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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File No. 0-23047
September 30, 2004
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 |_|.
As of November 10, 2004 the registrant had outstanding 24,500,648 shares of
common stock.
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Part 1
Financial Information
Item 1. Financial Statements
SIGA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, December 31,
2004 2003
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents ................................................ $ 3,176,327 $ 1,440,724
Accounts receivable ...................................................... 41,505 38,786
Prepaid expenses ......................................................... 89,098 50,338
------------- -------------
Total current assets .................................................... 3,306,930 1,529,848
Equipment, net ........................................................... 159,523 379,046
Goodwill ................................................................. 898,334 898,334
Intangible assets, net ................................................... 3,981,423 3,117,357
Other assets ............................................................. 217,972 174,995
------------- -------------
Total assets ............................................................ $ 8,564,182 $ 6,099,580
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ......................................................... $ 633,243 $ 353,051
Accrued expenses and other ............................................... 264,765 195,181
------------- -------------
Total liabilities ....................................................... 898,008 548,232
Stockholders' equity
Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
authorized, 68,038 and 81,366 issued and outstanding at September 30, 2004
and December 31, 2003, respectively) ..................................... 58,672 72,666
Common stock ($.0001 par value, 50,000,000 shares authorized,
24,500,648 and 18,676,851 issued and outstanding at September 30, 2004
and December 31, 2003, respectively) ................................... 2,450 1,868
Additional paid-in capital ............................................... 48,679,650 40,284,856
Accumulated deficit ...................................................... (41,074,598) (34,808,042)
------------- -------------
Total stockholders' equity .............................................. 7,666,174 5,551,348
------------- -------------
Total liabilities and stockholders' equity .............................. $ 8,564,182 $ 6,099,580
============= =============
The accompanying notes are an integral part of these financial statements.
1
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues
Research and development contracts .............. $ 532,724 $ 176,342 $ 992,478 $ 625,016
------------ ------------ ------------ ------------
Operating expenses
Selling, general and administrative ............. 919,165 684,223 3,036,559 1,993,007
Research and development ........................ 826,827 1,000,911 2,872,818 2,121,154
Patent preparation fees ......................... 83,580 65,003 230,320 187,109
Purchased in-process research and development ... 568,329 -- 568,329 --
Loss on impairment of intangible assets ......... -- -- 610,063 --
------------ ------------ ------------ ------------
Total operating expenses ..................... 2,397,901 1,750,137 7,318,089 4,301,270
------------ ------------ ------------ ------------
Operating loss ............................... (1,865,177) (1,573,795) (6,325,611) (3,676,254)
Other income, net .................................... 27,824 3,336 59,055 13,048
------------ ------------ ------------ ------------
Net loss ..................................... $ (1,837,353) $ (1,570,459) $ (6,266,556) $ (3,663,206)
============ ============ ============ ============
Weighted average shares outstanding: basic and diluted 23,875,368 16,825,628 23,462,307 14,769,960
============ ============ ============ ============
Net loss per share: basic and diluted ................ (0.08) $ (0.09) (0.27) $ (0.25)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
2
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine months ended
September 30,
2004 2003
----------- -----------
Cash flows from operating activities:
Net loss .................................................................. $(6,266,556) $(3,663,206)
Adjustments to reconcile net loss to net
cash used in operating activities:
Purchased in-process research and development .......................... 568,329 --
Loss on impairment of intangible assets ................................ 610,063 --
Bad debt expense ....................................................... -- 14,000
Depreciation ........................................................... 269,455 262,053
Amortization of intangible assets ...................................... 473,564 225,680
Stock based compensation ............................................... 47,400 1,375
Changes in assets and liabilities:
Accounts receivable .................................................. (2,719) (23,914)
Prepaid expenses ..................................................... (38,760) (3,161)
Other assets ......................................................... (27,977) (7,808)
Accounts payable and accrued expenses ................................ 331,776 (328,069)
----------- -----------
Net cash used in operating activities ................................ (4,035,425) (3,523,050)
----------- -----------
Cash flows from investing activities:
Acquisition of intangible assets .......................................... (1,033,022) --
Capital expenditures ...................................................... (49,932) (268,360)
----------- -----------
Net cash flow used in investing activities .............................. (1,082,954) (268,360)
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock ................................ 6,784,607 2,098,493
Receipts of stock subscriptions outstanding ............................... -- 791,940
Proceeds from exercise of options and warrants ............................ 69,375 --
Principal payments on capital lease obligations ........................... -- (11,206)
----------- -----------
Net cash provided from financing activities ............................. 6,853,982 2,879,227
----------- -----------
Net increase (decrease) in cash and cash equivalents ........................ 1,735,603 (912,183)
Cash and cash equivalents at beginning of period ............................ 1,440,724 2,069,004
----------- -----------
Cash and cash equivalents at end of period .................................. $ 3,176,327 $ 1,156,821
----------- -----------
Non-cash supplemental information:
Conversion of preferred stock to common stock ............................. $ 13,994 $ 371,008
Transfer of intangible assets for investment in Pecos Labs, Inc. .......... $ 15,000 $ --
Shares issued for assets from ViroPharma Incorporated ..................... $ 1,480,000 $ --
Shares issued for services ................................................ $ 47,400 $ --
Supplemental information of business acquired:
Fair value of assets acquired:
Equipment ................................................................. $ -- $ 27,711
Intangible assets ......................................................... -- 3,639,000
Goodwill .................................................................. -- 898,334
Less, liabilities assumed and non-cash consideration:
Current liabilities ....................................................... -- (494,142)
Stock issued .............................................................. -- (3,409,000)
Stock options and warrants issued ......................................... -- (255,873)
Accrued acquisition costs ................................................. -- (460,030)
The accompanying notes are an integral part of these financial statements.
3
SIGA TECHNOLOGIES, INC.
Notes to the September 30, 2004 Unaudited Condensed Consolidated Financial
Statements
1. Organization and Basis of Presentation
Organization
The financial statements of SIGA Technologies, Inc. (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the rules of the Securities and Exchange Commission
(the "SEC") for quarterly reports on Forms 10-QSB and do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the Company's audited financial statements and notes thereto
for the year ended December 31, 2003, included in the 2003 Form 10-KSB.
Basis of presentation
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. The Company has incurred cumulative net losses
and expects to incur additional losses to perform further research and
development activities. The Company does not have commercial products and has
limited capital resources. The Company anticipates that its current resources
will be sufficient to finance anticipated needs for operations and capital
expenditures through at least fiscal year ending 2005. 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. See Note 5 for recent private placement offerings.
2. Significant Accounting Policies
Business Combinations, Goodwill and Intangible Assets
The Company accounts for business combinations in accordance with the provisions
of Statement of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141"). SFAS 141 requires business combinations to be accounted for using
the purchase method of accounting. It also specifies the types of acquired
intangible assets required to be recognized and reported separately from
goodwill.
The Company accounts for the impairment of goodwill in accordance with the
provisions of Statement of Financial Accounting Standards No. 142 "Goodwill and
Other Intangible Assets" ("SFAS 142"). Goodwill is not subject to amortization
and is tested for impairment annually, or more frequently if events or changes
in circumstances indicate that the asset may be impaired. The impairment test
consists of a comparison of the fair value of goodwill with its carrying amount.
If the carrying amount of goodwill exceeds its fair value, a second step of the
goodwill impairment test shall be performed to measure the amount of impairment
loss, if any. After an impairment loss is recognized, the adjusted carrying
amount of goodwill is its new accounting basis. The annual impairment testing
required under SFAS 142 requires management to make assumptions and judgments
regarding the estimated fair value of the Company's goodwill. Such assumptions
include the present value discount factor used to determine the fair value of a
reporting unit, which is ultimately used to identify potential goodwill
impairment. Such estimated fair values might produce significantly different
results if other reasonable assumptions and estimates were to be used.
The Company accounts for the impairment of long-lived assets such as acquired
technology, non-compete agreements and research contracts in accordance with the
provisions of Statement of Financial Accounting Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. The Company compares the carrying amount of the asset to the
estimated undiscounted future cash flows expected to result from the use of the
asset. If the carrying amount of the asset exceeds estimated expected
undiscounted future cash flows, the Company records an impairment charge for the
difference between the carrying amount of the asset and its fair value. Changes
in events or circumstances to the Company that may affect long-lived assets
include, but are not limited to, cancellations or terminations of research
contracts or pending government research grants.
Net loss per share
The Company computes, presents and discloses earnings per share in accordance
with SFAS 128 "Earnings Per Share" ("EPS") which specifies the computation,
presentation and disclosure requirements for earnings per share of entities with
publicly held common stock or potential common stock. The statement defines two
earnings per
4
SIGA TECHNOLOGIES, INC.
Notes to the September 30, 2004 Unaudited Condensed Consolidated Financial
Statements
share calculations, basic and diluted. The objective of basic EPS is to measure
the performance of an entity over the reporting period by dividing income (loss)
by the weighted average shares outstanding. The objective of diluted EPS is
consistent with that of basic EPS, that is to measure the performance of an
entity over the reporting period, while giving effect to all dilutive potential
common shares that were outstanding during the period. The calculation of
diluted EPS is similar to basic EPS except the denominator is increased for the
conversion of potential common shares.
For the three months ended September 30, 2004 and 2003 and the nine months ended
September 30, 2004 and 2003, the Company's Series A convertible preferred stock
has been excluded from the computation of diluted loss per share as they are
anti-dilutive. For the three months ended September 30, 2004 and 2003 and the
nine months ended September 30, 2004 and 2003, outstanding options to purchase
the Company's common stock with exercise prices ranging from $1.00 to $5.50 have
been excluded from the computation of dilutive loss per share as they are
anti-dilutive. For the three months ended September 30, 2004 and 2003 and the
nine months ended September 30, 2004 and 2003, outstanding warrants to purchase
the Company's common stock with exercise prices ranging from $1.00 to $3.63 have
been excluded from the computation of dilutive 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 fair value of goodwill and intangible assets and the value
of options and warrants granted by the Company. Actual results could differ from
those estimates.
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,
"Accounting for Stock Issued to Employees" ("APB 25"). 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
Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), as amended by SFAS 148, "Accounting for Stock-Based Compensation -
Transaction and Disclosure, an amendment to FASB Statement No. 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 SFAS 123, the Company's net loss and net loss per share would
have been as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net loss, as reported ....................................... ($1,837,353) ($1,570,459) ($6,266,556) ($3,663,206)
=========== =========== =========== ===========
Add: Stock-based employee compensation expense recorded under
APB No. 25 .................................................. -- -- -- --
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects .................................. (816,882) (75,055) (1,084,685) (578,059)
----------- ----------- ----------- -----------
Pro forma net loss .......................................... ($2,654,235) ($1,645,514) ($7,351,241) ($4,241,265)
=========== =========== =========== ===========
Net loss per share:
Basic and diluted -as reported .............................. $ (0.08) $ (0.09) $ (0.27) $ (0.25)
=========== =========== =========== ===========
Basic and diluted -pro forma ................................ $ (0.11). $ (0.10) $ (0.31) $ (0.29)
=========== =========== =========== ===========
5
SIGA TECHNOLOGIES, INC.
Notes to the September 30, 2004 Unaudited Condensed Consolidated Financial
Statements
The weighted average fair value of options granted to employees during 2004 was
$1.08 using the Black-Scholes option-pricing model. The following
weighted-average assumptions were used for 2004: no dividend yield, expected
volatility of 100%, weighted average risk free interest rates of 3.89% and a
weighted average expected term of 6.5 years.
The weighted average fair value of options granted to employees during 2003 was
$1.19 using the Black-Scholes option-pricing model. The following
weighted-average assumptions were used for 2003: no dividend yield, expected
volatility of 100%, weighted average risk free interest rates of 3.18% and a
weighted average expected term of 4 years.
Recent Accounting Pronouncements
In December 2003, the FASB revised its FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46R). FIN 46R clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements". FIN 46R requires that a business enterprise review all of its legal
structures used to conduct its business activities, including those to hold
assets, and its majority-owned subsidiaries, to determine whether those legal
structures are variable interest entities (VIEs) required to be consolidated for
financial reporting purposes by the business enterprise. A VIE is a legal
structure for which the holders of a majority voting interest may not have a
controlling financial interest in the legal structure. FIN 46R provides guidance
for identifying those legal structures and provides guidance for determining
whether a business enterprise shall consolidate a VIE. FIN 46R requires that a
business enterprise that holds a significant variable interest in a VIE make new
disclosures in their financial statements. The Company adopted the provisions of
FIN 46R for the period ended March 31, 2004. The Company does not hold any
interests in VIEs that would require consolidation or additional disclosures.
In March 2004, the Emerging Issues Task Force issued EITF 03-06, "Participating
Securities and the Two-Class Method under FASB Statement No. 128". This
statement provides additional guidance on the calculation and disclosure
requirements for earnings per share. The FASB concluded in EITF 03-06 that
companies with multiple classes of common stock or participating securities, as
defined by SFAS No. 128, calculate and disclose earnings per share based on the
two-class method. The adoption of this statement did not have an impact to the
Company's financial statements presentation as the Company is in a loss
position.
3. Business acquisition of Plexus Vaccine, Inc.
On May 23, 2003, the Company acquired substantially all of the assets of Plexus
and assumed certain liabilities in exchange for 1,950,000 shares of the
Company's common stock and 190,950 of the Company's options and warrants at an
exercise price of $1.62 per share. The results of operations of Plexus have been
included in the statement of operations of the combined entity since May 23,
2003.
Selected Unaudited Pro Forma Financial Information
The Company has prepared a condensed pro forma statement of operations in
accordance with SFAS 141, for the three and nine months ended September 30, 2003
as if Plexus were part of the Company as of January 1, 2003.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2003
------------------ -----------------
Revenues ........................................... $ 176,342 $ 719,798
Net loss ........................................... $ (1,570,459) $ (5,931,951)
Net loss per common share - basic and diluted ...... $ (0.09) $ (0.38)
============ ============
Weighted average number of common shares outstanding 16,825,628 15,791,389
============ ============
6
SIGA TECHNOLOGIES, INC.
Notes to the September 30, 2004 Unaudited Condensed Consolidated Financial
Statements
4. Intangible Assets
Purchase of Intangible Assets
In August 2004, the Company acquired certain government grants and two early
stage antiviral programs, Smallpox and Arenavirus, targeting certain agenda of
biological warfare for a purchase price of $1,000,000 in cash and 1,000,000
shares of the Company's common stock from ViroPharma Incorporated
("ViroPharma"). Each program is in the early stage of development and the
Company expects both programs to be completed in or by 2008. The shares issued
to ViroPharma were valued at the closing date price.
The total purchase price of approximately $2.5 million was preliminarily
allocated to the government grants (approximately $1.9 million) and to purchased
in-process research and development (approximately $464,000 allocated to the
Smallpox program and approximately $104,000 to the Arenavirus program) ("IPRD").
The grants will be amortized over the contractual life of each grant or 2 years.
The amount expensed as IPRD was attributed to technology that has not reached
technological feasibility and has no alternate future use. The value allocated
to IPRD was determined using the income approach that included an excess
earnings analysis reflecting the appropriate costs of capital for the purchase.
Estimates of future cash flows related to the IPRD were made for both the
Smallpox and Arenavirus programs. The aggregate discount rate of approximately
55% utilized to discount the programs' cash flows were based on consideration of
the Company's weighted average cost of capital as well as other factors,
including the stage of completion and the uncertainty of technology advances for
these programs. If the programs are not successful or completed in a timely
manner, the Company's product pricing and growth rates may not be achieved and
the Company may not realize the financial benefits expected from the programs.
Transfer of Intangible Assets to Pecos Labs, Inc.
In May 2004, the Company sold intangible assets from its immunological
bioinformatics technology and certain non-core vaccine development assets to a
privately-held company, Pecos Labs, Inc. ("Pecos") in exchange for 150,000
shares of Pecos common stock. In addition, concurrent with the asset transfer,
the Company terminated its employment agreement with the President of the
Company. The Company paid approximately $270,000 in severance to the President
as well as accelerated vesting on 100,000 stock options that were due to vest in
May 2004. No compensation charge was recorded as the exercise price of the
options was above the fair value market price on the date of termination. In
addition, the Company reduced the covenant not to compete with the President to
one year from the date of termination.
As a result of the Pecos transaction in the second quarter of 2004, the Company
performed an impairment review of the intangible assets in accordance with SFAS
144. The impairment of intangible assets consists of $307,063 of impairments to
unamortized intangible assets related to the grants transferred to Pecos and
$303,000 of impairment to the unamortized covenant not to compete with the
President of the Company due to the reduction of the covenant to one year from
the date of termination.
The Company is accounting for its investment in Pecos under the cost method
under Accounting Principles Board Opinion No. 18, "The Equity Method of
Accounting for Investments in Common Stock" based upon its 10% ownership of
Pecos. The Company valued the 150,000 common shares at $0.10 per share based on
an investment made at a concurrent time by an outside investor to Pecos at $0.10
per share.
Amortization of Intangible Assets
For the three and nine months ended September 30, 2004, amortization of acquired
technology was approximately $55,000 and $165,000, respectively, amortization of
customer contract and grants was approximately $90,000 and $163,000,
respectively, and amortization of a covenant not to compete was approximately
$51,000 and $146,000, respectively. The Company anticipates amortization expense
to be approximately $833,000, $1,318,000, $904,000, $219,000, and $219,000 for
the fiscal years ending December 31, 2004, 2005, 2006, 2007, and 2008,
respectively.
5. Stockholders' Equity
At September 30, 2004, 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.
Holders of the Series A Convertible Preferred Stock are entitled to (i)
cumulative dividends at an 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
7
SIGA TECHNOLOGIES, INC.
Notes to the September 30, 2004 Unaudited Condensed Consolidated Financial
Statements
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.
In January 2004, MacAndrews & Forbes Holdings Inc. ("MacAndrews & Forbes"), a
holding company of which the Company's Chairman of the Board of Directors is
Vice Chairman and a director, and TransTech Pharma, Inc., a related party to the
Company and an affiliate of MacAndrews & Forbes ("TransTech Pharma"), completed
the final portion of their investment, following the approval of the Company's
stockholders at its annual meeting of stockholders held on January 8, 2004.
Immediately following the stockholders' meeting, MacAndrews & Forbes invested
$1,840,595 in exchange for 1,278,191 shares of common stock at a price of $1.44
per share, and warrants to purchase up to an additional 639,095 shares of common
stock at an exercise price of $2.00 per share; and TransTech Pharma invested
$5,000,000 in exchange for 3,472,222 shares of common stock and warrants to
purchase up to an additional 1,736,111 shares of common stock on the same terms.
In addition, as part of the investment, MacAndrews & Forbes and TransTech Pharma
each were given the right to appoint one board member to the Board of Directors,
subject to certain terms and conditions. On January 8, 2004, in accordance with
the terms of the investment, the respective designees of MacAndrews & Forbes and
TransTech Pharma were appointed to serve on SIGA's board of directors. In 2004,
the Company paid $120,000 to TransTech Pharma for work performed in connection
with the DegP SBIR grant.
During the three months September 30, 2004, the Company reached a settlement
agreement for breach of contract with a founder of the Company, whereby the
founder returned 40,938 common shares, 150,000 warrants and $15,000 to the
Company. The common shares were retired by the Company in the period ended
September 30, 2004. Other than the $15,000 recorded as Other income, this
transaction had no affect on the Statement of Operations.
6. Employee Agreements
In July 2004, the Company entered into an employment agreement with Bernard L.
Kasten, M.D. to serve as the Company's Chief Executive Officer. The employment
agreement provides for an annual salary of $250,000 plus, at the discretion of
the Board of Directors, bonus payments for a 3-year initial term with an
automatic 3-year renewal unless either party gives notice that it does not want
to renew. The agreement also provides for an option grant of 2,500,000 options
to purchase common stock with an exercise price of $1.30, of which 500,000
vested upon signing, 1 million options vest over the 3-year initial term and the
remaining 1 million options vest over the renewal term.
In July 2004, the Company entered into an amendment to its existing employment
agreement with the Company's Chief Scientific Officer. Pursuant to the
amendment, the employment agreement is effective through December 31, 2007 and
provides for an annual salary of $225,000 plus, at the discretion of the Board
of Directors, a bonus not to exceed 50% of the Chief Scientific Officer's
salary. The agreement also provides for an option grant of 150,000 options to
purchase common stock with an exercise price of $1.40, of which 75,000 vest on
December 31, 2005 and 75,000 vest on December 31, 2006.
In June 2004, the Company entered into an amendment to its existing employment
agreement with the Company's Chief Financial Officer. Pursuant to the amendment,
the employment agreement is effective through December 31, 2005 and provides for
an annual salary of $230,000 plus a one-time payment of $50,000 for the Chief
Financial Officer's prior service as Acting Chief Executive Officer. An
additional bonus not to exceed 25% of the Chief Financial Officer's salary may
be awarded at the discretion of the Board of Directors. The agreement also
provides for an option grant of 150,000 options to purchase common stock with an
exercise price of $1.40, of which 75,000 vested upon signing and the remainder
to vest on a prorata basis from January 1, 2005 through December 31, 2005.
The Company's employment agreement with its Vice President of Business
Development became effective in August 2004. The employment agreement provides
for an annual salary of $230,000 plus bonuses based on certain objectives and
goals met for a 3-year initial term with a 1-year renewal unless either party
gives notice that it does not want to renew. The agreement also provides for an
option grant of 200,000 options to purchase common stock with an exercise price
of $1.40, of which 50,000 vested upon signing and 50,000 vesting each
anniversary of the 3-year initial term. The agreement also provides for an
option grant, at the discretion of the Board of Directors and not to exceed
25,000 shares, upon certain milestone events during the 3-year initial term.
In addition to the 3,000,000 options granted to the executives mentioned above,
during the three months ended September 30, 2004, the Company granted 120,500
options at fair market value at the date of the grant with a ten-year term and
an exercise price of $1.40 per share.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with our financial
statements and notes to those statements and other financial information
appearing elsewhere in this Quarterly Report. In addition to historical
information, the following discussion and other parts of this Quarterly Report
contain forward-looking information that involves risks and uncertainties.
Overview
Since our inception in December 1995, we have been principally engaged in
the research and development of novel products for the prevention and treatment
of serious infectious diseases, including products for use in the defense
against biological warfare agents such as Smallpox. The effort to develop a drug
for Smallpox is being aided by a $1.6 million contract with the U.S. Army which
commenced in January 2003 and a Small Business Innovation Research (SBIR) grant
from the National Institutes for Health (NIH) totaling approximately $5.8
million which commenced in August 2004. In addition, commencing August 2004, we
received SBIR grants from the NIH totaling $6.2 million to develop a drug for
Arenavirus. Smallpox and Arenavirus have been designated as Category A
bioterrorism agents by the Centers for Disease Control (CDC).
We are developing technology for the mucosal delivery of our 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. Our anti-infectives programs are aimed at the
increasingly serious problem of drug resistance, and they are designed to block
the ability of infectious agents to attach to human tissue, the first step in
the infection process.
In August 2004, we acquired certain government grants and two early stage
antiviral programs, Smallpox and Arenavirus, targeting certain agents of
biological warfare from ViroPharma Incorporated ("ViroPharma") for a purchase
price of $1,000,000 in cash and 1,000,000 shares of our common stock on the date
of the closing. As part of the closing, we were awarded Phase I and II SBIR
grants from the NIH totaling approximately $12 million, which will be received
over the next two years, for the development of drugs for the treatment of
Smallpox and Arenavirus as noted above.
In May 2004, we sold intangible assets from our immunological
bioinformatics technology and certain non-core vaccine development assets to a
privately-held company, Pecos Labs, Inc. ("Pecos") in exchange for 150,000
shares of Pecos common stock. As a result of this transaction, we performed an
impairment review of the intangible assets and concluded that the carrying
amount of certain transferred intangible assets of $307,063 would not be
recoverable. In addition, we terminated our employment agreement with our
President. We paid approximately $270,000 in severance to the President as well
as accelerated vesting on 100,000 stock options that were due to vest in May
2004. No compensation charge was recorded as the exercise price of the options
was above the fair value market price on the date of termination. In addition,
we reduced the covenant not to compete with the President to one year from the
date of termination. We recognized $303,000 of impairment to the unamortized
covenant not to compete with our former President due to the reduction of the
covenant to one year from the date of termination.
We do not have commercial biomedical products, and we do not expect to
have such products 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 at least the year ending December 31, 2005.
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 anti-infectives programs through a combination of government
contracts and grants and strategic alliances. While we have had success in
obtaining strategic alliances, contracts 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.
9
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.
Recent Accounting Pronouncements
In December 2003, the FASB revised its FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46R). FIN 46R clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements". FIN 46R requires that a business enterprise review all of its legal
structures used to conduct its business activities, including those to hold
assets, and its majority-owned subsidiaries, to determine whether those legal
structures are variable interest entities (VIEs) required to be consolidated for
financial reporting purposes by the business enterprise. A VIE is a legal
structure for which the holders of a majority voting interest may not have a
controlling financial interest in the legal structure. FIN 46R provides guidance
for identifying those legal structures and provides guidance for determining
whether a business enterprise shall consolidate a VIE. FIN 46R requires that a
business enterprise that holds a significant variable interest in a VIE make new
disclosures in their financial statements. We adopted the provisions of FIN 46R
for the period ended March 31, 2004. We do not hold any interests in VIEs that
would require consolidation or additional disclosures.
In March 2004, the Emerging Issues Task Force issued EITF 03-06, "Participating
Securities and the Two-Class Method under FASB Statement No. 128". This
statement provides additional guidance on the calculation and disclosure
requirements for earnings per share. The FASB concluded in EITF 03-06 that
companies with multiple classes of common stock or participating securities, as
defined by SFAS No. 128, calculate and disclose earnings per share based on the
two-class method. The adoption of this statement did not have an impact to our
financial statements presentation as the Company is in a loss position.
Contractual Obligations, Commercial Commitments and Purchase Obligations
As of September 30, 2004, our purchase obligations are not material. We
lease certain facilities and office space under operating leases. Minimum future
rental commitments under operating leases having non-cancelable lease terms in
excess of one year are as follows:
Year ending December 31,
2004 $ 47,355
2005 190,627
2006 195,975
2007 200,863
2008 5,817
Thereafter --
--------
Total $640,637
=========
Results of Operations
Three months ended September 30, 2004 and September 30, 2003
Revenues from grants and research and development contracts were $532,724
for the three months ended September 30, 2004, compared to $176,342 for the same
period of 2003, an approximate 202% increase. The increase is due to revenue
from the Small Business Innovation Research (SBIR) grants awarded to us as the
result of our purchase of certain assets from ViroPharma in August 2004.
Revenues from these grants were $430,417 in the three month period ended
September 30, 2004. Revenue from the U.S. Army contract was $88,419 for the
three months ended September 30, 2004, an increase of approximately 14% from the
$77,343 received in the prior year. We also received $13,888 from an SBIR grant
that we have in conjunction with Oregon State University that was awarded in the
current year three month period. During the three months ended September 30,
2003 we received $40,000 under a subcontract with Oregon State University and
$58,999 in revenue from an SBIR grant. Work underwritten by this grant was
completed in May 2004.
Selling, general and administrative expenses for the three months ended
September 30, 2004 were $919,165 an increase of approximately 34% from expenses
of $684,223 for the three months ended September 30, 2003. Legal
10
expenses were $212,753 for the three months ended September 30, 2004 compared to
$24,627 for the prior year three month period. The increase was the primarily
due to the expenses incurred in association with hiring our new Chief Executive
Officer and other employee contractual matters and the settlement of a lawsuit
against a founder. Payroll expenses increased approximately 32% from $187,034
for the three months ended September 30, 2003 to $246,949 in the current year
period. The increase reflects the addition of the new Chief Executive Officer
and Vice President of Business Development and a one-time bonus payment of
$50,000 to the Chief Financial Officer. The increase in payroll costs was
partially offset by the salary of $54,000 of our former President who was
terminated in the second quarter of 2004. Consulting fees declined approximately
12% to $195,864 for the three months ended September 30, 2004 from $223,307 in
the prior year period. This decrease in consulting expenses was offset by an
increase in expenses associated with obtaining government funding and higher
investor relations costs.
Research and development expenses were $826,827 for the three months ended
September 30, 2004, an approximately 17% decrease from $1,000,911 for the same
period in 2003. The decrease was primarily the result of a decrease in
amortization by approximately 42% from $108,104 to $63,132 due to the sale of
certain intangible assets to Pecos Labs, Inc. in May 2004. The sale also
resulted in a reduction of sponsored research and development expense of
approximately $210,000 from the prior year three month period as well as a
$32,902 decrease in travel expenses as the result of integration of Plexus in
the prior year period. Offsetting these decreases was an additional amortization
expense of $81,779 for the grants purchased in conjunction with the ViroPharma
asset acquisition in the current year period. The decreases in expenses were
also partially offset by the approximately 37% increase in laboratory supply
costs to $144,864 for the three months ended September 30, 2004 from $105,853 in
the prior year period.
All of our product programs are in the early stage of development except
for the strep vaccine which is in Phase I clinical trials. At this stage of
development, we cannot make estimates of the potential cost for any program to
be completed or the time it will take to complete the project. For the three
months ended September 30, 2004, excluding non-cash and other charges, we
estimate that we spent a total of approximately $680,000 on all our research
programs: approximately $272,000 or 40% of the total was spent for the
development of Smallpox antivirals; approximately $136,000 or 20% of the total
was spent for the development of the Smallpox vaccine; approximately $204,000 or
30% of the total was spent for the development of the Arenavirus antiviral and
the remaining 10% of the total, approximately $68,000, was spent on the
development of other programs.
For the three months ended September 30, 2003, excluding non-cash and
other charges, we estimate that we spent approximately $800,000 on all our
product programs: approximately $320,000, or 40% of the total was spent for the
Smallpox anti-viral program; approximately $200,000 or 25% of the total was
spent for the DegP anti-infectives program; approximately 120,000 or 15% of the
total was spent on the Smallpox vaccine program; approximately $80,000 or 10% of
the total was spent on SARS and other vaccine programs including other vaccines
acquired from Plexus; and approximately $80,000 or 10% of the total was spent
for all other programs.
In addition to our own programs, we are working with TransTech Pharma on a
Smallpox anti-viral product and our DegP broad spectrum anti-biotic. There is a
high risk of non-completion of any program because of the 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 cannot be certain
if they will ever occur.
The risk of failure to complete any program is high, as each is in the
relatively early stage of development. Products for the biological warfare
defense market, such as the Smallpox anti-viral, could be available for sale in
two to three years. We believe the products directed toward this market are on
schedule. We expect the future research and development cost of this program to
increase as the potential products enter animal studies and safety testing.
Funds for future development will be partially paid for by the contract we have
with the U.S. Army and the SBIR grants from the NIH, additional government
funding and from future financing. If we are unable to obtain additional federal
grants and contracts or funding in the required amounts, the development
timeline for these products would slow or possibly be suspended. The clinical
trials for our Strep vaccine through Phase II are being funded under an
agreement with the NIH. The time to market for this product should be several
years from now because of the nature of the FDA requirements for approval of a
pediatric vaccine. We expect to fund the development of the Strep vaccine beyond
the Phase II clinical trials through a corporate collaboration or from
additional funding from debt or equity financings. We do not yet have a
corporate partner for this product and there is no assurance that we will ever
have one or that we will be able to raise the funds needed to go forward. If the
funding is not available or the clinical trials are not successful, the program
could be delayed or cancelled. We believe this product program is on schedule.
Delay or suspension of any of our programs could have an adverse impact on our
ability to raise funds in the future, enter into collaborations with corporate
partners or obtain additional federal funding from contracts or grants.
11
Patent preparation expenses for the three months ended September 30, 2004
were $83,580 an approximate 29% increase from the prior year period expense of
$65,003. The increase is due to a higher number of foreign patent filings in the
current year period.
For the three months ended September 30, 2004, as a result of the
acquisition of certain government grants and two early stage antiviral programs,
Smallpox and Arenavirus, targeting certain agenda of biological warfare from
ViroPharma Incorporated, $568,329 was immediately expensed as purchased
in-process research and development ("IPRD"). The amount expensed as IPRD was
attributed to technology that has not reached technological feasibility and has
no alternate future use. The value preliminarily allocated to IPRD was
determined using the income approach that included an excess earnings analysis
reflecting the appropriate costs of capital for the purchase. Estimates of
future cash flows related to the IPRD were made for both the Smallpox and
Arenavirus programs. The aggregate discount rate of approximately 55% utilized
to discount the programs' cash flows were based on consideration of the
Company's weighted average cost of capital, as well as other factors including
the stage of completion and the uncertainty of technology advances for these
programs. If the programs are not successful or completed in a timely manner,
the Company's product pricing and growth rates may not be achieved and the
Company may not realize the financial benefits expected from the programs.
Other income, net was $27,824 for the three months ended September 30,
2004, compared to $3,336 for the three months ended September 30, 2003. The
increase is the result of higher cash balances in the three months ended
September 30, 2004 compared to the prior year period. The increase in cash
balances was the result of the completion of the investment by MacAndrews &
Forbes Holdings Inc., TransTech Pharma, Inc. and related parties in January
2004. Additionally, we received $15,000 in the three months ended September 30,
2004, as a result of a settlement of a lawsuit against a founder. No such income
was received in the prior year period.
Nine months ended September 30, 2004 and September 30, 2003
Revenues from grants and research and development contracts were $992,478
for the nine months ended September 30, 2004, compared to $625,016 for the same
period of 2003, an approximate 59% increase. The increase is the result of
revenue from the Small Business Innovation Research (SBIR) grants awarded to us
as the result of our purchase of certain assets from ViroPharma in August 2004.
Revenues from these grants were $430,417 in the nine month period ended
September 30, 2004. Revenue from the U.S. Army contract was $269,357 for the
nine months ended September 30, 2004, compared to $226,804 received in the prior
year. During the nine months ended September 30, 2003 we received $351,433 in
revenue from an SBIR grant from the NIH compared to revenue from the grant of
$254,816 in the current year prior. Work underwritten by this grant was
completed in May 2004 causing the decline compared to the prior year.
Selling, general and administrative expenses for the nine months ended
September 30, 2004 were $3,036,559 an increase of approximately 52% from
expenses of $1,993,007 for the nine months ended September 30, 2003.
Approximately 69% of the increase was due to materially higher legal expenses.
The expenses were incurred as the result of costs incurred to review and amend
our corporate governance policies and procedures to ensure compliance with the
regulations promulgated under the Sarbanes Oxley Act of 2002, as well as the
NASDAQ Stock Market. Also contributing to the increase in legal expenses were
costs incurred in connection with a review of a potential business combination,
the sale of certain non-core vaccine assets, the hiring of a new Chief Executive
Officer and a legal action we initiated against a founder. Payroll expenses
increased approximately 124% in the nine months ended September 30, 2004 to
$826,437 from $368,525 in the nine months ended September 30, 2004. The increase
was the result of the addition of former Plexus employees to our staff in May
2003 and, therefore, only partially included in the prior year balance, the
addition of the salary expense of the Chief Executive Officer hired in July of
2003, the approximate $270,000 severance payment associated with the termination
agreement entered into with our former President in May 2004 and one time bonus
payments totaling $110,000. Consulting expenses for marketing efforts to present
our programs to agencies of the federal government increase approximately 9% in
the current year period to a total of $609,194. Furthermore, the nine months
ended September 30, 2004 had an increase of approximately $41,000 for
amortization of certain intangible assets acquired in the Plexus transaction in
May 2003 compared to the prior year period, which was only a partial period of
amortization.
Research and development expenses increased approximately 35% to
$2,872,818 for the nine months ended September 30, 2004 from $2,121,154 for the
same period in 2003. Amortization of certain intangible assets acquired in
connection with the Plexus acquisition and the acquisition of assets from
ViroPharma increased by approximately $194,000 and accounted for approximately
26% of the period to period increase. Payroll expense for the nine months ended
September 30, 2004, increased approximately 19% to $1,098,241 compared to prior
year expense of approximately $925,688. The increase was the result of the
addition of former Plexus employees to our staff, an increase in staff to
accelerate development on our lead products and bonus payments. Sponsored
research expense increased by approximately $266,000 for the nine months ended
September 30, 2004 compared to the same period in 2003 as the result of payments
for work being performed on former Plexus programs at a Danish University and
payments made to TransTech Pharma, Inc. for work performed on the SBIR grant
that was concluded in May 2004.
12
All our product programs are in the early stage of development except for
the strep vaccine which is in Phase I clinical trials. At this stage of
development, we cannot make estimates of the potential cost for any program to
be completed or the time it will take to complete the project. For the nine
months ended September 30, 2004, excluding non-cash charges, we estimate that we
spent a total of approximately $2,545,000 on all our research programs:
approximately $865,000 or 34% of the total for the development of the Smallpox
anti-viral; approximately $509,000 or 20% of the total for the development of
Smallpox vaccine; approximately $305,000 or 12% of the total for the development
of the strep vaccine; approximately $200,000 of the total for the development of
the Arenavirus anti-viral and approximately $666,000 or 26% of the total on all
other programs including programs that were transferred to Pecos in the second
quarter of 2004.
For the nine months ended September 30, 2003, excluding non-cash charges,
we estimate we spent a total of $1,615,000 on all our product programs:
approximately $375,000, or 23% of total was spent for the strep vaccine program;
approximately $510,000 or 32% of the total was spent for the Smallpox antiviral
program; approximately $390,000 or 24% of the total was spent for the DegP
anti-infectives program; approximately $260,000 or 16% of the total was spent
for other anti-infective programs and approximately $80,000 or 5% of the total
was spent on the SARS antiviral program.
In addition to our own programs we are working with TransTech Pharma on a
Smallpox anti-viral product and our DegP broad spectrum anti-biotic. There is a
high risk of non-completion of any program because of the 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 cannot be certain
if they will ever occur.
The risk of failure to complete any program is high, as each is in the
relatively early stage of development. Products for the biological warfare
defense market, such as the Smallpox anti-viral, could be available for sale in
two to three years. We believe the products directed toward this market are on
schedule. We expect the future research and development cost of this program to
increase as the potential products enter animal studies and safety testing.
Funds for future development will be partially paid for by the contract we have
with the U.S. Army and the SBIR grants from the NIH, additional government
funding and from future financing. If we are unable to obtain additional federal
grants and contracts or funding in the required amounts, the development
timeline for these products would slow or possibly be suspended. The clinical
trials for our Strep vaccine through Phase II are being funded under an
agreement with the NIH. The time to market for this product should be several
years from now because of the nature of the FDA requirements for approval of a
pediatric vaccine. We expect to fund the development of the Strep vaccine beyond
the Phase II clinical trials through a corporate collaboration or from
additional funding from debt or equity financings. We do not yet have a
corporate partner for this product and there is no assurance that we will ever
have one or that we will be able to raise the funds needed to go forward. If the
funding is not available or the clinical trials are not successful, the program
could be delayed or cancelled. We believe this product program is on schedule.
Delay or suspension of any of our programs could have an adverse impact on our
ability to raise funds in the future, enter into collaborations with corporate
partners or obtain additional federal funding from contracts or grants.
Patent preparation expenses for the nine months ended September 30, 2004
were $230,320 compared to $187,109 for the nine months ended September 30, 2003.
The 23% increase was the result of increased costs of patent work required on
the intellectual property acquired in the Plexus transaction, including foreign
patent filings.
For the nine months ended September 30, 2004, as a result of the
acquisition of certain government grants, Smallpox and Arenavirus, and two early
stage antiviral programs targeting certain agenda of biological warfare from
ViroPharma Incorporated, $568,329 was immediately expensed as purchased
in-process research and development ("IPRD"). The amount expensed as IPRD was
attributed to technology that has not reached technological feasibility and has
no alternate future use. The value preliminarily allocated to IPRD was
determined using the income approach that included an excess earnings analysis
reflecting the appropriate costs of capital for the purchase. Estimates of
future cash flows related to the IPRD were made for both the Smallpox and
Arenavirus programs. The aggregate discount rate of approximately 55% utilized
to discount the programs' cash flows were based on consideration of the
Company's weighted average cost of capital as well as other factors, including
the stage of completion and the uncertainty of technology advances for these
programs. If the programs are not successful or completed in a timely manner,
the Company's product pricing and growth rates may not be achieved and the
Company may not realize the financial benefits expected from the programs.
For the nine months September 30, 2004, we incurred a $307,063 loss on
impairment of intangible assets due to the transfer of certain grants to Pecos
Labs, Inc. and incurred an impairment of $303,000 to intangible assets due to
the change of the covenant not to compete with our President who was terminated
during the current year period.
Other income, net was $59,055 for the nine months ended September 30,
2004, compared to $13,048 for the nine months ended September 30, 2003. The
increase is the result of higher cash balances in the nine months ended
September 30, 2004 compared to the prior year period. The increase in cash
balances was the result of the completion of the investment by MacAndrews &
Forbes Holdings Inc., TransTech Pharma, Inc. and related parties in January
2004. Additionally, we received $15,000 in the nine
13
months ended September 30, 2004, as the result of the settlement of a lawsuit
against a founder. No such income occur in the prior year period.
Liquidity and Capital Resources
As of September 30, 2004, we had $3,176,327 in cash and cash equivalents.
In August 2004, we acquired certain government grants and two early stage
antiviral programs, Smallpox and Arenavirus, targeting certain agents of
biological warfare from ViroPharma for a purchase price of $1,000,000 in cash
and 1,000,000 shares of our common stock. As part of the closing, we were
awarded Phase I and II SBIR grants from the NIH totaling approximately $12
million, which will be received over the next two years, for the development of
drugs for the treatment of Smallpox and Arenavirus as noted above.
In May 2004, we sold intangible assets from our immunological
bioinformatics technology and certain non-core vaccine development assets to a
privately-held company, Pecos Labs, Inc. ("Pecos") in exchange for 150,000
shares of Pecos common stock. As a result of this transaction, we performed an
impairment review of the intangible assets and concluded that the carrying
amount of certain transferred intangible assets of $307,063 would not be
recoverable. In addition, we terminated our employment agreement with our
President. We paid approximately $270,000 in severance to our former President
as well as accelerated vesting on 100,000 stock options that were due to vest in
May 2004. No compensation charge was recorded as the exercise price of the
options was above the fair value market price on the date of termination. In
addition, we reduced the covenant not to compete with our former President to
one year from the date of termination. We recognized $303,000 of impairment to
the unamortized covenant not to compete with our former President due to the
reduction of the covenant to one year from the date of termination.
In October 2003, MacAndrews & Forbes Holdings Inc., TransTech Pharma, Inc.
and related parties, exercised their option to invest an additional $9,000,000
in us under the terms of the agreement signed in August 2003, as amended in
October 2003. Upon exercise of the option, we received gross proceeds of
$2,159,405 in exchange for 1,499,587 shares of common stock at a price of $1.44
per share and warrants to purchase 749,794 shares of common stock. The warrants
have an initial exercise price of $2.00 per share and a term of seven years. The
sale of the remaining 4,750,413 shares of common stock and warrants to purchase
2,375,206 shares of common stock on the same terms was subject to shareholder
approval. On January 8, 2004, at a meeting of shareholders, the transaction was
approved, the additional $6,840,595 of gross proceeds was received and the
common shares and warrants were issued.
We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures at least
through the year ending December 31, 2005. 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.
We lease certain facilities and office space under operating leases.
Minimum future rental commitments under operating leases having noncancellable
lease terms are $47,355, $190,627 and $195,975 for the years ending December 31,
2004, 2005 and 2006, respectively.
Off-Balance Sheet Arrangements
SIGA does not have any off-balance sheet arrangements.
Safe Harbor Statement
This report contains certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, as amended,
including statements regarding the efficacy of potential products, the timelines
for bringing such products to market and the availability of funding sources for
continued development of such products. Forward-looking statements are based on
management's estimates, assumptions and projections, and are subject to
uncertainties, many of which are beyond the control of SIGA. Actual results may
differ materially from those anticipated in any forward-looking statement.
Factors that may cause such differences include the risks that (a) potential
products that appear promising to SIGA or its collaborators cannot be shown to
be efficacious or safe in subsequent pre-clinical or clinical trials, (b) SIGA
or its collaborators will not obtain appropriate or necessary governmental
approvals to market these or other potential products, (c) SIGA may not be able
to obtain promised funding for its development projects or other needed funding,
and (d) SIGA may not be able to secure or enforce adequate legal protection,
including patent protection, for its products. More detailed information about
SIGA and risk factors that may affect the realization of forward-looking
statements, including the forward-looking statements in this presentation, is
set forth in SIGA's filings with the Securities and Exchange Commission,
including SIGA's Annual Report on Form 10-K for the fiscal year ended December
31, 2003, and in other documents that SIGA has filed with the Commission. SIGA
urges investors and security holders to read those documents free of charge at
the Commission's Web site at http://www.sec.gov. Interested parties may also
obtain those documents free of charge from SIGA. SIGA does not undertake to
publicly update or revise its forward-looking statements as a result of new
information, future events or otherwise.
Item 3. Controls and Procedures
As of the end of the fiscal quarter ended September 30, 2004, the
Company's management, including the Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15(d)-15(e) of the Securities Exchange Act of 1934, as amended). Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that such disclosure controls and procedures were effective for recording,
processing, summarizing and reporting information that the Company is required
to disclose in reports filed under the Securities and Exchange Act of 1934, as
amended.
14
There have been no changes in the Company's internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act, as amended) or in other factors during the fiscal
quarter ended September 30, 2004, that materially affected, or are reasonably
likely to materially affect, the Company's internal controls over financial
reporting.
15
Part II
Other information
Item 1. Legal Proceedings - SIGA is not a party, nor is its property the subject
of, any legal proceedings other than routine litigation incidental to its
business.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement, dated as of July 29, 2004, between SIGA
and John Odden.
10.2 Amendment No. 5 to Employment Agreement, dated as of July 29,
2004, between SIGA and Dr. Dennis E. Hruby.
10.3 Amendment No. 3 to Amended and Restated Employment Agreement,
dated as of July 29, 2004, between SIGA and Thomas N.
Konatich.
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
(1) On July 6, 2004, SIGA filed a Current Report on Form 8-K dated
July 6, 2004, pursuant to which SIGA reported under Item 5 that SIGA issued a
press release announcing the appointment of Bernard L. Kasten, M.D. as its Chief
Executive Officer.
(2) On August 24, 2004, SIGA filed a Current Report on Form 8-K
dated August 24, 2004, pursuant to which SIGA reported under Item 7.01 that SIGA
issued a press release announcing the receipt of two grants totaling
approximately $12 million from the National Institutes of Health.
(3) On September 14, 2004, SIGA filed a Current Report on Form 8-K
dated September 14, 2004, pursuant to which SIGA reported under Item 7.01 that
SIGA issued a press release announcing that it had been designated as a prime
contractor by the U.S. Air Force Surgeon General's office to create rational
development of vaccines and therapeutics against potential agents of biological
warfare.
(4) On October 5, 2004, SIGA filed a Current Report on Form 8-K
dated October 6, 2004, pursuant to which SIGA reported under Item 7.01 that SIGA
issued a press release announcing that the company's lead compound, SIGA-246 has
demonstrated significant antiviral activity against several mouse models of
poxvirus disease.
(5) On October 25, 2004, SIGA filed a Current Report on Form 8-K
dated October 12, 2004, pursuant to which SIGA reported under Item 7.01 that
SIGA issued a press release announcing that Dennis Hruby, SIGA's Chief
Scientific Officer, will present at the Rodman & Renshaw Techvest Conference on
October 27, 2004.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGA Technologies, Inc.
(Registrant)
Date November 15, 2004 By: /s/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Chief Financial Officer
(Authorized Signatory and
Principal Accounting Officer
and Financial Officer and Vice
President, Finance)
17
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of July 29,
2004, between SIGA Technologies, Inc., a Delaware corporation (the
"Corporation"), and John Odden (the "Executive").
WHEREAS, the Corporation desires to employ Executive and Executive desires
to accept such employment on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements and covenants hereinafter set forth, the parties hereto agree
to the terms and conditions of this Agreement as follows:
1. Employment for Term. The Corporation hereby employs Executive and
Executive hereby accepts employment with the Corporation for the period
beginning on August 23, 2004 and ending on the third anniversary thereof (the
"Initial Term"), or upon the earlier termination of such term pursuant to
Section 7. Unless one party provides the other party with at least three (3)
months advance notice of its desire not to renew the term of Executive's
employment hereunder, the term of Executive's employment with the Corporation
shall continue for one (1) additional year following the end of the Initial Term
(the "Renewal Term") except upon the earlier termination of such term pursuant
to Section 7 (such term of employment upon any such earlier termination, being
hereinafter referred to as the "Term"). The termination of Executive's
employment under this Agreement shall end the Initial Term or Renewal Term, as
applicable, but shall not terminate Executive's or the Corporation's other
agreements in this Agreement, except as otherwise provided herein.
2. Position and Duties. During the Term, Executive shall serve as Vice
President - Business Development of the Corporation. During the Term, Executive
shall also hold such additional positions and titles as the Board of Directors
of the Corporation (the "Board") may determine from time to time. During the
Term, Executive shall devote his full time and efforts to his duties as an
employee of the Corporation.
3. Compensation.
(a) Base Salary. The Corporation shall pay Executive a base salary,
beginning on the first day of the Term and ending on the last day of the Term,
of not less than $230,000 per annum, payable at least monthly on the
Corporation's regular pay cycle for professional employees (the "Base Salary").
(b) Bonus Payments. If Executive causes the Corporation to achieve
the objectives set forth on Schedule I attached hereto, Executive shall be
entitled to receive the bonus payments with respect to such objectives set forth
on Schedule I. Each bonus payment pursuant to this Section 3(b) shall be made at
the end of the fiscal quarter during which funds in respect of the relevant
objective in an amount that is sufficient to make such payment are received by
the Corporation.
(c) Stock Options.
(i) On the date hereof, the Corporation shall grant Executive
an option to purchase an aggregate of 200,000 shares of common stock, par value
$.0001 per share, of the Corporation ("Common Stock"), which shall vest with
respect to the first 50,000 shares, on the date hereof, with respect to the
second 50,000 shares, on the first anniversary of the date hereof, with respect
to the third 50,000 shares on the second anniversary of the date hereof and with
respect to the remaining 50,000 shares, on the third anniversary of the date
hereof, pursuant to and subject to the terms and conditions of a stock option
grant agreement, substantially the form attached hereto as Exhibit A (the "Time
Vested Options").
(ii) In addition to the Time Vested Options, upon the
formation of each "strategic relationship" (as defined below) resulting
substantially from Executive's efforts during the Term, the Corporation shall
grant an option to purchase such number of shares of Common Stock as determined
by the Board and not to exceed 25,000 shares, which shall be pursuant to and
subject to the terms and conditions of a stock option grant agreement, the form
of which shall be mutually agreed to by the Corporation and Executive and
consistent with the Corporation's then-existing form of stock option grant
agreement (the "Milestone Options"). For purposes of this Agreement, the term
"strategic relationship" shall mean a relationship between the Corporation and
an independent third party, which in the sole discretion of the Chief Executive
Officer of the Corporation or the Board, creates a signficant market advantage
for the Corporation.
(d) Other and Additional Compensation. The preceding sections
establish the minimum compensation during the Term and shall not preclude the
Board from awarding Executive a higher salary or any bonuses or stock options in
the discretion of the Board at any time during the Term.
4. Employee Benefits. During the Term, Executive shall be entitled to the
employee benefits including four (4) weeks vacation (to be taken at a time or
times mutually agreed by Executive and the Corporation), 401(k) plan, health
plan and other insurance benefits made generally available by the Corporation to
employees of the Corporation.
5. Expenses. The Corporation shall reimburse Executive for actual
out-of-pocket expenses incurred by him in the performance of his services for
the Corporation upon the receipt of appropriate documentation of such expenses.
6. Place of Performance. Executive shall be based in California but
Executive may perform his duties from whatever location the Corporation and
Executive shall mutually agree from time to time; provided that such location
allows Executive to perform his duties and obligations hereunder. In addition,
should the Corporation and Executive agree to a different location from which
Executive is to perform his duties hereunder, such change of location shall not
cause a breach hereunder or be treated as Good Reason (as defined herein).
7. Termination.
(a) General. The Initial Term (or Renewal Term, if applicable) shall
end immediately upon Executive's death. The Corporation shall have the right to
end the Initial
2
Term (or Renewal Term, if applicable) for Cause or Disability (each as defined
below), subject to the provisions of Section 8.
(b) Notice of Termination. Promptly after it ends the Term, the
Corporation shall give Executive notice of the termination, including a
statement of whether the termination was for Cause or Disability (as defined in
Section 8(a) and 8(b) below). The Corporation's failure to give notice under
this Section 7(b) shall not, however, affect the validity of the Corporation's
termination of the Term.
(c) Effective Termination by the Corporation. If the Corporation (i)
reassigns Executive's base of operations outside of California (except in
accordance with Section (6)), (ii) materially reduces Executive's duties during
the Term or (iii) materially breaches the Corporation's obligations under this
Agreement, then, at his option, Executive may treat such relocation or reduction
in duties or breach as a termination of the Initial Term (or Renewal Term, as
applicable) without Cause by the Corporation and as "Good Reason" for Executive
to resign.
8. Severance Benefits.
(a) Cause Defined. "Cause" means (i) willful malfeasance or willful
misconduct by Executive in connection with his employment; (ii) Executive's
gross negligence in performing any of his duties under this Agreement; (iii)
Executive's conviction of, or entry of a plea of guilty to, or entry of a plea
of nolo contendre with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; (iv) Executive's material breach of any
written policy applicable to all employees adopted by the Corporation which is
not cured to the reasonable satisfaction of the Corporation within fifteen (15)
business days after notice thereof; or (v) material breach by Executive of any
of his agreements in this Agreement which is not cured to the reasonable
satisfaction of the Corporation within fifteen (15) business days after notice
thereof.
(b) Disability Defined. "Disability" shall mean Executive's
incapacity due to physical or mental illness that results in his being
substantially unable to perform his duties hereunder for six consecutive months
(or for six months out of any nine month period). During a period of Disability,
Executive shall continue to receive the Base Salary hereunder, provided that if
the Corporation provides Executive with disability insurance coverage, payments
of the Base Salary shall be reduced by the amount of any disability insurance
payments received by Executive due to such coverage. The Corporation shall give
Executive written notice of termination which shall take effect sixty (60) days
after the date it is sent to Executive unless Executive shall have returned to
the performance of his duties hereunder during such sixty (60) day period
(whereupon such notice shall become void).
(c) Termination. If the Corporation ends the Initial Term (or
Renewal Term, if applicable) for Cause or Disability, or if Executive resigns as
an employee of the Corporation for reasons other than Good Reason as provided in
Section 7(c), or if Executive dies, then the Corporation shall have no
obligation to pay Executive any amount, whether for salary, benefits, bonuses,
or other compensation or expense reimbursements of any kind, accruing after the
end of the Term, and such rights shall, except as otherwise required by law, be
forfeited immediately upon the end of the Term. Notwithstanding the foregoing,
payments under Section 3(a) shall
3
continue for the remainder of the Initial Term (or Renewal Term, if applicable)
if the Corporation ends the Initial Term (or Renewal Term, if applicable) for
Disability. If the Corporation ends the Initial Term (or Renewal Term, if
applicable) without Cause or if Executive resigns for Good Reason as provided in
Section 7(c), then the Corporation will be obligated to continue to pay
Executive's Base Salary and all other amounts due hereunder for a period of six
(6) months following the date of termination or for the remainder of the Initial
Term (or Renewal Term, if applicable), whichever period is shorter (the
"Severance Period"); provided, however, that, in the event that Executive shall
materially breach Section 9 of this Agreement, in addition to any other remedies
the Corporation may have in the event Executive breaches this Agreement, the
Corporation's obligation pursuant to this Section 8(c) to make payments during
the Severance Period shall cease, all stock options shall expire, and
Executive's rights with respect to such payments and stock options shall
terminate and shall be forfeited. Except for the Time Vested Options, which
shall continue to vest during the Severance Period, if any, or as otherwise
expressly set forth herein, the treatment of the Time Vested Options and
Milestone Options shall be in accordance with the relevant stock option
agreement.
(d) Termination by Executive upon Change in Control. If anytime
within ninety (90) days prior to or within twelve (12) months after a Change in
Control (as defined below), (i) Executive's employment is terminated by the
Corporation or surviving organization, or (ii) if Executive is no longer the
Vice President - Business Development or its equivalent of the surviving
organization or the Corporation is not the surviving organization and Executive
elects to terminate his employment with Corporation as a result of such Change
in Control, the Corporation shall pay to Executive the Base Salary due and
payable through such date of termination. Notwithstanding the foregoing, if
Executive's employment is terminated other than for Cause or by the Executive
other than for Good Reason and a Change of Control occurs within one year
thereafter, then, at such Change of Control, Executive shall be entitled to the
amounts set forth in this Section 8(d) as if he were employed by the Corporation
at the time of the Change of Control. Section 8(d) shall not apply and the
Corporation shall have no obligations pursuant to this Section 8(d) if Executive
is terminated for Cause or leaves other than for Good Reason. For purposes of
this Agreement:
(i) "Change in Control" shall mean any of the following
occurrences:
(a) 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 (i) the Corporation, (ii) any
of its Subsidiaries, (iii) any shareholder of the
Corporation as of the date hereof which, together
with its affiliates, related parties, associates
or associated entities, own or control 10% or more
of the equity securities of the Corporation as of
the date hereof or (iv) any of such shareholders'
affiliates or designees which, together with its
affiliates, related parties, associates or
associated entities, own or control 10% or more of
equity securities of the corporation as of the
date hereof, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the
Exchange Act) of 35% or more of
4
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; or
(b) 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; provided, however, that
a merger, consolidation or reorganization effected
to implement a recapitalization of the Corporation
(or similar transaction) in which no "Acquiring
Person" acquires more than 50% of the combined
voting power of the Corporation's then outstanding
securities shall not constitute a Change in
Control; or
(c) 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; or
(d) a "Hostile Takeover" as hereinafter defined is
declared.
(ii) "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.
(e) Effect of Change in Control. Upon the occurrence of the Approval
Date (as defined below), all stock options and other stock-based grants to
Executive by the Corporation shall, irrespective of any provisions of his option
agreements, immediately and irrevocably vest and become exercisable as of the
Approval Date whereupon, at any time during the Option Term as defined in the
option agreements, Executive or his estate may by five (5) days' advance written
notice given to the Corporation, and irrespective of whether Executive is then
employed by the Corporation or then living, and solely at the election of
Executive or his estate, require the Corporation to:
(A) within thirty (30) days of a request by Executive or his
estate file and cause to become effective a Form S-8 (or
other appropriate
5
form) with the Securities and Exchange Commission
("SEC") registering for resale all shares underlying
stock options granted to Executive and outstanding with
all fees and expenses of such filing being paid by the
Corporation; or
(B) allow Executive to exercise all or any part of such
options at the option prices therefor specified in the
grant of such options.
For purposes of this Agreement, "Approval Date" means the date on which any
necessary corporate action, including, but not limited to, shareholder approval
or board of director approval, has been obtained in connection with any
agreement, transaction, or other event which, when given effect, will constitute
a Change in Control.
9. Confidentiality, Ownership, and Covenants. Executive acknowledges and
agrees that the Corporation would not enter into this Agreement without the
assurance that Executive will not engage in any of the activities prohibited by
this Section 9, and will otherwise comply with this Section 9, for the periods
set forth herein. Executive agrees to restrict his actions as provided for in
this Section 9. Executive further acknowledges that the scope and duration of
the covenants set forth in this Section 9 are reasonable in light of the
specific nature and duration of the transactions contemplated by this Agreement.
In consideration thereof, Executive agrees that he will not assert in any forum
that the provisions of this Section 9 prevent his from earning a living or
otherwise are void or unenforceable or should be held void or unenforceable.
(a) "Corporation Information" and "Inventions" Defined. "Corporation
Information" means all information, knowledge or data of or pertaining to (i)
the Corporation, its employees and all work undertaken on behalf of the
Corporation, and (ii) any other person, firm, corporation or business
organization with which the Corporation may do business during the Term, that
(as to both (i) and (ii) above) is not in the public domain (and whether
relating to methods, processes, techniques, discoveries, pricing, marketing or
any other matters). "Inventions" collectively refers to any and all inventions,
trade secrets, ideas, processes, formulas, source and object codes, data,
programs, other works of authorship, know-how, improvements, research,
discoveries, developments, designs, and techniques regarding any of the
foregoing.
(b) Confidentiality. (i) Executive hereby recognizes that the value
of all trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the Corporation in the course
of his employment with the Corporation may be attributable substantially to the
fact that such confidential information is maintained by the Corporation in
strict confidentiality and secrecy and would be unavailable to others without
the expenditure of substantial time, effort or money. Executive, therefore,
except as provided in the next two sentences, covenants and agrees that all
Corporation Information shall be kept secret and confidential at all times
during the Term and for the five (5) year period after the end of the Term and
shall not be used or divulged by his outside the scope of his employment as
contemplated by his Agreement, except as the Corporation may otherwise expressly
authorize by action of the Board. In the event that Executive is requested in a
judicial, administrative or governmental proceeding to disclose any of the
Corporation Information, Executive will promptly so notify the Corporation so
that the Corporation may seek a protective order of other
6
appropriate remedy and/or waive compliance with this Agreement. If disclosure of
any of the Corporation Information is required, Executive may furnish the
material so required to be furnished, but Executive will furnish only that
portion of the Corporation Information that legally is required.
(ii) Executive also hereby agrees to keep the terms of this
Agreement confidential to the same extent that the Corporation maintains such
confidentiality (except with regard to any disclosure by the Corporation
required under applicable securities laws).
(c) Ownership of Inventions, Patents and Technology. Executive
hereby assigns to the Corporation all of Executive's rights (including patent
rights, copyrights, trade secret rights, and all other rights throughout the
world), title and interest in and to Inventions, whether or not patentable or
registrable under copyright or similar statutes, made or conceived or reduced to
practice or learned by Executive, either alone or jointly with others, during
the course of the performance of services for the Corporation. Executive shall
also assign to, or as directed by, the Corporation, all of Executive's right,
title and interest in and to any and all Inventions, the full title to which is
required to be in the United States government of any of its agencies. The
Corporation shall have all right, title and interest in all research and work
product produced by Executive as an employee of the Corporation, including, but
not limited to, all research materials and lab books.
(d) Non-Competition Period Defined. "Non-Competition Period" means
the period beginning at the end of the Term and ending one (1) year after the
end of the Term.
(e) Covenants Regarding the Term and Non-Competition Period.
Executive acknowledges and agrees that his services pursuant to this Agreement
are unique and extraordinary; that the Corporation will be dependent upon
Executive for research, development and marketing expertise; and that he will
have access to and control of confidential information of the Corporation.
Executive further acknowledges that the business of the Corporation is
international in scope and cannot be confined to any particular geographic area.
Executive further acknowledges that the scope and duration of the restrictions
set forth in this Section 9(e) are reasonable in light of the specific nature
and duration of the transactions contemplated by this Agreement. For the
foregoing reasons and to induce the Corporation to enter this Agreement,
Executive covenants and agrees that, subject to Section 9(h), during the Term
and the Non-Competition Period Executive shall not unless with written consent
of the Corporation:
(i) engage in any business directly related to the research
and development of the products or processes in which the Corporation is
engaged in during the Term or in any other business conducted by the
Corporation during the Term (collectively the "Prohibited Activity") in
the World for his own account;
(ii) become interested in any individual, corporation,
partnership or other business entity (a "Person") engaged in any
Prohibited Activity in the world, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
employee, trustee, consultant or in any other relationship or capacity;
provided, however, that Executive may own directly or indirectly, solely
as an investment, securities of any Person which are traded on any
national securities exchange if
7
Executive (x) is not a controlling person of, or a member of a group which
controls, such person or (y) does not, directly or indirectly, own 5% or
more of any class of securities of such person; or
(iii) directly or indirectly hire, employ or retain any person
who at any time during the last two months of the Term was an employee of
the Corporation or directly or indirectly solicit, entice, induce or
encourage any such person to become employed by any other person.
(f) Remedies. Executive hereby acknowledges that the covenants and
agreements contained in Section 9 are reasonable and valid in all respects and
that the Corporation is entering into this Agreement, inter alia, on such
acknowledgement. If Executive breaches, or threatens to commit a breach, of any
of the restrictive covenants set forth in this Agreement (the "Restrictive
Covenants"), the Corporation shall have the following rights and remedies, each
of which rights and remedies shall be independent of the other and severally
enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Corporation under
law or in equity: (i) the right and remedy to have the Restrictive Covenants
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Corporation and that money damages will not provide an
adequate remedy to the Corporation; and (ii) the right and remedy to require
Executive to account for and pay over to the Corporation such damages as are
recoverable at law as the result of any transactions constituting a breach of
any of the Restrictive Covenants.
(g) Jurisdiction. The parties intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Covenants. If the courts of
any one or more such jurisdictions hold the Restrictive Covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties that such determination not bar or in any way affect
the Corporation's right to the relief provided above in the courts of any other
jurisdiction, within the geographical scope of such Covenants, as to breaches of
such Covenants in such other respective jurisdiction such Covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
(h) Executive's agreements and covenants under Section 9(e) shall
automatically terminate if (i) the Corporation ends the Initial Term (or the
Renewal Term, if applicable) without Cause or (ii) Executive resigns for Good
Reason as provided in Section 7(c).
10. Successors and Assigns.
(a) Executive. This Agreement is a personal contract, and the rights
and interests that the Agreement accords to Executive may not be sold,
transferred, assigned, pledged, encumbered, or hypothecated by him. All rights
and benefits of Executive shall be for the sole personal benefit of Executive,
and no other person shall acquire any right, title or interest under this
Agreement by reason of any sale, assignment, transfer, claim or judgement or
bankruptcy proceedings against Executive. Except as so provided, this Agreement
shall inure to
8
the benefit of and be binding upon Executive and his personal representatives,
distributes and legatees.
(b) The Corporation. This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns, including (but not limited to) any corporation that may acquire all
or substantially all of the corporation's assets or business or into or with
which the Corporation may be consolidated or merged. In the event that the
Corporation sells all or substantially all of its assets, merges or
consolidates, otherwise combines or affiliates with another business, dissolves
and liquidates, or otherwise sells or disposes of substantially all of its
assets and Executive does not elect to treat any such transaction as a
termination by the Corporation without Cause pursuant to Section 8(c), then this
Agreement shall continue in full force and effect. The Corporation's obligations
under this Agreement shall cease, however, if the successor to, the purchaser or
acquirer either of the Corporation or of all or substantially all of its assets,
or the entity with which the Corporation has affiliated, shall assume in writing
the Corporation's obligations under this Agreement (and deliver and executed
copy of such assumption to Executive), in which case such successor or
purchaser, but not the Corporation, shall thereafter be the only party obligated
to perform the obligations that remain to be performed on the part of the
Corporation under this Agreement.
11. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning Executive's employment with the Corporation and
supersedes all prior negotiations, discussions, understanding and agreements,
whether written or oral, between Executive and the Corporation relating to the
subject matter of this Agreement.
12. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by Executive and by a duly authorized officer of the Corporation. No
waiver by any party to this Agreement or any breach by another party of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
13. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
If to Executive: John Odden
67 Panorama
Cote de Coza, CA 92679
If to the Corporation: SIGA Technologies, Inc.
420 Lexington Avenue
Suite 601
New York, NY 10170
Fax: 212-697-3130
Attention: Bernard Kasten, M.D.
with a copy to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: James A. Grayer, Esq.
9
Any notice delivered personally or by overnight courier shall be deemed given on
the date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date mailed.
14. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
Executive that, to the extent that the provision is or would be valid or
enforceable under applicable law, any court of competent jurisdiction shall
construe and interpret or reform this Agreement to provide for a restriction
having the maximum enforceable area, time period and such other constraints or
conditions (although not greater than those contained currently contained in
this Agreement) as shall be valid and enforceable under the applicable law.
15. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
16. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
17. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to Executive under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of and federal, state or local authority.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
19. Applicable Law; Arbitration. The validity, interpretation and
enforcement of this Agreement and any amendments or modifications hereto shall
be governed by the laws of the State of New York, as applied to a contract
executed within and to be performed in such State. The parties agree that any
disputes shall be definitively resolved by binding arbitration before in
accordance with the Rules of the American Arbitration Association, with the
arbitration hearing to be held in New York, New York. The parties hereby consent
to the jurisdiction to the federal
10
courts of the Southern District of New York or, if there shall be no
jurisdiction, to the state courts located in New York County, New York, to
enforce any arbitration award rendered with respect thereto. Each party shall
choose one neutral arbitrator and the two neutral arbitrators shall choose a
third neutral arbitrator. All costs and fees related to such arbitration (and
judicial enforcement proceedings, if any) shall be borne and allocated by and
between the parties as the arbitrators decide is appropriate, with the intent
that the party who is the most unsuccessful should bear most (or all) of said
costs and fees.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
-----------------------
Thomas N. Konatich
Chief Financial Officer
/s/ John Odden
------------------------
John Odden
12
EXHIBIT A
SIGA TECHNOLOGIES, INC.
Incentive Stock Option Agreement
Granting Date: ______, 2004
To: Mr. John Odden:
We are pleased to notify you that SIGA TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), has granted to you (the "Holder") an
incentive stock option (the "Option") under the Corporation's Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") to
purchase all or any part of an aggregate of 200,000 shares of Common Stock of
the Corporation (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 $___ 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 become exerciseable with respect to the
first 50,000 Optioned Shares, on the date hereof, with respect to the second
50,000 Optioned Shares, on the first anniversary of the date hereof, with
respect to the third 50,000 Optioned Shares on the second anniversary of the
date hereof and with respect to the remaining 50,000 Optioned Shares, on the
third anniversary of the date hereof. 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
Corporation (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 Corporation 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 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 Corporation 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 Corporation 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 Corporation shall have been furnished with written notice thereof,
and such other evidence as the Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation, nor is the Corporation'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 Corporation
("Employment Termination Date"). If your employment with the Corporation 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. 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
Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation, or otherwise inimical,
contrary or harmful to the interests of the Corporation (including, but not
limited to, violating any non-competition or similar agreements entered into
with the Corporation 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 Corporation), then upon notice from
the Corporation to you any gain ("Gain") realized by you upon exercising such
Option shall be paid by you to the Corporation. For purposes of this Section 8,
such Gain shall be the excess of the Fair Market Value of the shares of stock
obtained through such exercise as of the date of option exercise over the
purchase price of such shares. The Corporation shall have the right to offset
such Gain against any amounts otherwise owed to you by the Corporation
(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 Corporation; or
(b) If to the Corporation, to 420 Lexington Avenue, Suite 601,
New York, NY 10017, or to such other address as the Corporation may
designate by notice to the Holders.
10. Supplements and Amendments. The Corporation 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 Corporation, 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, including all
schedules and exhibits hereto, contains the entire understanding between the
parties hereto with respect to the subject matter hereof.
14. Severability. 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 Corporation 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 Corporation 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]
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
-----------------------
Thomas N. Konatich
Chief Financial Officer
/s/ John Odden
---------------------------
John Odden
Exhibit 10.2
AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 5 TO EMPLOYMENT AGREEMENT (this "Amendment No.
5"), dated as of July 29, 2004 (the "Effective Date of Amendment No. 5"),
between SIGA Technologies, Inc., a Delaware corporation (the "Corporation"), and
Dr. Dennis E. Hruby ("Hruby"), amends certain provisions of the Employment
Agreement, dated as of January 1, 1998, as amended (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, 2005; and
WHEREAS, the Corporation and Hruby desire to amend the Existing
Agreement as provided in this Amendment No. 5.
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:
1. Employment for Term. The Corporation hereby employs Hruby
and Hruby hereby accepts employment with the Corporation for the period
beginning on the date hereof and ending on December 31, 2007 (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 date hereof, the Base Salary shall be not less than
$225,000 per annum, and the Corporation shall make the appropriate
adjustments to its payroll.
3. Subsection 4(e) of the Existing Agreement shall be deleted, be of
no further force and effect, and be replaced by the following:
(e) 2004 Stock Option Grant. Hruby shall be granted an option to
purchase a total of 150,000 shares of Common Stock of the Corporation at
an exercise price of $1.40 per share, which shall vest in 75,000 share
increments on December 31 of each year, commencing December 31, 2005,
pursuant to a Stock Option Grant Agreement in substantially the form
attached hereto as Exhibit A5A.
4. Section 4 of the Existing Agreement shall be amended to add a
Subsection (f) that reads as follows:
(f) 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. 5, any
bonus amount awarded Hruby in the discretion of the Board or a committee
thereof shall not exceed 50% of Hruby's annual salary.
5. The Existing Agreement shall be amended to add an Exhibit A5A
thereto in the form of Exhibit A5A hereto.
5. Any event occurring prior to the Effective Date of Amendment No.
5 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. 5, nor any
event that took place prior to the Effective Date of Amendment No. 5, 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 caused this Agreement to
be dully executed, as of the day and year first written.
SIGA TECHNOLOGIES, INC.
By: /s/ Bernard Kasten
------------------------------
Name: Bernard Kasten, M.D.
Title: Chief Executive Officer
/s/ Dennis Hruby
----------------------------------
Dr. Dennis E. Hruby
-3-
EXHIBIT A5A
SIGA TECHNOLOGIES, INC.
Incentive Stock Option Agreement
Granting Date: July 29, 2004
To: Dr. Dennis E. Hruby:
We are pleased to notify you that SIGA TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), has granted to you (the "Holder") an
incentive stock option (the "Option") under the Corporation's Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") to
purchase all or any part of an aggregate of 150,000 shares of Common Stock of
the Corporation (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 $1.40 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 become exercisable with respect to the first
75,000 Optioned Shares on December 31, 2005, and with respect to the remaining
75,000 Optioned Shares, on December 31, 2006. 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
Corporation (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 Corporation 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 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 Corporation 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 Corporation 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 Corporation
shall have
been furnished with written notice thereof, and such other evidence
as the Corporation 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 may 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 may, therefore, be
restricted. If there is no such registration, 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 Corporation 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 Corporation 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 Corporation 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 Corporation, nor is the Corporation'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 Corporation
("Employment Termination Date"). If your employment with the Corporation 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. 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
Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation, or otherwise inimical,
contrary or harmful to the interests of the Corporation (including, but not
limited to, violating any non-competition or similar agreements entered into
with the Corporation 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 Corporation), then upon notice from
the Corporation to you any gain ("Gain") realized by you upon exercising such
Option shall be paid by you to the Corporation. For purposes of this Section 8,
such Gain shall be the excess of the Fair Market Value of the shares of stock
obtained through such exercise as of the date of option exercise over the
purchase price of such shares. The Corporation shall have the right to offset
such Gain against any amounts otherwise owed to you by the Corporation
(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 Corporation; or
(b) If to the Corporation, to 420 Lexington Avenue, Suite 601,
New York, NY 10017, or to such other address as the Corporation may
designate by notice to the Holders.
10. Supplements and Amendments. The Corporation 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 Corporation, 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, including all
schedules and exhibits hereto, contains the entire understanding between the
parties hereto with respect to the subject matter hereof.
14. Severability. 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 Corporation 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 Corporation 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]
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/ Bernard Kasten
-----------------------
Bernard Kasten, M.D.
Chief Executive Officer
/s/ Dennis E. Hruby
---------------------------
Dennis E. Hruby
Exhibit 10.3
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT (this "Amendment No.
3"), dated as of July 29, 2004 (the "Effective Date of Amendment No. 3"),
between SIGA Technologies, Inc., a Delaware corporation (the "Corporation"), and
Thomas N. Konatich ("Konatich"), amends certain provisions of the Amended and
Restated Employment Agreement, dated as of October 6, 2000, between the
Corporation and Konatich, as amended (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
September 30, 2004; and
WHEREAS, the Corporation and Konatich desire to amend the Existing
Agreement as provided in this Amendment No. 3.
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 the date hereof and ending on December 31, 2005
(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 date hereof, the Base Salary shall be not less than
$230,000 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:
Furthermore, Konatich shall be granted an option to purchase a total of
150,000 shares of Common Stock of the Corporation at an exercise price of
$1.40 per share, which shall vest with respect to 75,000 shares
immediately and with respect to the remaining 75,000 shares on a pro rata
basis from January 1, 2005 through December 31, 2005 with no provision for
acceleration under any circumstances, pursuant to a Stock Option Grant
Agreement in substantially the form attached hereto as Exhibit A3A.
4. Section 3(c) of the Existing Agreement shall be amended to read
in its entirety as follows:
(c) Other and Additional Compensation. The preceding sections
establish the minimum compensation during the Term and shall not preclude the
Board from awarding Konatich 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. 3, any bonus amount awarded Konatich
in the discretion of the Board or a committee thereof shall not exceed 25% of
Konatich's annual salary. In addition, the Corporation shall make a one-time
payment to Konatich of $50,000 for his prior service as the Corporation's acting
CEO.
5. The Existing Agreement shall be amended to add an Exhibit A3A
thereto in the form of Exhibit A3A hereto.
6. Any event occurring prior to the Effective Date of Amendment No.
3 that would otherwise constitute a Change of Control shall not be deemed a
Change of Control for purposes of the Agreement.
7. Neither the amendments set forth in this Amendment No. 3, nor any
event that took place prior to the Effective Date of Amendment No. 3, 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. 3 as of July 29, 2004.
SIGA TECHNOLOGIES, INC.
By: /s/ Bernard Kasten
------------------------------
Name: Bernard Kasten, M.D.
Title: Chief Executive Officer
/s/ Thomas N. Konatich
----------------------------------
Thomas N. Konatich
-3-
EXHIBIT A3A
SIGA TECHNOLOGIES, INC.
Incentive Stock Option Agreement
Granting Date: July 29, 2004
To: Mr. Thomas N. Konatich:
We are pleased to notify you that SIGA TECHNOLOGIES, INC., a
Delaware corporation (the "Corporation"), has granted to you (the "Holder") an
incentive stock option (the "Option") under the Corporation's Amended and
Restated 1996 Incentive and Non-Qualified Stock Option Plan (the "Plan") to
purchase all or any part of an aggregate of 150,000 shares of Common Stock of
the Corporation (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 $1.40 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 become exercisable with respect to the first
75,000 Optioned Shares, on the date hereof, and with respect to the remainder of
the Optioned Shares quarterly, on a pro-rata basis from January 1, 2005 through
December 31, 2005. Notwithstanding anything to the contrary contained herein or
that certain Amended and Restated Employment Agreement, dated as of October 6,
2000, as amended, in no event shall the vesting of the Optioned Shares granted
hereby be accelerated. 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
Corporation (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 Corporation 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 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 Corporation 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 Corporation 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 Corporation shall have been furnished
with written notice thereof, and such other evidence as the Corporation 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 may 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 may, therefore, be
restricted. If there is no such registration, 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 Corporation 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 Corporation 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 Corporation 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 Corporation, nor is the Corporation'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 Corporation
("Employment Termination Date"). If your employment with the Corporation 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. 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
Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation, or otherwise inimical,
contrary or harmful to the interests of the Corporation (including, but not
limited to, violating any non-competition or similar agreements entered into
with the Corporation 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 Corporation), then upon notice from
the Corporation to you any gain ("Gain") realized by you upon exercising such
Option shall be paid by you to the Corporation. For purposes of this Section 8,
such Gain shall be the excess of the Fair Market Value of the shares of stock
obtained through such exercise as of the date of option exercise over the
purchase price of such shares. The Corporation shall have the right to offset
such Gain against any amounts otherwise owed to you by the Corporation
(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 Corporation; or
(b) If to the Corporation, to 420 Lexington Avenue, Suite 601,
New York, NY 10017, or to such other address as the Corporation may
designate by notice to the Holders.
10. Supplements and Amendments. The Corporation 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 Corporation, 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, including all
schedules and exhibits hereto, contains the entire understanding between the
parties hereto with respect to the subject matter hereof.
14. Severability. 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 Corporation 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 Corporation 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]
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/ Bernard Kasten
-----------------------
Bernard Kasten, M.D.
Chief Executive Officer
/s/ Thomas N. Konatich
---------------------------
Thomas N. Konatich
Exhibit 31.1
I, Bernard L. Kasten, M.D., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of SIGA
Technologies, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report, based on such evaluation; and
c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions);
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
controls over financial reporting.
Date: November 15, 2004
By /s/ Bernard L. Kasten, M.D.
------------------------------
Bernard L. Kasten, M.D.
Chief Executive Officer
Exhibit 31.2
I, Thomas Konatich, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of SIGA
Technologies, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report, based on such evaluation; and
c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and
5. The small business issuer's other certifying officer and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions);
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's internal
controls over financial reporting.
Date: November 15, 2004
By /s/ Thomas N. Konatich
-------------------------
Thomas N. Konatich
Chief Financial Officer
Exhibit 32.1
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 Quarterly Report of SIGA Technologies, Inc. (the
"Company") on Form 10-QSB for the period ending September 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Bernard L. Kasten, M.D., Chief Executive 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 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.
November 15, 2004
/S/ Bernard L. Kasten, M.D.
---------------------------
Bernard L. Kasten, M.D.
Chief Executive Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.
Exhibit 32.2
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 Quarterly Report of SIGA Technologies, Inc. (the
"Company") on Form 10-QSB for the period ending September 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Thomas N. Konatich., 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 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.
November 15, 2004
/S/ Thomas N. Konatich
----------------------
Thomas N. Konatich
Chief Financial Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.