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, 1999
Commission file number: 0-23047
SIGA PHARMACEUTICALS, 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
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 7, 1999, the Registrant had outstanding 6,557,712 shares of its $.0001
par value Common Stock.
SIGA PHARMACEUTICALS, INC.
(A development stage company)
Part I. Financial Information
Item 1. Financial Statements
BALANCE SHEET
March 31, December 31,
1999 1998
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents ................................................... $ 4,014,809 $ 4,966,873
Accounts receivable ......................................................... -- --
Prepaid sponsored research .................................................. -- --
Prepaid expenses ............................................................ 113,026 134,969
------------ ------------
Total current assets ...................................................... 4,127,835 5,101,842
Equipment, net .............................................................. 1,658,529 1,696,404
Investments ................................................................. 91,199 132,220
Other assets ................................................................ 147,002 147,002
------------ ------------
Total assets .............................................................. 6,024,565 7,077,468
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ............................................................ 286,087 266,371
Accrued expenses ............................................................ 58,771 143,364
Capital lease obligations ................................................... 312,477 369,288
------------ ------------
Total liabilities ......................................................... 657,335 779,023
Non current capital lease obligations ....................................... 632,478 650,659
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 6,577,712 issued and outstanding at March 31, 1999
and December 31, 1998, respectively) ...................................... 658 658
Additional paid-in capital .................................................. 16,712,044 16,697,424
Unrealized losses on available for sale securities .......................... (15,180) (34,816)
Deficit accumulated during the development stage ............................ (11,962,770) (11,015,480)
------------ ------------
Total stockholders' equity ................................................ 4,734,752 5,647,786
------------ ------------
Total liabilities and stockholders' equity ................................ 6,024,565 7,077,468
============ ============
The accompanying notes are an integral part of these financial statements
SIGA PHARMACEUTICALS, INC.
(A development stage company)
STATEMENT OF OPERATIONS
For The Period
December 28,
1995 (Date of
Three Months Ended Inception) to
March 31, March 31,
1999 1998 1999
------------ ------------ --------------
(Unaudited) (Unaudited) (Unaudited)
Revenues - Research and development
contracts 112,500 $ 112,500 $ 1,237,500
------------ ------------ ------------
Operating expenses
General and administrative (including amounts to
related parties of $126,356 and $117,120 for the
three months ended March 31, 1999 and 1998,
respectively $ 525,085 540,818 5,653,351
Research and development (including amounts
to related parties of $18,750 for each of the
three months ended March 31, 1999 and 1998 553,704 512,217 5,090,449
Write-off of in-process research and development -- 1,457,458 1,457,458
Patent preparation fees 61,939 40,278 999,216
Stock option and warrant compensation -- 14,407 450,450
------------ ------------ ------------
Total operating expenses 1,140,728 2,565,178 13,650,924
------------ ------------ ------------
Operating loss (1,028,228) (2,452,678) (12,413,424)
------------ ------------ ------------
Interest income/(expense) 56,848 81,932 426,564
Net gain on sale of securities 24,090 -- 24,090
------------ ------------ ------------
Net loss $ (947,290) $ (2,370,746) $(11,962,770)
------------ ------------ ------------
Other comprehensive income
Unrealized gain/(loss) on available for sale securities 19,636 -- (15,180)
------------ ------------ ------------
Comprehensive income/(loss) $ (927,654) $ (2,370,746) $(11,977,950)
Basic and diluted loss per share $ (0.14) $ (0.37)
------------ ------------
Weighted average common shares outstanding used
for basic and diluted loss per share 6,577,712 6,424,859
------------ ------------
The accompanying notes are an integral part of these financial statements
SIGA PHARMACEUTICALS, INC.
(A development stage company)
STATEMENT OF CASH FLOWS
For The Period
December 28,
1995 (Date of
Three Months Ended Inception) to
March 31, March 31, March 31,
1999 1998 1999
---------------------------------------------------------
(Unaudited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss $ (947,290) $ (2,370,746) $(11,962,770)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 92,459 10,656 320,440
Stock, options & warrant compensation 14,620 14,407 640,940
Amortization of debt discount -- -- 133,000
Write-off of in-process research and development -- 1,457,458 1,457,458
Realized gain on sale of marketable securities (24,090) (24,090)
Changes in assets and liabilities:
Accounts receivable -- 150,000 --
Prepaid sponsored research 11,684 --
Prepaid expenses and ither current assets 21,943 41,615 (113,026)
Other assets -- (112,618) (147,002)
Accounts payable and accrued expenses (64,877) (186,671) 344,858
------------ ------------ ------------
Net cash used in operating activities (907,235) (984,215) (9,350,192)
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures (54,584) (81,587) (1,978,969)
Purchase of minority interest (167,036)
Proceeds from sale of securities 84,747 -- 84,747
------------ ------------ ------------
Net cash flow used in investing activities 30,163 (81,587) (2,061,258)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 14,480,056
Receipts of stock subscriptions outstanding -- 1,248
Proceeds from bridge notes -- 1,000,000
Repayment of bridge notes (1,000,000)
Proceeds from sale and leaseback of equipment 1,139,085
Principal payments on capital lease obligations (74,992) -- (194,130)
------------ ------------ ------------
Net cash provided from financing activities (74,992) -- 15,426,259
------------ ------------ ------------
Net increase in cash and cash equivalents (952,064) (1,065,802) 4,014,809
Cash and cash equivalents at beginning of period 4,966,873 10,674,104 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 4,014,809 $ 9,608,302 $ 4,014,809
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements
SIGA Pharmaceuticals, Inc.
(A development stage company)
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, 1998, included in the 1998 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 ended March 31, 1999 are not necessarily
indicative of the results of operations to be expected for the full year ending
December 31, 1999.
2. License and Research Support Agreements
In January 1996, the Company entered into a research agreement with a third
party. Under the terms of the agreements, the Company had agreed to fund further
research by the third parties in the annual amount of approximately $360,000.
The agreement expired in January 1998; however, the Company has continued its
relationship with the third party under similar terms for the period ended
January 1999 and intends to continue its relationship with the third party on an
informal basis.
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. During the
three months ended March 31, 1999 and 1998 the company incurred sponsored
research expense in the amount of $44,808 and $0 under this agreement.
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, 1999,
the Company has sustained cumulative net losses of $11,962,770, 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, 1999, research and development expenses amounted to
$5,090,449, patent preparation and prosecution expenses totaled $999,216, and
general and administration expenses amounted to $5,653,351. From inception
through March 31, 1999 revenues from research and development agreements totaled
$1,237,500.
The Company expects to continue to incur substantial research and development
costs in the future resulting from 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 continue to be substantial in the future.
Accordingly, the Company expects to incur 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 commercial
sale 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, 1999 to the three months ended March 31, 1998
Revenues from research and development contracts were $112,500 for the three
months ended March 31, 1999, the same amount as received for the same period of
1998. The revenue was the result of payments made to the Company under an
agreement entered into in July of 1997 with Wyeth-Ayerst, under which the
Company receives certain payments for research and development activities
sponsored by Wyeth-Ayerst.
Research and development expenses increased to $553,704 for the three months
ended March 31, 1999, an 8.1% increase from the $512,217 of expenses incurred
for the same period in 1998. The modest increase reflects the Company's
concentration on its core development programs at a level that is consistent
with its financial resources. Further, in the 1999 quarter, the Company's
research and development activities were largely carried out at its Corvallis,
Oregon research facility, greatly reducing the amount spent on third party
research agreements as compared to the three months ended March 31, 1998.
The Company 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 from MedImmune, Inc. in
exchange for 335,530 shares of the Company's common stock. No similar charges
were incurred in the three month period ended March 31, 1999.
General and administrative expenses declined approximately 3% in the three
months ended March 31, 1999 to $525,085 from $540,818 for the three months ended
March 31, 1998. The decrease reflects the Company's ongoing effort to preserve
its cash resources. Beginning in the quarter ended December 31, 1998 and
carrying forward through the three month period ended March 31, 1999, the
Company has materially reduced its level of general and administrative spending
compared to the second and third quarters of the year ended December 31, 1998.
The reduced level of general and administrative spending was largely attained
through the restructuring of the Company's executive management and careful
monitoring of expenses.
Patent expense of $61,939 for the three months ended March 31, 1999 represents
an increase of 53.8% from the $40,278 level of the prior year. The increase in
spending is due to the Company's commitment to maintain and expand patent
protection for the technology developed by the Company and under third party
agreements.
Total operating loss declined by $1,424,450 to $1,028,228 for the three months
ended March 31, 1999 from $2,452,678 for the same period of 1998. Excluding the
one time non-cash expense of $1,457,458 for the write-off of in-process research
and development incurred for the three months ended March 31, 1998, the
operating loss was essentially equal for the two periods.
Interest income for the three months ended March 31, 1999 was $56,848 compared
to $81,932 for the prior year period. The decline is the result of lower cash
balances in the three month period of 1999 compared to the three months ended
March 31, 1998.
Net loss per common share of $0.14 for the three months ended March 31, 1999
represents a decrease in loss per share of $0.23 from the $0.37 loss incurred
for the three months ended March 31, 1998. The decline in the loss per share is
the result of the one-time non-cash charge for the write-off of in-process
research and development incurred in the prior year period. Excluding this
one-time charge, net loss per share for the three
months ended March 31, 1998 was $0.14, the same as the net loss per share for
the 1999 period.
Liquidity and Capital Resources
As of March 31, 1999 the Company had $4,014,809 in cash and cash equivalents and
$3,470,500 of net working capital. In July, August and September of 1998 the
Company sold certain laboratory equipment, computer equipment and furniture to a
third party, for $493,329, $385,423 and $260,333, respectively, under
sale/leaseback arrangements. The leases have a term of 42 months and require
minimum monthly payments of $13,171, $10,290 and $6,950, respectively. The
Company has an option to purchase the equipment for Fair Market Value (defined
in the agreement as 15% of original cost) at the end of the lease. 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. If certain milestones are met, 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 minimum payments to the Company
totaling $1,200,000. Through March 31, 1999 the Company has received a total of
$1,237,500 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 the first quarter of 2000. The Company will continue to
carefully monitor its general and administrative expenses and the progress of
its research programs in an effort to reduce expenditures where appropriate. 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.
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.
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 NONE
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, 1999
by: /s/ Thomas N. Konatich
-------------------------------------------
Thomas N. Konatich
Chief Financial Officer
(Principal Accounting and Financial Officer
and Vice President, Finance)