Acquisition
Activity (USAMRAA), Attn: Shelley Marken, 820 Chandler Street, Fort Detrick, MD
21702-5014 for review and forwarding for payment.
b. Voucher categories shall adhere to budget categories listed in the negotiated
budget used for funding the contract. All vouchers shall state the total amount
claimed and the subtotals claimed in the following types of categories: salaries
and wages, overhead stating percentage and base, travel, equipment, supplies,
and any other categories used in the negotiated budget. Suitable detailed
support for amounts claimed shall be shown on continuation sheets. For instance,
direct labor costs should include number of hours worked by individual, hourly
rate, and total. Travel costs should include number of trips, public carrier
rates, per diem costs, incidental costs, etc.
c. Cumulative totals of expenditures in each category shall also be shown.
d. Each voucher submitted must state the period of performance. Each voucher
submitted must request payment for only those man-hours or cost expenditures
incurred in that period.
e. The Contracting Officer shall be notified immediately in the event a budget
category is expected to deviate from the negotiated budget.
f. The completion voucher shall be submitted by the Contractor to the
Contracting Officer.
DAMD17-03-C-0040
Page 17 of 20
TRAVEL (MAR 1999) (USAMRAA)
a. Approval of Foreign Travel. The cost of foreign travel is allowable only when
the specific written approval of the Contracting Officer or Contract Specialist
responsible for administration of the contract is obtained prior to commencing
the trip. Approval must be requested at least 30 days before the scheduled
departure date in order that all necessary clearances may be processed. Each
individual trip must be approved separately even though it may have been
included in a previously approved budget. Foreign travel is defined as any
travel outside of Canada and the United States and its territories and
possessions.
b. Domestic/local travel shall take place in accordance with Department of
Defense Joint Travel Regulations (JTR). Documentation showing dates and mileage
for such travel shall be maintained and furnished in support of invoice claiming
reimbursement.
PROPERTY REPORTING (COMMERCIAL) (MAR 1999) (USAMRAA)
The designated property administrator for Government property acquired for use
under this contract is the Contract Specialist, US Army Medical Research
Acquisition Activity, Fort Detrick, MD 21702-5014. The contractor shall furnish
the designated property administrator report, (i.e. DD FORM 1662, DOD Property
in the Custody of Contractors).
a. Interim Inventories - Annually, as of 30 September, report due 10 October,
each year.
b. Final Inventory - When the contract expires.
DAMD17-03-C-0040
Page 18 of 20
Section I - Contract Clauses
CLAUSES INCORPORATED BY REFERENCE
52.202-1 Definitions DEC 2001
52.203-3 Gratuities APR 1984
52.203-5 Covenant Against Contingent Fees APR 1984
52.203-6 Restrictions On Subcontractor Sales To The Government JUL 1995
52.203-7 Anti-Kickback Procedures JUL 1995
52.203-8 Cancellation, Rescission, and Recovery of Funds for Illegal or JAN 1997
Improper Activity
52.203-10 Price Or Fee Adjustment For Illegal Or Improper Activity JAN 1997
52.203-12 Limitation On Payments To Influence Certain Federal JUN 1997
Transactions
52.204-4 Printed or Copied Double-Sided on Recycled Paper AUG 2000
52.208-8 Helium Requirement Forecast And Required Sources For APR 2002
Helium
52.209-6 Protecting the Government's Interest When Subcontracting JUL 1995
With Contractors Debarred, Suspended, or Proposed for
Debarment
52.215-2 Alt III Audit and RJUN 1999Negotiation (Jun 1999) Alternate III
52.216-7 Allowable Cost And Payment FEB 2002
52.216-11 Cost Contract--No Fee APR 1984
52.222-3 Convict Labor AUG 1996
52.222-21 Prohibition Of Segregated Facilities FEB 1999
52.222-26 Equal Opportunity APR 2002
52.223-6 Drug Free Workplace MAY 2001
52.223-14 Toxic Chemical Release Reporting OCT 2000
52.225-13 Restrictions on Certain Foreign Purchases JUL 2000
52.228-7 Insurance--Liability To Third Persons MAR 1996
52.232-9 Limitation On Withholding Of Payments APR 1984
52.232-17 Interest JUN 1996
52.232-22 Limitation Of Funds APR 1984
52.232-25 Alt I Prompt Payment (Feb 2002) Alternate I FEB 2002
52.232-33 Payment by Electronic Funds Transfer--Central Contractor MAY 1999
Registration
52.233-1 Disputes JUL 2002
52.233-3 Alt I Protest After Award (Aug 1996) - Alternate I JUN 1985
52.242-13 Bankruptcy JUL 1995
52.243-2 Alt V Changes--Cost-Reimbursement (Aug 1987) - Alternate V APR 1984
52.249-6 Termination (Cost Reimbursement) SEP 1996
52.249-14 Excusable Delays APR 1984
52.253-1 Computer Generated Forms JAN 1991
252.203-7001 Prohibition On Persons Convicted of Fraud or Other Defense- MAR 1999
Contract-Related Felonies
252.204-7003 Control Of Government Personnel Work Product APR 1992
252.204-7004 Required Central Contractor Registration NOV 2001
252.209-7004 Subcontracting With Firms That Are Owned or Controlled By MAR 1998
The Government of a Terrorist Country
252.225-7012 Preference For Certain Domestic Commodities APR 2002
252.225-7026 Reporting Of Contract Performance Outside The United JUN 2000
States
252.227-7034 Patents--Subcontracts APR 1984
DAMD17-03-C-0040
Page 19 of 20
252.227-7039 Patents--Reporting Of Subject Inventions APR 1990
252.235-7011 Final Scientific or Technical Report SEP 1999
252.243-7001 Pricing Of Contract Modifications DEC 1991
252.243-7002 Requests for Equitable Adjustment MAR 1998
252.244-7000 Subcontracts for Commercial Items and Commercial MAR 2000
Components (DoD Contracts)
252.247-7023 Transportation of Supplies by Sea MAY 2002
252.247-7024 Notification Of Transportation Of Supplies By Sea MAR 2000
CLAUSES INCORPORATED BY FULL TEXT
52.252-2 CLAUSES INCORPORATED BY REFERENCE (FEB 1998)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available. Also, the full text of a clause may
be accessed electronically at this/these address(es):
www.usamraa.army.mil
(End of clause)
52.252-6 AUTHORIZED DEVIATIONS IN CLAUSES (APR 1984)
(a) The use in this solicitation or contract of any Federal Acquisition
Regulation (48 CFR Chapter 1) clause with an authorized deviation is indicated
by the addition of "(DEVIATION)" after the date of the clause.
b. The use in this solicitation or contract of any Defense Federal Acquisition
Regulation Supplement (48 CFR Chapter 2) clause with an authorized deviation is
indicated by the addition of "(DEVIATION)" after the name of the regulation.
252.235-7002 ANIMAL WELFARE. (DEC 1991)
(a) The Contractor shall register its research facility with the Secretary of
Agriculture in accordance with 7 U.S.C. 2316 and 9 CFR subpart C, and 2.30, and
furnish evidence of such registration to the Contracting Officer before
beginning work under this contract.
(b) The Contractor shall acquire animals only from dealers licensed by the
Secretary of Agriculture under 7 U.S.C. 2133 and 9 CFR subpart A, 2.1 through
2.11, or from sources that are exempt from licensing under those sections.
(c) The Contractor agrees that the care and use of animals will conform with the
pertinent laws of the United States and regulations of the Department of
Agriculture (see 7 U.S.C. 2131 et. seq. and 9 CFR subchapter A, parts 1 through
4).
(d) The Contracting Officer may immediately suspend, in whole or in part, work
and further payments under this contract for failure to comply with the
requirements of paragraphs (a) through (c) of this clause.
(1) The suspension will stay in effect until the Contractor complies with the
requirements.
DAMD17-03-C-0040
Page 20 of 20
(2) Failure to complete corrective action within the time specified by the
Contracting Officer may result in termination of this contract and removal of
the Contractor's name from the list of contractors with approved Public Health
Service Welfare Assurances.
(e) The Contractor may request registration of its facility and a current
listing of licensed dealers from the Regional Office of the Animal and Plant
Health Inspection Service (APHIS), United States Department of Agriculture
(USDA), for the region in which its research facility is located. The location
of the appropriate APHIS regional office, as well as information concerning this
program may be obtained by contacting the Senior Staff Officer, Animal Care
Staff, USDA/APHIS, Federal Center Building, Hyausville, MD 20782.
(f) The Contractor shall include this clause, including this paragraph (f), in
all subcontracts involving research of live vertebrate animals.
252.235-7010 Acknowledgment of Support and Disclaimer. (MAY 1995)
(a) The Contractor shall include an acknowledgment of the Government's support
in the publication of any material based on or developed under this contract,
stated in the following terms: This material is based upon work supported by the
U.S. Army Medical Research Acquisition Activity (USAMRAA) under Contract No.
DAMD17-03-C-0040..
(b) All material, except scientific articles or papers published in scientific
journals, must, in addition to any notices or disclaimers by the Contractor,
also contain the following disclaimer: Any opinions, findings and conclusions or
recommendations expressed in this material are those of the author(s) and do not
necessarily reflect the views of the USAMRAA.
Exhibit 10(ddd)
[FOUR STAR GROUP LOGO] Four Star Group 646-872-7882
495 Broadway Street
New York, NY 10038
www.fourstargroup.com elrapp@frontiernet.net
==========================================================================
MARKETING REPRESENTATION
AGREEMENT
-----------------------------------------------------------------
[SIGA TECHNOLOGIES LOGO]
-----------------------------------------------------------------
APPLIED BACTERIAL GENOMICS
SIGA Technologies is applying bacterial
genomics in the design and development
of novel products for the prevention and
treatment of serious infectious diseases.
-----------------------------------------------------------------
FOR: SIGA TECHNOLOGIES, INC.
420 Lexington Ave.
New York, NY 10170
A DIVISION OF EXECUTIVE INTELLIGENCE NETWORK LLC.
- ---------------------------------------------------------------------------
1. FOUR STAR GROUP
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
The bridge between the commercial and government sectors
Marketing professionals specializing in technology, security and
intelligence.
- ---------------------------------------------------------------------------
The Mission
- ---------------------------------------------------------------------------
o Provide clients with a cost effective entrance into and means
of doing business with the US Government marketplace.
o Help clients better understand the Government Programming &
Budgeting System and the Government Acquisition Cycle.
o Represent clients with honesty and integrity.
o Provide clients with the tools and personnel necessary for
success in entering and understanding the Governmental
marketplace.
- ---------------------------------------------------------------------------
The Group
- ---------------------------------------------------------------------------
Four Star Group (FSG)
Is a marketing consulting firm that bridges the gap between the
commercial and government sectors. With unparalleled knowledge of
the technology, security and intelligence industries, FSG's network
of corporate leaders and military experts identifies and marries
public sector business opportunities with cutting edge technologies
developed in the private sector. By serving as the liaison between
these two disparate worlds, FSG develops unique solutions that
effectively address the nation's most critical information and
security needs.
Four Star Group, a division of Executive Intelligence Network LLC,
was established in September 2001 in response to the increasing
demand to integrate best of breed technologies in the interest of
national security.
The FSG Team
Brigadier General Richard W. Potter Jr. (USA Ret) - Director
Government Sector
After a distinguished thirty-five year career in the military,
Brigadier General Richard Potter retired in 1994 from the post as
Deputy Commanding General, United States Army Special Operations
Command.
Since 1995 he has provided independent consulting services
specializing in high tech firms and companies within the defense
industry, including Raytheon, Northrop Grumman,
CONFIDENTIAL PAGE 2 OF 9 2/5/2003
Jacobs-Sverdrup, ACS Defense, GrayHawk Systems, and Arete'
Associates. Additionally, he serves as a consultant to the Assistant
Secretary of Defense, Command Control Communications Computers
Intelligence (ASDC4I), the United States Special Operations Command
(USSOCOM), United States Army Special Operations Command (USASOC),
as well as with the Department of the Army and other government
agencies on special projects both domestically and abroad. From
1996-1998, General Potter served on the Defense Science Board.
Richard Potter has been responsible for the procurement of over 500
million dollars in government contracts.
Cary Fields - Director Financial and Capital Markets Sector
A renowned financial advisor, Mr. Fields holdings and influence span
the real estate, petro-chemical, pharmaceutical, technology and
financial industries.
Edward Lee Rapp - Director Marketing Operations
Mr. Rapp's operational experience in advertising (Interpublic
Group), marketing (Zentropy Partners), technology (Arc Studios
International) and media (WeMedia Inc.), combined with his
successful track record as a contractor for USSOCOM and INSCOM,
provides Four Star Group a unique bridge between commercial and
government marketing.
Gray Hawk Systems Inc. - Team Partner
Our partnership with Gray Hawk Systems, Inc. provides experience as
a US Government Contractor for DoD, the US Congress, and other
Federal Agencies. Gray Hawk also has the ability to pair technology,
products, and services with USG Requirements as well as the ability
to furnish a Government Defense Security Service IS-Cleared facility
and personnel. Gray Hawk gives our clients permanent Washington DC
presence and representation.
The Gray Hawk Teem
Dr. Stephen W. Drew
Dr. Drew, a Gray Hawk consultant for this effort, is an independent
consultant to the pharmaceutical, biotechnology and investment
banking industries and is a member of several scientific advisory
boards to members of these industries. Dr. Drew teaches a biological
product design course at Princeton University and was recently the
Astra Zeneca Visiting Fellow at Cambridge University. He retired
from Merck & Co., Inc. in 2000, where his responsibilities included
vice presidential positions in the Merck Manufacturing Division
(MMD) as the VP of Vaccine Science and Technology, the VP of Vaccine
Operations, and the VP of Technical Operations & Engineering. Prior
to joining MMD in 1987, he was the Senior Director of Biochemical
Engineering in the Merck Research Laboratories (MRL), a department
that Dr. Drew started in 1981. His current scientific and technical
interests focus on biological product design, metabolic engineering
to achieve novel chiral synthesis of pharmaceuticals, biological
process validation and on the integration of engineering and the
life sciences.
Dr. Drew received Bachelor's and Master's degrees from the
University of Illinois and his Ph.D. from MIT. He is a member of the
National Academy of Engineering, where he is
CONFIDENTIAL PAGE 3 OF 9 2/5/2003
Chair of the Bioengineering Section. He is a member of several
professional organizations serving interests in chemical
engineering, chemistry and biology. He has held offices in the
American Institute of Chemical Engineers, the American Chemical
Society, the American Society for Microbiology, the Society for
Industrial Microbiology, and is a Founding Fellow of the American
Institute for Medical and Biological Engineering. He is the past
chairman of the Advisory Committee to the Engineering Directorate of
the National Science Foundation and has served the departments of
chemical engineering at several universities as a member of their
review committees.
Thomas E. Mitchell - Vice President, Operations, Intelligence, and
Security Division Gray Hawk Systems Inc.
Mr. Mitchell is an accomplished business executive. A retired U.S.
Army Colonel, Mr. Mitchell served in key leadership and management
positions within the Special Operations Community. He currently
manages a professional staff providing support to a variety of
commercial and governmental organizations. Additionally, Mr.
Mitchell lends his extensive experience as a serving member of a
Homeland Defense Committee of the National Academy of Sciences.
Mr. Mitchell has been responsible for the procurement and management
of over 200 million dollars in government and commercial contracts.
Edward F. Phillips- Division Deputy & Director, Gray hawk Systems
Inc.
Mr. Phillips is Director and Deputy to the Vice President of the
Operations, Intelligence, and Security Division, responsible for
business development and program management of division contracts.
A former White House Staffer, Mr. Phillips served as an Intelligence
analyst at the National Security Council and in the White House
Situation Room during the Bush and Clinton Administrations. He was
responsible for 8 portfolios ranging from international and domestic
counter-narcotic and counter-terrorist operations to worldwide
environmental issues, and was recognized as the best White House
staff intelligence officer in the NSC by Brent Scowroft. Mr.
Phillips holds a Master of Science degree in Management, and has
been responsible for the procurement of over 100 million dollars of
government contracts.
CONFIDENTIAL PAGE 4 OF 9 2/5/2003
- ---------------------------------------------------------------------------
2 Scope Of Work
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
To be performed for SIGA Technologies, Inc.
- ---------------------------------------------------------------------------
1. GENERAL DESCRIPTION AND BACKGROUND
This Statement of Work (SOW) ("Agreement") describes the tasks
necessary to provide SIGA Technologies, Inc. with marketing
representation as set forth below under Phase 1 and 2.
2. OBJECTIVE
The objective of Phase 1 is to provide SIGA Technologies, Inc.
("SIGA") and Four Star Group the information necessary for designing
a successful marketing plan and product list for the penetration
(Phases 2) of Federal, State local and the Homeland Defense markets.
This includes identifying near term contracts and grants in addition
to providing the necessary data for an informed gap analysis between
potential contracts and SIGA Technologies, Inc. products.
3. TASKS
3.1. Manning
The Four Star Group shall, when funded, provide SIGA personnel with
relevant subject matter expertise to carry out all tasks, in the
areas of Federal, State and local Governments, and private sector as
well as connectivity for Homeland Defense.
3.2. Phase 1 - Research, Assessment, Evaluation and Planning
The Four Star Group shall act as the marketing and market research
department for SIGA Technologies, Inc. during phase one Marketing
Assessment. In that role, the Four Star Group may in its reasonable
judgment and in keeping with the client's objectives provide the
following services:
3.2.1. Conduct interviews with the client's personnel, and key
personnel in government agencies and potential private sector
partners. Including, but not limited too, visits with SIGA
personnel at their the labs
3.2.2. Investigate and research the underlying science and
development process including safety and efficacy.
3.2.3. Investigate and analyze various registration strategies
3.2.4. Identify and analyze the strengths and weaknesses of
competitors vying for the same market space
3.2.5. Evaluate the clients position in comparison to its
competition through its sources
3.2.5.1. DoD
3.2.5.2. FDA
3.2.5.3. NIH
3.2.6. Analyze product strategies, including short term market to
bio defense, and their impact on both the marketplace and the
client
CONFIDENTIAL PAGE 5 OF 9 2/5/2003
3.2.7. Investigate and analyze the potential customers, market or
partners perception of the client
3.2.8. Identify and reconcile the clients corporate goals
3.2.9. Provide a "Gap Analysis" Between Clients present position and
its marketing goals
3.2.10. Help create a "Second Generation" product strategy for the
public market
3.2.11. Identify potential candidates for alliance or merger.
3.2.12. Identify potential research development contracts leading
toward desired product
3.2.13. Produce marketplace information releases to prepare for
market penetration
3.3. Phase 2 Marketing
The Four Star Group shall act as the marketing and market research
department for SIGA Technologies, Inc. during phase Two Marketing.
In that role, the Four Star Group may in its reasonable judgment and
in keeping with the client's objectives provide the following
services:
3.3.1. Respond to and align SWOT report
3.3.2. Execute the approved strategic marketing plan
3.3.3. Development of linked independent efforts directed to
maximize medical importance impact on Bio defense
3.3.4. Produce Investor-confidence information releases to raise
capital market awareness
3.3.5. Identify and endeavor to Capture relevant R&D contracts
3.3.6. Aide in the Identification and courting of a Strategic
Takeover Partner
3.4. Recommendation
3.4.1. Four Star Group shall make recommendations to SIGA
Technologies, Inc. or designated SIGA personnel regarding
follow-on activities identified and/or evaluated during SOW
execution.
3.5. Additional Tasks
3.5.1. Four Star Group personnel may attend meetings, conferences,
and discussions as required and as provided for in 5.0 Travel
3.5.2. In addition, Four Star Group will provide SIGA a full time
presence in the Washington DC area.
4. DELIVERABLES
4.1. At the end of Phase one FSG will provide the client with:
4.1.1. A "SWOT" Report outlining Strengths, Weakness, Opportunities
and Threats.
4.1.2. A Strategic marketing action plan (allowing for the
development of commercial product) to include Near, Mid, and
Long term sub-plans
4.2. Interim Progress Reports
4.2.1. At monthly intervals FSG will provide the client with an IPR
outlining actions taken, tasks performed and a synopsis of
findings.
CONFIDENTIAL PAGE 6 OF 9 2/5/2003
4.3. Time Line
4.3.1. The final reports for phase one are anticipated to be
prepared within twelve to fourteen weeks after acceptance of
this proposal by SIGA and receipt of funds by the Four Star
Group.
4.4. Format
The Four Star Group shall provide deliverables in Microsoft Word
electronic format. The deliverables shall also be provided in hard
copy.
5. TRAVEL REQUIREMENTS
5.1. In support of this statement of work, Four Star Group will invoice
SIGA for local travel within the NCA, at the approved government
mileage rate. SIGA will fund approved travel outside the NCA. SIGA's
project manager prior to travel execution will approve all travel
requests. All invoices will be paid within thirty (30) days of
dispatch or be subject to an APR of 18% and all costs and fees
associated with collection of any unpaid invoice.
6. SIGA TECHNOLOGIES RESPONSIBILITIES
6.1. SIGA will provide Four Star Group with all information necessary for
Four Star's marketing evaluation. Information to be provided to Four
Star Group will include, but is not limited to, complete product
specifications, financial information, manufacturing and
producibility data, information regarding prior sales, and
information regarding key employees. SIGA will cooperate fully with
requests for information from Four Star Group and, upon request,
present detailed briefings regarding any and all aspects of SIGA's
business model and business plans, to include future product
development plans.
7. Terms
7.1. The term of this agreement shall be twelve (12) months from the
commencement of work
7.1.1. SIGA may terminate this agreement with or without cause 6
(six) months after commencement, with 60 (sixty) Days prior
written notice. (E.g. February 1st 2003 commencement written
notice must be received by June 1st 2003)
7.1.2. In the event of termination all contract and grant proposals
already submitted will upon award, regardless of time, count
towards the requirements for warrants laid out in 7.3.2 of
this document.
7.2. The cash retainer is two hundred forty nine thousand four hundred
twenty USD ($249,420), plus all travel expenses as outlined in
section 5.0 Travel Requirements. Payable to Executive Intelligence
Network LLC. All work will commence upon the unconditional receipt
of funds.
7.2.1. Schedule of payments:
7.2.1.1. $35,000 (USD) Upon Signing of agreement.
7.2.1.2. $35,000 (USD) March 1st 2003
7.2.1.3. 12 equal Payments of $14,951.67 (USD) due on the
first of each month Commencing February 1, 2003
CONFIDENTIAL PAGE 7 OF 9 2/5/2003
7.3. Four Star Group, in consideration of discounts given, will receive
7.3.1. Upon award to SIGA contracts or grants with a cumulative
value equal to $2,000,000 USD (two million) fully vested and
unencumbered, four Hundred thousand (400,000) warrants for
SIGA (NASDAQ) stock to be issued pro rata at time of award of
contract or grant (1 warrant per $5 of contract or grant
awarded) at a strike price of SIGA NASDAQ Closing price
January 31st 2003 with an expiration of 36 months from time of
issuance..
7.3.2. Upon renewal of marketing agreement 12 months from
commencement of this agreement fully vested and unencumbered,
one hundred thousand (100,000) warrants for SIGA (NASDAQ)
stock at a strike price of Fair Market Value at time of
renewal and with an expiration of 36 months.
7.4. The cost of printing and distribution of all public relations
material shall be born solely by SIGA Technologies
7.5. SIGA understands and agrees that the provision of any information to
Four Star Group is solely for the purpose of an independent
marketing evaluation, and does not guarantee that any future
business opportunities, sales, or contracts will result from the
work conducted by Four Star Group. SIGA will reimburse Four Star
Group for all costs associated with due diligence and the
development of a final report containing an analysis of the
marketability of the products and services offered by SIGA.
8. MISCELLANEOUS
8.1. SIGA Technology shall not, for a period of twenty four (24) months,
directly or indirectly, solicit or encourage any employee, agent, or
consultant of EIN, its partners (i.e. Gray Hawk) divisions (i.e.
Four Star Group) to leave the "employ" of EIN for any reason, nor
shall SIGA employ such employee in its, a competing or other
business endeavor.
8.2. The parties represent, warrant and acknowledge that they have
carefully read this Agreement, they know and understand its
contents, have consulted with an attorney of their choice, and have
signed this Agreement of their own free will and have the authority
to execute this document on behalf of their respective entities.
8.3. All notices and communications provided for hereunder shall be in
writing and shall be mailed return receipt, or faxed or hand
delivered to the business address of the respective party, effective
upon deposit.
8.4. A party who sues under this Proposal shall pay all costs and
reasonable attorney's fees if unsuccessful.
8.5. Each party agrees to waives any judicial interpretation of this
Agreement which would create a presumption against the other as a
result of its being the drafter of any provision of this Agreement.
8.6. The parties agree that all abbreviations, captions, numbering,
headings and titles are for the convenience of the Parties and shall
not effect the Agreement's judicial interpretation and further that
all words and terms shall be given their English meaning as set
forth in the latest edition of Webster's Unabridged International
Dictionary.
8.7. This Agreement shall be venued, construed and interpreted in
accordance with the laws of the State of New York.
CONFIDENTIAL PAGE 8 OF 9 2/5/2003
8.8. This Agreement constitutes the entire agreement and understanding
between the parties, and there are no other written or oral
representations taken into consideration in this Agreement.
Accepted for SIGA Technologies, Accepted for Four Star Group
/s/ Thomas N. Konatich /s/ Edward Lee Rapp
- ---------------------- ----------------------------
Name Edward Lee Rapp
_______________________ Director Marketing Operations
Title
_______________________ February 5, 2003
Date 2/5/03
[STAMP for Thomas N. Konatich
Vice President and
Chief Financial Officer]
CONFIDENTIAL PAGE 9 OF 9 2/5/2003
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-8 (Nos. 333-35992 and 333-56216) and Forms S-3 (Nos.
333-36682, 333-43750, 333-64414, 333-72554, 333-74390 and 333-103231) of SIGA
Technologies, Inc. of our report dated February 14, 2003 relating to the
financial statements, which appears in this Form 10-KSB.
PricewaterhouseCoopers LLP
March 31, 2003
New York, New York
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of SIGA Technologies, Inc. (the
"Company") on Form 10-KSB for the period ending December 31, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas N. Konatich, Acting Chief Executive Officer and Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Thomas N. Konatich
----------------------------------------
Thomas N. Konatich
Acting Chief Executive Officer
and Chief Executive Officer
March 31, 2003
