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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended March 31, 2006
OR
|_| Transition Report Pursuant To Section 13 Or 15(d) Of
the Securities Exchange Act of 1934
For the Transition Period from ___________ to _____________
Commission File No. 0-23047
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SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
A Delaware Corporation IRS Employer No. 13-3864870
420 Lexington Avenue, Suite 408, New York, NY 10170
Telephone Number (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 |_|.
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer |_| Accelerated Filer |_| Non-Accelerated Filer |X|.
Indicate by check mark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act). Yes |_| No|X|.
As of May 10, 2005 the registrant had 26,500,648 shares of common stock
outstanding.
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SIGA Technologies, Inc.
Form 10-Q
Table of Contents
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................................................2
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......12
Item 3. Quantitative and Qualitative Disclosure About Market Risk..................................17
Item 4. Controls and Procedures....................................................................17
PART II OTHER INFORMATION
Item 1. Legal Proceedings..........................................................................18
Item 1A. Risk Factors...............................................................................18
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities...........18
Item 3. Defaults Upon Senior Securities............................................................18
Item 4. Submission of Matters to a Vote of Security Holders........................................18
Item 5. Other Information..........................................................................18
Item 6. Exhibits...................................................................................18
SIGNATURES..........................................................................................19
1
Part I - Financial Information
Item 1 - Financial Statements
SIGA TECHNOLOGIES, INC.
BALANCE SHEETS
Unaudited
March 31, December 31,
2006 2005
------------ ------------
ASSETS
Current assets
Cash and cash equivalents ....................................................... $ 2,478,102 $ 1,772,489
Accounts receivable ............................................................. 258,182 883,054
Prepaid expenses ................................................................ 97,878 160,144
------------ ------------
Total current assets ........................................................... 2,834,162 2,815,687
Property, plant and equipment, net .............................................. 1,492,392 1,224,147
Goodwill ........................................................................ 898,334 898,334
Intangible assets, net .......................................................... 658,386 932,735
Other assets .................................................................... 244,284 234,126
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Total assets ................................................................... $ 6,127,558 $ 6,105,029
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ................................................................ $ 581,103 $ 1,251,854
Accrued expenses and other ...................................................... 441,805 452,082
Deferred revenue ................................................................ 1,264,356 347,319
Common stock rights ............................................................. 1,007,722 73,400
Notes payable ................................................................... 1,107,520 107,520
------------ ------------
Total current liabilities ...................................................... 4,402,506 2,232,175
Non-current portion of notes payable ............................................... 79,825 106,705
Common stock warrants .............................................................. 1,126,432 535,119
------------ ------------
Total liabilities .............................................................. 5,608,763 2,873,999
Commitments and contingencies ...................................................... -- --
Stockholders' equity
Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
authorized, 68,038 issued and outstanding at March 31, 2006
and December 31, 2005) ........................................................ 58,672 58,672
Common stock ($.0001 par value, 50,000,000 shares authorized,
26,500,648 issued and outstanding at March 31, 2006
and December 31, 2005) ........................................................ 2,650 2,650
Additional paid-in capital ...................................................... 49,760,044 49,638,619
Accumulated deficit ............................................................. (49,302,571) (46,468,911)
------------ ------------
Total stockholders' equity ..................................................... 518,795 3,231,030
------------ ------------
Total liabilities and stockholders' equity ..................................... $ 6,127,558 $ 6,105,029
============ ============
The accompanying notes are an integral part of these financial statements.
2
SIGA TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31,
2006 2005
------------ ------------
Revenues
Research and development ............................................. $ 1,394,454 $ 1,458,565
------------ ------------
Operating expenses
Selling, general and administrative (includes $92,172 of non-cash
share based compensation) ............................... 941,540 844,709
Research and development (includes $29,253 of non-cash share
based compensation) ..................................... 1,657,670 1,551,640
Patent preparation fees .............................................. 109,537 175,038
------------ ------------
Total operating expenses ............................................ 2,708,747 2,571,387
------------ ------------
Operating loss ...................................................... (1,314,293) (1,112,822)
Increase in fair market value of common stock rights
and common stock warrants ............................................ (1,525,635) --
Other income, net ......................................................... 6,268 5,397
------------ ------------
Net loss ............................................................ $ (2,833,660) $ (1,107,425)
============ ============
Weighted average shares outstanding: basic and diluted .................... 26,500,648 24,500,648
============ ============
Net loss per share: basic and diluted ..................................... $ (0.11) $ (0.05)
============ ============
The accompanying notes are an integral part of these financial statements.
3
SIGA TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
2006 2005
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Cash flows from operating activities:
Net loss ............................................................... $(2,833,660) $(1,107,425)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation ........................................................... 39,172 39,497
Amortization of intangible assets ...................................... 274,349 324,848
Increase in fair market value of common stock rights and warrants ...... 1,525,635 --
Stock based compensation ............................................... 121,425 --
Changes in assets and liabilities:
Accounts receivable ................................................. 624,872 46,174
Prepaid expenses .................................................... 62,266 44,178
Other assets ........................................................ (10,158) (61,651)
Deferred revenue .................................................... 917,037 --
Accounts payable and accrued expenses ............................... (681,028) 88,007
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Net cash provided by (used in) operating activities ................. 39,910 (626,372)
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Cash flows from investing activities:
Capital expenditures ................................................... (307,417) (363,465)
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Net cash used in investing activities ............................... (307,417) (363,465)
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Cash flows from financing activities:
Proceeds from note payable ............................................. 1,000,000 --
Repayment of note payable .............................................. (26,880) --
----------- -----------
Net cash provided by financing activities ........................... 973,120 --
----------- -----------
Net increase (decrease) in cash and cash equivalents ................... 705,613 (989,837)
Cash and cash equivalents at beginning of period ....................... 1,772,489 2,020,938
----------- -----------
Cash and cash equivalents at end of period ............................. $ 2,478,102 $ 1,031,101
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
SIGA TECHNOLOGIES, INC.
Notes to the March 31, 2006 Financial Statements (Unaudited)
1. Basis of Presentation
SIGA Technologies, Inc. ("SIGA" or the "Company") is a bio-defense company
engaged in the discovery, development and commercialization of products for use
in defense against biological warfare agents such as Smallpox and Arenaviruses.
In December 2005, the FDA accepted the SIGA's IND application for the Company's
lead product, SIGA-246, an orally administered anti-viral drug that targets the
smallpox virus. The Company is also engaged in the discovery and development of
other novel anti-infectives, vaccines, and antibiotics for the prevention and
treatment of serious infectious diseases. The Company's anti-viral programs are
designed to prevent or limit the replication of viral pathogens. SIGA's
anti-infectives programs are aimed at the increasingly serious problem of drug
resistant bacteria and emerging pathogens.
The financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and the rules and regulations of the Securities
and Exchange Commission (the "SEC") for quarterly reports on Forms 10-Q and
should be read in conjunction with the Company's audited financial statements
and notes thereto for the year ended December 31, 2005, included in the 2005
Form 10-K. All terms used but not defined elsewhere herein have the meaning
ascribed to them in the Company's 2005 annual report and Form 10-K. In the
opinion of management, all adjustments (consisting of normal and recurring
adjustments) considered necessary for a fair presentation of the results of the
interim periods presented have been included. The results of operations for the
three months ended March 31, 2006 are not necessarily indicative of the results
expected for the full year.
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. 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 commercially reasonable terms or that the
Company will be able to secure funding from anticipated government contracts and
grants.
On April 19, 2006, the Company received the second $1.0 million under a $3.0
million Bridge Note Purchase Agreement between the Company and PharmAthene, Inc.
(see Note 6). Management believes that existing cash combined with anticipated
cash flows, including receipt of future funding from government contracts and
grants and receipt of the remaining $1.0 million funding under the Bridge Note
Purchase Agreement will be sufficient to support its operations beyond June 30,
2007, and that sufficient cash flows will be available to meet the Company's
business objectives. Management has developed a plan to further reduce the
Company's operating expenses in the event that sufficient funds are not
available, or if the Company is not able to obtain the additional $1.0 million
funding from the Bridge Note Purchase Agreement or the anticipated government
contracts and grants, which would be sufficient to enable the Company to operate
beyond June 30, 2007. If the Company is unable to raise adequate capital or
achieve profitability, future operations will need to be scaled back or
discontinued. Continuance of the Company as a going concern is dependent upon,
among other things, the success of the Company's research and development
programs and the Company's ability to obtain adequate financing. The financial
statements do not include any adjustments relating to the recoverability of the
carrying amount of recorded assets and liabilities that might result from the
outcome of these uncertainties.
2. Significant Accounting Policies
Share-based Compensation
On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123(R)") which
requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors including employee
stock options and employee stock purchases related to the Employee Stock
Purchase Plan ("employee stock purchases") based on estimated fair values. SFAS
123(R) supersedes the Company's previous accounting under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") for
periods beginning on January 1, 2006. In March 2005, the SEC issued Staff
Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company has
applied the provisions of SAB 107 in its adoption of SFAS 123(R).
5
The Company adopted SFAS 123(R) using the modified prospective transition
method, which requires the application of the accounting standard as of January
1, 2006, the first day of the Company's fiscal year 2006. The Company's
Financial Statements as of and for the three months ended March 31, 2006 reflect
the impact of SFAS 123(R). In accordance with the modified prospective
transition method, the Company's Financial Statements for prior periods have not
been restated to reflect, and do not include, the impact of SFAS 123(R).
Share-based compensation related to stock options expense recognized under SFAS
123(R) for the three months ended March 31, 2006 was $121,425. No share-based
compensation expense related to employee stock options was recognized during the
three months ended March 31, 2005.
SFAS 123(R) requires companies to estimate the fair value of share-based payment
awards on the grant-date using an option-pricing model. The value of the portion
of the award that is ultimately expected to vest is recognized as expense over
the requisite service periods in the Company's Statements of Operations. Prior
to the adoption of SFAS 123(R), the Company accounted for share-based awards to
employees and directors using the intrinsic value method in accordance with APB
25 as allowed under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). Under the intrinsic
value method, no share-based compensation expense related to stock options had
been recognized in the Company's Statements of Operations when the exercise
price of the Company's stock options granted to employees and directors equaled
the fair market value of the underlying stock at the grant-date.
Share-based compensation expense recognized during the current period is based
on the value of the portion of share-based payment awards that is ultimately
expected to vest. SFAS 123(R) requires forfeitures to be estimated at the time
of grant in order to estimate the amount of share-based awards that will
ultimately vest. The forfeiture rate is based on historical rates. Share-based
compensation expense recognized in the Company's Statements of Operations for
the first quarter of 2006 includes (i) compensation expense for share-based
payment awards granted prior to, but not yet vested as of December 31, 2005,
based on the grant-date fair value estimated in accordance with the pro forma
provisions of SFAS 123 and (ii) compensation expense for the share-based payment
awards granted subsequent to December 31, 2005, based on the grant-date fair
value estimated in accordance with the provisions of SFAS 123(R). The Company
utilizes the Black-Scholes option pricing model for the valuation of share-based
awards.
Share-based compensation expense reduced the Company's results of operations for
the three months ended March 31, 2006 by $121,425 or $0.00 per share and had no
impact on the Company's cash flow.
The following table illustrates the effect on net loss and net loss per share as
if the Company had applied the fair value recognition provisions of SFAS No.
123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosures" ("SFAS 148").
Three months ended
March 31, 2005
------------------
Net loss available to common stockholders, as reported $(1,107,425)
Add: Stock-based employee compensation expense included
in reported net income --
Deduct: Total stock based compensation expense determined
under the fair value based method (211,136)
-----------
Net loss available to common stockholders, pro forma $(1,318,561)
===========
Loss per common share - basic and diluted:
As reported $ (0.05)
Pro forma $ (0.05)
Use of Estimates
The financial statements and related disclosures are prepared in conformity with
accounting principles generally accepted in the United States of America.
Management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and revenue and expenses
during the period reported. These estimates include the realization of deferred
tax assets, useful lives and impairment of tangible and intangible assets, and
the value of options and warrants granted by the Company. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the financial statements in the period they are determined to be necessary.
Actual results could differ from these estimates.
6
Cash and cash equivalents
Cash and cash equivalents consist of short term, highly liquid investments, with
original maturities of less than three months when purchased and are stated at
cost. Interest income is accrued as earned.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of the various asset classes. Estimated lives are 5 years for laboratory
equipment; 3 years for computer equipment; 7 years for furniture and fixtures;
and the shorter of the estimated lives or the life of the lease for leasehold
improvements. Maintenance, repairs and minor replacements are charged to expense
as incurred. Upon retirement or disposal of assets, the cost and related
accumulated depreciation are removed from the Balance Sheet and any gain or loss
is reflected in the Statement of Operations.
Revenue Recognition
The Company recognizes revenue from contract research and development and
research payments in accordance with SEC Staff Accounting Bulletin No. 104,
Revenue Recognition, ("SAB 104"). In accordance with SAB 104, revenue is
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, collectibility is reasonably
assured, contractual obligations have been satisfied and title and risk of loss
have been transferred to the customer. The Company recognizes revenue from
non-refundable up-front payments, not tied to achieving a specific performance
milestone, over the period which the Company is obligated to perform services or
based on the percentage of costs incurred to date, estimated costs to complete
and total expected contract revenue. Payments for development activities are
recognized as revenue as earned, over the period of effort. Substantive at-risk
milestone payments, which are based on achieving a specific performance
milestone, are recognized as revenue when the milestone is achieved and the
related payment is due, providing there is no future service obligation
associated with that milestone. In situations where the Company receives payment
in advance of the performance of services, such amounts are deferred and
recognized as revenue as the related services are performed.
For the three month periods ended March 31, 2006 and 2005, revenues from
National Institutes of Health ("NIH") Small Business Innovation Research
("SBIR") grants approximated 52% and 94%, respectively, of total revenues
recognized by the Company.
Accounts Receivable
Accounts receivable are recorded net of provisions for doubtful accounts. An
allowance for doubtful accounts is based on specific analysis of the
receivables. At March 31, 2006 and December 31, 2005 the Company had no
allowance for doubtful accounts.
Research and development
Research and development expenses include costs directly attributable to the
conduct of research and development programs, including employee related costs,
materials, supplies, depreciation on and maintenance of research equipment, the
cost of services provided by outside contractors, and facility costs, such as
rent, utilities, and general support services. All costs associated with
research and development are expensed as incurred. Costs related to the
acquisition of technology rights, for which development work is still in
process, and that have no alternative future uses, are expensed as incurred.
Goodwill
Goodwill is recorded when the purchase price paid for an acquisition exceeds the
estimated fair value of the net identified tangible and intangible assets
acquired.
The Company performs an annual review in the fourth quarter of each year, or
more frequently if indicators of potential impairment exist, to determine if the
carrying value of the recorded goodwill is impaired. Goodwill impairment is
determined using a two-step approach in accordance with Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). The impairment review process compares the fair value of the reporting
unit in which goodwill resides to its carrying value.
Identified Intangible Assets
Acquisition-related intangible assets include acquired technology, customer
contracts, grants and covenants not to compete, and are amortized on a straight
line basis over periods ranging from 2 to 4 years.
In accordance with Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
the Company performs a review of its identified intangible assets to determine
if
7
facts and circumstances exist which indicate that the useful life is shorter
than originally estimated or that the carrying amount of assets may not be
recoverable. If such facts and circumstances do exist, the Company assesses the
recoverability of identified intangible assets by comparing the projected
undiscounted net cash flows associated with the related asset or group of assets
over their remaining lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair
value of those assets. Changes in events or circumstances that may affect
long-lived assets include, but are not limited to, cancellations or terminations
of research contracts or pending government grants.
Income taxes
Income taxes are accounted for under the asset and liability method prescribed
by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred income taxes are recorded for temporary differences between
financial statement carrying amounts and the tax basis of assets and
liabilities. Deferred tax assets and liabilities reflect the tax rates expected
to be in effect for the years in which the differences are expected to reverse.
A valuation allowance is provided if it is more likely than not that some or all
of the deferred tax asset will not be realized.
Net income (loss) per common 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 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.
The Company incurred losses for the three months ended March 31, 2006 and 2005,
and as a result, certain equity instruments are excluded from the calculation of
diluted loss per share. At March 31, 2006 and 2005, 68,038 shares of the
Company's Series A convertible preferred stock have been excluded from the
computation of diluted loss per share as they are anti-dilutive. At March 31,
2006 and 2005, outstanding options to purchase 8,488,727 and 10,012,061 shares,
respectively, of the Company's common stock with exercise prices ranging from
$0.94 to $5.50 have been excluded from the computation of diluted loss per share
as they are anti-dilutive. At March 31, 2006 and 2005, outstanding warrants to
purchase 9,478,794 and 8,469,594 shares, respectively, of the Company's common
stock, with exercise prices ranging from $1.18 to $3.60 have been excluded from
the computation of diluted loss per share as they are anti-dilutive.
Fair value of financial instruments
The carrying value of cash and cash equivalents, accounts payable and accrued
expenses approximates fair value due to the relatively short maturity of these
instruments.
Concentration of credit risk
The Company has cash in bank accounts that exceed the Federal Deposit Insurance
Corporation insured limits. The Company has not experienced any losses on its
cash accounts. No allowance has been provided for potential credit losses
because management believes that any such losses would be minimal.
Segment information
The Company is managed and operated as one business. The entire business is
managed by a single management team that reports to the Chief Executive Officer.
The Company does not operate separate lines of business or separate business
entities with respect to any of its product candidates. Accordingly, the Company
does not prepare discrete financial information with respect to separate product
areas or by location and only has one reportable segment as defined by SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information".
8
3. Intangible Assets
Amortization expense recorded for the three months ended March 31, 2006 and 2005
was as follows:
Three Months Ended
March 31,
2006 2005
---------- ----------
Amortization of acquired grants $ 245,337 $ 245,336
Amortization of customer contract and grants 8,357 8,357
Amortization of covenants not to compete -- 50,500
Amortization of acquired technology 20,655 20,655
---------- ----------
$ 274,349 $ 324,848
---------- ----------
4. Stockholders' Equity
At March 31, 2006, 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
adjustments) plus all accrued but unpaid dividends; (iii) convert each share of
Series A to a number of fully paid and non-assessable shares of common stock as
calculated by dividing $1.4375 by the Series A Conversion Price (shall initially
be $1.4375); and (iv) vote with the holders of other classes of shares on an
as-converted basis.
In November 2005, the Company sold 2,000,000 shares of the Company's common
stock at $1.00 per share, warrants to purchase 1,000,000 shares of the Company's
common stock with an initial exercise price of $1.18 per share, and rights to
purchase 2,000,000 additional shares of the Company's common stock for an
initial price of $1.10 per share. The warrants are exercisable at any time and
from time to time through and including the seventh anniversary of the sale
closing date and the rights are exercisable for a period of 90 trading days
following the effectiveness of a registration statement. An initial registration
statement relating to the common stock sold and the stock underlying the
warrants became effective on December 2, 2005. A registration statement relating
to the common stock underlying the rights became effective on April 17, 2006.
The Company accounted for the transaction under the provisions of EITF 00-19
which requires that free standing derivative financial instruments that require
net cash settlement be classified as assets or liabilities at the time of the
transaction, and recorded at their fair value. EITF 00-19 also requires that any
changes in the fair value of the derivative instruments be reported in earnings
as long as the derivative contracts are classified as assets or liabilities. At
March 31, 2006, the fair value of the warrants to acquire common stock and the
option to acquire additional shares of common stock was $1,123,000 and
$1,008,000, respectively. At December 31, 2005, the fair market value of the
warrants to acquire common stock and the option to acquire additional shares of
common stock was $535,000 and $73,000, respectively. The Company applied the
Black-Scholes model to calculate the fair values of the respective derivative
instruments using the contracted term of the instruments. Management estimates
the expected volatility using a combination of the Company's historical
volatility and the volatility of a group of comparable companies. SIGA recorded
a loss of $1,526,000 for the increase in the instruments' fair value from
December 31, 2005 to March 31, 2006.
5. Related Parties
During the three months ended March 31, 2006, the Company incurred costs of
$38,900 related to work performed by Transtech Pharma, Inc., a related party,
and its affiliates in connection with one of the Company's lead product
programs. On March 31, 2006, the Company's outstanding payables included
$157,000 payable to the related party and its affiliates. Revenues for the three
months ended March 31, 2006 included $21,500 related to services provided by the
Company to Transtech Pharma, Inc. The balance is included in the Company's
accounts receivable on March 31, 2006.
9
6. Notes Payable
On May 20, 2005, the Company borrowed approximately $276,000 under a Promissory
Note payable to General Electric Capital Corporation. The note is payable in 36
monthly installments of principal and interest of 10.31% per annum. The note is
secured by a master security agreement dated as of April 29, 2005 and by
specific property listed under the master security agreement.
On March 20, 2006, SIGA entered into a Bridge Note Purchase Agreement ("Note
Purchase Agreement") with PharmAthene, Inc. for the sale of three 8% Notes by
SIGA, for $1,000,000 each. The first and second Notes were issued on March 20,
2006 and April 19, 2006, respectively. The subsequent remaining Note is
contemplated to be issued on May 19, 2006. The proceeds of the Notes will be
used by the Company for (i) expenses directly related to the development of
SIGA's lead product, SIGA-246, (ii) expenses related to the Company's planned
merger with PharmAthene and (iii) corporate overhead. Pursuant to a Security
Agreement between the Company and PharmAthene, also entered into on March 20,
2006, the Notes are secured by a first priority security interest in the
Company's assets (other than assets subject to the security interest granted to
General Electric Capital Corporation).
The first and second Notes for a principal amount of $1,000,000 each, will be
payable on the earliest of (x) March 20, 2008 and April 19, 2008, respectively,
(the "Maturity Dates"), (y) the closing of a Qualified Financing (as defined in
the Purchase Agreement) or (z) a Sale Event (as defined in the Purchase
Agreement). In the event of default under the Notes, payment of the Notes will
be accelerated such that the entire unpaid principal amount of the Notes and all
accrued and unpaid interest shall become immediately due and payable in full.
7. Stock Compensation Plans
In January 1996, the Company implemented its 1996 Incentive and Non-Qualified
Stock Option Plan (the "Plan"). The Plan as amended provides for the granting of
up to 11,000,000 shares of the Company's common stock to employees, consultants
and outside directors of the Company. The exercise period for options granted
under the Plan, except those granted to outside directors, is determined by a
committee of the Board of Directors. Stock options granted to outside directors
pursuant to the Plan must have an exercise price equal to or in excess of the
fair market value of the Company's common stock at the date of grant.
For the three months ended March 31, 2006, the Company recorded compensation
expense of approximately $121,000 related to stock options. The total fair value
of options vested during the three months ended March 31, 2006 was $222,000. The
total compensation cost not yet recognized related to non-vested awards at March
31, 2006 was $1,634,000. The weighted average period over which total
compensation cost is expected to be recognized is 2.5 years.
SIGA calculated the fair value of each option grant using the Black-Scholes
model with the following weighted average assumptions:
Three months ended
Weighted Average Assumptions March 31, 2006
------------------
Expected volatility 54.35%
Dividend Yield 0.00%
Risk-free interest rate 4.29%
Forfeitures rate 2.50%
Expected holding period 3.00
The Company calculates the expected volatility using a combination of SIGA's
historical volatility and the volatility of a group of comparable companies. The
risk-free interest rate assumption is based upon observed interest rate
appropriate for the term of the Company's employee stock options. The dividend
yield assumption is based on the Company's intent not to issue a dividend in the
foreseeable future. The expected holding period assumption was estimated based
on historical experience.
10
Stock option activity of the Company is summarized as follows:
Number of Average Exercise
Shares Price ($)
Options outstanding at December 31, 2005 9,399,561 2.00
Granted 122,500 0.94
Forfeited (1,250,000) 1.30
Expired (33,334) 1.50
Exercised -- --
---------- ----------
Options outstanding at March 31, 2006 8,238,727 2.09
Weighted
Number of Average Intrinsic
Shares Value ($)
Nonvested options at December 31, 2005 1,987,500 --
Nonvested options at March 31, 2006 524,974 0.18
Options vested during 2006 212,526 0.21
Options available for future grant at March 31, 2006 2,546,232
Weighted average fair value of options granted during 2006 $ 0.38
Weighted average fair value of options forfeited during 2006 $ 1.02
The following table summarizes information about options outstanding at March
31, 2006:
Weighted
Average Number Fully Aggregate
Number of Options Remaining Weighted Vested & Weighted Intrinsic
Range of Outstanding at Contractual Life Average Exercisable at Average Value at
Exercise Price March 31, 2006 (Years) Exercise Price March 31, 2006 Exercise Price March 31, 2006
($) ($) ($)
1.00 - 1.85 3,063,250 7.70 1.38 2,415,776 1.40 $ 493,100
2.00 - 2.75 4,837,250 4.94 2.38 4,837,250 2.38 --
3.94 - 5.50 338,227 2.91 4.36 338,227 4.36 --
------------- ------------- -------------
8,238,727 7,591,253 $ 493,100
============= ============= =============
8. Commitments and Contingencies
As of March 31, 2006, 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 ended December 31,
2006 $ 255,400
2007 261,800
2008 133,200
2009 135,900
2010 22,700
---------
Total $ 809,000
---------
11
SIGA TECHNOLOGIES, INC.
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 and Arenaviruses. The effort
to develop a drug for Smallpox is being aided by SBIR grants from the NIH
totaling approximately $5.8 million that were awarded in the third quarter of
2004, an agreement with Saint Louis University, funded by the NIH that was
signed in September 2005, and a $1.6 million contract with the U.S. Army which
began in January 2003. The Arenavirus program is being supported by SBIR grants
from the NIH totaling approximately $6.3 million that were awarded in the third
quarter of 2004.
Our anti-viral programs are designed to prevent or limit the replication
of the viral pathogen. Our anti-infectives programs are aimed at the
increasingly serious problem of drug resistance. These programs are designed to
block the ability of bacteria to attach to human tissue, the first step in the
infection process. We are also developing a technology for the mucosal delivery
of our vaccines which may allow the vaccines to activate the immune system at
the mucus lined surfaces of the body -- the mouth, the nose, the lungs and the
gastrointestinal and urogenital tracts -- the sites of entry for most infectious
agents.
We do not have commercial biomedical products, and we do not expect to
have such products for one to three 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 and projected cash flows to support operations beyond June 30, 2007.
Our biotechnology operations are based in our research facility in
Corvallis, Oregon. We continue to seek to fund a major portion of our ongoing
antiviral, antibiotic and vaccine programs through a combination of government
grants and strategic alliances. While we have had success in obtaining strategic
alliances and grants, there is no assurance that we will continue to be
successful in obtaining funds from these sources. Until additional relationships
are established, we expect to continue to incur significant research and
development costs and costs associated with the manufacturing of product for use
in clinical trials and pre-clinical testing. It is expected that general and
administrative costs, including patent and regulatory costs, necessary to
support clinical trials and research and development will continue to be
significant in the future.
To date, we have not marketed, or generated revenues from the commercial
sale of any products. Our biopharmaceutical product candidates are not expected
to be commercially available for several years, if at all. Accordingly, we
expect to incur operating losses for the foreseeable future. There can be no
assurance that we will ever achieve profitable operations.
Critical Accounting Estimates
The methods, estimates and judgments we use in applying our accounting
policies have a significant impact on the results we report in our financial
statements, which we discuss under the heading "Results of Operations" following
this section of our MD&A. Some of our accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our most critical accounting
estimates include the assessment of recoverability of goodwill, which could
impact goodwill impairments; the assessment of recoverability of long-lived
assets, which primarily impacts operating income if impairment exists. Below, we
discuss these policies further, as well as the estimates and judgments involved.
Other key accounting policies, including revenue recognition, are less
subjective and involve a far lower degree of estimates and judgment.
12
Significant Accounting Policies
The following is a brief discussion of the more significant accounting
policies and methods used by us in the preparation of our financial statements.
Note 2 of the Notes to the Financial Statements includes a summary of all of the
significant accounting policies.
Share-based Compensation
On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), "Share-Based Payment," ("SFAS 123(R)") which
requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors including employee
stock options and employee stock purchases related to the Employee Stock
Purchase Plan ("employee stock purchases") based on estimated fair values. SFAS
123(R) supersedes the Company's previous accounting under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") for
periods beginning on January 1, 2006. In March 2005, the SEC issued Staff
Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company has
applied the provisions of SAB 107 in its adoption of SFAS 123(R).
The Company adopted SFAS 123(R) using the modified prospective transition
method, which requires the application of the accounting standard as of January
1, 2006, the first day of the Company's fiscal year 2006. The Company's
Financial Statements as of and for the three months ended March 31, 2006 reflect
the impact of SFAS 123(R). In accordance with the modified prospective
transition method, the Company's financial statements for prior periods have not
been restated to reflect, and do not include, the impact of SFAS 123(R).
Share-based compensation related to stock options expense recognized under SFAS
123(R) for the three months ended March 31, 2006 was $121,000. No share-based
compensation expense related to employee stock options was recognized during the
three months ended March 31, 2005.
SFAS 123(R) requires companies to estimate the fair value of share-based
payment awards on the grant-date using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Company's Statements of
Operations. Prior to the adoption of SFAS 123(R), the Company accounted for
share-based awards to employees and directors using the intrinsic value method
in accordance with APB 25 as allowed under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Under
the intrinsic value method, no share-based compensation expense related to stock
options had been recognized in the Company's Statements of Operations when the
exercise price of the Company's stock options granted to employees and directors
equaled the fair market value of the underlying stock at the grant-date.
Share-based compensation expense recognized during the current period is
based on the value of the portion of share-based payment awards that is
ultimately expected to vest. SFAS 123(R) requires forfeitures to be estimated at
the time of grant in order to estimate the amount of share-based awards that
will ultimately vest. The forfeiture rate is based on historical rates.
Share-based compensation expense recognized in the Company's Statements of
Operations for the first quarter of 2006 includes (i) compensation expense for
share-based payment awards granted prior to, but not yet vested as of December
31, 2005, based on the grant-date fair value estimated in accordance with the
pro forma provisions of SFAS 123 and (ii) compensation expense for the
share-based payment awards granted subsequent to December 31, 2005, based on the
grant-date fair value estimated in accordance with the provisions of SFAS
123(R). The Company utilizes the Black-Scholes options pricing model for the
valuation of share-based awards.
Revenue Recognition
The Company recognizes revenue from contract research and development and
research progress payments in accordance with SEC Staff Accounting Bulletin No.
104, Revenue Recognition, ("SAB 104"). In accordance with SAB 104, revenue is
recognized when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed and determinable, collectibility is reasonably
assured, contractual obligations have been satisfied and title and risk of loss
have been transferred to the customer. The Company recognizes revenue from
non-refundable up-front payments, not tied to achieving a specific performance
milestone, over the period which the Company is obligated to perform services or
based on the percentage of costs incurred to date, estimated costs to complete
and total expected contract revenue. Payments for development activities are
recognized as revenue is earned, over the period of effort. Substantive at-risk
milestone payments, which are based on achieving a specific performance
milestone, are recognized as revenue when the milestone is achieved and the
related payment is due, providing there is no future service obligation
associated with that milestone. In situations where the Company receives payment
in advance of the performance of services, such amounts are deferred and
recognized as revenue as the related services are performed.
13
Goodwill
Goodwill is recorded when the purchase price paid for an acquisition
exceeds the estimated fair value of the net identified tangible and intangible
assets acquired.
The Company performs an annual review in the fourth quarter of each year,
or more frequently if indicators of potential impairment exist, to determine if
the carrying value of the recorded goodwill is impaired. Goodwill impairment is
determined using a two-step approach in accordance with Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142"). The impairment review process compares the fair value of the reporting
unit in which goodwill resides to its carrying value. In 2005, the Company
operated as one business and one reporting unit. Therefore, the goodwill
impairment analysis was performed on the basis of the Company as a whole using
the market capitalization of the Company as an estimate of its fair value. The
estimated fair values might produce significantly different results if other
reasonable assumptions and estimates were to be used.
Identified Intangible Assets
Acquisition-related intangibles include acquired technology, customer
contracts, grants and covenants not to compete, and are amortized on a straight
line basis over periods ranging from 1-4 years.
In accordance with Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"),
the Company performs a review of its identified intangible assets to determine
if facts and circumstances exist which indicate that the useful life is shorter
than originally estimated or that the carrying amount of assets may not be
recoverable. If such facts and circumstances do exist, the Company assesses the
recoverability of identified intangible assets by comparing the projected
undiscounted net cash flows associated with the related asset or group of assets
over their remaining lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair
value of those assets.
Results of Operations
Three months ended March 31, 2006 and 2005
Revenues from grants and research and development contracts were
approximately $1.4 million for the three months ended March 31, 2006, compared
to $1.5 million for the three months ended March 31, 2005. During the first
quarters of 2006 and 2005 we recorded revenues of $504,000 and $1,364,000,
respectively, from our two Phase I and two Phase II SBIR grants which were
awarded by the NIH during the third quarter of 2004. The Phase II grants are for
a two year period ending in the third quarter of 2006. Revenue from our contract
with the U.S. Army approximated $94,100 for the three month periods ending March
31, 2006 and 2005. On September 1, 2005, we entered into an agreement with Saint
Louis University for the continued development of one of the Company's leading
compounds. The agreement was funded through the NIH and expired on February 28,
2006. For the three months ended March 31, 2006, we recognized revenues of
$226,000 from this agreement. On September 22, 2005, we entered into a $3.2
million, one year contract with USAMRMC. The agreement, for the rapid
identification and treatment of anti-viral diseases, is funded through the USAF
(the "USAF Agreement"). For the three months ended March 31, 2006, the Company
recognized revenues of $550,000 from the USAF Agreement.
Selling, general and administrative expenses ("SG&A") increased $97,000 or
11.00% to $942,000 from $845,000 for the three months ended March 31, 2006 and
2005, respectively. On January 1, 2006 the Company adopted FAS 123(R) and
recorded a non-cash charge of $91,000 for share based compensation. On March 31,
2006, the Company recorded $115,000 reflecting severance payment due to Dr.
Kasten upon termination of his employment as the Company's Chief Executive
Officer. In addition to such charges, the Company's legal expenses increased
$92,000 as compared to the same period in 2005 mainly due to the negotiation of
a merger of the Company with PharmAthene, Inc. and related transactions. The
increases were partially offset by a decline of $46,000 in investor relations
expense, a decline of $71,000 in payroll expense and a decline of $51,000 in
amortization expense.
Research and development expenses were $1.7 million and $1.6 million for
the three months ended March 31, 2006 and 2005, respectively. The increase of
approximately $100,000 or 6.25% mainly reflects higher payroll expenses related
to the expansion of the Company's research and development work force from 30
full time employees to 38 on March 31, 2005 and 2006, respectively.
14
Patent preparation expenses for the three months ended March 31, 2006 were
$110,000 compared to $175,000 for the three months ended March 31, 2005. We
incurred higher costs during the 2005 three months period for the filings of
patents in connection with the ViroPharma assets acquisition.
A loss from the increase in common stock rights and common stock warrants
was recorded in connection with the sale of common stock, warrants and rights in
November 2005. The warrants and rights to purchase common stock of SIGA were
recorded at fair market value and classified as liabilities at the time of the
transaction. A loss of $1.5 million was recorded by us, reflecting the increase
in the fair value of the warrants and the rights to acquire additional shares of
our common stock, during the period December 31, 2005 to March 31, 2006.
Other income of $6,000 and $5,000 for the three months ended March 31,
2006 and 2005, respectively, reflect interest income for the period.
Our product programs are in the early stage of development. At this stage
of development, we cannot make reasonable estimates of the potential cost for
most of our programs to be completed or the time it will take to complete the
project. Our lead product, SIGA-246, is an orally administered anti-viral drug
that targets the smallpox virus. In December 2005 the FDA accepted our IND
application for SIGA-246 and granted it Fast-Track status. Fast Track programs
of the FDA are designed to facilitate the development and expedite the review of
new drugs that are intended to treat serious or life-threatening conditions and
that demonstrate the potential to address unmet medical needs.
We expect that costs to complete our SIGA-246 program will approximate $15
million to $20 million, and that the project could be completed in 12 months to
36 months. There is a high risk of non-completion of any program, including
SIGA-246, because of the lead time to program completion and uncertainty of the
costs. Net cash inflows from any products developed from our programs are at
least one 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, other than
our smallpox program that entered phase I clinical trials in 2006, is in the
relatively early stage of development. Products for the biological warfare
defense market, such as the SIGA-246 smallpox anti-viral, could generate
revenues in one to three years. We believe the products directed toward this
market are on schedule. We expect the future research and development cost of
our biological warfare defense programs to increase as the potential products
enter animal studies and safety testing, including human safety trials. Funds
for future development will be partially paid for by NIH SBIR grants, the
contract we have with the U.S. Army, 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. 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.
Liquidity and Capital Resources
As of March 31, 2006 we had approximately $2.5 million in cash and cash
equivalents. We believe that these funds and our anticipated cash flows,
including receipt of funding from government contracts and grants, will be
sufficient to support our operations beyond June 30, 2007.
On March 9, 2006, SIGA entered into a term sheet for the merger of the
Company with PharmAthene, Inc. Under the provisions of the term sheet, the Chief
Executive Officer of PharmAthene will serve as President and Chief Executive
Officer of the combined company and the Board of Directors for the new company
will reflect the new proportionate ownership. It is expected that the
shareholders of SIGA will own approximately 32% of the combined company, which
is anticipated to remain listed on the NASDAQ stock market. The transaction is
conditioned on, among other things, the execution of a definitive merger
agreement, approval of the shareholders of each company, regulatory approval and
other customary closing conditions.
On March 20, 2006, in connection with the transaction, we entered into a
Bridge Note Purchase Agreement ("Notes Purchase Agreement") with PharmAthene for
the sale of three 8% Notes by SIGA, for $1,000,000 each. The first and second
Notes were issued on March 20, 2006 and April 19, 2006, respectively. The
subsequent remaining Note is contemplated to be issued on May 19, 2006. The
proceeds of the Notes will be used by the Company for (i) expenses
15
directly related to the development of SIGA's lead product, SIGA-246, (ii)
expenses related to the Company's planned merger with PharmAthene and (iii)
corporate overhead. Pursuant to a Security Agreement between SIGA and
PharmAthene, also entered into on March 20, 2006, the Notes are secured by a
first priority security interest in the Company's assets (other than assets
subject to the security interest granted to General Electric Capital
Corporation).
We believe that our existing cash combined with anticipated cash flows,
including receipt of future funding from government contracts and grants and
receipt of the remaining $1.0 million funding under the Bridge Note Purchase
Agreement will be sufficient to support our operations beyond June 30, 2007, and
that sufficient cash flows will be available to meet our business objectives. We
have developed a plan to further reduce the Company's operating expenses in the
event that sufficient funds are not available, or if we are not able to obtain
funding from the Bridge Note Purchase Agreement or the anticipated government
contracts and grants, which would be sufficient to enable us to operate beyond
June 30, 2007. If we are not unable to raise adequate capital or achieve
profitability, future operations will need to be scaled back or discontinued.
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 anticipated funding for its development projects or other needed
funding, (d) SIGA may not be able to secure funding from anticipated government
contracts and grants, (e) SIGA may not be able to secure or enforce adequate
legal protection, including patent protection, for its products and (f)
unanticipated internal control deficiencies or weaknesses or ineffective
disclosure controls and procedures. 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, 2005, 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. Forward-looking statements speak only as of
the date they are made, and except for our ongoing obligations under the U.S.
federal securities laws, we undertake no obligation to publicly update any
forward-looking statements whether as a result of new information, future events
or otherwise.
16
Item 3. Quantitative and Qualitative Disclosure About Market Risk
None
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures. The Company's management, with the
participation of the Company's Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
fiscal period covered by this Quarterly Report on Form 10-Q. Based upon such
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Company's disclosure controls
and procedures are effective.
(b) Internal Control Over Financial Reporting. There have not been any
changes in the Company's internal control over financial reporting (as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal period covered by this Quarterly Report on Form 10-Q that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
17
Part II
Other information
Item 1. Legal Proceedings - On or about February 28, 2006, Four Star Group, a
Division of Executive Intelligence Network, LLC filed suit in the
Supreme Court of the State if New York naming as defendants SIGA
Technologies, Inc., Bernard Kasten and "John Odgen [sic]." In 2004,
SIGA renewed a contract with Four Star under which Four Star was to
assist SIGA in identifying and obtaining contracts and grants.
Plaintiff Four Star alleges that SIGA breached its contract by
allegedly failing to compensate Four Star within the time set by the
contract and that SIGA breached the contract, and tortuously interfered
with Four Star's contractual relationships, by allegedly soliciting
and/or hiring certain affiliates of Four Star. Plaintiff asserts that
it has not fully calculated its damages, but states that they are
"believed to be" in excess of approximately $700,000. Plaintiff also
seeks relief preventing defendants from soliciting agents and employees
of plaintiff. SIGA believes the claims are without merit and intends to
contest them vigorously.
Item 1A. Risk Factors - there were no material changes to Risk Factors disclosed
in SIGA's 2005 Form 10-K.
Item 2. Unregistered Sale of Equity 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
* 31 Certification of Chief Financial Officer and Acting Chief
Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
* 32 Certification of Chief Financial Officer and Acting Chief
Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Filed herein
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGA Technologies, Inc.
(Registrant)
Date: May 12, 2006 By: /s/ Thomas N. Konatich
-----------------------
Thomas N. Konatich
Chief Financial Officer and Acting Chief
Executive Officer
19