siga_10q.htm
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-Q
(Mark One)
| x |
|
Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 |
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| |
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For the Quarterly Period Ended June
30, 2010 |
| OR |
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| o |
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Transition Report Pursuant To Section 13
or 15(d) of the Securities Exchange Act of 1934 |
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For the Transition
Period from __________ to __________ |
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Commission File No.
0-23047
____________________________
SIGA Technologies, Inc.
(Exact name of registrant as specified in its
charter)
| Delaware |
13-3864870 |
| (State or other jurisdiction
of |
(I.R.S. Employer Identification.
No.) |
| incorporation or organization) |
|
| |
|
| 35 East 62nd
Street |
10065 |
| New York, NY |
(zip code) |
| (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 o.
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes o
No o.
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer o Accelerated filer x Non-accelerated filer o Smaller
reporting company o.
(Do not check if a smaller reporting company)
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No x.
As of July 26,
2010 the registrant had 45,741,279 shares of common stock
outstanding.
SIGA Technologies,
Inc.
Form 10-Q
Table of Contents
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Page No. |
| PART I – FINANCIAL
INFORMATION |
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| Item 1 – Financial Statements |
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2 |
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| Item 2 – Management’s Discussion and
Analysis of Financial Condition and Results of Operations |
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11 |
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| Item 3 – Quantitative and Qualitative
Disclosures About Market Risk |
|
15 |
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| Item 4 – Controls and
Procedures |
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15 |
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| PART II – OTHER
INFORMATION |
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| Item 1. |
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Legal Proceedings |
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16 |
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| Item 1A. |
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Risk Factors |
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16 |
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| Item 2. |
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Unregistered Sale of Equity Securities
and Use of Proceeds |
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16 |
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| Item 3. |
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Defaults upon Senior
Securities |
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16 |
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| Item 4. |
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Reserved |
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16 |
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| Item 5. |
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Other Information |
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16 |
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| Item 6. |
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Exhibits |
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16 |
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| SIGNATURES |
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17 |
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1
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements.
SIGA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
June 30, |
|
December 31, |
|
|
|
2010 |
|
2009 |
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
6,540,003 |
|
|
$ |
14,496,313 |
|
|
Short term investments |
|
|
8,749,800 |
|
|
|
4,999,300 |
|
| Accounts receivable |
|
|
3,445,347 |
|
|
|
2,405,861 |
|
|
Prepaid expenses |
|
|
605,903 |
|
|
|
1,585,072 |
|
|
Total current assets |
|
|
19,341,053 |
|
|
|
23,486,546 |
|
| |
| Property, plant and equipment,
net |
|
|
1,651,810 |
|
|
|
1,225,656 |
|
|
Goodwill |
|
|
898,334 |
|
|
|
898,334 |
|
| Other assets |
|
|
268,665 |
|
|
|
304,751 |
|
|
Total assets |
|
$ |
22,159,862 |
|
|
$ |
25,915,287 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
4,403,759 |
|
|
$ |
3,458,013 |
|
|
Accrued expenses and
other |
|
|
747,928 |
|
|
|
740,333 |
|
| Deferred revenue |
|
|
600,927 |
|
|
|
1,570,234 |
|
|
Common stock warrants |
|
|
4,082,000 |
|
|
|
3,260,000 |
|
|
Total current
liabilities |
|
|
9,834,614 |
|
|
|
9,028,580 |
|
| |
|
|
|
|
|
|
|
|
| Common stock warrants |
|
|
8,495,057 |
|
|
|
6,398,216 |
|
|
Total liabilities |
|
|
18,329,671 |
|
|
|
15,426,796 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders' equity |
|
|
|
|
|
|
|
|
|
Common stock ($.0001 par value,
100,000,000 shares authorized, |
|
|
|
|
|
|
|
|
|
43,671,893 and 43,061,635 issued
and outstanding at June 30, 2010, |
|
|
|
|
|
|
|
|
|
and December 31, 2009,
respectively) |
|
|
4,367 |
|
|
|
4,306 |
|
| Additional paid-in capital |
|
|
103,737,034 |
|
|
|
101,417,677 |
|
|
Accumulated other comprehensive
income |
|
|
3,361 |
|
|
|
- |
|
| Accumulated deficit (See Note
2) |
|
|
(99,914,571 |
) |
|
|
(90,933,492 |
) |
|
Total stockholders'
equity |
|
|
3,830,191 |
|
|
|
10,488,491 |
|
|
Total liabilities and stockholders'
equity |
|
$ |
22,159,862 |
|
|
$ |
25,915,287 |
|
The accompanying notes
are an integral part of these unaudited financial statements.
2
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
| Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Research and
development |
|
$ |
4,446,753 |
|
|
$ |
4,008,959 |
|
|
$ |
9,521,964 |
|
|
$ |
5,934,736 |
|
| |
|
|
|
|
|
|
|
|
|
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|
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|
|
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| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and
administrative |
|
$ |
2,233,825 |
|
|
|
1,801,746 |
|
|
|
4,202,616 |
|
|
|
3,860,778 |
|
|
Research and development |
|
|
4,929,961 |
|
|
|
4,712,863 |
|
|
|
10,756,984 |
|
|
|
7,410,245 |
|
| Patent preparation
fees |
|
|
305,661 |
|
|
|
84,426 |
|
|
|
626,000 |
|
|
|
193,556 |
|
|
Total operating expenses |
|
|
7,469,447 |
|
|
|
6,599,035 |
|
|
|
15,585,600 |
|
|
|
11,464,579 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(3,022,694 |
) |
|
|
(2,590,076 |
) |
|
|
(6,063,636 |
) |
|
|
(5,529,843 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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| Increase in fair value of common stock
rights, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common stock warrants, and
treasury securities |
|
|
(1,548,927 |
) |
|
|
(7,763,035 |
) |
|
|
(2,917,443 |
) |
|
|
(11,707,770 |
) |
|
Net loss |
|
$ |
(4,571,621 |
) |
|
$ |
(10,353,111 |
) |
|
$ |
(8,981,079 |
) |
|
$ |
(17,237,613 |
) |
| Unrealized gain on securities |
|
|
3,361 |
|
|
|
- |
|
|
|
3,361 |
|
|
|
- |
|
|
Comprehensive loss |
|
$ |
(4,568,260 |
) |
|
$ |
(10,353,111 |
) |
|
$ |
(8,977,718 |
) |
|
$ |
(17,237,613 |
) |
| |
| Weighted average shares outstanding:
basic and diluted |
|
|
43,620,212 |
|
|
|
36,747,909 |
|
|
|
43,408,287 |
|
|
|
36,293,128 |
|
| Net loss per share: basic and diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.47 |
) |
The accompanying notes
are an integral part of these unaudited financial statements.
3
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six Months Ended |
|
|
June 30, |
|
|
2010 |
|
2009 |
| Cash flows from operating
activities: |
|
|
|
|
|
|
|
| Net loss |
$ |
(8,981,079 |
) |
|
$ |
(17,237,613 |
) |
| Adjustments to reconcile net loss to
net |
|
|
|
|
|
|
|
| cash used in operating
activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
300,751 |
|
|
|
232,471 |
|
| Increase in fair value of rights and
warrants |
|
2,917,443 |
|
|
|
11,707,770 |
|
|
Stock based compensation |
|
1,068,227 |
|
|
|
1,110,650 |
|
| Changes in assets and
liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
(1,039,486 |
) |
|
|
(893,357 |
) |
|
Prepaid expenses |
|
979,169 |
|
|
|
(72,106 |
) |
|
Other assets |
|
36,086 |
|
|
|
3,954 |
|
|
Deferred revenue |
|
(969,307 |
) |
|
|
26,520 |
|
|
Accounts payable and accrued
expenses |
|
953,341 |
|
|
|
796,164 |
|
|
Net cash used in operating
activities |
|
(4,734,855 |
) |
|
|
(4,325,547 |
) |
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(726,905 |
) |
|
|
(191,787 |
) |
|
Proceeds from short term
investments |
|
8,750,000 |
|
|
|
|
|
|
Purchases of short term
investments |
|
(12,495,741 |
) |
|
|
- |
|
|
Net cash used in investing
activities |
|
(4,472,646 |
) |
|
|
(191,787 |
) |
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net proceeds from exercise of
warrants and options |
|
1,251,191 |
|
|
|
3,804,086 |
|
|
Net cash provided by financing
activities |
|
1,251,191 |
|
|
|
3,804,086 |
|
| Net decrease in cash and cash equivalents |
|
(7,956,310 |
) |
|
|
(713,248 |
) |
| Cash and cash equivalents at beginning of period |
|
14,496,313 |
|
|
|
2,321,519 |
|
| Cash and cash equivalents at end of period |
$ |
6,540,003 |
|
|
$ |
1,608,271 |
|
| |
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these unaudited financial statements.
4
SIGA TECHNOLOGIES, INC.
Notes to the June 30, 2010 and 2009
Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
SIGA Technologies,
Inc. (“SIGA” or the “Company”) is a bio-defense company mainly engaged in the
discovery, development and commercialization of novel products for the
prevention and treatment of serious infectious diseases, including products for
use in defense against biological warfare agents such as smallpox and
arenaviruses. The Company’s anti-viral programs are designed to prevent or limit
the replication of viral pathogens.
The consolidated
financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and the rules and regulations of the
Securities and Exchange Commission (the “SEC”) for quarterly reports on Form
10-Q and should be read in conjunction with the Company's consolidated audited
financial statements and notes thereto for the year ended December 31, 2009,
included in the 2009 Annual Report on Form 10-K. All terms used but not defined
elsewhere herein have the meaning ascribed to them in the Company’s 2009 Annual
Report on Form 10-K filed on March 10, 2010. In the opinion of management, all
adjustments (consisting of normal and recurring adjustments) considered
necessary for a fair statement of the results of the interim periods presented
have been included. The 2009 year-end balance sheet data was derived from the
audited financial statements but does not include all disclosures required by
U.S. GAAP. The results of operations for the three and six months ended June 30,
2010 are not necessarily indicative of the results expected for the full
year.
The accompanying
consolidated 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 capital
through a combination of commercial opportunities, collaborative agreements,
strategic alliances, research grants, and future equity and debt financing.
Although management will continue to pursue these plans, there is no assurance
that the Company will be successful in obtaining sufficient future financing on
commercially reasonable terms or that the Company will be able to secure funding
from anticipated government contracts and grants. Management believes that
existing funds combined with cash flows primarily from continuing government
grants and contracts will be sufficient to support its operations for at least
the next twelve months. The success of the Company is dependent upon
commercializing its research and development programs and the Company’s ability
to obtain adequate future funding. If the Company is unable to raise adequate
capital and/or achieve profitable operations, future operations might need to be
scaled back or discontinued. 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
Use of Estimates
The consolidated financial statements and
related disclosures are prepared in conformity with U.S. GAAP. 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 recorded during
the period reported. These estimates include the value of options and warrants
granted or issued by the Company, the realization of deferred tax assets, and
impairment of goodwill. 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.
Reclassifications
Certain reclassifications of
previously reported amounts have been made to conform to the current year
presentation. Such reclassifications did not impact net income or shareholders’
equity as previously reported.
5
Cash, Cash Equivalents, Short-term Investments and Marketable Securities
The Company
considers all highly liquid investment instruments purchased with a maturity of
three months or less to be cash equivalents.
The Company
classifies short-term investments and marketable securities with readily
determinable fair values as “available-for-sale.” Investments in securities that
are classified as available-for-sale are measured at fair market value in the
balance sheet, and unrealized holding gains and losses on investments are
reported as a separate component of stockholders’ equity until realized.
As of June 30, 2010
the Company’s short-term investments consisted of approximately $8.75 million
invested in short- term U.S. Treasury bills classified as available for
sale. For the six months ended June 30, 2010 the unrealized gain
relating to this investment was $3,361.
Revenue Recognition
The Company recognizes revenue from contract
research and development and research payments in accordance with FASB ASC 605,
Revenue Recognition (“ASC 605”). In accordance with ASC 605,
revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable, collectability 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 under cost-plus-fee grants and contracts are recognized as revenue
when earned, over the period of effort. Funding for the acquisition of capital
assets under cost-plus-fee grants and contracts is evaluated for appropriate
recognition as a reduction to the cost of the asset, a financing arrangement, or
revenue based on the specific terms of the related grants and contracts.
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 six months
ended June 30, 2010 and 2009, revenues from National Institutes of Health
(“NIH”) contracts and grants were 92% and 100%, respectively, of total revenues
recognized by the Company.
Net Loss per Common Share
The Company computes, presents and discloses
earnings per share (“EPS”) in accordance with FASB ASC 260 Earnings Per Share 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, which 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, unless the impact of such common shares is
anti-dilutive.
The Company incurred
losses for the three and six months ended June 30, 2010 and 2009. As a result,
certain equity instruments are excluded from the calculation of diluted loss per
share. At June 30, 2010 and 2009, outstanding options to purchase 5,788,159
and 6,795,583 shares, respectively, of the Company’s common stock with exercise
prices ranging from $0.94 to $9.32 have been excluded from the computation of
diluted loss per share as the effect of such shares is anti-dilutive. At June
30, 2010 and 2009, outstanding warrants to purchase 4,293,752 and 6,516,445
shares, respectively, of the Company’s common stock, with exercise prices
ranging from $1.18 to $4.99 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. Common stock warrants
which are classified as liabilities under the provisions of FASB ASC 815,
Derivatives and Hedging (“ASC 815”), are recorded at their fair market value as
of each reporting period.
The Company applies
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities that are
required to be measured at fair value, and non-financial assets and liabilities
that are not required to be measured at fair value on a recurring
basis.
6
ASC 820 provides that
the measurement of fair value requires the use of techniques based on observable
and unobservable inputs. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect our market assumptions.
The inputs create the following fair value hierarchy:
- Level 1 – Quoted prices for
identical instruments in active markets.
- Level 2 – Quoted prices for
similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations where
inputs are observable or where significant value drivers are observable.
- Level 3 – Instruments where
significant value drivers are unobservable to third parties.
SIGA uses
model-derived valuations where inputs are observable in active markets to
determine the fair value of certain common stock warrants on a recurring basis
and classify such warrants in Level 2. SIGA utilizes the Black-Scholes model to
value the warrants and inputs include the closing price of SIGA’s common stock
at June 30, 2010, the remaining life of the warrant, the weighted average stock
price volatility of SIGA and comparable companies, and the risk free market
rate. At June 30, 2010 and December 31, 2009, the fair value of such warrants
was as follows:
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
| Common stock warrants classified as
current liabilities |
$ |
4,082,000 |
|
$
|
3,260,000 |
| Common stock warrants classified as long term liabilities |
$ |
8,495,057 |
|
|
6,398,216 |
| Total |
$ |
12,577,057 |
|
$ |
9,658,216 |
ASC 820-10 applies to
non-financial assets and non-financial liabilities measured on a nonrecurring
basis and was effective January 1, 2009. The adoption of this standard had no
impact on the Company.
As of June 30, 2010,
the Company held approximately $8.75 million in U. S. Treasury bills, classified
as a Level 1 security. SIGA does not hold
any Level 3 securities and there were no transfers between Level 1, 2, or 3
during each of the six month periods ended June 30, 2010, and 2009.
Recent Accounting Pronouncements
In October 2009, the
FASB issued Accounting Standards Update (“ASU”) 2009-13 (“ASU 09-13”), Revenue Recognition (Topic 605): Multiple-Deliverable
Revenue Arrangements (a consensus of the FASB Emerging Issues Task
Force). ASU 09-13 updates the existing multiple-element arrangement
guidance currently in FASB Topic 605-25 (Revenue Recognition – Multiple-Element
Arrangements). This new guidance requires companies to allocate revenue in
arrangements involving multiple deliverables based on the estimated selling
price of each deliverable, even though such deliverables are not sold separately
by either company itself or other vendors. This new guidance also significantly
expands the disclosures required for multiple-element revenue arrangements. The
revised guidance will be effective for the first annual period beginning on or
after June 15, 2010. We adopted the provisions of the update on January 1, 2010.
The adoption did not have an impact on the consolidated financial statements.
In January 2010, the FASB issued ASU 2010-06, Improving Disclosures
about Fair Value Measurements. This update provides amendments to Subtopic
820-10 that requires new disclosure as follows: 1) Transfers in and out of
Levels 1 and 2. A reporting entity should disclose separately the amounts
of significant transfers in and out of Level 1 and Level 2 fair value
measurements and describe the reasons for the transfers. 2) Activity
in Level 3 fair value measurements. In the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), a reporting entity
should present separately information about purchases, sales, issuances, and
settlements (that is, on a gross basis rather than as one net number). This
update provides amendments to Subtopic 820-10 that clarifies existing
disclosures as follows: 1) Level of disaggregation. A reporting entity should
provide fair value measurement disclosures for each class of assets and
liabilities. A class is often a subset of assets or liabilities within a line
item in the statement of financial position. A reporting entity needs to use
judgment in determining the appropriate classes of assets and liabilities. 2)
Disclosures about inputs and valuation techniques. A reporting entity should
provide disclosures about the valuation techniques and inputs used to measure
fair value for both recurring and nonrecurring fair value measurements. Those
disclosures are required for fair value measurements that fall in either Level 2
or Level 3. The new disclosures and clarifications of existing disclosures are
effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and
settlements in the roll forward of activity in Level 3 fair value measurements.
Those disclosures are effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. The Company has adopted
some of the requirements of the standard update, however, the Company does not
expect the adoption of this ASU to have a material impact on the consolidated
financial statements.
In February 2010, the FASB issued ASU 2010-09 which
requires that SEC filers, as defined, evaluate subsequent events through the
date that the financial statements are issued. ASU 2010-09 removed the
requirement for SEC filers to disclose the date through which subsequent events
have been evaluated in originally issued and revised financial statements. The
adoption of this guidance on January 1, 2010 did not have a material effect on
the Company’s consolidated financial statements.
7
3. Stockholders’ Equity
As of June 30, 2010,
the Company's authorized share capital consisted of 110,000,000 shares, of which
100,000,000 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.
2009 Financing
On December 9, 2009, the Company sold
2,725,339 shares of the Company’s common stock, par value $0.0001 per share, at
a purchase price of $7.35 per share. Net proceeds to the Company were
approximately $18.6 million.
2008 Financing
On June 19, 2008, SIGA entered into a letter
agreement (the “Letter Agreement”) with MacAndrews & Forbes, LLC
(“M&F”), a related party, for M&F’s commitment to invest, at SIGA’s
discretion and at M&F’s option, up to $8 million in exchange for (i) SIGA
common stock at a per share price equal to the lesser of (A) $3.06 or (B)
the average of the volume-weighted average price per share for the 5 trading
days immediately preceding each funding date, and (ii) warrants to purchase 40%
of the number of SIGA shares acquired by M&F. On April 29, 2009, SIGA and
M&F agreed to extend the Letter Agreement through June 19,
2010.
On June 18, 2010,
M&F notified SIGA of its intention to exercise its right to invest $5.5
million, the remaining amount available under the Letter Agreement and entered
into a Deferred Closing and Registration Rights Agreement dated as of June 18,
2010 with the Company. On July 26, 2010, upon satisfaction of certain customary
closing conditions, including the expiration of the applicable waiting period
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, M&F funded the $5.5 million purchase price to SIGA in exchange for
the issuance of (i) 1,797,386 shares of common stock and (ii) warrants to
purchase 718,954 shares of SIGA common stock at an exercise price of $3.519 per
share.
The Company followed
the provisions of ASC 815 to account for the warrants issuable to M&F under
the Letter Agreement, which can be exercised either by payment of cash or
cashless exercise and as such are no longer considered "indexed to the Company's
own stock”. As a result, such warrants meet the definition of a derivative and
must be recorded on the Company's balance sheet. The Company applied the
Black-Scholes model to calculate the fair value of the respective derivative
instruments using the Monte Carlo simulation to estimate the price of the
Company’s common stock on the derivative’s expiration date. The Company
recorded a loss of $822,000 for the six months ended June 30, 2010 representing
the increase in the fair value of the warrants from January 1, 2010 through June
30, 2010.
2006 and 2005 Placements
In 2006 and 2005 the
Company sold shares of its common stock and warrants to purchase shares of
common stock. As of June 30, 2010, 1,000,000 warrants issued in 2006 with an
initial exercise price of $4.99 per share and 579,192 warrants issued in 2005
with an initial exercise price of $1.18 per share were outstanding. These
warrants may be exercised through and including the seventh anniversary of their
respective issuance date.
The Company accounted
for the transactions under the provisions of ASC 815 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. ASC 815 also requires that any changes in the fair
value of the derivative instruments be reported in earnings or loss as long as
the derivative contracts are classified as assets or liabilities. At June 30,
2010, the fair market value of the warrants issued in 2006 and 2005 was $4.7
million and $3.8 million, respectively. The Company applied the Black-Scholes
model to calculate the fair values of the respective derivative instruments
using the contracted term of the warrants. Management estimates the expected
volatility using a combination of the Company’s historical volatility and the
volatility of a group of comparable companies. For the six months ended June 30,
2010, SIGA recorded a loss of $2.1 million as a result of a net increase in the
2006 and 2005 placement warrants’ fair value.
8
4. Research Agreements
In February 2010, the
Company was awarded a $2.8 million contract with options for up to $9.9 million
from the Department of Defense's Transformational Medical Technologies (TMT)
through the Defense Threat Reduction Agency (DTRA) to support the pre-clinical
development and Investigational New Drug (IND) filing of a broad spectrum
antiviral drug candidate.
5. Related Parties
On June 19, 2008,
SIGA entered into a Letter Agreement with M&F, a related party, for
M&F’s commitment to invest, at SIGA’s discretion, up to $8 million. M&F
had the option, during the term of the Letter Agreement, to invest in the
Company under the investment terms outlined in the Letter Agreement and on June
18, 2010 notified SIGA of its intention to exercise the $5.5 million remaining
available balance under the Letter Agreement (See Note 3).
On December 1, 2009,
the Company entered into an Office Service Agreement with an affiliate of
M&F to occupy office space for approximately $8,000 per month. The agreement
is cancelable upon 60 days notice by SIGA or the affiliate of M&F.
A member of the
Company’s Board of Directors is a member of the Company’s outside counsel.
During the six months ended June 30, 2010 and 2009, the Company incurred costs
of $1.4 million and $1.2 million, respectively, related to services provided by
the outside counsel. On June 30, 2010, the Company’s outstanding payables
included $1.4 million payable to the outside counsel.
6. Stock Compensation Plans
In May 2010, the
Company adopted its 2010 Incentive Stock Option Plan (the “2010 Plan”) to
supplement its 1996 Incentive and Non-Qualified Stock Option Plan (the “1996
Plan”). The 2010 Plan and the 1996 Plan, as amended, (collectively, the
“Plans”) provide for the granting of up to 2,000,000 and 11,000,000 shares of
the Company’s common stock, respectively, to employees, consultants and outside
directors of the Company. The exercise period for options granted under
the Plans, 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 Plans 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 six months
ended June 30, 2010 and 2009, the Company recorded compensation expense of
approximately $1.0 million and $1.1 million, respectively, related to employees
and directors stock options. The total fair value of options vested during the
six months ended June 30, 2010 and 2009, was $708,000 and $588,000,
respectively. The total compensation cost not yet recognized related to
non-vested awards at June 30, 2010, is $1.5 million. The weighted average period
over which total compensation cost is expected to be recognized is 1.42 years.
7. Commitments and
Contingencies
In December 2006,
PharmAthene, Inc. (“PharmAthene”) filed an action against the Company in the
Delaware Court of Chancery captioned PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its amended complaint,
PharmAthene asks the Court to order the Company to enter into a license
agreement with PharmAthene with respect to ST-246®, as well as issue a
declaration that the Company is obliged to execute such a license agreement, and
award damages resulting from the Company’s supposed breach of that obligation.
PharmAthene also alleges that the Company breached an obligation to negotiate
such a license agreement in good faith, as well as seeks damages for promissory
estoppel and unjust enrichment based on supposed information, capital and
assistance that PharmAthene allegedly provided to the Company during the
negotiation process. In January 2008, the Court of Chancery denied the Company’s
motion to dismiss the original complaint, and discovery proceeded. In May 2009,
PharmAthene amended its complaint with respect to its claim for breach of an
obligation to negotiate in good faith, and the Company filed its answer to the
amended complaint and counterclaim denying the new claim and asserting
defenses.
PharmAthene has
submitted expert reports asserting several alternative theories of damages,
including amounts in a wide range of up to one billion dollars. The Company
believes that the expert’s damages analyses are flawed and methodologically
unsound. The Company also continues to believe that it has meritorious defenses
to the claims. The Company filed a partial summary judgment motion on March 19,
2010, regarding certain aspects to PharmAthene’s claims and damage assessments.
The motion for partial summary
judgment has been fully submitted to the court, and no decision has been
rendered on such motion. SIGA expects that trial on all remaining claims and
defenses will occur in January 2011. It is not currently possible to
estimate a range of loss, if any.
9
From time to time, the Company is
involved in disputes or legal proceedings arising in the ordinary course of
business. The Company believes that there is no other dispute or litigation
pending that could have, individually or in the aggregate, a material adverse
effect on its financial position, results of operations or cash flows.
8. Subsequent Event
On July 26, 2010,
SIGA received gross proceeds of $5.5 million from M&F under the terms of a
Letter Agreement dated June 19, 2008, in exchange for the issuance of (i)
1,797,386 shares of SIGA common stock and (ii) warrants to purchase 718,954
shares of SIGA common stock at an exercise price of $3.519 per share (See Note
3).
10
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 consolidated 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 incorporation in 1995, SIGA has
pursued the research, development and commercialization 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. Our lead product, ST-246®, is an orally administered antiviral
drug that targets orthopoxviruses. In December 2006, the Food and Drug
Administration (“FDA”) granted Orphan Drug designation to ST-246 for the
prevention and treatment of smallpox. In May 2009, we submitted a response to a
Request for Proposal (“RFP”) issued by the U.S. Biomedical Research and
Development Agency (“BARDA”) with respect to the purchase of 1.7 million courses
of a smallpox antiviral (the “BARDA Smallpox RFP”), and, in June 2009, BARDA
informed us that our response to the BARDA Smallpox RFP was deemed technically
acceptable and in the competitive range. There can be no assurance that SIGA or
any other company will receive an award pursuant to this RFP. Further, any award
on this RFP would be subject to negotiation of final contract terms and
specifications; thus, the final terms under any contract with BARDA may be
materially different than those indicated in the RFP.
Critical Accounting Policies and Estimates
Note 2 of the Notes to the Consolidated
Financial Statements includes a summary of all of the significant accounting
policies. There were no significant changes to the critical accounting policies
described in the 2009 Annual Report on Form 10-K.
Results of Operations
Three months ended June 30, 2010 and 2009
Revenue from research and development
(“R&D”) grants and contracts was $4.4 million and $4.0 million, respectively
for the three months ended June 30, 2010 and 2009, respectively. The increase of
$400,000, or 10.9%, is principally due to $960,000 of revenue generated from our
grant and contract for the development of a broad-spectrum anti-viral drug and
an increase of $550,000 in revenue generated from our grants for the development
of drug candidates for arenavirus pathogens. The increase was partially offset
by a $1.1 million decline in revenue generated from our grants and contracts for
the development of ST-246 and its alternative formulations.
General and Administrative expenses
(“G&A”) for the three months ended June 30, 2010 and 2009, were $2.2 million
and $1.8 million, respectively, reflecting an increase of approximately $432,000
or 24.0%. Higher G&A expenses recognized during the three months ended June
30, 2010 relate mainly to an increase in legal fees and an increase in G&A
personnel-related costs, including non-cash stock-based compensation.
Research and Development (“R&D”) expenses
were $4.9 million and $4.7 million for the three months ended June 30, 2010 and
2009, respectively. R&D expenses related to the development of our lead drug
candidate, ST-246 declined $882,000 as compared to the same period in the prior
year. The decline was offset by an increase in personnel-related costs, expenses
incurred in connection with the development of a broad-spectrum antiviral drug
and expenses related to the development of drug candidates for arenavirus
pathogens.
During the three months ended June 30, 2010
and 2009, we spent $2.3 million and $3.1 million, respectively, on the
development of our lead drug candidate, ST-246. For the three months ended June
30, 2010, we spent $449,000 on internal human resources and $1.9 million mainly
on manufacturing. For the three months ended June 30, 2009, we spent $433,000 on
internal human resources and $2.67 million mainly on manufacturing and clinical
testing.
During the three months ended June 30, 2010
and 2009, we spent $547,000 and $122,000, respectively, to support the
development of ST-193, a drug candidate for Lassa fever virus, ST-294, a drug
candidate for certain arenavirus pathogens, and other drug candidates for
hemorrhagic fevers. For the three months ended June 30, 2010, we spent $56,000
on internal human resources and $491,000 mainly on analysis of the ST-193
compounds. For the three months ended June 30, 2009, we spent $47,000 on
internal human resources and $75,000 on pre-clinical testing of our drug
candidates.
11
During the three months ended June 30, 2010,
we spent $413,000 to support the development of a broad-spectrum antiviral drug
candidate, of which $162,000 was mainly spent on internal human resources, and
$251,000 mainly on the optimization of lead antiviral compounds.
Patent preparation expenses increased to
$306,000 for the three months ended June 30, 2010, from $84,000 for the same
period in the prior year mainly as a result of our increased efforts to protect
our lead drug candidates in expanded geographic territories.
Changes in the fair value of certain warrants
to acquire common stock are recorded as gains or losses. For the three months
ended June 30, 2010 and 2009, we recorded losses of $1.6 million and $7.6
million, respectively, reflecting changes in the fair market value of warrants
to purchase common stock during the respective three month periods.
Six months ended June 30, 2010 and 2009
Revenues from research and development
contracts and grants for the six months ended June 30, 2010 were $9.5 million,
an increase of $3.6 million or 60% from the $5.9 million of revenues recognized
for the six months ended June 30, 2009. Higher revenues in 2010 relate to an
increase of $1.7 million in revenues generated from grants and contracts
supporting the development of our lead drug candidate, ST-246, an increase of
$520,000 in revenues generated from grants supporting the development of drug
candidates for arenavirus pathogens and $1.3 million of revenues generated from
our grant and contract for the development of a broad-spectrum antiviral drug.
G&A expenses for the six months ended June
30, 2010 and 2009 were $4.2 million and $3.9 million, respectively. The increase
of $342,000 million or 9% relates mainly to $105,000 increase in insurance
premiums and an increase of $210,000 in legal fees.
Research and development expenses for the six
months ended June 30, 2010 and 2009 were $10.8 million and $7.4 million,
respectively, an increase of $3.3 million or 45%. Expenditures related to the
continued development of ST-246 and its alternative formulations, including
costs associated with our commercial validation campaign increased $1.9 million
from the same period in the prior year. Higher R&D costs also relate to
$431,000 incurred in connection with the development of a broad-spectrum
antiviral drug, an increase of $387,000 in costs related to the development of
drug candidates for arena virus pathogens and an increase of $433,000 in
employee compensation expenses.
During the six months ended June 30, 2010 and
2009, we spent $6.3 million and $4.4 million, respectively, on the development
of ST-246. For the six months ended June 30, 2010, we spent $906,000 on internal
human resources and $5.4 million mainly on manufacturing. For the six months
ended June 30, 2009, we spent $770,000 on internal human resources and $3.6
million mainly on manufacturing and clinical testing. From inception of the
ST-246 development program to-date, we expended a total of $32.2 million related
to the program, of which $6.1 million was spent on internal human resources, and
$26.1 million was spent on manufacturing, clinical and pre-clinical work. These
resources reflect SIGA’s R&D expenses directly related to the program. They
exclude additional expenditures such as the cost to acquire the program, patent
costs, allocation of indirect expenses, and the value of other services received
from the NIH and the Department of Defense (“DoD”).
R&D expenses of $653,000 and $251,000
during the six months ended June 30, 2010 and 2009, respectively, were used to
support the development of ST-193, a drug candidate for Lassa fever virus,
ST-294, a drug candidate for certain arenavirus pathogens, and other drug
candidates for hemorrhagic fevers. For the six months ended June 30, 2010, we
spent $96,000 on internal human resources and $558,000 mainly on the analysis of
the Lassa fever drug compounds. For the six months ended June 30, 2009, we spent
$106,000 on internal human resources and $145,000 mainly on pre-clinical
testing. From inception of our program to develop ST-193, ST-294 and other drug
candidates for hemorrhagic fevers, to-date, we spent a total of $6.5 million
related to the program, of which $2.3 million and $4.2 million were expended on
internal human resources and pre-clinical work, respectively. These resources
reflect SIGA’s R&D expenses directly related to the program. They exclude
additional expenditures such as the cost to acquire the program, patent costs,
allocation of indirect expenses, and the value of other services received from
the NIH and the DoD.
12
During the six months ended June 30, 2010, we
spent $568,000 to support the development of a broad-spectrum antiviral drug
candidate, of which $212,000 was mainly spent on internal human resources, and
$357,000 mainly on the optimization of lead anti-viral compounds. From the
inception of our program to develop a broad-spectrum anti-viral drug to date, we
have spent a total of $635,000 related to the program, of which $253,000 and
$382,000 were mainly expended on internal human resources and supporting
medicinal chemistry and the optimization of lead antiviral compounds,
respectively. These resources reflect SIGA’s R&D expenses directly related
to the program. They exclude additional expenditures such as the cost to acquire
the program, patent costs, allocation of indirect expenses, and the value of
other services received from the NIH and the DoD.
Patent preparation expenses for the six months
ended June 30, 2010 and 2009 were $626,000 and $194,000, respectively. Higher
costs in 2010 reflect heightened efforts to protect our lead drug candidates in
expanded geographic territories.
Changes in the fair value of certain warrants
to acquire common stock are recorded as gains or losses. For the six months
ended June 30, 2010 and 2009, we recorded a loss of $2.9 million and a loss of
$11.7 million, respectively, reflecting changes in the fair market value of
warrants to purchase common stock during the respective six month
periods.
Liquidity and Capital Resources
On June 30, 2010, we had $6.5
million in cash and cash equivalents and $8.7 million in short-term investments.
Operating
activities
Net cash used in operations during the six
months ended June 30, 2010 and 2009 was approximately $4.7 million and $4.3
million, respectively. Our operating loss for the six months ended June 30, 2010
and 2009 was $6.1 million and $5.5 million, respectively, and changes in our
accounts receivable and accounts payable for the six-month period in 2010
remained substantially similar to the six-month period in 2009.
Investing
activities
Capital expenditures of $727,000 during the
six months ended June 30, 2010 mainly supported acquisitions of laboratory and
computer equipment. In addition, SIGA invested $3.75 million in U.S. Treasury
bills and maintained a total position of approximately $8.75 million invested in
U.S. Treasury bills on each of March 31, and June 30, 2010.
Financing
activities
Cash provided by financing activities during
the six months ended June 30, 2010 and 2009 was $1.3 million and $3.8 million,
respectively, generated from exercises of options and warrants to purchase SIGA
common stock.
Other
On June 19, 2008, SIGA entered into a letter
agreement (the “Letter Agreement”) expiring on June 19, 2010, with MacAndrews
& Forbes, LLC (“M&F”), a related party, for M&F’s commitment to
invest, at SIGA’s discretion and at M&F’s option, up to $8 million in
exchange for (i) SIGA common stock and (ii) warrants to purchase 40% of the
number of SIGA shares acquired by M&F.
On June 18, 2010, M&F notified us of its
intention to exercise its right to invest $5.5 million, the remaining amount
available under the Letter Agreement and entered into a Deferred Closing and
Registration Rights Agreement dated as of June 18, 2010 with the Company. On
July 26, 2010, upon satisfaction of certain customary closing conditions,
including the expiration of the applicable waiting period pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, M&F funded
the $5.5 million purchase price to SIGA in exchange for the issuance of (i)
1,797,386 shares of SIGA common stock and (ii) warrants to purchase 718,954
shares of SIGA common stock at an exercise price of $3.519 per
share.
We have incurred cumulative net losses and
expect to incur additional losses to perform further research and development
activities. We do not have commercial products and have limited capital
resources. We will need additional funds to complete the development of our
products. Our plans with regard to these matters include continued development
of our products as well as seeking additional capital through a combination of
collaborative agreements, strategic alliances, research grants, and future
equity and debt financing. Although we continue to pursue these plans, there is
no assurance that we will be successful in obtaining future financing on
commercially reasonable terms or that we will be able to secure funding from
anticipated government contracts and grants.
13
We believe that our existing funds combined
with cash flows primarily from continuing government grants and contracts will
be sufficient to support our operations for at least the next 12 months. The
success of the Company is dependent upon commercializing its R&D programs
and the Company’s ability to obtain adequate future financing. If the Company is
unable to raise adequate capital and/or achieve profitable operations, future
operations might need to be scaled back or discontinued. 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.
Our technical operations are based in our
research facility in Corvallis, Oregon. We continue to seek to fund a major
portion of our ongoing antiviral programs through a combination of government
grants, contracts and strategic alliances. While we have had success in
obtaining strategic alliances, contracts 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 R&D 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 R&D will continue to be significant in the
future. We expect to incur operating losses for the foreseeable future and there
can be no assurance that we will ever achieve profitable operations.
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
(i) the risk that 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, (ii) the risk that SIGA or its collaborators
will not obtain appropriate or necessary governmental approvals to market these
or other potential products, (iii) the risk that SIGA may not be able to obtain
anticipated funding for its development projects or other needed funding, (iv)
the risk that SIGA may not be able to secure funding from anticipated government
contracts and grants, (v) the risk that SIGA may not be able to secure or
enforce sufficient legal rights in its products, including patent protection for
its products, (vi) the risk that any challenge to our patent and other property
rights, if adversely determined, could affect our business and, even if
determined favorably, could be costly, (vii) the risk that regulatory
requirements applicable to SIGA’s products may result in the need for further or
additional testing or documentation that will delay or prevent seeking or
obtaining needed approvals to market these products, (viii) the risk that BARDA
may not complete the procurement set forth in its solicitation for the
acquisition of smallpox antiviral for the strategic national stockpile, or may
complete it on different terms, (ix) the risk that third parties may protest
contracts awarded to us through an RFP process which may cause such potential
awards to be delayed or overturned, (x) the risk that the volatile and
competitive nature of the biotechnology industry may hamper SIGA’s efforts, (xi)
the risk that the changes in domestic and foreign economic and market conditions
may adversely affect SIGA’s ability to advance its research or its products, and
(xii) the effect of federal, state, and foreign regulation on SIGA’s businesses.
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, 2009, 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 United States of America
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.
14
Item 3 – Quantitative and Qualitative
Disclosures About Market Risk.
Our investment portfolio includes cash, cash
equivalents and short-term investments. Our main investment objectives are the
preservation of investment capital and the maximization of after-tax returns on
our investment portfolio. We believe that our investment policy is conservative,
both in the duration of our investments and the credit quality of the
investments we hold. We do not utilize derivative financial instruments,
derivative commodity instruments or other market risk sensitive instruments,
positions or transactions to manage exposure to interest rate changes.
Accordingly, we believe that, while the securities we hold are subject to
changes in the financial standing of the issuer of such securities and our
interest income is sensitive to changes in the general level of U.S. interest
rates, we are not subject to any material risks arising from changes in interest
rates, foreign currency exchange rates, commodity prices, equity prices or other
market changes that affect market risk sensitive instruments.
Item 4 – Controls and Procedures.
(a) Disclosure Controls and Procedures. The
Company's management, with the participation of the Company's Chief Executive
Officer and 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) Changes in 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.
15
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
In December 2006,
PharmAthene, Inc. (“PharmAthene”) filed an action against us in the Delaware
Court of Chancery captioned PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its amended complaint,
PharmAthene asks the Court to order us to enter into a license agreement with
PharmAthene with respect to ST-246, as well as issue a declaration that we are
obliged to execute such a license agreement, and award damages resulting from
our supposed breach of that obligation. PharmAthene also alleges that we
breached an obligation to negotiate such a license agreement in good faith, as
well as seeks damages for promissory estoppel and unjust enrichment based on
supposed information, capital and assistance that PharmAthene allegedly provided
to us during the negotiation process. In January 2008, the Court of Chancery
denied our motion to dismiss the original complaint, and discovery proceeded. In
May 2009, PharmAthene amended its complaint with respect to its claim for breach
of an obligation to negotiate in good faith, and we filed our answer to the
amended complaint and counterclaim denying the new claim and asserting
defenses.
PharmAthene has
submitted expert reports asserting several alternative theories of damages,
including amounts in a wide range of up to one billion dollars. We believe that
the expert’s damages analyses are flawed and methodologically unsound. We also
continue to believe that we have meritorious defenses to the claims. We filed a
partial summary judgment motion on March 19, 2010, regarding certain aspects to
PharmAthene’s claims and damage assessments. The motion for partial summary judgment has
been fully submitted to the court, and no decision has been rendered on such
motion. SIGA expects that trial on all remaining claims and defenses will occur
in January 2011. It is not
currently possible to estimate a range of loss, if any.
Item 1A. Risk Factors.
There are no material changes to the Risk
Factors disclosed in our Annual report on Form 10-K for the fiscal year ended
December 31, 2009.
Item 2. Unregistered Sale of Equity Securities
and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Reserved.
Item 5. Other Information.
None.
Item 6. Exhibits.
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10.1 |
|
Deferred Closing and Registration Rights Agreement, dated as of
June 18, 2010 (incorporated by reference to the Current Report on Form 8-K
of the Company filed June 22, 2010). |
| |
|
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|
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| * |
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31.1 |
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Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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|
|
|
|
| * |
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31.2 |
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Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
| * |
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32.1 |
|
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
| * |
|
32.2 |
|
Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
| * Filed
herein |
16
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.
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SIGA Technologies, Inc. |
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(Registrant) |
| |
| |
| Date: August 5, 2010 |
By: |
/s/ Ayelet Dugary |
|
| |
| |
Ayelet Dugary |
| |
Chief Financial
Officer |
17