UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ | |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the Quarterly Period Ended | |
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
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 13-3864870 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification. No.) |
31 East 62nd Street | 10065 |
New York, NY | (zip code) |
(Address of principal executive offices) |
Registrant’s telephone number, including area code: (212) 672-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
common stock, $.0001 par value | ||
SIGA | ||
The Nasdaq Global Market | ||
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
As of NovemberMay 1, 20172020, the registrant had outstanding 78,908,92981,047,424 shares of common stock, par value $.0001, per share
SIGA TECHNOLOGIES, INC.
FORM 10-Q
Table of Contents
Page No. | ||||
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 77,377,300 | $ | 65,249,072 | ||||
Restricted cash and cash equivalents, short-term | - | 95,737,862 | ||||||
Accounts receivable | 1,685,642 | 4,167,996 | ||||||
Inventory | 16,342,014 | 9,652,855 | ||||||
Prepaid expenses and other current assets | 2,617,852 | 5,234,000 | ||||||
Total current assets | 98,022,808 | 180,041,785 | ||||||
Property, plant and equipment, net | 2,500,641 | 2,618,303 | ||||||
Deferred tax assets, net | 16,304,697 | 14,151,002 | ||||||
Goodwill | 898,334 | 898,334 | ||||||
Other assets | 847,983 | 856,766 | ||||||
Total assets | $ | 118,574,463 | $ | 198,566,190 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 4,765,817 | $ | 3,054,032 | ||||
Accrued expenses and other current liabilities | 16,658,698 | 8,636,911 | ||||||
| Total debt, current | - | 80,044,866 | ||||||
Total current liabilities | 21,424,515 | 91,735,809 | ||||||
Warrant liability | 6,132,947 | 6,116,882 | ||||||
Other liabilities | 2,874,879 | 2,929,743 | ||||||
Total liabilities | 30,432,341 | 100,782,434 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Common stock ($.0001 par value, 600,000,000 shares authorized, 81,047,424 and 81,269,868 issued and outstanding at March 31, 2020, and December 31, 2019, respectively) | 8,105 | 8,127 | ||||||
Additional paid-in capital | 221,057,307 | 220,808,037 | ||||||
Accumulated deficit | (132,923,290 | ) | (123,032,408 | ) | ||||
Total stockholders’ equity | 88,142,122 | 97,783,756 | ||||||
Total liabilities and stockholders’ equity | $ | 118,574,463 | $ | 198,566,190 | ||||
| September 30, 2017 | December 31, 2016 | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 25,798,125 | $ | 28,701,824 | |||
| Restricted cash and cash equivalents, short-term | 10,408,810 | 10,138,890 | |||||
| Accounts receivable | 612,166 | 3,154,370 | |||||
| Inventory | 2,983,249 | 26,209,964 | |||||
| Prepaid expenses and other current assets | 1,092,396 | 954,426 | |||||
| Total current assets | $ | 40,894,746 | $ | 69,159,474 | |||
| Property, plant and equipment, net | 119,735 | 299,477 | |||||
| Restricted cash and cash equivalents, long-term | 9,430,016 | 17,333,332 | |||||
| Deferred costs | 96,741,244 | 72,649,277 | |||||
| Goodwill | 898,334 | 898,334 | |||||
| Other assets | 642,083 | 642,083 | |||||
| Total assets | $ | 148,726,158 | $ | 160,981,977 | |||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 1,362,331 | $ | 2,517,072 | |||
| Accrued expenses and other current liabilities | 4,320,994 | 4,584,752 | |||||
| Warrant liability | 7,355,033 | 6,727,409 | |||||
| Total current liabilities | 13,038,358 | 13,829,233 | |||||
| Deferred revenue | 377,447,093 | 367,483,905 | |||||
| Deferred income tax liability, net | 306,449 | 286,066 | |||||
| Other liabilities | 844,407 | 247,989 | |||||
| Long-term debt | 69,916,765 | 66,553,053 | |||||
| Total liabilities | 461,553,072 | 448,400,246 | |||||
| Commitments and Contingencies | |||||||
| Stockholders’ deficiency | |||||||
| Common stock ($.0001 par value, 600,000,000 shares authorized, 78,908,929 and 78,692,612 issued and outstanding at September 30, 2017, and December 31, 2016, respectively) | 7,890 | 7,869 | |||||
| Additional paid-in capital | 214,238,249 | 213,714,154 | |||||
| Accumulated deficit | (527,073,053 | ) | (501,140,292 | ) | |||
| Total stockholders’ deficiency | (312,826,914 | ) | (287,418,269 | ) | |||
| Total liabilities and stockholders’ deficiency | $ | 148,726,158 | $ | 160,981,977 | |||
The accompanying notes are an integral part of these financial statements.
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSINCOME (LOSS) (UNAUDITED)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenues | ||||||||
Product sales and supportive services | $ | 113,009 | $ | 7,142,400 | ||||
Research and development | 2,506,756 | 3,316,684 | ||||||
Total revenues | 2,619,765 | 10,459,084 | ||||||
Operating expenses | ||||||||
Cost of sales and supportive services | 109,094 | 915,367 | ||||||
Selling, general and administrative | 3,176,024 | 3,166,566 | ||||||
Research and development | 3,150,105 | 3,997,281 | ||||||
Patent expenses | 182,597 | 187,916 | ||||||
Total operating expenses | 6,617,820 | 8,267,130 | ||||||
Operating (loss) income | (3,998,055 | ) | 2,191,954 | |||||
(Loss) gain from change in fair value of warrant liability | (16,065 | ) | 3,136,265 | |||||
| Loss on extinguishment of Term Loan | (4,981,461 | ) | - | |||||
Interest expense | (3,016,817 | ) | (3,928,418 | ) | ||||
Other income, net | 412,363 | 736,129 | ||||||
(Loss) income before income taxes | (11,600,035 | ) | 2,135,930 | |||||
Benefit (provision) for income taxes | 2,702,506 | (506,153 | ) | |||||
Net and comprehensive (loss) income | $ | (8,897,529 | ) | $ | 1,629,777 | |||
Basic (loss) income per share | $ | (0.11 | ) | $ | 0.02 | |||
Diluted (loss) per share | $ | (0.11 | ) | �� | $ | (0.02 | ) | |
Weighted average shares outstanding: basic | 81,240,105 | 80,913,320 | ||||||
Weighted average shares outstanding: diluted | 81,240,105 | 82,139,108 | ||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | |||||||||||||||
| Research and development | $ | 1,390,254 | $ | 4,658,355 | $ | 10,856,601 | $ | 7,829,402 | |||||||
| Operating expenses | |||||||||||||||
| Selling, general and administrative | 3,093,926 | 2,855,255 | 9,022,039 | 9,276,507 | |||||||||||
| Research and development | 2,470,835 | 6,068,567 | 13,899,162 | 11,553,469 | |||||||||||
| Patent expenses | 250,857 | 230,246 | 688,471 | 689,651 | |||||||||||
| Lease termination | 1,225,421 | — | 1,225,421 | — | |||||||||||
| Interest on PharmAthene liability | — | 3,566,451 | — | 10,716,276 | |||||||||||
| Total operating expenses | 7,041,039 | 12,720,519 | 24,835,093 | 32,235,903 | |||||||||||
| Operating loss | (5,650,785 | ) | (8,062,164 | ) | (13,978,492 | ) | (24,406,501 | ) | |||||||
| Interest expense | (3,737,175 | ) | (94,776 | ) | (10,995,900 | ) | (104,991 | ) | |||||||
| Loss from change in fair value of warrant liabilities | (295,771 | ) | (1,121,530 | ) | (627,624 | ) | (1,121,530 | ) | |||||||
| Other income, net | 2,021 | 30,756 | 11,818 | 100,556 | |||||||||||
| Reorganization items, net | — | — | — | (3,716,902 | ) | ||||||||||
| Loss before income taxes | (9,681,710 | ) | (9,247,714 | ) | (25,590,198 | ) | (29,249,368 | ) | |||||||
| (Provision)/Benefit for income taxes | (134,668 | ) | 4,072 | (342,563 | ) | (8,692 | ) | ||||||||
| Net and comprehensive loss | $ | (9,816,378 | ) | $ | (9,243,642 | ) | $ | (25,932,761 | ) | $ | (29,258,060 | ) | |||
| Loss per share: basic and diluted | $ | (0.12 | ) | $ | (0.17 | ) | $ | (0.33 | ) | $ | (0.54 | ) | |||
| Weighted average shares outstanding: basic and diluted | 78,908,929 | 54,284,296 | 78,842,611 | 54,205,354 | |||||||||||
The accompanying notes are an integral part of these financial statements.
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss)/income | $ | (8,897,529 | ) | $ | 1,629,777 | |||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities: | ||||||||
Depreciation and other amortization | 133,163 | 137,724 | ||||||
Loss/(gain) on change in fair value of warrant liability | 16,065 | (3,136,265 | ) | |||||
Stock-based compensation | 259,016 | 408,894 | ||||||
Deferred income taxes, net | (2,153,695 | ) | 505,678 | |||||
| Loss on extinguishment of Term Loan | 4,981,461 | - | ||||||
Non-cash interest expense | 887,132 | 1,108,916 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 2,482,354 | (2,140,821 | ) | |||||
Inventory | (4,086,487 | ) | 891,133 | |||||
Prepaid expenses and other assets | 22,259 | 508,400 | ||||||
Accounts payable, accrued expenses and other liabilities | (1,624,681 | ) | (1,181,885 | ) | ||||
Deferred revenue | 11,303,389 | 1,277,828 | ||||||
Net cash provided by operating activities | 3,322,447 | 9,379 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (15,501 | ) | (8,951 | ) | ||||
Net cash used in investing activities | (15,501 | ) | (8,951 | ) | ||||
Cash flows from financing activities: | ||||||||
Payment of employee tax obligations for common stock tendered | (9,746 | ) | (56,590 | ) | ||||
| Repurchase of common stock | (993,375 | ) | - | |||||
| Repayment of Term Loan | (85,913,459 | ) | - | |||||
Net cash used in financing activities | (86,916,580 | ) | (56,590 | ) | ||||
Net (decrease)/increase in cash, cash equivalents and restricted cash | (83,609,634 | ) | (56,162 | ) | ||||
Cash, cash equivalents and restricted cash at the beginning of period | 160,986,934 | 180,396,910 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 77,377,300 | $ | 180,340,748 | ||||
Supplemental disclosure of non-cash activities: | ||||||||
Conversion of warrants to common stock | $ | - | $ | 1,172,801 | ||||
Issuance of common stock upon cashless exercise | $ | - | $ | 118,500 | ||||
| Nine months ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (25,932,761 | ) | $ | (29,258,060 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and other amortization | 105,212 | 130,704 | |||||
| Loss on change in fair value of warrant liability | 627,624 | 1,121,530 | |||||
| Lease termination | 1,225,421 | — | |||||
| Stock-based compensation | 773,671 | 521,666 | |||||
| Deferred income taxes, net | 20,383 | 16,246 | |||||
| Write down of inventory, net | 536,000 | — | |||||
| Non-cash interest expense | 3,363,712 | — | |||||
| Interest expense on term loan - paid with restricted cash | 7,633,396 | — | |||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | 2,542,204 | (35,070,347 | ) | ||||
| Inventory | 22,690,715 | (5,304,431 | ) | ||||
| Deferred costs | (24,091,967 | ) | (21,452,562 | ) | |||
| Prepaid expenses and other current assets | (137,970 | ) | (1,835,322 | ) | |||
| Other assets | — | 1,347,437 | |||||
| Accounts payable, accrued expenses and other current liabilities | (1,719,229 | ) | 385,680 | ||||
| PharmAthene liability | — | 93,654,855 | |||||
| Liabilities subject to compromise | — | (206,972,170 | ) | ||||
| Deferred revenue | 9,963,188 | 111,865,203 | |||||
| Other liabilities | (199,501 | ) | (63,171 | ) | |||
| Net cash used in operating activities | (2,599,902 | ) | (90,912,742 | ) | |||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (54,242 | ) | (10,997 | ) | |||
| Net cash used in investing activities | (54,242 | ) | (10,997 | ) | |||
| Cash flows from financing activities: | |||||||
| Net proceeds from exercise of warrants and options | 27,497 | — | |||||
| Buy back of stock options | (84,000 | ) | — | ||||
| Payments associated with loan agreement and rights offering | (1,294,501 | ) | |||||
| Payment of employee tax obligations for common stock tendered | (193,052 | ) | — | ||||
| Net cash used in financing activities | (249,555 | ) | (1,294,501 | ) | |||
| Net decrease in cash and cash equivalents | (2,903,699 | ) | (92,218,240 | ) | |||
| Cash and cash equivalents at beginning of period | 28,701,824 | 112,711,028 | |||||
| Cash and cash equivalents at end of period | $ | 25,798,125 | $ | 20,492,788 | |||
| Supplemental disclosure of cash flows information: | |||||||
| Cash interest paid on term loan from restricted cash | $ | 7,633,396 | $ | — | |||
Fair value of warrant, at issuance date, in connection with loan agreement and recorded as warrant liability | — | (5,832,624 | ) | ||||
The accompanying notes are an integral part of these financial statements
SIGA TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements are presented 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 audited financial statements and notes thereto for the year ended December 31, 2016,2019, included in the 20162019 Annual Report on Form 10-K. All terms used but not defined elsewhere herein have the meaning ascribed to them in the Company’s 20162019 Annual Report on Form 10-K filed on March 7, 2017.5, 2020. 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 20162019 year-end condensed consolidated balance sheet data waswere derived from the audited financial statements but doesdo not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2017March 31, 2020 are not necessarily indicative of the results expected for the full year.
2. Summary of Chapter 11 Case
Revenue Recognition
All of the Company’s revenue is derived from long-term contracts that span multiple years. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). A contract’s transaction price is allocated to distinct performance obligations and recognized as revenue when, or as, a performance obligation is satisfied. As of March 31, 2020, the Company's active performance obligations, for the contracts outlined in Note 3, consist of the following: five performance obligations relate to research and development services; one relates to manufacture and delivery of product; and one is associated with storage of product. The aggregate amount of transaction price allocated to remaining performance obligations was $47.0 million as of March 31, 2020. Remaining performance obligations represent the transaction price for which work has not been performed and excludes unexercised contract options.
Contract Balances
The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the condensed consolidated balance sheets. Generally, amounts are billed as work progresses in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones. Under typical payment terms of fixed price arrangements, the customer pays the Company emergedeither performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such payments occur within a short period of time from chapter 11billing. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the three months ended March 31, 2020, the Company recognized revenue of $0.1 million that was included in deferred revenue at the beginning of the Bankruptcy Code whenperiod.
Restricted Cash and Cash Equivalents
On March 13, 2020, the Company's planCompany repaid its Term Loan and restrictions on certain cash accounts were removed. Prior to the repayment of reorganization (the “Plan”) became effective, andthe Term Loan, there were restrictions on December 22, 2016 the Company's chapter 11 case was closed by the Bankruptcy Court.certain cash accounts. Under the Plan, the Company fully paid all of its claims. The Company did not apply the provision of fresh start accounting as ownership of existing sharesterms of the Company's common stock remained unaltered by the Plan.
The following tables reconcile cash, cash equivalents and restricted cash per the condensed consolidated statements of cash flows to the condensed consolidated balance sheet for each respective period:
As of | ||||||||
March 31, 2020 | December 31, 2019 | |||||||
Cash and cash equivalents | $ | 77,377,300 | $ | 65,249,072 | ||||
Restricted cash-short term | — | 95,737,862 | ||||||
| Cash, cash equivalents and restricted cash | $ | 77,377,300 | $ | 160,986,934 | ||||
March 31, 2019 | December 31, 2018 | |||||||
Cash and cash equivalents | $ | 102,085,215 | $ | 100,652,809 | ||||
Restricted cash-short term | 11,461,290 | 11,452,078 | ||||||
Restricted cash-long term | 66,794,243 | 68,292,023 | ||||||
Cash, cash equivalents and restricted cash | $ | 180,340,748 | $ | 180,396,910 | ||||
Repurchase of shares
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a debtor-in-possession under chapter 11,deduction from equity. The excess of the purchase price above par value of repurchased shares that are retired is presented as an increase to accumulated deficit (or a reduction of retained earnings, if any).
3. Procurement Contracts and Research Agreements
19C BARDA Contract
On September 10, 2018, the Company pursued an appealentered into a contract with the U.S. Biomedical Advanced Research and Development Authority ("BARDA") pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile"), and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of the Delaware Courtintravenous (IV) formulation of Chancery Final OrderTPOXX® ("IV TPOXX®"). Additionally, the contract includes funding from BARDA for advanced development of IV TPOXX®, post-marketing activities for oral and Judgment, without havingIV TPOXX®, and procurement activities. As of April 29, 2020, the contract with BARDA (as amended, modified, or supplemented from time to post a bond.
The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of 20,000 courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance ("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments of approximately $0.6 million for supportive procurement activities. As of March 31, 2020, the Company had received $11.1 million for the successful delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $4.7 million for other base period activities. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received for the manufacture of IV BDS has been recorded as deferred revenue as of March 31, 2020 and December 31, 2019; such amount is expected to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-managed inventory.
The options that have been exercised to date provide for additional potential payments up to approximately $127.1 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®, payments up to $101.3 million for the delivery of up to 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®, of which, $2.3 million had been received as of March 31, 2020. The $11.2 million received for the procurement of raw materials has been recorded as deferred revenue as of March 31, 2020; such amount is expected to be recognized as revenue when oral TPOXX® formulated with PharmAthene. Insuch materials is delivered to the Strategic Stockpile or placed in vendor-managed inventory.
Unexercised options specify potential payments up to approximately $423.7 million in total PharmAthene was(if all such options are exercised). There are options for the following activities: payments of up to $337.7 million for the delivery of up to approximately 1,089,000 courses of oral TPOXX® to the Strategic Stockpile; payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid $217.0upon the manufacture of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV TPOXX®; and payments of up to approximately $5.6 million for supportive procurement activities.
The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drug substance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP Options”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing for 64,000 courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV FDP Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
Revenues in connection with the Outstanding Judgment. See
2011 BARDA Contract
On May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oral TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.
The accompanying consolidated financial statementscontract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract") includes a base contract, as modified, ("2011 Base Contract") as well as options. The 2011 Base Contract specifies approximately $508.4 million of payments (including exercised options), of which, as of March 31, 2020, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of oral TPOXX® and $45.1 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $3.5 million remains eligible to be received in the future for reimbursements of development and supportive activities.
For courses of oral TPOXX® that have been prepared assumingphysically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product replacement obligations, including: (i) a product replacement obligation in the event that the Company will continue asfinal version of oral TPOXX® approved by the FDA was different from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the “FDA Approval Replacement Obligation”); (ii) a going concern and contemplate the realization of assets and the satisfaction of liabilitiesproduct replacement obligation, at no cost to BARDA, in the normal courseevent that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a product replacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July 13, 2018, the FDA approved oral TPOXX® for the treatment of business. The Company is not entitled to receive any additional procurement-related payments under the current BARDA Contract (Note 3) if and until U.S. Food and Drug Administration (“FDA”) approval of TPOXX® has been achieved,smallpox and there is no difference between the approved product and courses of TPOXX® which have been delivered to the U.S. Strategic National Stockpile (“Strategic Stockpile”). Upon meeting these requirements, the Company is entitled to a $41 million hold back payment under the BARDA Contract. Based on a targeted New Drug Application (“NDA”) filing for TPOXX® by the end of 2017, it is currently anticipated that the Company will be eligible to receive the $41 million hold back payment in the second half of 2018.
The 2011 BARDA Contract or a significant reduction ofincludes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its operating expenses or operations, or that the lenders would agreeoption relating to modify the term loan
The 2011 BARDA Contract expires in September 2020.
Revenues in connection with the 2011 BARDA Contract isare recognized either over time or at a multiple deliverable arrangement comprising delivery of courses and covered research and development activities. The BARDA Contract provides certain product replacement rights with respect to delivered courses. For this reason, recognition of revenue that might otherwise occur upon delivery of courses is expected to be deferred until the Company’spoint in time. Performance obligations related to potential replacement of delivered courses are satisfied. The Company assessedproduct delivery generate revenue at a point in time. Remaining performance obligations under the selling price for each of2011 BARDA Contract generate revenue over time. For the aforementioned deliverables - researchthree months ended March 31, 2020 and development activities and drug product. The selling price of certain reimbursed research and development services was determined by reference to existing and past research and development grants and contracts between2019, the Company and various government agencies. The selling price of drug product was determined by reference to other companies’ sales of drug products such as antiviral therapeutics, orphan drugs and drugs with potential life-saving impact similar to TPOXX®, including products delivered to the Strategic Stockpile.
Research Agreements and Grants
The Company obtains funding fromhas an R&D program for IV TPOXX®. This program is funded by the contracts19C BARDA Contract and grants it obtains from various agencies of the U.S. Government to support its research anda development activities. Currently, the Company has one contract with an expiration dateBARDA (“IV Formulation R&D Contract”). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020 and one grant with an expiration date2020. As of April 30, 2018, which in combination provideMarch 31, 2020, the IV Formulation R&D Contract provides for potential future aggregate research and development funding for specific projects of approximately $15.4$2.6 million. During
Revenues in connection with the IV Formulation R&D Contract are recognized over time. For the three months ended March 31, 2017,2020 and 2019, the Company recognized revenue of $0.4 million and $1.9 million, respectively, under this contract.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from the United States Department of Defense ("DoD") to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract was amendedreferred to increaseas the available funding for"PEP Label Expansion R&D Contract"). The term of the R&D program relatedinitial award is five years. In February 2020, the DoD increased the value of the award to the IV formulationtotal contract value of TPOXX® by$19.5 million. As of March 31, 2020 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the initial award of approximately $10.1$19.2 million. For the three months ended March 31, 2020, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of less than $0.1 million on an over time basis.
Contracts and to extend the end date of the period of performance from June 30, 2020 to December 30, 2020.
4.Inventory
Inventory includes costs related to the deferralmanufacture of revenue under the BARDA Contract (see
As of | ||||||||
March 31, 2020 | December 31, 2019 | |||||||
| Raw materials | $ | 2,602,672 | $ | - | ||||
Work in-process | 12,779,944 | 8,693,457 | ||||||
Finished goods | 959,398 | 959,398 | ||||||
Inventory | $ | 16,342,014 | $ | 9,652,855 | ||||
| As of | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| Work in-process | $ | 2,025,445 | $ | 18,916,084 | |||
| Finished goods | 957,804 | 7,293,880 | |||||
| Inventory | $ | 2,983,249 | $ | 26,209,964 | |||
5.Property, Plant and Equipment
Property, plant and equipment consisted of the following:
As of | ||||||||
March 31, 2020 | December 31, 2019 | |||||||
Leasehold improvements | $ | 2,420,028 | $ | 2,420,028 | ||||
Computer equipment | 617,298 | 601,797 | ||||||
Furniture and fixtures | 377,859 | 377,859 | ||||||
Operating lease right-of-use assets | 2,944,932 | 2,944,932 | ||||||
| 6,360,117 | 6,344,616 | |||||||
Less - accumulated depreciation and amortization | (3,859,476 | ) | (3,726,313 | ) | ||||
Property, plant and equipment, net | $ | 2,500,641 | $ | 2,618,303 | ||||
| As of | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| Leasehold improvements | $ | 2,420,028 | $ | 2,542,044 | |||
| Computer equipment | 655,880 | 770,479 | |||||
| Furniture and fixtures | 363,588 | 455,220 | |||||
| 3,439,496 | 3,767,743 | ||||||
| Less - accumulated depreciation | (3,319,761 | ) | (3,468,266 | ) | |||
| Property, plant and equipment, net | $ | 119,735 | $ | 299,477 | |||
Depreciation and amortization expense on property, plant, and equipment was $29,375$133,163 and $42,660$137,724 for the three months ended September 30, 2017March 31, 2020 and 2016, respectively, and was $105,212 and $130,704 for nine months ended September 30, 2017 and 2016,2019, respectively. In connection with the lease termination discussed in
6.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of | ||||||||
March 31, 2020 | December 31, 2019 | |||||||
Compensation | $ | 955,494 | $ | 2,966,139 | ||||
Deferred revenue | 13,601,728 | 2,298,341 | ||||||
Interest payable | — | 977,724 | ||||||
Lease liability, current portion | 427,064 | 419,709 | ||||||
Research and development vendor costs | 231,832 | 707,685 | ||||||
Professional fees | 401,073 | 288,707 | ||||||
Vacation | 340,242 | 256,402 | ||||||
Other | 701,265 | 722,204 | ||||||
Accrued expenses and other current liabilities | $ | 16,658,698 | $ | 8,636,911 | ||||
| As of | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| Bonus | $ | 1,676,745 | $ | 2,357,194 | |||
| Professional fees | 661,194 | 481,641 | |||||
| Vacation | 333,675 | 262,664 | |||||
| Other (primarily R&D vendors and CMOs) | 1,649,380 | 1,483,253 | |||||
| Accrued expenses and other current liabilities | $ | 4,320,994 | $ | 4,584,752 | |||
2016 Warrant
On September 2, 2016, in connection with the entry into the Loan Agreement (see
Note 8 for additional information), the Company issued a warrant (theThe Company accounted for the Warrant in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain anti-dilution and cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities. Accordingly, theThe Company classified the Warrant as a liability and reportedreports the change in fair value in the statement of operations.
As of the Warrant,March 31, 2020, the fair value of the liability classified Warrant was $5.8 million.$6.1 million. The Company applied a Monte Carlo Simulation-model to calculate the fair value of the liability classifiedliability-classified Warrant was calculated using the following assumptions: risk free interest rate of 1.60%0.50%; no dividend yield; an expected life of 10 years;6.42 years; and a volatility factor of 80%75%.
8. The Company compared the Monte Carlo simulation model calculation to a Black-Scholes model calculation. These models generated substantially equal fair values for the Warrant. As such,Debt
On March 13, 2020, the Company utilized a Black-Scholes model for September 30, 2017 to determine the fair value of the Warrant.
On September 2, 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Loan Agreement”) with OCM Strategic Credit SIGTEC Holdings, LLC (“Lender”), pursuant to which the Company received $80.0 million (the "Term Loan") (less fees and other items) on November 16, 2016 having satisfied certain pre-conditions. Such $80.0 million had been placed in an escrow account on September 30, 2016 (the “Escrow Funding Date”). Prior to the Escrow Release Date (November 16, 2016), the Company did not have access to, or any ownership interest in, the escrow account. Until the Escrow Release Date occurred, the Company did not have an obligation to make any payments under the Loan Agreement, no security was granted under the Loan Agreement and no affirmative or negative covenants or events of default were effective under the Loan Agreement. Amounts were held in the escrow account until the satisfaction of certain conditions including the closing of the Rights Offering on November 16, 2016. As part of the satisfaction of the PharmAthenea litigation claim, funds were released from the escrow account (the date on which such transfer occurred, the “Escrow Release Date”).
The Term Loan shall maturehad a maturity date on the earliest to occur of (i) the four yearfour-year anniversary of the Escrow Release Date, and (ii) the acceleration of certain obligations pursuant to the Loan Agreement. At maturity, $80.0 million of principal will be repaid, and an additional $4.0 million will be paid (see below). Prior to maturity, there are no scheduled principal payments.
Through the three and one-half year anniversary (May 17, 2020) of the Escrow Release Date, any prepayment of the Term Loan iswas subject to a make-whole provision in which interest payments related to the prepaid amount arewere due (subject to a discount of treasury rate plus 0.50%).
In connection with the Term Loan, the Company has granted the Lender a lien on and security interest in allissuance of the Company’s right, title and interest in substantially all of the Company’s tangible and intangible assets, including all intellectual property.
9.Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, restricted cash, and cash equivalents,accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilitiesa liability are recorded at their fair market value as of each reporting period.
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.
The Company uses model-derived valuations where certain inputs are unobservable to third parties to determine the fair value of certain common stock warrants on a recurring basis and classifyclassifies such liability classifiedliability-classified warrants in Level 3. As described in
There were no transfers between levels of the fair value hierarchy for the ninethree months ended September 30, 2017
The following table presents changes in the liability classifiedliability-classified warrant measured at fair value using Level 3 inputs:
Fair Value Measurements of Level 3 liability-classified warrant | ||||
Warrant liability at December 31, 2019 | $ | 6,116,882 | ||
Increase in fair value of warrant liability | 16,065 | |||
Exercise of warrants | — | |||
Warrant liability at March 31, 2020 | $ | 6,132,947 | ||
| Fair Value Measurements of Level 3 liability classified warrant | |||
| Warrant liability at December 31, 2016 | $ | 6,727,409 | |
| Increase in fair value of warrant liability | 627,624 | ||
| Warrant liability at September 30, 2017 | $ | 7,355,033 | |
The Company computes, presents and discloses earnings per share in accordance with the authoritative guidance which specifies the computation, presentation and disclosure requirements for earnings per share of entities with publicly held common stock or potential common stock. 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, except that it also gives effect to all potentially dilutive common shares outstanding during the period.
The following is a reconciliation of the basic and diluted loss per share computation:
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net (loss)/income for basic earnings per share | $ | (8,897,529 | ) | $ | 1,629,777 | |||
Less: Change in fair value of warrants | — | (3,136,265 | ) | |||||
Net (loss)/income, adjusted for change in fair value of warrants for diluted earnings per share | $ | (8,897,529 | ) | $ | (1,506,488 | ) | ||
Weighted-average shares | 81,240,105 | 80,913,320 | ||||||
Effect of potential common shares | — | 1,225,788 | ||||||
Weighted-average shares: diluted | 81,240,105 | 82,139,108 | ||||||
(Loss)/income per share: basic | $ | (0.11 | ) | $ | 0.02 | |||
(Loss) per share: diluted | $ | (0.11 | ) | $ | (0.02 | ) | ||
For the three months ended March 31, 2019, the diluted earnings per share calculation reflects the effect of the assumed exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. Weighted-average diluted shares include the dilutive effect of warrants. The dilutive effect of warrants is calculated based on the average share price for each fiscal period using the treasury stock method.
The Company incurred losses for the three and nine months ended September 30, 2017March 31, 2020 and 2016 and aslosses adjusted for the change in the fair value of warrants for the three months ended March 31, 2019. As a result, the equity instruments listed below arewere excluded from the calculation of diluted earningsincome (loss) per share as the effect of the exercise, conversion or vesting of such instruments would be anti-dilutive. The weighted average number of equity instruments excluded consistsconsisted of:
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Stock options | 280,835 | 377,011 | ||||||
Stock-settled stock appreciation rights | — | 6,756 | ||||||
Restricted stock units | 236,848 | 509,411 | ||||||
Warrants | 1,547,296 | — | ||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||
| Stock Options | 1,200,123 | 1,756,967 | 1,485,466 | 1,802,277 | ||||||||||
| Stock-Settled Stock Appreciation Rights | 360,031 | 360,031 | 360,031 | 360,125 | ||||||||||
| Restricted Stock Units | 1,472,001 | 586,675 | (1 | ) | 1,371,364 | 603,427 | ||||||||
| Warrants | 2,690,950 | 840,579 | (2 | ) | 2,690,950 | 282,238 | (2 | ) | ||||||
The appreciation of each stock-settled stock appreciation right was capped at a determined maximum value. As a result, the weighted average number shown in the table above for stock-settled stock appreciation rights reflectsreflected the weighted average maximum number of shares that could be issued.
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although such claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any, will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Purchase Commitments
In the course of our business, the Company regularly enters into agreements with third party organizations to provide contract manufacturing services and research and development services. Under these agreements, the Company issues purchase orders which obligate the Company to pay a specified price when agreed-upon services are performed. Commitments under the purchase orders do not exceed our planned commercial and research and development needs. As of March 31, 2020, the Company had approximately $22.5 million of purchase commitments.
12.Related Party Transactions
Board of Directors and Outside Counsel
A member of the Company’s Board of Directors is a member ofpartner at the Company’s outside counsel. During the three months ended September 30, 2017March 31, 2020 and 2016,2019, the Company incurred expenses of $82,000 and $528,000, respectively, related to services provided by the outside counsel. During the nine months ended September 30, 2017 and 2016, the Company incurred expenses of $298,000 and $1,066,000, respectively,$117,000 and $113,000, respectively, related to services provided by the outside counsel. On September 30, 2017March 31, 2020 the Company’s outstanding payables and accrued expenses included an approximate $78,000 liability to the outside counsel.
Board of Directors-Consulting Agreement
On October 13, 2018, the Company, entered into a consulting agreement with Dr. Eric A. Rose, a member, and former Executive Chairman, of the Company’s Board of Directors. Under the agreement, the consulting services will include assisting the Company on expanded indications for TPOXX® and other business development opportunities as requested by the Company. The term of the agreement is for two years, with compensation for such services at an annual rate of $200,000. During the three months ended March 31, 2020 and 2019, the Company incurred $50,000 related to services under this agreement. As of March 31, 2020, the Company’s outstanding payables and accrued expenses included a $76,000$50,000 liability to the outside counsel.
Real Estate Leases
On May 26, 2017, the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a ten-year Office Lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at 2731 East 62
On July 31, 2017, the Company and M&F entered into a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”), pursuant to which the Company and M&F agreed to terminate the sublease dated January 9, 2013 for 6,676 square feet of rental square footage located at 660 Madison Avenue, Suite 1700, New York, New York (such sublease being the
Effectiveness of the Old HQ Sublease Termination Agreement was conditioned upon the commencement of a sublease for the Old HQ between M&F and a new subtenant (the “Replacement M&F Sublease”), which occurred on August 2, 2017. The Old HQ Sublease Termination Agreement obligates the Company to pay, on a monthly basis, an amount equal to the discrepancy (the “Rent Discrepancy”) between the sum of certain operating expenses and taxes (“Additional Rent”) and fixed rent and Additional Rent (as defined below) under the Old HQ Overlease (as defined below)overlease between M&F and the landlord at 660 Madison Avenue and the sum of Additional Rent and fixed rent and Additional Rent under the Replacement M&F Sublease. Under the Old HQ Sublease Termination Agreement, the Company and M&F release each other from any liability under the Old HQ Sublease.
Under the Old HQ Sublease, the Company was obligated to pay fixed rent of approximately $60,000 per month until August 2018 and approximately $63,400 per month thereafter until the Old HQ Sublease expiration date of August 31, 2020. Additionally, the Company was obligated to pay certain operating expenses and taxes (“("Additional Rent”Rent"), such Additional Rent being specified in the overlease between M&F and the landlord at 660 Madison Avenue (the “Old"Old HQ Overlease”Overlease").
Under the Replacement M&F Sublease, the subtenant’s rental obligations arewere excused for the first two (2) months of the lease term (“Rent Concession Period
For the time period between August 2, 2017 and August 31, 2020 (the expiration date of the Old HQ Sublease), the Company estimates that it will pay a total of approximately $0.9 million combined in fixed rent and additional amounts payable under the New HQ Lease and a total of approximately $1.1 million in Rent Discrepancy under the Old HQ Sublease Termination Agreement, for a cumulative total of $2.0 million. In contrast, fixed rent and estimated Additional Rent under the Old HQ Sublease, for the aforementioned time period, would have been a total of approximately $2.4 million if each of the New HQ Lease, Replacement M&F Sublease and Old HQ Sublease Termination Agreement had not been entered into by each of the parties thereto. Because amounts such as operating expenses and taxes may vary, the foregoing totals can only be estimated at this time and are subject to change.
As a result of the above-mentioned transactions, the Company has discontinued usage of Old HQ in the third quarter of 2017. As such, during the three monthsyear ended September 30,December 31, 2017 the Company recorded a loss of approximately $1.1 million in accordance with Accounting Standards Codification (
13.Income Taxes
The following table summarizes activity relatingCompany’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the liabilityCOVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (ii) enacted a technical correction so that wasqualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes (iv) enhanced recoverability of AMT tax credit carryforwards. As a result of the CARES Act, the Company recorded a discrete income tax benefit of approximately $19,000 related to a reduction in 2019 state and local taxes as a result of increased deductions and recorded a balance sheet reclassification to reflect an income tax receivable of $0.7 million related to the lease termination:accelerated recoverability of AMT credit carryforwards with a corresponding reduction to the Company’s deferred tax assets.
For the three months ended March 31, 2020 and 2019, we incurred pre-tax (loss)/income of ($11.6) million and $2.1 million, respectively, and a corresponding income tax benefit (provision) of $2.7 million and ($0.5) million, respectively.
The effective tax rate for the three months ended March 31, 2020 was 23.3% compared to 23.7% in the comparable prior period. The effective tax rate for the three months ended March 31, 2020 and 2019 differs from the U.S. statutory rate of 21% primarily as a result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
14. Equity
The tables below present changes in stockholders' equity for the three months ended March 31, 2020 and 2019.
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2019 | 81,269,868 | $ | 8,127 | $ | 220,808,037 | $ | (123,032,408 | ) | $ | — | $ | 97,783,756 | ||||||||||||
| Net loss | — | — | (8,897,529 | ) | — | (8,897,529 | ) | |||||||||||||||||
Repurchase of common stock | (225,094 | ) | (22 | ) | — | (993,353 | ) | — | (993,375 | ) | ||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (1,892 | ) | — | (9,746 | ) | — | — | (9,746 | ) | |||||||||||||||
Issuance of common stock upon vesting of RSUs | 4,542 | — | — | — | - | |||||||||||||||||||
Stock-based compensation | — | — | 259,016 | — | — | 259,016 | ||||||||||||||||||
Balances at March 31, 2020 | 81,047,424 | $ | 8,105 | $ | 221,057,307 | $ | (132,923,290 | ) | $ | — | $ | 88,142,122 | ||||||||||||
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2018 | 80,763,350 | $ | 8,076 | $ | 218,697,872 | $ | (115,791,261 | ) | $ | — | $ | 102,914,687 | ||||||||||||
Net income | — | — | — | 1,629,777 | — | 1,629,777 | ||||||||||||||||||
Issuance of common stock upon exercise of stock options | 9,769 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Issuance of common stock upon exercise of stock-settled appreciation rights | 16,771 | 2 | (2 | ) | — | — | — | |||||||||||||||||
Issuance of common stock upon exercise of warrants | 159,782 | 16 | 1,172,785 | — | — | 1,172,801 | ||||||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (8,148 | ) | (1 | ) | (56,589 | ) | — | — | (56,590 | ) | ||||||||||||||
Stock-based compensation | — | — | 408,894 | — | — | 408,894 | ||||||||||||||||||
Balances at March 31, 2019 | $ | 80,941,524 | $ | 8,094 | $ | 220,222,959 | $ | (114,161,484 | ) | $ | — | $ | 106,069,569 | |||||||||||
| Lease Termination liability | |||
| Balance at December 31, 2016 | $ | — | |
| Charges (recorded in the quarter ended September 30) | 1,096,648 | ||
| Cash payments, net of sublease income | (206,457 | ) | |
| Balance at September 30, 2017 | $ | 890,191 | |
On March 5, 2020, the Company announced that the board of September 30, 2017, approximately $0.6directors had authorized a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $50 million of the Company's common stock through December 31, 2021. The timing and actual number of shares repurchased will depend on a variety of factors, including: exercise of procurement options under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; and other corporate liquidity requirements and priorities. Repurchases under the program may be made from time to time at the Company’s discretion in open market transactions, through block trades, in privately negotiated transactions, and pursuant to any trading plan that may be adopted by the Company’s management in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or otherwise. During the three-month period ended March 31, 2020, the Company repurchased 225,094 shares of common stock for approximately $1 million.
15. Leases
The Company leases its Corvallis, Oregon, facilities and office space under an operating lease terminationwhich was signed on November 3, 2017 and commenced on January 1, 2018. The initial term of this lease was to expire on December 31, 2019 after which the Company has two successive renewal options; one for two years and the other for three years. In the second quarter of 2019, the Company exercised the first renewal option, which extended the lease expiration date to December 31, 2021.
On May 26, 2017 the Company and M&F entered into a ten-year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet in New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company has no leases that qualify as finance leases.
Operating lease costs totaled $0.1 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.1 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, the weighted-average remaining lease term of the Company’s operating leases was 6.10 years while the weighted-average discount rate was 4.53%.
Future undiscounted cash flows under operating leases as of March 31, 2020 are expected to be as follows:
2020 | $ | 396,034 | ||
2021 | 600,362 | |||
2022 | 368,467 | |||
2023 | 402,078 | |||
2024 | 404,258 | |||
Thereafter | 982,880 | |||
Total undiscounted cash flows under leases | 3,154,079 | |||
Less: Imputed interest | (449,481 | ) | ||
Present value of lease liabilities | $ | 2,704,598 |
As of March 31, 2020, approximately $2.3 million of the lease liability is included in otherOther liabilities on the Condensed Consolidated Balance sheet.
| Nine months ended September 30, | ||||
| 2016 | ||||
| Legal fees | $ | 1,951,381 | ||
| Professional fees | 1,732,521 | |||
| Trustee fees | $ | 33,000 | ||
| Total | $ | 3,716,902 | ||
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes to those statements and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. 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
We are a commercial-stage pharmaceutical company specializing infocused on the developmenthealth security market. Health security comprises countermeasures for biological, chemical, radiological and commercialization of solutionsnuclear attacks (biodefense market), vaccines and therapies for serious unmet medical needsemerging infectious diseases, and biothreats.health preparedness. Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an orally administered antiviral drug for the treatment of human smallpox disease caused by variola virus.
COVID-19 Pandemic
The COVID-19 pandemic has caused significant societal and economic disruption. Such disruption, and the associated risks and costs, are expected to continue for an indeterminate period of time. Given the uncertain future course of the COVID-19 pandemic, and the uncertain scale and scope of its future impact, the Company is continually reviewing business and financial risks related to the pandemic and seeking coordination with its government partners with respect to the performance of current and future government contracts. Additionally, the Company is coordinating with service providers and vendors, in particular CMOs that targets orthopoxvirus infections, including smallpox. While TPOXX® is not yet approved as safe or effectiveconstitute our supply chain, to review actions and risks caused by the U.S. Food & Drug Administration, it is a novel small-molecule drug that is being deliveredCOVID-19 pandemic.
As of the filing date of this document, the Company has not identified or been notified by government customers of impediments to the Strategic National Stockpilecontinued full performance of their government contracts. Additionally, the Company’s supply chain for the manufacture of TPOXX® has remained operational without material disruption to TPOXX®-related manufacture, and in the ordinary course of operations, the supply chain has secured sufficient raw materials to support the ultimate manufacture and product delivery of at least 363,000 courses of oral TPOXX® (number of courses specified in April 2020 option exercise under Project Bioshield.
Overall, the COVID-19 pandemic has not adversely affected the liquidity position of the Company, nor is it currently expected to have a material adverse effect on the financial condition or financial results of the Company. The pandemic has resulted in connectionalmost all of our employees working from home; however, the shift in location for employees has not had a material adverse impact on the day-to-day operations of the Company. If the negative effect of the COVID-19 pandemic is prolonged, there could be risks to our business and cash flows.
BARDA Contracts-TPOXX®
19C BARDA Contract
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 19C BARDA Contract and a separate development contract with BARDA ("IV Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As of March 31, 2020, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $2.6 million. See Note 3 to the condensed consolidated financial statements regarding the 19C BARDA Contract.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an investigational productinitial award of $12.4 million, from the United States Department of Defense ("DoD") to support work in pursuit of a potential label expansion for oral TPOXX® that is not currently approved by FDA as a treatmentwould include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). The term of the initial award is five years. In February 2020, the DoD increased the value of the award to the total contract value of $19.5 million. As of March 31, 2020 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the award, as modified, of approximately $19.2 million.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts and grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at any other indication. FDAtime. As such, we may not be eligible to receive all available funds.
International Promotion of Oral TPOXX®
On April 3, 2020, the Company announced that the Canadian Department of National Defence (the “CDND”) awarded a contract (the "Canadian Contract") to Meridian Medical Technologies, Inc., a Pfizer Company ("Meridian"), pursuant to which the CDND will purchase up to 15,325 courses of oral TPOXX® over four years for a total value of $14.3 million, with an initial purchase of 2,500 courses for $2.3 million and remaining purchases, at the option of the CDND, expected to occur after regulatory approval of oral TPOXX® in Canada. Meridian is the CDND's counterparty under the Canadian Contract, and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder. The contract award was coordinated between SIGA and Meridian under the international promotion agreement (the "International Promotion Agreement") that was entered into by the parties on June 3, 2019.
Under the terms of the International Promotion Agreement, Meridian was granted exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States and South Korea (the “Territory”), and Meridian has designatedagreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified field of use in the Territory. SIGA will retain ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with TPOXX®, and, in the United States and South Korean markets, will also retain sales and marketing rights with respect to oral TPOXX®. SIGA’s consent shall be required for “fast-track” status, creatingthe entry into any sales arrangement pursuant to the International Promotion Agreement.
The fee Meridian retains pursuant to the International Promotion Agreement will be a pathspecified percentage of the collected proceeds of sales of oral TPOXX® net of certain expenses, for expedited FDA reviewyears in which customer invoiced amounts net of such expenses are less than or equal to a specified threshold, and eventual regulatory approval.a higher specified percentage of such collected net proceeds for years in which such net invoiced amounts exceed the specified threshold.
The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our condensed consolidated financial statements, which we discuss under the heading “Results of Operations” following this section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations. 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. Information regarding our critical accounting policies and estimates appears in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2019 as filed on March 5, 2020. Our most critical accounting estimates include revenue recognition, the valuation of stock-based awards including options and warrants granted or issued by the Company revenue recognition,and income taxes, and realization of deferred tax assets.
Results of Operations
Three Months Ended March 31, 2020 and Nine2019
For the three months ended September 2017March 31, 2020 and 2016
Revenues from research and development contracts and grantsactivities for the three months ended September 30, 2017March 31, 2020 and 2016,2019, were $1.4$2.5 million and $4.7$3.3 million, respectively. The decrease in revenue of approximately $3.3$0.8 million, or 70%24%, primarily reflects a decrease in revenues from our federal contracts supporting the development of TPOXX. Revenues from federal contracts supportingIV TPOXX® because the scope of development activities related to IV TPOXX® has decreased. This decrease was partially offset by an increase of approximately $1.0 million associated with oral TPOXX®. Revenue in connection with the development of TPOXX have decreasedoral TPOXX® has increased because the numberscope of development activities related to oral TPOXX® has increased.
Cost of sales and scalesupportive services for the three months ended March 31, 2020 and 2019, were $0.1 million and $0.9 million, respectively. Such costs in 2019 were associated with the delivery of studies that were activeapproximately 23,000 courses of oral TPOXX® during the quarter have decreased in comparison to the prior year.
Selling, general and 2016, were $10.9 million and $7.8 million, respectively. The increase in revenue of approximately $3.1 million, or 39%, is attributable to an increase in revenues from our federal contracts supporting the development of TPOXX. Revenues from federal contracts supporting the development of TPOXX have increased for the nine-month period because the number and scale of studies that were active in the early part of 2017 had increased in comparison to the corresponding period in the prior year.
Research and decreases in a broad array of corporate expenses. The increase in employee compensation expense is primarily due to an increase in senior management headcount.
Patent expenses were $0.2 million, in each case, for the three and nine months ended September 30, 2017 were $251,000March 31, 2020 and $688,000, respectively. Patent expenses for the three and nine months ended September 30, 2016 were $230,000 and $690,000, respectively.2019. These expenses reflect our ongoing efforts to protect our lead drug candidates in variedvarious geographic territories.
In connection with the voluntary repayment of the Term Loan on March 13, 2020, we recognized a loss on the extinguishment of the Term Loan of approximately $5.0 million for the three and nine months ended September 30, 2017 was approximately $1.2 million. This expense relates to the Old HQ Sublease Termination Agreement. See
Interest expense for the three and nine months ended September 30, 2017March 31, 2020 and 2019 was $3.7$3.0 million and $11.0$3.9 million, respectively. Interest expenseThe $3.0 million of interest for the three and nine months ended September 30, 2016 was $95,000March 31, 2020 includes $0.9 million of accretion of unamortized costs and $105,000, respectively. Interest expense in 2017 represents interest accrued onfees (prior to repayment of the Term Loan.Loan). The $11.0$3.9 million of interest expense for the ninethree months ended September 30, 2017March 31, 2019 includes a $7.6 million cash payment from restricted cash, and $3.4$1.1 million of accretion of unamortized costs and fees related to the Term Loan balance.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded within the income statement. For the three months ended March 31, 2020, we recorded a loss of approximately $16,000. For the three months ended March 31, 2019, we recorded a gain of approximately $3.1 million reflecting a decrease in the fair value of the liability-classified warrant primarily due to the decrease in our stock price.
Other income of $0.4 million for the three and nine months ended September 30, 2016 were $0March 31, 2020 reflects interest income on the Company's cash and $3.7 million, respectively. These expenses were incurredcash equivalent balances held in connection with the chapter 11 case. See
For the three and nine months ended September 30, 2017,March 31, 2020 and 2019, we incurred pre-tax losses(loss)/income of $9.7$(11.6) million and $25.6$2.1 million, respectively, and a corresponding income tax expensebenefit (provision) of $135,000$2.7 million and $343,000,($0.5) million, respectively. The effective tax rate during the three and nine months ended September 30, 2017March 31, 2020 and 2019 was (1.4)%23.3% and (1.3) %,23.7%, respectively. Our effective tax rate for the periods ended September 30, 2017March 31, 2020 and 2019 differs from the statutory rate primarily as no income tax benefit was recordeda result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for current year operating losses due to the Company’s assessment regarding tax realizabilityfair market value of its deferred tax assets. For the three and nine months ended September 30, 2016, we incurred pre-tax losses of $9.2 million and $29.2 million and corresponding income tax benefit/(expense) of approximately $4,000 and $(8,700), respectively.
Liquidity and Capital Resources
As of September 30, 2017,March 31, 2020, we had $25.8$77.4 million in unrestricted cash and cash equivalents compared with $28.7$65.2 million at December 31, 2016. As of September 30, 2017, the Company had $19.82019. Additionally, in comparison to $95.7 million of restricted cash and cash equivalents compared with $27.5 million at December 31, 2016.2019, there was no restricted cash as of March 31, 2020 given that the Term Loan was repaid in March 2020. The restricted cash is utilizedwas available to pay interest, fees and principal related to the Term Loan. The Company voluntarily prepaid the Term Loan on March 13, 2020 in an approximately aggregate amount of $87.2 million, including accrued interest. Upon repayment of the Term Loan, there are no restrictions on the use of our cash and cash equivalents.
Operating Activities
We prepare our condensed consolidated statement of cash flows using the indirect method. Under this method, we reconcile net (loss) income to cash flows from operating activities by adjusting net (loss) income for those items that impact net income (loss) but may not result in actual cash receipts or payments during the period. These reconciling items include but are not limited to stock-based compensation, loss on the extinguishment of the Term Loan, deferred income taxes, non-cash interest expense and changes in the fair value of our warrant liability, gains and losses from various transactions and changes in the condensed consolidated balance sheet for working capital from the beginning to the end of the period.
Net cash provided by operations for the three months ended March 31, 2020 and 2019 was $3.3 million and less than $0.1 million, respectively. For the three months ended March 31, 2020, we incurred $2.1 million of cash interest expense on the Term Loan, as it becomes due and $5.0used approximately $3.2 million in support of ordinary course working capital (accounts receivable, accounts payable, prepaids, among other items). Additionally, cash was used for customary operating activities. These cash uses were partially offset by the restricted cash may be withdrawn after June 30, 2018 uponreceipt of approximately $11.2 million from BARDA in connection with the satisfactionprocurement of certain conditions. See
Investing Activities
For the ninethree months ended September 30, 2017March 31, 2020 and 20162019, we used cash usagein the amounts of approximately $54,000$15,501 and $11,000,$8,951, respectively, related tofor capital expenditures.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2020 was $86.9 million, which was attributable to our voluntary prepayment of the Term Loan, of which approximately $85.9 million is recorded as a financing activity, and our repurchase of 0.2 million shares of common stock for approximately $1.0 million. Net cash used by financing activities for the ninethree months ended September 30, 2017March 31, 2019 was approximately $250,000. Cash was used$56,590, which is attributable to repurchase $193,000the payment of tax obligations for employee common stock to meet minimum statutory tax withholding requirements for restricted shares issued to employees and to buy back $84,000 of options at intrinsic value. During the nine months ended September, 30 2016, we paid approximately $1.3 million in connection with the Term Loan and Rights Offering; both of which were completed in November 2016.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Recently Issued Accounting Standards
For discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company's condensed consolidated financial statements, as well as those standards that were adopted, see
Note 2,Safe Harbor Statement
Certain statements in this Quarterly Report on Form 10-Q, including certain statements contained in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1995,1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the progress of SIGA’s development programs and time linestimelines for bringing products to market, delivering products to the U.S. Strategic National Stockpile and the enforceability of the 2011 BARDA Contract.Contract and the 19C BARDA Contract (each as defined previously, and collectively, the "BARDA Contracts") with BARDA. The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of SIGA is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that BARDA elects, in its sole discretion as permitted under the BARDA Contracts, not to exercise all, or any, of the remaining unexercised options under those contracts, (ii) the risk that SIGA may not complete performance under the BARDA Contracts on schedule or in accordance with contractual terms, (iii) the risk that the BARDA Contracts are modified or canceled at the request or requirement of the U.S. government, (iv) the risk that the nascent international biodefense market does not develop to a degree that allows SIGA to successfully market TPOXX® internationally, (v) the risk that potential products, including potential alternative uses or formulations of TPOXX® that appear promising to SIGA or its collaborators, cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (ii)(vi) 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, including from anticipated governmental contracts and grants (iv) the risk that SIGA may not complete performance under the BARDA Contract on schedule or in accordance with contractual terms, (v)uses, (vii) the risk that SIGA may not be able to secure or enforce sufficient legal rights in its products, including intellectual property protection, (vi)(viii) the risk that any challenge to SIGA’s patent and other property rights, if adversely determined, could affect SIGA’s business and, even if determined favorably, could be costly, (vii)(ix) 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 one or more protests could be filed and upheld in whole or in part or other governmental action taken, in either case leading to a delay of performance under the BARDA Contract or other governmental contracts, (ix) the risk that the BARDA Contract is modified or canceled at the request or requirement of the U.S. government, (x) the risk that the volatile and competitive nature of the biotechnology industry may hamper SIGA’s efforts to develop or market its products, (xi) the risk that changes in domestic andor foreign economic and market conditions may affect SIGA��sSIGA’s ability to advance its research or may affect its products adversely, (xii) the effect of federal, state, and foreign regulation, including drug regulation and international trade regulation, on SIGA’s businesses, (xiii) the risk that the COVID-19 pandemic could impact SIGA’s operations by disrupting SIGA’s supply chain for the manufacture of TPOXX®, causing delays in SIGA’s research and development activities, causing delays or the re-allocation of funding in connection with SIGA’s government contracts, or diverting the attention of government staff overseeing SIGA’s government contracts and (xiv) the risk that the U.S. Government'sgovernment’s responses (including inaction) to the national andor global economic situation or infectious disease such as COVID-19 may affect SIGA'sSIGA’s business adversely, as well as the risks and (xiv)uncertainties included in Item 1A “Risk Factors” on Form 10-K for the risk that some amounts received and recorded as deferred revenue ultimately many not be recognized as revenue.fiscal year ended December 31, 2019. All such forward-looking statements are current only as of the date on which such statements were made. SIGA does not undertake any obligation to update publicly any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in thisthe presentation, is set forth in SIGA’sSIGA's filings with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q and SIGA’sSIGA's Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2019, and in other documents that SIGA has filed with the SEC. SIGA urges investors and security holders to read those documents free of charge at the SEC’sSEC's Web site at http://www.sec.gov. In addition, our website can be found on the internet at www.siga.com. The website contains information about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, access www.siga.com, click on “Investor Relations” and “Financial Information.” The information contained on, or that may be accessed through, our website or any social media accounts associated with us or our personnel is not incorporated by reference into, and is not a part of, this report. Forward-looking statements are current only as of the date on which such statements were made, and except for our ongoing obligations under the United States of America federal securities laws, we undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise.
Our investment portfolio includes cash and cash equivalents. Our main investment objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio.capital. 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. As such, we believe that, the securities we hold are subject to market risk, 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. Additionally, we are also subject to the risk of rising LIBOR rates; in the event that the minimum rate among one-month, two-month, three-month and six-month LIBOR rates (“minimum LIBOR rate”) is above 1%, then the interest rate charged on the Term Loan could increase materially depending on the magnitude of any increase in LIBOR rates. For every increase of 0.50% in the minimum LIBOR rate (e.g. an increase from a LIBOR rate of 1.25% to 1.75%), annual interest payments on the
Item 4.4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017.March 31, 2020. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2017March 31, 2020 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2017March 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although such claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any, will not have a material adverse effect on our business, condensed consolidated financial position, or results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Item 1A.1A. Risk Factors
Our results of operations and financial conditionscondition are subject to numerous risks and uncertainties described in our 20162019 Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Item 2.2. Unregistered Sale of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Dollar Value of Shares That May Yet Be Purchased Under the Program | ||||||||||||
January 1, 2020 to January 31, 2020 | - | $ | - | - | $ | - | ||||||||||
February 1, 2020 to February 29, 2020 | - | - | - | - | ||||||||||||
March 1, 2020 to March 31, 2020 | 225,094 | 4.41 | 225,094 | 49,006,625 | ||||||||||||
| 225,094 | $ | 4.41 | 225,094 | $ | 49,006,625 | |||||||||||
On March 5, 2020, the Company announced that the Board of Directors had authorized a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $50 million of the Company’s common stock through December 31, 2021. The timing and actual number of shares repurchased will depend on a variety of factors, including: exercise of procurement options under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; and other corporate liquidity requirements and priorities. Prior to executing any repurchases under this program, the Company’s current term loan needed to be fully repaid or its terms needed to be amended to allow for share repurchases.
Item 3.3. Defaults upon Senior Securities
None.
No disclosure is required pursuant to this item.
Item 5.5. Other Information
No disclosure is required pursuant to this item.
Exhibit No. | Description | |
| 10.1 | Amendment of Solicitation/Modification of Contract 0004, dated February 4, 2020, to Agreement, dated September 10, 2018 by and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed) | |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101.INS | ||
XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
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 6, 2020 | By: | /s/ Daniel J. Luckshire | |||
Daniel J. Luckshire | ||||||
Executive Vice President and | ||||||
| Chief Financial Officer | ||||||
(Principal Financial Officer and | ||||||
| Principal Accounting Officer) | ||||||