SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended March 31, 1998
Commission file number: 0-23047
SIGA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-864870
(State or other jurisdiction of (IRS Employer Id. No.)
incorporation or organization)
420 Lexington Avenue
New York, NY 10170
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 672-9100
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 May 13, 1998, the Registrant had outstanding 6,557,712 shares of its
$.0001 par value Common Stock.
<PAGE>
SIGA Pharmaceuticals, Inc.
(A development stage company)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEET
<TABLE>
<CAPTION>
March, 31 December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents ............................................ $ 9,608,302 $ 10,674,104
Accounts receivable .................................................. 150,000
Prepaid sponsored research ........................................... -- 11,684
Prepaid expenses ..................................................... 2,083 43,698
------------ ------------
Total current assets ............................................. 9,610,385 10,879,486
Equipment, net ....................................................... 100,745 29,814
Other assets ......................................................... 255,459 142,841
------------ ------------
Total assets ..................................................... $ 9,966,589 $ 11,052,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ..................................................... $ 99,399 $ 224,623
Accrued expenses ..................................................... 113,101 174,548
Patent preparation fees payable ...................................... 66,437 66,437
------------ ------------
Total liabilities ................................................ 278,937 465,608
Commitments and contingencies ............................................. -- --
Stockholders' equity
Preferred stock ($.0001 par value, 10,000,000 shares authorized,
none issued and outstanding) ....................................... -- --
Common stock ($.0001 par value, 25,000,000 shares authorized,
6,577,712 and 6,242,182 issued and outstanding at March 31, 1998 and
December 31, 1997, respectively) ................................... 658 624
Additional paid-in capital ........................................... 16,521,554 15,049,723
Deficit accumulated during the development stage ..................... (6,834,560) (4,463,814)
------------ ------------
Total stockholders' equity (deficit) ............................. 9,687,652 10,586,533
------------ ------------
Total liabilities and stockholders' equity ....................... $ 9,966,589 $ 11,052,141
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
SIGA PHARMACEUTICALS, INC.
(A development stage company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For The Period
December 28,
1995 (Date of
Three Months Ended Inception) to
March 31, March 31, March 31,
1998 1997 1998
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues -- Research and development
contracts $ 112,500 -- $ 787,500
----------- ----------- -----------
Operating expenses
General and administrative (including amounts to related parties of
$117,120 and $113,605 for the three months ended March 31, 1998 and
1997, respectively 540,818 $ 300,962 2,884,321
Research and development (including amounts to related parties of $18,750
for each of the three months ended March 31, 1998 and 1997,
respectively 512,217 203,959 2,121,207
Write-off of in-process research and development 1,457,458 -- 1,457,458
Patent preparation fees 40,278 15,462 780,484
Stock option and warrant compensation 14,407 -- 450,450
----------- ----------- -----------
Total operating expenses 2,565,178 520,383 7,693,920
----------- ----------- -----------
Operating loss (2,452,678) (520,383) (6,906,420)
----------- ----------- -----------
Interest income/(expense) 81,932 (30,390) 71,860
----------- ----------- -----------
Net loss $(2,370,746) $ (550,773) $(6,834,560)
----------- ----------- -----------
Net loss per common share $ (0.37) $ (0.16)
----------- -----------
Weighted average number of
shares outstanding 6,424,859 3,367,182
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
SIGA PHARMACEUTICALS, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For The Period
December 28,
1995 (Date of
Three Months Ended Inception) to
March 31, March 31, March 31,
1998 1997 1998
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,370,746) $ (550,773) $ (6,834,560)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 10,656 2,389 27,117
Stock, options & warrant compensation 14,407 -- 450,450
Amortization of debt discount -- 22,167 133,000
Write-off of in-process research and development 1,457,458 -- 1,457,458
Changes in assets and liabilities:
Accounts receivable 150,000 -- --
Prepaid sponsored research 11,684 71,878 --
Prepaid expenses 41,615 (18,750) (2,083)
Other assets (112,618) -- (255,459)
Accounts payable and accrued expenses (186,671) 66,441 278,937
------------ ------------ ------------
Net cash used by operating activities (984,215) (406,648) (4,745,140)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (81,587) -- (127,862)
------------ ------------ ------------
Net cash used by investing activities (81,587) -- (127,862)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- 14,480,056
Receipts of stock subscriptions outstanding -- -- 1,248
Deferred offering costs -- (47,801)
Proceeds from bridge notes -- 1,000,000 1,000,000
Repayment of bridge notes -- -- (1,000,000)
------------ ------------ ------------
Net cash provided from financing activities -- 952,199 14,481,304
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (1,065,802) 545,551 9,608,302
Cash and cash equivalents at beginning of period 10,674,104 42,190 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 9,608,302 $ 587,741 $ 9,608,302
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
SIGA Pharmaceuticals, Inc.
(A development stage company)
Notes to Unaudited Financial Statements
1. Basis of Presentation
The financial statements of SIGA Pharmaceuticals, Inc. 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, 1997, included in the 1997 Form 10-KSB.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of normal adjustments, necessary
for a fair presentation of results of operations for the interim periods. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results of operations to be expected for the full
year ending December 31, 1998.
2. New Accounting Pronouncements
Effective January 31, 1998 the Company adopted Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"), which requires
the presentation of the components of comprehensive income in the company's
financial statement for reporting periods beginning subsequent to December 15,
1997. Comprehensive income is defined as the change in the company's equity
during a financial reporting period from transactions and other circumstances
from non-owner sources (including cumulative translation adjustments, minimum
pension liabilities and unrealized gains/losses on available for sale
securities). The adoption of FAS 130 did not have a material impact on the
Company's financial statements.
Effective January 31, 1998 the Company adopted Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("FAS 131"), which requires disclosure of information about
operating segments in annual financial statements for reporting periods
beginning subsequent to December 15, 1997. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The adoption of
FAS 131 did not have a material impact on the Company's financial statements.
3. License and Research Support Agreements
In January 1996, the Company entered into research agreements with third
parties. Under the terms of the agreements, the Company had agreed to fund
further research by the third parties in the annual amount of approximately
$496,000. The agreements expired in
<PAGE>
January 1998; however, the Company intends to continue its relationship with the
third parties under similar terms.
In February 1998, the Company entered into a research collaboration and
license agreement with a third party. Under the terms of the agreement, the
Company has been granted an exclusive world-wide license to make, use and sell
products derived from the licensed technology, in exchange for royalty payments
equal to a certain percentage of net sales of products incorporating the
licensed technology, and certain milestone payments. In addition, the Company
agreed to sponsor further research by the third party for the development of the
licensed technologies in the amounts of approximately $187,000, $387,000 and
$403,000, for the years ending December 31, 1998, 1999 and 2000.
4. Technology Purchase Agreement
In February 1998, the Company entered into an agreement with a third party
pursuant to which the Company acquired the third party's rights to certain
technology, intellectual property and related rights in the field of gram
negative antibiotics in exchange for 335,530 shares of the Company's common
stock. Write-off of in-process research and development related to this
agreement amounted to $1,457,458 for the quarter ended March 31, 1998.
5. Employment agreements
In February 1998, the Company entered into two-year employment agreements
with two officers. Under the terms of the agreements, the officers receive
aggregate annual base compensation of $395,000 per year. In addition, the
Company has granted the officers options to purchase an aggregate of 195,000
shares of the Company's common stock.
6. Related Party Transactions
In March 1998, the Company entered into a consulting agreement with a
limited liability company in which two of the Company's executive officers are
principals. The agreement is effective January 15, 1998, has an initial term of
three years and provides for automatic renewals of additional one year periods.
Pursuant to the agreement, the limited liability company will receive an annual
consulting fee of $150,000 and annual stock option grants to purchase 16,667
shares of the Company's common stock.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company is a development stage, biopharmaceutical company. Since its
inception in December 1995, the Company's efforts have been principally devoted
to research and development, securing patent protection, obtaining corporate
relationships and raising capital. Since its inception through March 31, 1998,
the Company has sustained cumulative losses of $6,834,560, including non-cash
charges in the amount of $1,457,458 for the write-off of research and
development expenses associated with the acquisition of certain technology
rights acquired from a third party in exchange for the Company's common stock.
In addition, a non-cash charge of $450,450 was incurred for stock option and
warrant compensation expense. The Company's losses have resulted primarily from
expenditures incurred in connection with research and development, patent
preparation and prosecution and general and administrative expenses. From
inception through March 31, 1998, research and development expenses amounted to
$2,121,207, patent preparation and prosecution expenses totaled $780,484,
general and administration expenses amounted to $2,884,321. From inception
through March 31, 1998, total revenues from research and development agreements
totaled $787,500.
The Company expects to continue to incur substantial research and
development costs in the future resulting form ongoing research and development
programs, manufacturing of products for use in clinical trials and pre-clinical
testing of the Company's products. The Company also expects that general and
administrative costs, including patent and regulatory costs, necessary to
support clinical trials, research and development, will increase in the future.
Accordingly, the Company expects to incur increasing operating losses for the
foreseeable future. There can be no assurance that the Company will ever achieve
profitable operations.
To date, the Company has not marketed, or generated revenues from the
commercialization of, any products. The Company's current product candidates are
not expected to be commercially available for several years.
Results of Operations
Three months ended March 31, 1998 to the three months ended March 31, 1997
Revenues from research and development contracts were $112,500 for the
three months ended March 31, 1998 compared to no revenue for the same period of
1997. The revenue was the result of a payment made to the Company under an
agreement entered into in July of 1997 with Wyeth-Ayerst, whereby the Company
receives certain payments for research and development activities sponsored by
the Company.
Research and development expenses increased to $512,217 for the three
months ended March 31, 1998 from $203,959 for the same period in 1997. The
approximate 151% increase is consistent with the Company's plan to expand its
research and development activities. The
<PAGE>
Company has entered into additional agreements to fund research and development
with third parties in exchange for licenses to their technology. The Company
also incurred a non-cash charge for the three months ended March 31, 1998
totaling $1,457,458 for the write-off of in-process research and development
associated with the acquisition of certain technology purchased from MedImmune,
Inc. in exchange for 335,530 shares of the Company's common stock. No similar
charges were incurred in the same period of 1997.
General and administrative expenses increased approximately 80% in the
three months ended March 31, 1998 to $540,818 from $300,962 for the three months
ended March 31, 1997. The increase is due to an increase in staff and higher
spending levels needed to support the Company's expanded research and
development effort.
Patent expense of $40,278 for the three months ended March 31, 1998
represents an increase of approximately 160% from the $15,462 level of the prior
year. The increase is due to the Company's increase in spending for research and
development which has resulted in the need to spend more for the preparation and
prosecution of patents for the added technologies obtained from third parties.
Total operating loss increased by approximately $1.9 million to $2,452,678
for the three months ended March 31, 1998 from $520,383 for the same period of
1997. The increase in the operating loss is the result of the increased spending
for research and development, general and administrative activities and patent
preparation and prosecution.
Interest income for the three months ended March 31, 1998 was $81,932
compared to interest expense of $30,390 for the prior year period. The change is
the result of repayment of debt outstanding in the prior year period from the
proceeds of the Company's initial public offering and the interest income earned
on the investment of the proceeds from that offering in the period ended March
31, 1998.
Net loss per common share of 0.16 for the three months ended March 31, 1997
increased to 0.37 per share for the three months ended March 31, 1998. The loss
per share increased approximately 131% which reflects the approximate
330%increase in the Company's net loss and an approximate 91% increase in the
weighted average number of common shares outstanding. The share increase
reflects the successful completion of the Company's IPO in the second half of
1997 and the issuance of 335,530 shares to MedImmune, Inc. in the first quarter
of 1998 for the purchase of certain technology.
Liquidity and Capital Resources
As of March 31, 1998 the Company had $9,608,302 in cash and cash
equivalents and $9,331,448 of working capital. In July of 1997 the Company
entered into a collaborative research and license agreement with Wyeth-Ayerst.
Under the terms of the agreement, the Company has granted Wyeth-Ayerst an
exclusive worldwide license to develop, make, use and sell products derived from
specified technologies. The agreement requires Wyeth-Ayerst to sponsor further
research by the Company for the development of the licensed technologies for a
period of two years from the effective date of the agreement, in return for
payments to the Company totaling $1,200,000. Through March 31, 1998 the Company
has received a total of
<PAGE>
$787,500 from Wyeth-Ayerst.
The Company anticipates that its current resources will be sufficient to
finance the Company's currently anticipated needs for operating and capital
expenditures through at least 1999. In addition, the Company will attempt to
generate additional working capital through a combination of collaborative
agreements, strategic alliances and equity financings. However, no assurance can
be provided that additional capital will be obtained through these sources. In
addition, until September of 1998, prior written consent of Sunrise Securities
Corp, an underwriter of the Company's Initial Public Offering, is required if
the Company seeks to raise additional funds through the issuance of equity.
The Company's working capital and capital requirements will depend upon
numerous factors, including progress of the Company's research and development
programs; pre-clinical and clinical testing; timing and cost of obtaining
regulatory approvals; levels of resources that the Company devotes to the
development of manufacturing and marketing capabilities; technological advances;
status of competitors; and the ability of the Company to establish collaborative
arrangements with other organizations.
<PAGE>
Part II
Other Information
Item 1 Legal Proceedings NONE
Item 2 Changes in Securities NONE
Item 3 Defaults upon Senior Securities NONE
Item 4 Submission of Matters to Vote of Security Holders NONE
Item 5 Other Information NONE
Item 6 Exhibits and Reports on Form 8-K
The Company's Current Report on Form 8-K, dated April 22, 1998,
filed pursuant to Section 13 of the Securities Act.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGA PHARMACEUTICALS, INC.
Dated: May 14, 1998
by: /s/ Thomas N.Konatich
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting and
Financial Officer) and Vice
President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,608,302
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,610,385
<PP&E> 127,862
<DEPRECIATION> (27,117)
<TOTAL-ASSETS> 9,966,589
<CURRENT-LIABILITIES> 278,937
<BONDS> 0
0
0
<COMMON> 658
<OTHER-SE> 9,686,994
<TOTAL-LIABILITY-AND-EQUITY> 9,966,589
<SALES> 0
<TOTAL-REVENUES> 112,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,565,178
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,932
<INCOME-PRETAX> (2,370,746)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,370,746)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,370,746)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
