UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 21, 2004
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SIGA Technologies, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-23047 13-3864870
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(State or other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification Number)
420 Lexington Avenue, Suite 601
New York, New York Zip Code
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(Address of Principal Executive offices) 10170
(212) 672-9100
(Registrant's telephone number, including area code)
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro forma Financial Information
Introduction to Unaudited Pro Forma Financial Statement
Unaudited Pro Forma Statement of Operations for the Year ended December
31, 2003.
Notes to Unaudited Pro Forma Financial Statement.
UNAUDITED PRO FORMA FINANCIAL STATEMENT
On May 23, 2003, SIGA Technologies, Inc. ("SIGA") acquired substantially all of
the assets of Plexus Vaccine Inc. ("Plexus") and assumed certain liabilities in
exchange for 1,950,000 shares of SIGA's common stock and 190,950 of SIGA's
options and warrants at an exercise price of $1.62 per share.
The following unaudited pro forma financial statement gives effect to the asset
purchase agreement between SIGA and Plexus. The unaudited pro forma statement of
operations is based on the individual statements of operations of SIGA and
Plexus appearing in SIGA's most recent annual report and in the Current Report
on Form 8-K/A of SIGA dated July 22, 2003, respectively, and combine the results
of operations of SIGA and Plexus for the year ended December 31, 2003 as if the
transaction occurred on January 1, 2003.
The unaudited pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results that would have been
achieved if the acquisition had been consummated as of the beginning of the
period presented, nor is it necessarily indicative of future operating results
of SIGA. A preliminary allocation of the purchase price has been made to certain
identifiable tangible and intangible assets based on information available to
the management of SIGA at the date of the preparation of the accompanying pro
forma financial statement. The pro forma financial information does not give
effect to any costs savings or incremental costs, which may result from the
integration of SIGA and Plexus operations.
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SIGA Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 2003
Historical Pro Forma
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For the period
For the year January 1,
ended December 2003 through
31, 2003 May 23, 2003
SIGA (1) Plexus (2) Adjustments (3) Combined
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Research and development contracts $ 731,743 $ 94,782 $ -- $ 826,525
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Total revenues 731,743 94,782 -- 826,525
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Operating expenses
Selling, general and administrative 2,646,586 907,308 84,167 (A) 3,638,061
Research and development 2,942,809 243,417 161,327 (B) 3,347,553
Patent preparation fees 300,494 -- -- 300,494
Loss on impairment of intangible asset 136,750 -- -- 136,750
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Total operating expenses 6,026,639 1,150,725 245,494 7,422,858
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Operating loss (5,294,896) (1,055,943) (245,494) (6,596,333)
Interest income / (expense), net 18,256 (949,129) -- (930,873)
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Net loss $ (5,276,640) $ (2,005,072) $ (245,494) $ (7,527,206)
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Weighted average number of common shares
outstanding: basic and diluted 15,717,138 763,972 (C) 16,481,110
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Net loss per share: basic and diluted $ (0.34) $ (0.46)
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See notes to Unaudited Pro Forma Financial Statement
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NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENT
1. This column reflects the historical results of operations of SIGA for the
year ended December 31, 2003.
2. This column reflects the historical results of operations of Plexus for
the period January 1, 2003 through May 23, 2003.
3. The preliminary allocation of the purchase price of approximately
$4,070,903 is as follows:
Net liabilities assumed $ (466,431)
Acquired technology 2,191,000
Contracts and grants 741,000
Covenant not to compete 707,000
Goodwill 898,334
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$4,070,903
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The following are the descriptions of the intangible assets acquired from Plexus
and the methodologies in valuing each intangible asset.
Acquired Technology
The acquired technology from Plexus is comprised of a combination of technology
and know-how of computational platforms and in vitro and in vivo testing
capabilities for rational design of vaccines. The acquired technology includes
one patent, two patent applications, and six pending patents supporting such
technologies, as well as certain unpatented technology. As such, the acquired
technology arises from contractual or legal rights, or can be transferred,
licensed, rented or exchanged in combination with these patents, and therefore
meets the separable criteria presented in paragraph 39 of SFAS 141.
The acquired technology was valued utilizing an income approach via a relief
firm royalty methodology. This methodology is based upon the premise that the
recognition of intellectual assets by potential customers and competitors is a
valuable asset to the owner. The premise behind the valuation of these assets is
that a buyer would be willing to pay a royalty for the right to use an
established technology. Accordingly, this methodology values the technology via
the relief from the royalty that a willing buyer would typically pay. This
methodology is comprised of two elements, the determination of an appropriate
royalty rate and the conversion of royalty savings into value. Based on a review
of royalty rates paid in third-party licensing agreements, a royalty rate of
3.0% of revenue was used over an estimated useful life of ten years. Royalty
"savings" were then discounted to a present value utilizing a discount rate of
28.5%.
Contracts and Grants
SIGA acquired several contracts and grants with various institutions, the terms
of which range from two and a half to four and a half years, and are expected to
generate revenue in future periods. The contracts and grants arise from
contractual rights and were recognized pursuant to paragraph 39 of SFAS 141.
The contracts and grants were valued utilizing an income approach known as the
excess earnings methodology, whereby excess earnings are computed as the
earnings remaining after deducting for the market rates of return on the
estimated value of contributory assets including working capital, tangible and
intangible assets. The excess earnings are thereby calculated for each year of a
multiyear projection period. The primary components of this methodology consist
of the determination of excess earnings and
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an appropriate rate of return. The earnings were based on projected after-tax
profits over the estimated term (two and a half to four and a half years)
discounted at a rate of 26.0%.
Covenant Not to Compete
As part of the asset purchase, SIGA entered into a three and a half year
non-competition agreement with the president of Plexus. The covenant not to
compete arises from contractual rights and was recognized pursuant to paragraph
39 of SFAS 141.
The covenant not to compete was valued utilizing an income approach via the
discounted cash flow methodology, which is based upon converting expected lost
earnings over the three and a half year term to present value. This methodology
calculates the present value of potential lost earnings, by giving values to
five discrete scenarios as to the timing of when the president would compete had
there not been an agreement in place. Each scenario was then weighted, based on
the probability of each scenario occurring, to arrive at the intangible asset
value.
Under this approach, lost earnings before interest and taxes was estimated for
each scenario. These earnings were then tax affected and converted into value
utilizing a discount rate of 26.0%.
The following adjustments were made to the statement of operations for the year
ended December 31, 2003 to give effect to the transaction:
A) Amortization of the covenant not to compete based on the contractual
life of the agreement.
B) Amortization of acquired technology and contracts and grants over
the estimated useful life.
C) Weighted average shares increase based on common stock issued.
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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 hereunto duly authorized.
SIGA TECHNOLOGIES, INC.
By: /s/ Thomas N. Konatich
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Thomas N. Konatich
Acting Chief Executive Officer and
Chief Financial Officer
Date: April 21, 2004
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