UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) May 23, 2003
----------
SIGA Technologies, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23047 13-3864870
(State or other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification Number)
420 Lexington Avenue, Suite 601
New York, New York 10170
(Address of Principal Executive Offices)
(Zip Code)
(212) 672-9100
(Registrant's telephone number, including area code)
This Amendment No. 1 to Current Report on Form 8-K/A ("Amendment") amends the
Current Report on Form 8-K filed by the registrant on May 23, 2003 (the
"Report"). This Amendment is being filed to provide the financial information
required by Items 7(a) and 7(b). Items 7(a) and 7(b) are hereby amended to read
as follows:
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
Report of Independent Auditors.
Consolidated Balance Sheets of Plexus Vaccine Inc. ("Plexus") as of March
31, 2003 (unaudited), December 31, 2002 and December 31, 2001.
Consolidated Statements of Operations of Plexus for the three months ended
March 31, 2003 (unaudited) and March 31, 2002 (unaudited), for the year
ended December 31, 2002 and for the period from April 27, 2001 (inception)
to December 31, 2001.
Consolidated Statements of Stockholders' (Deficit) Equity of Plexus as of
March 31, 2003 (unaudited), December 31, 2002 and December 31, 2001.
Consolidated Statements of Cash Flows of Plexus for the three months ended
March 31, 2003 (unaudited) and March 31, 2002 (unaudited), for the year
ended December 31, 2002 and for the period from April 27, 2001 (inception)
to December 31, 2001.
Notes to Consolidated Financial Statements.
2
Report of Independent Auditors
To the Board of Directors and
Stockholders of Plexus Vaccine Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' (deficit) equity and of
cash flows present fairly, in all material respects, the financial position of
Plexus Vaccine Inc. and its subsidiary (the "Company") at December 31, 2002 and
2001, and the results of their operations and their cash flows for the year
ended December 31, 2002 and for the period from April 27, 2001 (date of
inception) through December 31, 2001, 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.
As explained in Note 1, in May 2003, SIGA Technologies, Inc. acquired
substantially all of the assets and assumed certain liabilities of the Company
in accordance with the terms of an asset purchase agreement.
/s/ PricewaterhouseCoopers LLP
New York, New York
July 17, 2003
3
Plexus Vaccine Inc.
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
March 31, December 31,
2003 2002 2001
----------- ------------ -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 18,723 $ 31,689 $ 378,596
Accounts receivable -- 30,000 --
----------- ----------- -----------
Total current assets 18,723 61,689 378,596
Equipment, net 27,940 33,152 22,241
Other assets 8,612 9,360 18,408
----------- ----------- -----------
Total assets $ 55,275 $ 104,201 $ 419,245
=========== =========== ===========
Liabilities and Stockholders' (Deficit) Equity:
Current liabilities:
Accounts payable and accrued expenses $ 384,011 $ 234,420 $ 87,411
Deferred revenue 34,499 86,425 --
Deferred salary 157,805 102,402 --
Notes payable and related interest 624,153 472,138 --
----------- ----------- -----------
Total liabilities 1,200,468 895,385 87,411
Commitments (Note 8)
Stockholders' (deficit) equity:
Preferred stock (no par value, 20,000,000 shares
authorized, none issued and outstanding) -- -- --
Common stock (no par value, 80,000,000 shares
authorized, 2,794,000, 2,794,000 and 2,730,000
issued and outstanding at 2003, 2002 and 2001,
respectively) 2,583,167 1,258,628 977,079
Notes receivable (35,000) (35,000) (36,122)
Deferred compensation (13,800) -- --
Accumulated deficit (3,679,560) (2,014,812) (609,123)
----------- ----------- -----------
Total stockholders' (deficit) equity (1,145,193) (791,184) 331,834
----------- ----------- -----------
Total liabilities and stockholders' (deficit) equity $ 55,275 $ 104,201 $ 419,245
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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Plexus Vaccine Inc.
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
For the Period
From
April 27, 2001
Three Months Ended Year Ended (inception) to
March 31, December 31, December 31,
2003 2002 2002 2001
----------- ----------- ------------ --------------
(Unaudited)
Revenues:
Grant and contract revenues $ 65,100 $ 3,991 $ 172,378 $ --
----------- ----------- ----------- -----------
Operating expenses:
General and administrative 570,176 174,406 573,836 330,014
Research and development 214,076 159,280 937,593 287,562
----------- ----------- ----------- -----------
Total operating expenses 784,252 333,686 1,511,429 617,576
----------- ----------- ----------- -----------
Operating loss (719,152) (329,695) (1,339,051) (617,576)
Interest (expense) / income (945,596) 1,248 (66,638) 8,453
----------- ----------- ----------- -----------
Net loss $(1,664,748) $ (328,447) $(1,405,689) $ (609,123)
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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Plexus Vaccine Inc.
Consolidated Statements of Stockholders' (Deficit) Equity
- --------------------------------------------------------------------------------
Stockholders' (Deficit) Equity
----------------------------------------------------------------------------------
Notes Deferred Accumulated Stockholders'
Common Stock Receivable Compensation Deficit (Deficit) Equity
------------------------ ----------- ------------ ----------- ----------------
Shares Amount
Balance at April 27, 2001 (inception) -- $ -- $ -- $ -- $ -- $ --
Shares issued to founder 200,000 2,000 -- -- -- 2,000
Proceeds from issuance and sale of
common stock ($0.05 - $1.00 per share) 1,850,000 820,000 -- -- -- 820,000
Shares issued to employees for notes receivable 400,000 35,000 (35,000) -- -- --
Interest on notes receivable -- -- (1,122) -- -- (1,122)
Compensation expense in connection
with services performed for shares 280,000 75,584 -- -- -- 75,584
Issuance of compensatory stock options
and warrants to non-employees -- 44,495 -- -- -- 44,495
Net loss -- -- -- -- (609,123) (609,123)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2001 2,730,000 977,079 (36,122) -- (609,123) 331,834
Bonus compensation for interest
on notes receivable -- -- 1,122 -- -- 1,122
Compensation expense in connection
with services performed for shares 64,000 99,463 -- -- -- 99,463
Issuance of compensatory stock options
and warrants to non-employees -- 73,984 -- -- -- 73,984
Issuance of warrants in connection with
bridge financing -- 108,102 -- -- -- 108,102
Net loss -- -- -- -- (1,405,689) (1,405,689)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2002 2,794,000 1,258,628 (35,000) -- (2,014,812) (791,184)
Compensation expense in connection with
services performed -- 8,271 -- (13,800) -- (5,529)
Issuance of warrants in connection with
bridge financing and deferred compensation -- 1,316,268 -- -- -- 1,316,268
Net loss -- -- -- -- (1,664,748) (1,664,748)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2003 (Unaudited) 2,794,000 $ 2,583,167 $ (35,000) $ (13,800) $(3,679,560) $(1,145,193)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
Plexus Vaccine Inc.
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
For the Period
From
April 27, 2001
Three Months Ended Year Ended (inception) to
March 31, December 31, December 31,
2003 2002 2002 2001
----------- ----------- ------------ --------------
(Unaudited)
Cash flows from operating activities:
Net loss $(1,664,748) $ (328,447) $(1,405,689) $ (609,123)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 5,212 1,462 13,347 3,517
Non-cash compensation expense 439,369 22,749 173,447 122,079
Accrued interest receivable
on notes receivable -- (613) 1,122 (1,122)
Accrued interest on notes payable 10,600 -- 21,553 --
Interest expense for warrants issued below
fair value related to a bridge financing 862,650 -- -- --
Accretion to notes payable 72,135 -- 44,687 --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 30,000 (15,965) (30,000) --
Decrease (increase) in other assets 748 4,527 9,048 (18,408)
Increase (decrease) in accounts payable
and accrued expenses 149,591 (29,583) 147,009 87,411
(Decrease) increase in deferred revenue (51,926) 11,974 86,425 --
Increase in deferred salary 55,403 -- 102,402 --
----------- ----------- ----------- -----------
Net cash used in operating activities (90,966) (333,896) (836,649) (415,646)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets -- (14,998) (24,258) (25,758)
----------- ----------- ----------- -----------
Net cash used in investing activities -- (14,998) (24,258) (25,758)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- -- -- 820,000
Proceeds from bridge note financing 28,000 125,000 514,000 --
Proceeds from loan from Siga Technologies, Inc. 50,000 -- -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities 78,000 125,000 514,000 820,000
----------- ----------- ----------- -----------
Net decrease in cash and cash equivalents (12,966) (223,894) (346,907) 378,596
Cash and cash equivalents, beginning of period 31,689 378,596 378,596 --
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period $ 18,723 $ 154,702 $ 31,689 $ 378,596
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
7
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Operations and Basis of Presentation
Plexus Vaccine Inc. ("Plexus" or the "Company") was incorporated in the
State of California on April 27, 2001 ("Inception"). The Company is a
structure-based rational vaccine design and development company directed
toward the convergence of structural biology, pharmacogenomics and
molecular immunology. The Company is employing its technologies to
formulate and test a vaccine candidate for severe acute respiratory
syndrome, or "SARS".
The Company has a subsidiary, Plexus Denmark ApS (the "Subsidiary") that
was incorporated in Denmark on January 2, 2002. The Subsidiary performs
research in immunological bioinformatics and computational prediction and
experimental validation of key antigenic elements of pathogens.
On May 23, 2003, SIGA Technologies, Inc. ("SIGA") acquired substantially
all of the assets and assumed certain liabilities of the Company in
accordance with the terms of an asset purchase agreement dated May 14,
2003 for 1,950,000 shares of SIGA common stock. In addition, SIGA issued
190,950 options and warrants to purchase common shares of SIGA to certain
holders of options and warrants of the Company.
Prior to the closing, SIGA had loaned the Company $50,000 in March 2003
and $20,000 in May 2003 at an interest rate of 6% as well as made certain
other payments on behalf of the Company.
In the opinion of management, the accompanying unaudited consolidated
financial statements as of March 31, 2003 and for the three-month periods
ended March 31, 2002 and 2001, contain all adjustments (normal and
recurring in nature) necessary to present fairly the financial position,
results of operations and cash flows for the periods presented in
conformity with accounting principles generally accepted in the United
States of America applicable to interim periods. The results of operations
for any interim period are not necessarily indicative of the results to be
expected for the full fiscal year or any future period.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant intercompany transactions
and balances have been eliminated in consolidation.
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: computer equipment - 3 years, laboratory equipment - 5 years,
and 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 arrangement exists, the
contract price is fixed and determinable, and the collection of the
resulting receivable is probable. In
8
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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 incurred to date, estimated costs to complete and
total expected contract revenue. Milestone payments, 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.
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.
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.
Accounting for stock based compensation
The Company has elected 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" as
provided for by Statement of Financial Accounting Standard ("FAS") No.
123, "Accounting for Stock-Based Compensation" ("FAS 123"). 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 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of 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 would have
been as follows:
9
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
For the Period
From
April 27, 2001
Three Months Ended Year Ended (inception) to
March 31, December 31, December 31,
2003 2002 2002 2001
----------- ----------- ------------ --------------
(Unaudited)
Net loss, as reported $(1,664,748) $ (328,447) $(1,405,689) $ (609,123)
Add: Stock-based employee compensation
recorded under APB No. 25 600 -- -- --
Deduct: Total stock-based employee
compensation expense determined
under fair value based method (2,726) (2,521) (8,363) (2,626)
----------- ----------- ----------- --------------
Pro forma, net loss $(1,666,874) $ (330,968) $(1,414,052) $ (611,749)
=========== =========== =========== ==============
The weighted average fair value of the options granted to employees during
2002 and 2001 was $0.19 and $0.17, respectively on the date of the
respective grant using the Black-Scholes option-pricing model. The
following weighted-average assumptions utilizing the minimum volatility
method used for 2002 and 2001 were the following: no dividend yield, risk
free interest rates of 4.18% for 2002 and 3.74% for 2001 and an expected
term of 5 years for 2002 and 2001.
3. Revenues and Accounts Receivable Concentration
For the year ended December 31, 2002, revenue was earned from four
contracts with each contract consisting of more than 10% of total
revenues. As of December 31, 2002, one customer accounted for the accounts
receivable balance.
4. Bridge Financing
First Bridge Financing
From March through June 2002, the Company completed a bridge financing.
The gross proceeds of the bridge financing were $292,000. In connection
with the bridge financing, the Company issued promissory notes in the
aggregate principal amount of $292,000 (the "First Bridge Notes"). The
First Bridge Notes accrued interest at a rate of 8% per annum and were due
and payable, together with accrued interest at the earlier of (a) a
closing of a Qualified Financing, as defined, (b) Merger, as defined, (c)
Asset Sale, as defined, or (d) March 1, 2003. Due to the fact that there
was no financing, merger or asset sale entered into by March 1, 2003, the
holders of the First Bridge Notes had the option to convert the First
Bridge Notes into common stock of Plexus based on a price of $1.00 per
share. The First Bridge Notes contained detachable warrants to purchase an
aggregate 58,400 shares of common stock at an exercise price of $1.00 per
share (the "First Bridge Warrants"). The First Bridge Warrants expire ten
years from the date of issuance.
The gross proceeds from the bridge financing were allocated to the First
Bridge Notes and the First Bridge Warrants based on their relative fair
values at the date of the bridge financing. The Company recorded the First
Bridge Notes at a discount of approximately $39,000. Such discount
represents the portion of the gross proceeds from the bridge financing
that was allocated to the First Bridge Warrants, and was amortized from
the date of the agreement through March 1, 2003. For the year ended
December 31, 2002, amortization expense for the discount was approximately
$27,000.
10
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Second Bridge Financing
From July 2002 through December 2002, the Company completed another bridge
financing. The gross proceeds of the bridge financing were $250,000. In
2002, in connection with the bridge financing, the Company issued
promissory notes in the aggregate principal amount of $222,000 (the
"Second Bridge Notes"). The Second Bridge Notes accrued interest at a rate
of 8% per annum and were due and payable, together with accrued interest
at the earlier of (a) a closing of a Qualified Financing, as defined, or
(b) March 1, 2003. Due to the fact that there was no financing entered
into by March 1, 2003, the holders of the Second Bridge Notes had the
option to convert the Second Bridge Notes into common stock of Plexus
based on a price of $0.10 per share. The Second Bridge Notes contained
detachable warrants to purchase an aggregate number of warrants based on
60% of the Second Bridge Notes (the "Second Bridge Warrants"). Due to the
fact that there was no financing entered into by March 1, 2003, the Second
Bridge Warrants amounted to 1,332,000 warrants to purchase shares of
common stock at an exercise price of $0.10, resulting in additional
interest expense of approximately $766,000 in 2003. The Second Bridge
Warrants expire ten years from the date of issuance.
The gross proceeds from the bridge financing were allocated to the Second
Bridge Notes and the Second Bridge Warrants based on their relative fair
values at the date of the bridge financing. The Company recorded the
Bridge Notes at a discount of approximately $69,000. Such discount
represents the portion of the gross proceeds from the bridge financing
that was allocated to the Second Bridge Warrants, and were amortized from
the date of the agreement through March 1, 2003. For the year ended
December 31, 2002, amortization expense for the discount was approximately
$18,000.
Subsequent to December 31, 2002, the Company issued additional Second
Bridge Notes for gross proceeds of $28,000 with an accrued interest rate
of 8% and detachable warrants to purchase an aggregate number of warrants
based on 60% of the Second Bridge Notes. Due to the fact that there was no
financing entered into by March 1, 2003, the Second Bridge Warrants
amounted to 168,000 warrants to purchase shares of common stock at an
exercise price of $0.10, resulting in additional interest expense of
approximately $97,000 in 2003. The Second Bridge Warrants expire ten years
from the date of issuance.
5. Stockholders' Equity
At December 31, 2002, the Company's authorized share capital consisted of
100,000,000 shares, of which 80,000,000 are designated common shares
having no par value and 20,000,000 are designated preferred shares having
no par value. 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. As of December 31, 2002, there were
no preferred shares issued.
During 2001, the Company raised proceeds of $820,000 from third party
investors for 1,850,000 shares of common stock. The holders of the
outstanding Common Stock will be entitled to one vote per share and will
be entitled to elect one director of the Company at each annual election
of the Board.
6. Stock Options and Warrants
In 2001, the Company adopted a Stock Option Plan (the "Plan") pursuant to
which incentive stock options up to 400,000 shares of the Company's common
stock may be issued under the Plan to employees. The exercise price of
incentive stock options granted under the Plan may not be less than 100%
of the fair market value of the underlying shares at the grant date. The
term of the options may be no more than 10 years from the date of grant.
Options generally vest at a rate of 25% after 12 months and 6.25% every
three-months thereafter.
The following table summarizes the activity of the Company's stock option
plan to employees:
11
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Number of Weighted average
options exercise price
Outstanding - April 27, 2001 -- --
Granted 300,000 $ 1.00
-------- --------
Outstanding - December 31, 2001 300,000 1.00
Granted 18,000 1.00
Forfeited (100,000) 1.00
-------- --------
Outstanding - December 31 2002 218,000 $ 1.00
======== ========
Exercisable at December 31, 2002 51,563 $ 1.00
======== ========
As of December 31, 2002, 182,000 options were available for grant under
the Company's Plan. The weighted average life of the outstanding options
at December 31, 2002 and 2001 was 8.83 and 9.78 years, respectively.
Stock options and warrants granted to members of the advisory board as
well as to other non-employees outside of the plan were 156,000 and
208,400 for 2002 and 2001, respectively, which vest over a period of two
to four years. In accordance with Emerging Issues Task Force Abstract No.
96-18, Accounting for Equity Investments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services, the Company is recording the value of the services received
based on the fair value of the options and warrants provided, which is
more reliably measurable than the value of the services received. For 2002
and 2001, the Company recorded the estimated fair value of the vested
portion of the options and warrants using the Black-Scholes option pricing
model, of approximately $74,000 and $44,000, respectively, as an expense.
The fair value of the options and warrants granted to the advisory board
and non-employees is estimated using the Black-Scholes option pricing
model. The weighted average assumptions used for grants to non-employees
made in 2002 and 2001 were as follows: zero dividend yield; risk-free
interest rates of 2.73% and 4.33%, respectively; expected lives of 5
years; and expected volatility of 100%. The weighted average fair value of
options and warrants granted to non-employees during 2002 and 2001 was
$0.40 and $0.84 per share, respectively.
7. Income Taxes
The Company has incurred losses since inception, which have generated net
operating loss carryforwards of approximately $1,421,000 and $522,000,
respectively, at December 31, 2002 and 2001 for federal and state income
tax purposes.
The net operating loss carryforwards result in a noncurrent deferred tax
asset at December 31, 2002 and 2001 of approximately $568,000 and
$209,000, 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 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.
12
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
8. Commitments
License and research agreements
In July 2001, and as modified in April 2002, the Company entered into an
alliance agreement with Molsoft LLC ("Molsoft"). The alliance agreement
references a software license agreement, in which the Company licensed
certain technology from Molsoft under a non-exclusive license agreement.
The term of the license agreement expires in June 2006, unless extended by
the mutual consent of both parties. The Company will pay Molsoft annual
payments for an aggregate total of $780,000 for the five-year agreement
and $225,000 per annum if the agreement is extended.
In March 2002, the Company entered into a license agreement with Soeren
Brunack and Soeren Buus ("Inventors") for certain license patents and a
number or pending patents filed by the Inventors. In consideration for the
exclusive license and other rights, the Company was to pay each Inventor a
payment of $25,000 upon the closing of a financing and an annual cash
payment of $20,000 during the first four years of the agreement. In
addition, the Inventors are entitled to royalties of up to 4% if the
license is used in development and sale of the licensed patents and
license methods, as defined, and 20% for any consideration received for
sub-licensing the licensed patents or licensed methods, as defined.
In June 2002, the Company entered into a research collaboration agreement
with the Technical University of Denmark BioCentrum-DTU ("DTU") within the
area of computational prediction of vaccines epitomes. The Company will
pay annually up to approximately $416,000 to DTU for research funding of
salaries, research and development and administrative expenses. The
Company must pay at a minimum approximately $7,000 per month in order to
not be in breach of the provisions of the agreement. The agreement expires
in June 2004.
Operating leases
In 2001, the Company entered into operating sub-lease agreements for the
two offices it uses. The Company's laboratory office has a month-to-month
term with a 30-day notice to terminate. The Company's main office lease
will expire in June 2004. Rent expense for 2002 and 2001 was approximately
$40,000 and $21,000, respectively. Minimum future rental commitments under
these leases are approximately $21,000 for 2003 and $21,000 for 2004.
Employment agreements
In May 2001, the Company granted the President and Chief Executive Officer
("Executive") of the Company 200,000 shares for $2,000 as founder shares.
In addition, 300,000 shares were granted to the Executive for a promissory
note of $15,000. The promissory note accrued interest at a rate of 7% per
annum and is payable on December 31, 2003.
In October 2001, the Company and Executive entered into an employment
agreement that can be terminated at any time with 2 weeks notice. Under
the agreement, the Executive was paid annual compensation of $216,000 with
severance pay upon termination, and was granted 100,000 stock options to
purchase the Company's common stock at $1.00 per share. One quarter of the
options vest after one year, with the remainder vesting quarterly over a
three-year period.
In July 2002, the Company entered into a salary reduction and bonus
agreement with the Executive, whereby the Executive deferred her salary
for a 10% bonus on the deferment to be repaid upon a Qualified Financing,
as defined. As additional compensation, the Company granted warrants at
60% of all salary deferred divided by the price per share of the Qualified
Financing, as defined, or $0.10 if there was no Qualified Financing by
March 1, 2003.
In March 2003, the Company memorialized various modifications, which had
been made previously to the July 2002 agreement concerning the deferred
compensation and bonus of the Executive. Pursuant to the July 2002
13
Plexus Vaccine Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
and March 2003 agreements, the Company granted to the Executive a warrant
to purchase 624,000 shares of the Company's common stock at $0.10 per
share for a term of 10 years and the option to convert 50% of the deferred
salary into 522,600 shares of common stock. In addition, the Company
forgave its note receivable of $15,000 from the Executive for the purchase
of 300,000 shares of common stock in 2001 as well as granted a cash bonus
of $8,000 for tax liabilities in relation to the forgiveness of the note.
In 2003, in connection with the warrants and shares granted, the Company
recorded a compensation charge of approximately $412,000.
In 2001, the Company issued 100,000 shares of common stock to the Vice
President of Research and Development of the Company for a promissory note
of $20,000. The promissory note accrued interest at a rate of 7% per annum
and is payable on December 31, 2003. In May 2003, the promissory note was
forgiven and the Company recorded a compensation charge for the
forgiveness of the note.
9. Subsequent Events
In March 2003, the Company granted a warrant to purchase 34,440 shares of
the Company's common stock at $0.10 per share for a term of 10 years and
60,060 shares of common stock for deferred compensation. In 2003, in
connection with this agreement, the Company will record a compensation
charge of approximately $33,000.
In March 2003, the Company granted options to two new members of the Board
of Directors to purchase an aggregate of 90,000 shares of the Company's
common stock. The options have an exercise price of $0.30 per share and
vest quarterly over a two-year period. Based on the intrinsic value of the
common stock at the date of grant, the Company will record an aggregate
amount of approximately $14,000 in compensation expense for these options
over the two-year period.
In May 2003, the Company adjusted the conversion price of the First Bridge
Notes from $1.00 to $0.30 on condition that the holders of the First
Bridge Notes convert 70% of the loan into common stock of the Company. The
discount is considered additional interest expense to the holders of the
First Bridge Notes and, in 2003 the Company will record approximately
$681,000 to interest expense.
In May 2003, in connection with the closing of the asset purchase
agreement with SIGA, 2,041,390 warrants were exercised into common stock
at an exercise price of $0.10 per warrant, approximately $320,000 Bridge
Notes and related interest and deferred salary converted into 3,198,840
common stock at $0.10 per share and approximately $263,000 Bridge Notes
and related interest converted into 876,580 shares of common stock at
$0.30 per share.
14
(b) Pro Forma Financial Information.
Introduction to Unaudited Pro Forma Financial Information
Unaudited Pro Forma Balance Sheet as of March 31, 2003.
Unaudited Pro Forma Statement of Operations for the three months ended
March 31, 2003.
Unaudited Pro Forma Statement of Operations for the year ended December
31, 2002.
Notes to Unaudited Pro Forma Financial Statements.
15
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On May 23, 2003, SIGA Technologies, Inc. ("SIGA") acquired substantially all of
the assets of Plexus Vaccine Inc. ("Plexus") and assumed certain liabilities in
exchange for 1,950,000 shares of SIGA's common stock and 190,950 of SIGA's
options and warrants at an exercise price of $1.62 per share.
The following unaudited pro forma financial statements give effect to the asset
purchase agreement between SIGA and Plexus. The unaudited pro forma balance
sheet is based on the individual balance sheets of SIGA and Plexus appearing in
SIGA's most recent annual and quarterly reports and elsewhere in this amended
current report, respectively, and has been prepared to reflect the transaction
by SIGA and Plexus as of March 31, 2003. The unaudited pro forma statement of
operations is based on the individual statements of operations of SIGA and
Plexus appearing in SIGA's most recent annual and quarterly reports and
elsewhere in this amended current report, respectively, and combines the results
of operations of SIGA and Plexus for the three months ended March 31, 2003 and
for the year ended December 31, 2002 as if the transaction occurred on January
1, 2002.
The unaudited pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the financial position or operating results
that would have been achieved if the acquisition had been consummated as of the
beginning of the periods presented, nor are they necessarily indicative of
future operating results or financial position of SIGA. A preliminary allocation
of the purchase price has been made to certain identifiable tangible and
intangible assets based on information available to the management of SIGA at
the date of the preparation of the accompanying pro forma financial statements.
The pro forma financial information does not give effect to any costs savings or
incremental costs, which may result from the integration of SIGA and Plexus
operations.
16
SIGA Technologies Inc. and Subsidiaries
Unaudited Pro Forma Balance Sheet
As of March 31, 2003
Historical Pro Forma
------------------------------ ------------------------------------
SIGA (1) Plexus (1) Adjustments (2)(3) Combined
------------ ----------- ----------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 1,669,469 $ 18,723 (18,723)(E) $ 1,669,469
Accounts receivable 178,046 -- -- 178,046
Prepaid expenses 113,902 -- (50,000)(A) 63,902
------------ ----------- ----------- ------------
Total current assets 1,961,417 18,723 (68,723) 1,911,417
Equipment, net 504,039 27,940 (229)(B) 531,750
Intangible assets -- -- 3,639,000 (C) 3,639,000
Goodwill -- -- 777,000 (C) 777,000
Other assets 149,562 8,612 (8,612)(E) 149,562
------------ ----------- ----------- ------------
Total assets $ 2,615,018 $ 55,275 $ 4,338,436 $ 7,008,729
============ =========== =========== ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 381,168 $ 193,822 $ -- $ 574,990
Accrued expenses and other 151,061 190,189 157,161 (D) 498,411
Deferred salary -- 157,805 (58,273)(E) 99,532
Deferred revenue -- 34,499 -- 34,499
Notes payable and related interest -- 624,153 (50,000)(A)
(520,518)(E) 53,635
------------ ----------- ----------- ------------
Total liabilities 532,229 1,200,468 (471,630) 1,261,067
------------ ----------- ----------- ------------
Commitments and contingencies
Stockholders' equity
Series A convertible preferred stock 81,321 -- -- 81,321
Common stock 1,325 2,583,167 (2,583,167)(E)
195 (F) 1,520
Additional paid-in capital 32,413,783 -- 3,408,805 (F)
255,873 (G) 36,078,461
Deferred compensation -- (13,800) 13,800 (E) --
Notes receivable -- (35,000) 35,000 (E) --
Accumulated deficit (30,413,640) (3,679,560) 3,679,560 (E) (30,413,640)
------------ ----------- ----------- ------------
Total shareholders' equity 2,082,789 (1,145,193) 4,810,066 5,747,662
------------ ----------- ----------- ------------
Total liabilities and shareholders' equity $ 2,615,018 $ 55,275 $ 4,338,436 $ 7,008,729
============ =========== =========== ============
See notes to Unaudited Pro Forma Financial Statements.
17
SIGA Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Statement of Operations
For the Three Months Ended March 31, 2003
Historical Pro Forma
------------------------------ -----------------------------------
SIGA (1) Plexus (1) Adjustments (2)(4) Combined
------------ ----------- ------------------ ------------
Revenues:
Grants and research and development contracts $ 205,144 $ 65,100 $ -- $ 270,244
------------ ----------- ----------- ------------
Total revenues 205,144 65,100 -- 270,244
------------ ----------- ----------- ------------
Operating expenses:
General and administrative 560,308 570,176 50,500 (H) 1,180,984
Research and development 477,499 214,076 101,088 (I) 792,663
Patent preparation fees 55,932 -- -- 55,932
------------ ----------- ----------- ------------
Total operating expenses 1,093,739 784,252 151,588 2,029,579
------------ ----------- ----------- ------------
Operating loss (888,595) (719,152) (151,588) (1,759,335)
Interest income / (expense) 6,357 (945,596) -- (939,239)
------------ ----------- ----------- ------------
Net loss applicable to common shareholders $ (882,238) $(1,664,748) $ (151,588) $ (2,698,574)
============ =========== =========== ============
Weighted average number of common shares
outstanding 13,243,162 1,950,000 (J) 15,193,162
============ =========== ============
Weighted average common shares outstanding used
for basic and diluted loss per share (0.07) (0.18)
============ ============
See notes to Unaudited Pro Forma Financial Statements.
18
SIGA Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2002
Historical Pro Forma
---------------------------- --------------------------------
SIGA (1) Plexus (1) Adjustments (2)(4) Combined
------------ ----------- ------------------ -----------
Revenues:
Research and development contracts $ 344,450 $ 172,378 $ -- $ 516,828
------------ ----------- ------------ -----------
Total revenues 344,450 172,378 -- 516,828
------------ ----------- ------------ -----------
Operating expenses:
General and administrative 1,838,470 573,836 202,000 (H) 2,614,306
Reseach and development 1,766,368 937,593 404,350 (I) 3,108,311
Patent preparation fees 104,700 -- -- 104,700
------------ ----------- ------------ -----------
Total operating expenses 3,709,538 1,511,429 606,350 5,827,317
------------ ----------- ------------ -----------
Operating loss (3,365,088) (1,339,051) (606,350) (5,310,489)
Interest income / (expense) 34,061 (66,638) -- (32,577)
------------ ----------- ------------ -----------
Net loss (3,331,027) (1,405,689) (606,350) (5,343,066)
Deemed dividend related to beneficial conversion feature 29,200 -- -- 29,200
------------ ----------- ------------ -----------
Net loss applicable to common stockholders $ (3,360,227) $(1,405,689) $ (606,350) $(5,372,266)
============ =========== ============ ===========
Basic and diluted loss per share $ (0.32) $ (0.43)
============ ===========
Weighted average common shares outstanding used
for basic and diluted loss per share 10,450,529 1,950,000 (J) 12,400,529
============ ===========
See notes to Unaudited Pro Forma Financial Statements.
19
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. These columns reflect the historical financial position and results of
operations of SIGA and Plexus.
2. For the purpose of these pro forma financial statements, equity consideration
has been calculated based on Emerging Issues Task force ("EITF") 99-12,
"Accounting for Formula Arrangements under EITF 95-19". For this calculation,
SIGA used the average market price for a few days before and after the merger
was agreed to and announced, May 14, 2003. Based on EITF 99-12, the value of the
common stock issued was approximately $3,409,000. As part of the asset purchase
agreement, SIGA exchanged outstanding Plexus options and warrants for 190,950
options and warrants to purchase SIGA common stock. The value attributed to the
options and warrants exchanged was approximately $256,000. In addition, loans
made to Plexus, payments made on behalf Plexus prior to the asset purchase
agreement and expected costs incurred for the transaction amounted to
approximately $250,000.
The preliminary allocation of the above purchase price of approximately
$3,915,000 is as follows:
Net liabilities assumed $ (501,000)
Acquired technology $ 2,191,000
Contracts and grants $ 741,000
Covenant not to compete $ 707,000
Goodwill $ 777,000
-----------
$ 3,915,000
3. The following adjustments were made to the balance sheet as of March 31, 2003
to give effect to the transaction:
A) Elimination of amounts previously funded to Plexus prior to March
31, 2003.
B) Adjustment of fixed assets to fair value.
C) To record acquired technology, covenant not to compete, contracts
and grants and goodwill.
D) Costs incurred by SIGA related to the acquisition.
E) Elimination of cash, other assets, deferred salary, notes payable,
common stock, deferred stock compensation, notes receivable and
accumulated deficit of Plexus as a result of the transaction.
F) Common stock equity consideration less registration costs.
G) Common stock options and warrants consideration.
4. The following adjustments were made to the statement of operations for the
three months ended March 31, 2003 and for the year ended December 31, 2002 to
give effect to the transaction:
H) Amortization of the covenant not to compete based on the contractual
life of the agreement.
I) Amortization of acquired technology and contracts and grants over
the estimated useful life.
J) Weighted average shares increase based on common stock issued.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
----------------------------------
Thomas N. Konatich
Acting Chief Executive Officer and
Chief Financial Officer
Date: July 22, 2003
21