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 |
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
As of November 1, 2017July 22, 2022, the registrant had outstanding 78,908,92973,024,147 shares of common stock, par value $.0001, per share
Table of Contents
Page No. | ||||
Item 1 - Condensed Consolidated Financial Statements
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2022 | December 31, 2021 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 114,530,926 | $ | 103,138,819 | ||||
Accounts receivable | 19,598,122 | 83,650,450 | ||||||
Inventory | 16,431,382 | 19,510,379 | ||||||
Prepaid expenses and other current assets | 3,083,027 | 2,453,444 | ||||||
Total current assets | 153,643,457 | 208,753,092 | ||||||
Property, plant and equipment, net | 2,109,720 | 2,365,957 | ||||||
Deferred income taxes, net | 3,039,814 | 2,422,607 | ||||||
Goodwill | 898,334 | 898,334 | ||||||
Other assets | 249,170 | 286,585 | ||||||
Total assets | $ | 159,940,495 | $ | 214,726,575 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 1,214,617 | $ | 2,028,004 | ||||
Accrued expenses and other current liabilities | 14,844,830 | 9,252,812 | ||||||
Income tax payable | 634,619 | 19,207,042 | ||||||
Total current liabilities | 16,694,066 | 30,487,858 | ||||||
Warrant liability | 0 | 6,521,441 | ||||||
Other liabilities | 3,477,575 | 3,402,869 | ||||||
Total liabilities | 20,171,641 | 40,412,168 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Common stock ($.0001 par value, 600,000,000 shares authorized, 73,024,147 and 73,543,602, issued and outstanding at June 30, 2022 and December 31, 2021, respectively) | 7,302 | 7,354 | ||||||
Additional paid-in capital | 232,942,666 | 226,070,308 | ||||||
Accumulated deficit | (93,181,114 | ) | (51,763,255 | ) | ||||
Total stockholders’ equity | 139,768,854 | 174,314,407 | ||||||
Total liabilities and stockholders’ equity | $ | 159,940,495 | $ | 214,726,575 |
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues | ||||||||||||||||
Product sales and supportive services | $ | 8,615,765 | $ | 6,924,162 | $ | 15,936,637 | $ | 10,447,505 | ||||||||
Research and development | 8,051,280 | 1,729,127 | 11,269,708 | 3,019,528 | ||||||||||||
Total revenues | 16,667,045 | 8,653,289 | 27,206,345 | 13,467,033 | ||||||||||||
Operating expenses | ||||||||||||||||
Cost of sales and supportive services | 882,096 | 995,990 | 5,602,212 | 1,246,838 | ||||||||||||
Selling, general and administrative | 5,874,139 | 5,392,226 | 9,585,427 | 9,641,744 | ||||||||||||
Research and development | 6,840,099 | 2,263,971 | 10,386,876 | 4,566,756 | ||||||||||||
Total operating expenses | 13,596,334 | 8,652,187 | 25,574,515 | 15,455,338 | ||||||||||||
Operating income/(loss) | 3,070,711 | 1,102 | 1,631,830 | (1,988,305 | ) | |||||||||||
Gain from change in fair value of warrant liability | 49,559 | 442,269 | 400,663 | 1,361,070 | ||||||||||||
Other income, net | 72,373 | 24,235 | 95,694 | 49,803 | ||||||||||||
Income/(loss) before income taxes | 3,192,643 | 467,606 | 2,128,187 | (577,432 | ) | |||||||||||
Provision for income taxes | (1,155,581 | ) | (298,406 | ) | (452,175 | ) | (65,473 | ) | ||||||||
Net and comprehensive income/(loss) | $ | 2,037,062 | $ | 169,200 | $ | 1,676,012 | $ | (642,905 | ) | |||||||
Basic income/(loss) per share | $ | 0.03 | $ | 0.00 | $ | 0.02 | $ | (0.01 | ) | |||||||
Diluted income/(loss) per share | $ | 0.03 | $ | (0.00 | ) | $ | 0.02 | $ | (0.03 | ) | ||||||
Weighted average shares outstanding: basic | 72,678,333 | 75,810,641 | 72,873,366 | 76,281,211 | ||||||||||||
Weighted average shares outstanding: diluted | 73,332,888 | 76,660,054 | 73,699,226 | 77,128,973 |
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)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 1,676,012 | $ | (642,905 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and other amortization | 256,237 | 264,834 | ||||||
Gain on change in fair value of warrant liability | (400,663 | ) | (1,361,070 | ) | ||||
Stock-based compensation | 764,208 | 713,817 | ||||||
Write down of inventory, net | 157,740 | 630,707 | ||||||
Deferred income taxes, net | (617,207 | ) | (187,420 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 64,052,328 | (3,865,872 | ) | |||||
Inventory | 2,921,257 | 34,921 | ||||||
Prepaid expenses and other assets | (592,168 | ) | 622,109 | |||||
Accounts payable, accrued expenses and other liabilities | 1,582,679 | (1,927,150 | ) | |||||
Income tax payable | (18,572,423 | ) | (892,148 | ) | ||||
Deferred revenue | 3,270,658 | 373,593 | ||||||
Net cash provided by/(used in) operating activities | 54,498,658 | (6,236,584 | ) | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | 0 | (24,424 | ) | |||||
Cash used in investing activities | 0 | (24,424 | ) | |||||
Cash flows from financing activities: | ||||||||
Payment of employee tax obligations for common stock tendered | (12,533 | ) | (13,361 | ) | ||||
Repurchase of common stock | (10,149,704 | ) | (13,129,858 | ) | ||||
Payment of dividend | (32,944,314 | ) | 0 | |||||
Cash used in financing activities | (43,106,551 | ) | (13,143,219 | ) | ||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | 11,392,107 | (19,404,227 | ) | |||||
Cash, cash equivalents and restricted cash at the beginning of period | 103,138,819 | 117,890,240 | ||||||
Cash and cash equivalents at end of period | $ | 114,530,926 | $ | 98,486,013 | ||||
Supplemental disclosure of non-cash financing activities: | ||||||||
Conversion of warrant to common stock | $ | 6,120,778 | $ | 0 |
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 of SIGA Technologies, Inc. (“we,” “our,” “us,” “SIGA” or the “Company”) 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-Q10-Q and should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2016,2021, included in the 2016Company's 2021 Annual Report on Form 10-K.10-K filed on March 3, 2022 (the "2021 Form 10-K"). All terms used but not defined elsewhere herein have the meaning ascribed to them in the Company’s 2016 Annual Report on2021 Form 10-K filed on March 7, 2017.10-K. 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 20162021 year-end condensed consolidated balance sheet data waswere derived from the audited financial statements but does do not include all disclosures required by U.S. GAAP. The results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 are not necessarily indicative of the results expected for the full year.
Revenue Recognition
All of the Bankruptcy Code when the Company's plan of reorganization (the “Plan”) became effective, and on December 22, 2016 the Company's chapter 11 case was closed by the Bankruptcy Court. Under the Plan, the Company fully paid all of its claims.Company’s revenue is derived from long-term contracts that span multiple years. The Company did not apply the provision of fresh start accounting as ownership of existing shares of the Company's common stock remained unaltered by the Plan.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or other substantial cash inflows, by Octoberservice to the customer and is the unit of 2018, then, based on currently forecasted operating costs,account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the Company will require additional sourcesperformance obligation is satisfied.
Contract modifications may occur during the course of fundingperformance of our contracts. Contracts are often modified to continue operationsaccount for changes in contract specifications or requirements. In most instances, contract modifications are for services that are not distinct, and, prevent an event of default under its term loan (
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. All of the Company’s revenue related to current research and development performance obligations is recognized over time, because the customer simultaneously receives and consumes the benefits provided by the services as the Company performs these services. The Company recognizes revenue related to these services based on the progress toward complete satisfaction of the performance obligation and measures this progress under an input method, which is based on the Company’s cost incurred relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed (i.e., cost of third-party services performed, cost of direct labor hours incurred, and cost of materials consumed) compared to the total estimated costs to completely satisfy the performance obligation. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. The incurred and estimated costs used in the measure of progress include third-party services performed, direct labor hours, and material consumed.
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; as of June 30, 2022, the accounts receivable balance in the condensed balance sheet includes approximately $14.0 million of unbilled receivables. This amount includes net proceeds, net of Meridian fee (as defined below) from international sales, which will be billed and collected by Meridian and paid to SIGA. Under typical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its operating expenses;actual costs incurred, as well as its allocated overhead and general and administrative costs. Such payments occur within a short period of time from billing. When the Company receives consideration, or modifyingsuch consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of the Loan Agreement. There can be no assurance that TPOXX® will receive FDA approval on a timely basis, if at all, or that there will be no difference between the approved product and courses of TPOXX® which have been delivered to the Strategic Stockpile. Furthermore, there can be no assurance thatsales contract, the Company would be able to increase cash liquidity, if needed, throughrecords deferred revenue, which represents a financing, a new contract for TPOXX® or
Repurchase of shares
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes that interim period. The Companydirectly attributable costs, is currently evaluating the impact that ASU 2017-11 will have on its consolidated financial statements.
19C BARDA Contract
On May 13, 2011, September 10, 2018, the Company signedentered into a contract with the U.S. Biomedical Advanced Research and Development Authority (“BARDA”("BARDA") pursuant to which SIGA agreed to deliver two millionup to 1,488,000 courses of oral TPOXX® to the U.S. Strategic Stockpile. The contract with BARDA (as modified, the “BARDA Contract”National Stockpile ("Strategic Stockpile") is worth approximately $472.3 million, including $409.8 million related, and to the manufacture and delivery of 1.7 million courses of TPOXX® and $62.5 million of potential reimbursements connected to development and supportive activities (the “Base Contract”).
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)Stockpile; payments of $8.0 million for the manufacture of 20,000 courses of final drug product of IV TPOXX® ("IV FDP"), or if TPOXX® is recalled or deemedof which $3.2 million of payments are related to the manufacture of bulk drug substance ("IV BDS") to be recalledused 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 any reason.
The options that have been exercised to date provide for payments up to approximately $239.7 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials used in 2013.
Unexercised options specify potential payments up to approximately $311.1 million in total (if all such options are exercised). There are options for the Company does not have a continuing product replacement obligationfollowing activities: payments of up to BARDA.
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 exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV FDP Option). 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 19C BARDA Contract are recognized either over time or at a dosage of 600 mg administered twice per day (1,200 mg per day). Courses deliveredpoint in time. Performance obligations related to the Strategic Stockpile are currently subject to a product replacement obligation.
U.S. Department of Defense Procurement Contract (“DoD Contract”)
On May 12, 2022, the Company announced a change fromprocurement contract with the provisional dosage that was in effect when product deliveries were made in 2013U.S. Department of Defense (“DoD”). The DoD Contract includes a firm commitment for the DoD to procure approximately $3.6 million of oral TPOXX®, and 2014 (600 mg per day)an option, exercisable at the sole discretion of the DoD, for the procurement of approximately $3.8 million of oral TPOXX®. In 2013 and 2014, the provisional dosagesecond quarter of courses delivered to the Strategic Stockpile was 600 mg administered once a day. The change in the provisional dosage was based on FDA guidance received by2022, the Company in 2014, subsequent todelivered and recognized revenue of $3.6 million for the delivery of 1.3oral TPOXX® to the DoD and fulfilled the firm commitment order noted above.
International Procurement Contracts
This year, through July 31, the Company has received firm commitment orders from ten international jurisdictions (including Canada) for the delivery of approximately $60 million of oral TPOXX®, of which approximately $39 million is for Canada and approximately $21 million is for jurisdictions in Europe, Asia Pacific, Asia and the Middle East. Additionally, the contract with CDND (defined below) has an option, exercisable at the sole discretion of CDND, for the purchase of up to an additional $6 million of oral TPOXX®. With respect to the $60 million of firm commitment orders that have been received this year, approximately $5 million of oral TPOXX® was delivered in the three months ended June 30, 2022. Through an International Promotion Agreement (defined below), Meridian Medical Technologies, Inc. (“Meridian”) is the counterparty to international contracts under which orders are placed for the purchase of oral TPOXX®. The Public Health Agency of Canada (“PHAC”) and the Canadian Department of National Defence (“CDND”) are among the contracting parties for the purchase of oral TPOXX® (see below for a summary description of these contracts).
On January 13, 2021, PHAC awarded a contract to Meridian (the “PHAC Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. In March 2022 and July 2022, PHAC executed amendments in which total procurement of oral TPOXX® under the PHAC Contract was increased to an amount of approximately $45 million. Prior to 2022, approximately $10 million of oral TPOXX® had been ordered and delivered to PHAC. No courses of oral TPOXX®. Based on were delivered under this contract for the current provisional dosagefirstsix months of 600 mg administered twice per day (1,200 mg per day), 2022. In July 2022, $16 million of oral TPOXX® was delivered to PHAC. As of July 31, 2022, after the delivery of $16 million of oral TPOXX® in mid- July, there are approximately $19 million of firm commitment orders that remain to be delivered under this contract.
On April 3, 2020, the Company supplemented previouslyannounced that the CDND awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND would purchase up to approximately $14 million of oral TPOXX® over four years. Prior to 2022, approximately $4 million of oral TPOXX® had been ordered and delivered to CDND. No courses of oral TPOXX®, were delivered under this contract for the firstsix months of 2022. As of June 30, 2022, an approximate firm commitment order of $4 million remains to be delivered under this contract. Additionally, there are approximately $6 million of unexercised options, exercisable at no cost to BARDA,the sole discretion of CDND, remaining under this contract.
The above-listed contract awards were coordinated between SIGA and Meridian under the international promotion agreement (as amended, the "International Promotion Agreement") that was entered into by the parties on June 3, 2019. Under the International Promotion Agreement, Meridian is the counterparty in connection with additional dosages so that allinternational contracts for oral TPOXX® and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder.
Under the terms of the courses previously deliveredInternational Promotion Agreement, Meridian was granted exclusive rights to BARDA are now at the current provisional dosage. In February 2016, the FDA confirmed (through dose concurrence) its earlier dosage guidance of 600 mg administered twice per day (1,200 mg per day).
The fee Meridian retains pursuant to potential replacement of delivered courses are satisfied. The Company assessed the selling price for eachInternational Promotion Agreement is a specified percentage of the aforementioned deliverables - research and development activities and drug product. The selling pricecollected proceeds of sales of oral TPOXX® net of certain reimbursed researchexpenses, for calendar years in which customer collected amounts net of such expenses are less than or equal to a specified threshold, and development services was determined by reference to existinga higher specified percentage of such collected net proceeds for calendar years in which such net collected amounts exceed the specified threshold. It is probable that we will exceed the specified threshold in 2022 and, past research and development grants and contracts betweenas a result, 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.
Revenue in connection with international procurement contracts for the delivery of courses of TPOXX® toproduct are recognized at a point in time on a gross basis, as the Strategic StockpileCompany acts as the principal in the transaction. During the three and certain supportive services provided as part of the BARDA Contract. For the three and ninesix months ended SeptemberJune 30, 2017, revenue from reimbursed research2022, the Company recognized $5.0 million of sales in connection with international contracts. During the three and development undersix months ended June 30, 2021, the BARDA Contract was $641,000Company recognized $6.9 million and $8.3$10.3 million respectively.of sales, respectively, for delivery to PHAC.
In July 2019, the Company obtains fundingwas awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from the contracts and grants it obtains from various agencies of the U.S. GovernmentDoD to support its researchwork 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 development activities. Currently, the Company has one contract with an expiration date of December 30, 2020 and one grant with an expiration date of April 30, 2018, which in combination provide for potential future aggregate research and development funding for specific projects of approximately $15.4 million. During the three months ended March 31, 2017, the contract was amendedreferred to increaseas the "PEP Label Expansion R&D Contract"). In subsequent modifications, the DoD increased the scope and the available funding forunder the PEP Label Expansion R&D program relatedContract to the IV formulation of TPOXX® by approximately $10.1 million and to extend the end date of the$27 million. The period of performance from for this contract, as modified, terminates on January 31, 2025. As of June 30, 20202022, remaining revenue to Decemberbe recognized in the future under the PEP Label Expansion R&D Contract is up to $15.4 million. Revenue from the performance obligation under the PEP Label Expansion R&D Contract is recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the three months ended June 30, 2020.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, the contractcontracts and grantgrants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at any time. As such, we the Company may not be ableeligible to utilizereceive all available funds under the contract and/or grant.funds.
Inventory includes costs related to the deferralmanufacture of revenue under the BARDA Contract (see
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Raw materials | $ | 22,047 | $ | 22,047 | ||||
Work in-process | 9,287,024 | 17,453,358 | ||||||
Finished goods | 7,122,311 | 2,034,974 | ||||||
Inventory | $ | 16,431,382 | $ | 19,510,379 |
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 |
Property, plant and equipment consisted of the following:
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 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Leasehold improvements | $ | 2,420,028 | $ | 2,420,028 | ||||
Computer equipment | 473,386 | 511,062 | ||||||
Furniture and fixtures | 377,859 | 377,859 | ||||||
Operating lease right-of-use assets | 3,678,647 | 3,678,647 | ||||||
6,949,920 | 6,987,596 | |||||||
Less - accumulated depreciation and amortization | (4,840,200 | ) | (4,621,639 | ) | ||||
Property, plant and equipment, net | $ | 2,109,720 | $ | 2,365,957 |
Depreciation and amortization expense on property, plant, and equipment was $29,375 and $42,660$0.3 million for each of the threesix months ended SeptemberJune 30, 2017 2022 and 2016, respectively, and was $105,212 and $130,704 for nine months ended September 30, 2017 and 2016, respectively. In connection with the lease termination discussed in
Accrued expenses and other current liabilities consisted of the following:
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Deferred revenue | $ | 7,035,354 | $ | 3,764,696 | ||||
Research and development vendor costs | 3,657,403 | 256,397 | ||||||
Compensation | 1,424,067 | 2,811,700 | ||||||
Other | 934,745 | 938,082 | ||||||
Professional fees | 808,246 | 527,026 | ||||||
Lease liability, current portion | 507,140 | 466,830 | ||||||
Inventory | 477,875 | 488,081 | ||||||
Accrued expenses and other current liabilities | $ | 14,844,830 | $ | 9,252,812 |
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, 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”). The Company voluntarily prepaid this Loan Agreement in2020. Upon such prepayment and release, the Loan Agreement was terminated. In connection with the entry into the Loan Agreement, (see
During the timethree months ended June 30, 2022, the Warrant was fully exercised, and therefore there are 0 remaining underlying shares as of June 30, 2022. See Note 8. For the transaction, andthree months ended June 30, 2022, we recorded at their fair value. Any changesa gain of approximately $50,000, reflecting a decrease in the fair value of the derivative instruments are reportedliability-classified warrant primarily due to the decrease in earnings or loss as long asour stock price prior to the derivative contracts are classified as assets or liabilities. Accordingly, the Company classified the Warrant as a liability and reported the change in fair value in the statement of operations.
As of September 30, 2017,December 31, 2021, there were approximately 1.0 million shares underlying the outstanding Warrant and the fair value of the Warrant was $7.4$6.5 million. A Black Scholes model was applied to calculate theThe fair value of the liability classifiedliability-classified Warrant was calculated using the following assumptions: risk freerisk-free interest rate of 2.29%1.21%;no dividend yield; an expected life of 8.924.7 years; and a volatility factor of 80%55%.
The carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses and other current liabilities, and income tax payable approximates fair value due to the relatively short maturity of these instruments. CommonPrior to being fully exercised, common stock warrants, which arewere classified as liabilities area liability, were 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. |
There were no transfers between levels of the fair value hierarchy for the ninesix months ended SeptemberJune 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, 2021 | $ | 6,521,441 | ||
Decrease in fair value of Warrant liability | (400,663 | ) | ||
Exercise of Warrant | (6,120,778 | ) | ||
Warrant liability at June 30, 2022 | $ | 0 |
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income/(loss) for basic earnings per share | $ | 2,037,062 | $ | 169,200 | $ | 1,676,012 | $ | (642,905 | ) | |||||||
Less: Change in fair value of warrants and cash-based RSUs | 49,559 | 428,128 | 400,663 | 1,346,929 | ||||||||||||
Net income/(loss), adjusted for change in fair value of warrants and cash-based RSUs for diluted earnings per share | $ | 1,987,503 | $ | (258,928 | ) | $ | 1,275,349 | $ | (1,989,834 | ) | ||||||
Weighted-average shares | 72,678,333 | 75,810,641 | 72,873,366 | 76,281,211 | ||||||||||||
Effect of potential common shares | 654,555 | 849,413 | 825,860 | 847,762 | ||||||||||||
Weighted-average shares: diluted | 73,332,888 | 76,660,054 | 73,699,226 | 77,128,973 | ||||||||||||
Income/(loss) per share: basic | $ | 0.03 | $ | 0.00 | $ | 0.02 | $ | (0.01 | ) | |||||||
Income/(loss) per share: diluted | $ | 0.03 | $ | (0.00 | ) | $ | 0.02 | $ | (0.03 | ) |
For the three and six months ended June 30, 2022, the diluted earnings per share calculation reflects the effect of the 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 in-the-money options, stock-settled RSUs and warrants. The dilutive effect of warrants, stock-settled RSUs and options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the average amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares. Cash-settled RSUs were presumed to be cash-settled and therefore excluded from the diluted earnings per share calculations for the three and six months ended June 30, 2022 because the net effect of their inclusion, including the elimination of the impact in the operating results of the change in fair value of these RSUs, would have been anti-dilutive. For the three and six months ended June 30, 2022, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share were 51,930 and 53,353, respectively.
For the three and six months ended June 30, 2021, the Company incurred losses for the three and nine months ended September 30, 2017 and 2016 and as a result, the equity instruments listed below arewere excluded from the calculation of diluted earnings (loss) per share as the effect of the exercise, conversion or vesting of such instruments would behave been anti-dilutive. The weighted average number of equity instruments excluded consists of:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2021 | 2021 | |||||||
Stock options | 123,667 | 154,617 | ||||||
Restricted stock units (stock settled) | 166,683 | 165,309 |
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 | ) |
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. In connection with many CMO purchase orders, reimbursement by CMOs for inventory losses is limited. Commitments under the purchase orders do not exceed our planned commercial and research and development needs. As of June 30, 2022, the Company had approximately $21.7 million of purchase commitments associated with manufacturing obligations.
Board of Directors and Outside Counsel
A former member of the Company’s Board of Directors who did not stand for re-election at the Company's 2021 annual meeting of stockholders is a member ofpartner at a law firm used by the Company’sCompany. The Company did not incur any expenses related to services provided by the outside counsel.counsel during the three months ended June 30, 2022 and 2021 or the six months ended June 30, 2022. During the threesix months ended SeptemberJune 30, 2017 and 2016,2021, the Company incurred expenses$0.1 million of $82,000 and $528,000, respectively,expenses related to services provided by the outside counsel. During the nine months ended September 30, 2017 and 2016, theThe Company incurredhad 0 outstanding payables or accrued expenses of $298,000 and $1,066,000, respectively, related to services providedperformed by the outside counsel. On Septembercounsel as of June 30, 2017 the Company’s outstanding payables and accrued expenses included a $76,000 liability to the outside counsel.
Real Estate Leases
On May 26, 2017, the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a ten-yearten-year Office Lease agreement (the “New HQ“HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at 2731 East 62
12.Revenues by Geographic Region
Revenues by geographic region were as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
United States | $ | 11,715,302 | $ | 1,673,083 | $ | 22,254,602 | $ | 2,911,455 | ||||||||
International | ||||||||||||||||
Asia-Pacific | 4,929,423 | 0 | 4,929,423 | 0 | ||||||||||||
Canada | 0 | 6,980,206 | 0 | 10,555,578 | ||||||||||||
Other | 22,320 | 0 | 22,320 | 0 | ||||||||||||
Total International | 4,951,743 | 6,980,206 | 4,951,743 | 10,555,578 | ||||||||||||
Total revenues | $ | 16,667,045 | $ | 8,653,289 | $ | 27,206,345 | $ | 13,467,033 |
The Company’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.
For the three months ended June 30, 2022 and 2021, we incurred pre-tax income of $3.2 million and $0.5 million, respectively, and a corresponding income tax provision of $1.2 million and $0.3 million, respectively.
For the six months ended June 30, 2022 and 2021, we incurred pre-tax income of $2.1 million and losses of ($0.6) million, respectively, and a corresponding income tax provision of $0.5 million and $0.1 million, respectively.
The effective tax rate for the three months ended June 30, 2022 was 36.2% compared to 63.8% for the three months ended June 30, 2021. The effective tax rate for the three months ended June 30, 2022 differs from the U.S. statutory rate of 21% primarily as a result of state taxes, various non-deductible expenses, including executive compensation under Internal Revenue Code Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
The effective tax rate for the six months ended June 30, 2022 was 21.2% compared to (11.3)% for the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 differs from the U.S. statutory rate of 21% primarily as a result of state taxes, various non-deductible expenses, including executive compensation under Internal Revenue Code Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
The tables below present changes in stockholders' equity for the three and six months ended June 30, 2022 and 2021.
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at March 31, 2022 | 72,566,367 | $ | 7,256 | $ | 226,426,529 | $ | (58,696,989 | ) | $ | 0 | $ | 167,736,796 | ||||||||||||
Net income | 0 | 0 | 2,037,062 | 0 | 2,037,062 | |||||||||||||||||||
Repurchase of common stock | (494,979 | ) | (49 | ) | 0 | (3,576,873 | ) | 0 | (3,576,922 | ) | ||||||||||||||
Issuance of common stock upon vesting of RSUs | 127,856 | 13 | (13 | ) | 0 | 0 | 0 | |||||||||||||||||
Issuance of common stock upon exercise of warrants | 824,903 | 82 | 6,120,696 | 0 | 0 | 6,120,778 | ||||||||||||||||||
Cash dividend ($0.45 per share) | — | 0 | 0 | (32,944,314 | ) | 0 | (32,944,314 | ) | ||||||||||||||||
Stock-based compensation | — | 0 | 395,454 | 0 | 0 | 395,454 | ||||||||||||||||||
Balances at June 30, 2022 | 73,024,147 | $ | 7,302 | $ | 232,942,666 | $ | (93,181,114 | ) | $ | 0 | $ | 139,768,854 |
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2021 | 73,543,602 | $ | 7,354 | $ | 226,070,308 | $ | (51,763,255 | ) | $ | 0 | $ | 174,314,407 | ||||||||||||
Net income | — | 0 | 0 | 1,676,012 | 0 | 1,676,012 | ||||||||||||||||||
Repurchase of common stock | (1,474,781 | ) | (147 | ) | 0 | (10,149,557 | ) | 0 | (10,149,704 | ) | ||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (1,973 | ) | 0 | (12,533 | ) | 0 | 0 | (12,533 | ) | |||||||||||||||
Issuance of common stock upon vesting of RSUs | 132,396 | 13 | (13 | ) | 0 | 0 | 0 | |||||||||||||||||
Issuance of common stock upon exercise of warrants | 824,903 | 82 | 6,120,696 | 0 | 0 | 6,120,778 | ||||||||||||||||||
Cash dividend ($0.45 per share) | — | 0 | 0 | (32,944,314 | ) | 0 | (32,944,314 | ) | ||||||||||||||||
Stock-based compensation | — | 0 | 764,208 | 0 | 0 | 764,208 | ||||||||||||||||||
Balances at June 30, 2022 | 73,024,147 | $ | 7,302 | $ | 232,942,666 | $ | (93,181,114 | ) | $ | 0 | $ | 139,768,854 |
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at March 31, 2021 | 76,240,439 | $ | 7,625 | $ | 225,211,481 | $ | (102,534,239 | ) | $ | 0 | $ | 122,684,867 | ||||||||||||
Net income | — | 0 | 0 | 169,200 | 0 | 169,200 | ||||||||||||||||||
Repurchase of common stock | (956,022 | ) | (96 | ) | 0 | (6,600,414 | ) | 0 | (6,600,510 | ) | ||||||||||||||
Issuance of common stock upon vesting of RSUs | 105,000 | 10 | (10 | ) | 0 | 0 | 0 | |||||||||||||||||
Stock-based compensation | — | 0 | 467,405 | 0 | 0 | 467,405 | ||||||||||||||||||
Balances at June 30, 2021 | 75,389,417 | $ | 7,539 | $ | 225,678,876 | $ | (108,965,453 | ) | $ | 0 | $ | 116,720,962 |
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
Balances at December 31, 2020 | 77,195,704 | $ | 7,720 | $ | 224,978,430 | $ | (95,192,881 | ) | $ | 0 | $ | 129,793,269 | ||||||||||||
Net loss | — | 0 | 0 | (642,905 | ) | 0 | (642,905 | ) | ||||||||||||||||
Repurchase of common stock | (1,913,927 | ) | (191 | ) | 0 | (13,129,667 | ) | 0 | (13,129,858 | ) | ||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (1,902 | ) | 0 | (13,361 | ) | 0 | 0 | (13,361 | ) | |||||||||||||||
Issuance of common stock upon vesting of RSUs | 109,542 | 10 | (10 | ) | 0 | 0 | 0 | |||||||||||||||||
Stock-based compensation | — | 0 | 713,817 | 0 | 0 | 713,817 | ||||||||||||||||||
Balances at June 30, 2021 | 75,389,417 | $ | 7,539 | $ | 225,678,876 | $ | (108,965,453 | ) | $ | 0 | $ | 116,720,962 |
On JulyAugust 2, 2021, the Company's Board of Directors authorized a share repurchase program ("New Repurchase Authorization") under which the Company may repurchase up to $50 million of the Company's common stock through December 31, 2023. The Company started repurchasing shares under this program in the fourth quarter of 2021. Repurchases under the New Repurchase Authorization 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 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise. The timing and actual number of shares repurchased will depend on a variety of factors, including: timing of 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; alternative capital management uses of cash; and other corporate liquidity requirements and priorities. During the three and six months ended June 30, 2022, the Company repurchased approximately 0.5 million and 1.5 million shares of common stock under the New Repurchase Authorization for approximately $3.6 million and $10.1 million, respectively.
Prior to the effective date of the New Repurchase Authorization, the Company repurchased shares under a program that was announced in March 2020. Under this program, $50 million of the Company's common stock was repurchased, including approximately 1.0 million shares of common stock for approximately $6.6 million that was repurchased during the three months ended June 30, 2021, and 1.9 million shares of common stock for approximately $13.1 million that was repurchased during the six months ended June 30, 2021.
On May 5, 2022, the Board of Directors declared a special dividend of $0.45 per share on the common stock of the Company, which resulted in an overall dividend payment of $32.9 million. The special dividend was paid on June 2, 2022 to shareholders of record at the close of business on May 17, 2022.
The Company leases its Corvallis, Oregon, facilities and office space under an operating lease, which 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 had 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. In the second quarter of 2021, the Company exercised the second renewal option, which extended the lease expiration date to December 31, 2024. In connection with the exercise of the second renewal option, the Company recorded an increase to operating lease right-of-use assets and operating lease liabilities of approximately $0.7 million in the second quarter 2021.
On May 26, 2017 the Company and M&F entered into the HQ Lease, a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”),ten-year office lease agreement, pursuant to which the Company and M&F agreed to terminate the sublease dated January 9, 2013 for 6,676lease 3,200 square feet of rental square footage located at 660 Madison Avenue, Suite 1700,in New York, New York (such sublease being the “Old HQ Sublease” and the location being the “Old HQ”).
Operating lease costs totaled $0.1 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 three months ended June 30, 2022 and Old HQ Sublease Termination Agreement had not been entered into by2021. Operating lease costs totaled $0.3 million for each of the parties thereto. Becausesix months ended June 30, 2022 and 2021. Cash paid for amounts such asincluded in the measurement of lease liabilities from operating expenses and taxes may vary, the foregoing totals can only be estimated at this time and are subject to change.
Future cash flows under operating leases as of leasehold improvements and furniture and fixtures relatedJune 30, 2022 are expected to the Old HQ.
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 |
2022 | $ | 272,625 | ||
2023 | 669,048 | |||
2024 | 678,627 | |||
2025 | 406,994 | |||
2026 | 409,971 | |||
Thereafter | 165,916 | |||
Total undiscounted cash flows under leases | 2,603,181 | |||
Less: Imputed interest | (251,805 | ) | ||
Present value of lease liabilities | $ | 2,351,376 |
As of SeptemberJune 30, 2017,2022, approximately $0.6$1.8 million of the lease termination 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.10-Q and in the Company's Annual Report on Form 10-K filed on March 3, 2022 (the "2021 Form 10-K"). 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 company specializing in the development and commercialization of solutions for serious unmet medical needs and biothreats.commercial-stage pharmaceutical company. Our lead product, TPOXX® (“oral TPOXX®”, also known as "tecovirimat" in certain international markets), is TPOXX®, an orally administeredoral formulation antiviral drug that targets orthopoxvirus infections, including smallpox. While TPOXX® is not yet approved as safe or effectivefor the treatment of human smallpox disease caused by variola virus. On July 13, 2018, the U.S.United States Food & Drug Administration it is a novel small-molecule drug that is being delivered to(“FDA”) approved oral TPOXX® for the Strategic National Stockpile under Project Bioshield.
In addition to being approved by the FDA, oral TPOXX® (tecovirimat) has regulatory approval with the European Medicines Agency ("EMA"), Health Canada and the Medicines and Healthcare Products Regulatory Agency ("MHRA") of the United Kingdom. The EMA and MHRA approved label indication covers the treatment of smallpox, monkeypox, cowpox, and vaccinia complications following vaccination against smallpox. The Health Canada approved label indication covers the treatment of smallpox.
With respect to the regulatory approvals by the EMA, MHRA and Health Canada, oral tecovirimat represents the same formulation that was approved by the FDA in July 2018 under the brand name TPOXX®. Upon meeting
For the intravenous formulation of TPOXX® ("IV TPOXX®"), SIGA announced on May 19, 2022 that the FDA approved this formulation for the treatment of smallpox.
Monkeypox Outbreak
Starting in June 2022, procurement orders for oral TPOXX® from new international jurisdictions, as well as orders under existing contracts, have occurred as SIGA has received a large and ongoing number of inquiries about accessing oral TPOXX® in connection with a global monkeypox outbreak. The Company believes that a portion of the courses of oral TPOXX® delivered under these requirements,orders will be used for the treatment of active monkeypox cases as part of a response to this outbreak by the global health community.
Monkeypox is a disease caused by infection with the monkeypox virus. Monkeypox virus is part of the same family of viruses as smallpox. Monkeypox symptoms are similar to smallpox, but not as severe and with historical fatality in Africa of less than 1% to 10% depending on region and clade. The first human case of monkeypox was recorded in 1970. Since then, monkeypox has been reported in several central and western African countries, with case numbers greatly increasing in recent years. Prior to the ongoing 2022 outbreak, nearly all monkeypox cases in people outside of Africa were linked to international travel to countries where the disease commonly occurs, or through imported animals, including two cases in the United States in 2021. These cases are currently occurring on multiple continents. On July 23, 2022, the World Health Organization (WHO) declared the monkeypox outbreak as a public health emergency of international concern.
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 direct and indirect impact, the Company is entitledcontinually reviewing business and financial risks related to a $41 million hold back payment under the BARDA Contract. Based on a targeted New Drug Application (
As of 2017, it is currently anticipated thatthe filing date of this report, the Company will be eligiblehas not identified or been notified by government customers of impediments to receive the $41 million hold back paymentcontinued full performance of their government contracts. With regard to day-to-day operations, the COVID-19 pandemic, and the secondary effects of the pandemic, have at times slowed the daily pace of execution of government contracts as well as new contract generation. For example, U.S. and foreign government staffs overseeing health security preparedness have been involved directly or indirectly in governmental responses to the second halfpandemic, which has diverted government staff time that might normally have been directed toward contract matters involving SIGA. Additionally, the COVID-19 pandemic, and the secondary effects of 2018.
Overall, while the COVID-19 pandemic has not adversely affected the liquidity position of default under the Term Loan (
Procurement Contracts with the U.S. Government
19C BARDA Contract
On September 10, 2018, the Company entered into a new contract forwith 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 any other product, a sale of assets, or the modificationstore as vendor-managed inventory, up to 212,000 courses of the existingintravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, the contract includes funding from BARDA Contract; significantly reducingfor a range of activities, including: advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and procurement activities. As of June 30, 2022, the contract with BARDA (as amended, modified, or supplemented from time to time, the "19C BARDA Contract") contemplates up to approximately $602.5 million of payments, of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately $239.7 million of payments are related to exercised options and up to approximately $311.1 million of payments are currently specified as unexercised options. BARDA may choose in its operating expenses;sole discretion when, or modifying the termswhether, to exercise any of the Loan Agreement. There canunexercised options. The period of performance for options is up to ten years from the date of entry into the 19C BARDA Contract and such options could be no assurance thatexercised at any time during the contract term, including during the base period of performance.
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® will receive FDA approval on a timely basis, if at all, or that thereto 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 June 30, 2022, the Company has received $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS, $4.3 million for the delivery of IV FDP to the Strategic Stockpile and $15.5 million for other base period activities. IV BDS has been used for the manufacture of courses of IV FDP. The $3.2 million received for the completed manufacture of IV BDS had been recorded as deferred revenue as of December 31, 2021, but with the delivery of IV FDP to the Strategic Stockpile during the six months ended June 30, 2022, $2.9 million was recognized as revenue. The remaining $0.3 million of deferred revenue will be no difference between the approved product and courses of TPOXX® which have beenrecognized as IV FDP containing such IV BDS is delivered to the Strategic Stockpile. Furthermore, there can be no assurance
The options that have been exercised to date provide for payments up to approximately $239.7 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials used in the 2020 manufacture of certain courses of oral TPOXX®; payments up to $213.9 million for the delivery of up to 726,140 courses of oral TPOXX®; and payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®. As of June 30, 2022, the Company would be able to increase cash liquidity, if needed, through a financing, a new contract for TPOXX® or
Unexercised options specify potential payments up to approximately $311.1 million in total (if all such options are exercised). There are options for the following activities: payments of up to $225.1 million for the delivery of oral TPOXX® to the Strategic Stockpile; payments of up to $76.8 million for the manufacture of courses of IV FDP, of which up to $30.7 million of payments would be paid upon 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 exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV FDP Option). 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. The Company estimates that sales of the IV formulation under this contract (under current terms), assuming the IV FDP Options were exercised, would have a gross margin (sales less cost of sales, as a percentage of sales) that is worthless than 40%.
Under the terms of this contract, exercise of procurement options is at the sole discretion of BARDA. The request for proposal that preceded the award of the 19C BARDA Contract indicated that the expected purpose of the contract was to maintain the level of smallpox antiviral preparedness in the Strategic Stockpile. Based on prior product delivery activity, and current FDA-approved shelf life of oral TPOXX®, the Company estimates that approximately $472.3940,000 courses of smallpox antiviral treatment would need to be delivered to the U.S. Government between 2022 and 2024 in order to maintain stockpile levels of unexpired smallpox antiviral treatment during this period.
U.S. Department of Defense Procurement Contract (“DoD Contract”)
On May 12, 2022, the Company announced a procurement contract with the U.S. Department of Defense (“DoD”). The DoD Contract includes a firm commitment for the DoD to procure approximately $3.6 million including $409.8of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD, for the procurement of approximately $3.8 million of oral TPOXX®. In the second quarter of 2022, the Company delivered and recognized revenue of $3.6 million for the delivery of oral TPOXX® to the DoD and fulfilled the firm commitment order noted above.
International Procurement Contracts
This year, through July 31, the Company has received firm commitment orders from ten international jurisdictions (including Canada) for the delivery of approximately $60 million of oral TPOXX®, of which approximately $39 million is for Canada and approximately $21 million is for jurisdictions in Europe, Asia Pacific, Asia and the Middle East. Additionally, the contract with CDND (defined below) has an option, exercisable at the sole discretion of CDND, for the purchase of up to an additional $6 million of oral TPOXX®. With respect to the $60 million of firm commitment orders that have been received this year, approximately $5 million of oral TPOXX® was delivered in the three months ended June 30, 2022, approximately $26 million is expected to be delivered in the third quarter of 2022 and the remaining orders are expected to be fulfilled between October 1, 2022 and July 31, 2023. Through an International Promotion Agreement (defined below), Meridian Medical Technologies, Inc. (“Meridian”) is the counterparty to international contracts under which orders are placed for the purchase of oral TPOXX®. The Public Health Agency of Canada (“PHAC”) and the Canadian Department of National Defence (“CDND”) are among the contracting parties for the purchase of oral TPOXX® (see below for a summary description of these contracts).
On January 13, 2021, PHAC awarded a contract to Meridian (the “PHAC Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. In March 2022 and July 2022, PHAC executed amendments in which total procurement of oral TPOXX® under the PHAC Contract was increased to an amount of approximately $45 million. Prior to 2022, approximately $10 million of oral TPOXX® had been ordered and delivered to PHAC. No courses of oral TPOXX® were delivered under this contract for the first six months of 2022. In July 2022, $16 million of oral TPOXX® was delivered to PHAC. As of July 31, 2022, after the delivery of $16 million of oral TPOXX® in mid-July, there are approximately $19 million of firm commitment orders that remain to be delivered under this contract.
On April 3, 2020, the Company announced that the CDND awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND would purchase up to approximately $14 million of oral TPOXX® over four years. Prior to 2022, approximately $4 million of oral TPOXX® had been ordered and delivered to CDND. No courses of oral TPOXX® were delivered under this contract for the first six months of 2022. As of June 30, 2022, an approximate firm commitment order of $4 million remains to be delivered under this contract. Additionally, there are approximately $6 million of unexercised options, exercisable at the sole discretion of CDND, remaining under this contract.
The above-listed contract awards were coordinated between SIGA and Meridian under the international promotion agreement (as amended, the "International Promotion Agreement") that was entered into by the parties on June 3, 2019. Under the International Promotion Agreement, Meridian is the counterparty in connection with international contracts for oral TPOXX® and SIGA is responsible for manufacture and delivery of 1.7 million courses ofany oral TPOXX® and $62.5 million of potential reimbursements related to development and supportive activities (the “Base Contract”). purchased thereunder.
International Promotion Agreement
Under the Base Contract, BARDAterms 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 (the “Territory”), and Meridian has agreed not to buy fromcommercialize any competing product, as defined in the International Promotion Agreement, in the specified field of use in the Territory. SIGA 1.7 million courses ofretains ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with TPOXX®, and, in the United States market, also retains sales and marketing rights with respect to oral TPOXX®. Additionally, SIGASIGA’s consent is required to contribute to BARDA 300,000 courses at no additional cost to BARDA.
The fee Meridian retains pursuant to the Company in the event of FDA approval for extension to 84-month expiry for TPOXX® (from 38-month expiry as required in the Base Contract); would fund up to $58.3 million of development and supportive activities such as work onInternational Promotion Agreement is a smallpox prophylaxis indication for TPOXX®; and/or would fund $14.4 million of production-related activities related to warm-base manufacturing. In 2015, BARDA exercised two options related to extending the indicationspecified percentage of the drugcollected proceeds of sales of oral TPOXX® net of certain expenses, for calendar years in which customer collected amounts net of such expenses are less than or equal to a specified threshold, and a higher specified percentage of such collected net proceeds for calendar years in which such net collected amounts exceed the geriatricspecified threshold. It is probable that we will exceed the specified threshold in 2022 and, pediatric populations. The stated value of these exercises was minimal. BARDA may choose not to exercise additional options in the future. Options are exercisable by BARDA at its sole discretion. BARDA has indicated that it will evaluate, after the FDA's review and evaluation of stability data, the Company's request that BARDA exercise the option for the $50.0 million payment to the Company in the event of FDA approval of 84-month expiry for TPOXX®.
Critical Accounting Estimates
The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our 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 Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K. Our most critical accounting estimates include revenue recognition over time, 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 June 30, 2022 and Nine2021
For the three months ended September 2017June 30, 2022, revenues from product sales and 2016
Revenues from research and development contracts and grantsactivities for the three months ended SeptemberJune 30, 20172022 and 2016,2021, were $1.4$8.1 million and $4.7 million, respectively. The decrease in revenue of approximately $3.3 million, or 70%, primarily reflects a decrease in revenues from our federal contracts supporting the development of TPOXX. Revenues from federal contracts supporting the development of TPOXX have decreased because the number and scale of studies that were active during the quarter have decreased in comparison to the prior year.
Cost 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 increasedsales and supportive services for the nine-month period becausethree months ended June 30, 2022 and 2021 were $0.9 million and $1.0 million, respectively. Such costs in 2022 were primarily associated with the numbermanufacture and scaledelivery of studies thatcourses of oral TPOXX®. Such costs in 2021 were active inassociated with the early partmanufacture and delivery of 2017 had increased in comparison to the corresponding period in the prior year.
Selling, Generalgeneral and Administrativeadministrative (“SG&A”) expenses for the three months ended SeptemberJune 30, 20172022 and 2016,2021 were $3.1$5.9 million and $2.9$5.4 million, respectively, reflecting anrespectively. The increase of approximately $239,000, or 8%. The increase is$0.5 million primarily attributable to a $445,000reflects an increase in employee compensation expense, partially offset by an $82,000 decrease in corporate governance expenses, which were elevated in the third quarter of 2016 due to strategic initiativesconsultant costs in connection with the final resolution of the PharmAthene litigation,responding to government, medical profession 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.
Research and Developmentdevelopment (“R&D”) expenses for the three months ended SeptemberJune 30, 20172022 and 20162021 were $2.5$6.8 million and $6.1 million, respectively, reflecting a decrease of approximately $3.6 million, or 59%. The decrease is attributable to a $3.3 million decrease in direct vendor-related expenses supporting the development of TPOXX.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded within the financial statements for additional information.
For the three months ended June 30, 2022 and 2021, we recorded pre-tax lossesincome of $9.7$3.2 million and $25.6$0.5 million, respectively, and a corresponding income tax expenseprovision of $135,000$1.2 million and $343,000,$0.3 million, respectively. The effective tax raterates during the three and nine months ended SeptemberJune 30, 2017 was (1.4)%2022 and (1.3) %,2021 were 36.2% and 63.8%, respectively. Our effective tax rate for the periods ended SeptemberJune 30, 2017 differs2022 and 2021 differ from the statutory rate primarily as no income tax benefita result of state taxes, non-deductible executive compensation under Internal Revenue Code Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
Six Months Ended June 30, 2022 and 2021
For the six months ended June 30, 2022, revenues from product sales and supportive services were $15.9 million. Such revenues primarily relate to approximately $7.2 million of sales of IV TPOXX® to the U.S. Government under the 19C BARDA Contract; approximately $3.6 million of oral TPOXX® sales to the DoD; and approximately $5.0 million of international sales of oral TPOXX®. For the six months ended June 30, 2021, revenues from product sales and supportive services were $10.4 million. Such revenues mostly relate to international sales of oral TPOXX® to Canada.
Revenues from research and development activities for the six months ended June 30, 2022 and 2021, were $11.3 million and $3.0 million, respectively. Substantially all of the increase of $8.3 million relates to clinical trial activity under the PEP Label Expansion R&D Contract in connection with the PEP development program.
Cost of sales and supportive services for the six months ended June 30, 2022 and 2021 were $5.6 million and $1.2 million, respectively. The increase of $4.4 million primarily relates to the manufacture and sale of IV TPOXX® in 2022; manufacturing costs per unit are higher for IV TPOXX® than oral TPOXX®, and the sales mix in 2021 was only oral TPOXX®.
SG&A expenses for each of the six months ended June 30, 2022 and 2021 were $9.6 million. An increase in consulting costs in connection with responding to government, medical profession and media inquiries related to the global monkeypox outbreak was offset by a decrease in promotion fees in connection with international sales.
R&D expenses for the six months ended June 30, 2022 and 2021 were $10.4 million and $4.6 million, respectively. The increase of $5.8 million is primarily attributable to an increase in direct vendor-related expenses incurred in connection with activities under the PEP Label Expansion R&D Contract.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded for current year operating losseswithin the statement of operations. The warrant was fully exercised during the six months ended June 30, 2022. For the six months ended June 30, 2022, we recorded a gain of approximately $0.4 million, reflecting a decrease in the fair value of the liability-classified warrant primarily due to the Company’s assessment regarding tax realizability of its deferred tax assets.decrease in our stock price. For the three and ninesix months ended SeptemberJune 30, 2016,2021, we incurredrecorded a gain of approximately $1.4 million, reflecting a decrease in the fair value of the liability-classified warrant primarily due to the decrease in our stock price.
For the six months ended June 30, 2022, we recorded pre-tax lossesincome of $9.2$2.1 million and $29.2 million anda corresponding income tax benefit/(expense)provision of approximately $4,000$0.5 million. For the six months ended June 30, 2021, we recorded a pre-tax loss of ($0.6) million and $(8,700)a corresponding income tax provision of $0.1 million. The effective tax rates during the six months ended June 30, 2022 and 2021 were 21.2% and (11.3)%, respectively.
Liquidity and Capital Resources
As of SeptemberJune 30, 2017,2022, we had $25.8$114.5 million in unrestricted cash and cash equivalents compared with $28.7$103.1 million at December 31, 2016. As2021.
Operating Activities
We prepare our condensed consolidated statement of September 30, 2017,cash flows using the Company had $19.8 millionindirect method. Under this method, we reconcile net income/(loss) to cash flows from operating activities by adjusting net income/(loss) 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, deferred income taxes, changes in the fair value of restricted cashour warrant liability, inventory write offs, gains and cash equivalents compared with $27.5 million at December 31, 2016. The restricted cash is utilizedlosses from various transactions and changes in the condensed consolidated balance sheet for working capital from the beginning to pay interest on the Term Loan as it becomes due and $5.0 millionend of the restrictedperiod.
Net cash may be withdrawn afterprovided by/(used in) operating activities for the six months ended June 30, 2018 upon the satisfaction of certain conditions. See
Investing Activities
There was no cash-related investing activity for the six months ended June 30, 2022. For the six months ended June 30, 2021, we used cash of $24,424 for capital expenditures.
Financing Activities
Cash used byin financing activities for the ninesix months ended SeptemberJune 30, 20172022 was $43.1 million, which was primarily attributable to our special cash dividend of approximately $250,000. Cash was used to repurchase $193,000$32.9 million. In addition, we repurchased approximately 1.5 million shares of 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. Duringapproximately $10.1 million. Cash used in financing activities for the ninesix months ended September,June 30, 2016,2021 was $13.1 million, which was substantially all attributable to our repurchase of approximately 1.9 million shares of common stock.
On May 5, 2022, the Board of Directors declared a special dividend of $0.45 per share on the common stock of the Company, which resulted in an overall dividend payment of $32.9 million. The special dividend was paid on June 2, 2022 to shareholders of record at the close of business on May 17, 2022.
Future Cash Requirements
As of June 30, 2022, we paidhad outstanding purchase orders associated with manufacturing obligations in the aggregate amount of 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
The Company did not adopt any accounting standards that were recently issued but not yet effective, on the Company's condensed consolidated financial statements, see
Safe Harbor Statement
Certain statements in this Quarterly Report on Form 10-Q, including certain statements contained in “Business” andthe foregoing “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 (the “Securities Act”), and Section 21E of the Exchange Act, including statements relating to the progress of SIGA’s development programs and time linestimelines for bringing products to market, anddelivering products to the Strategic Stockpile, the enforceability of our procurement contracts, such as the 19C BARDA Contract.Contract (the "BARDA Contracts"), with BARDA, and responding to the global outbreak of monkeypox. 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 SIGA from 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 of disruptions to 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, (xiv) the risk that the U.S. Government'sor foreign governments' responses (including inaction) to the national andor global economic situationconditions or infectious diseases, such as COVID-19, are ineffective and may adversely affect SIGA’s business, and (xv) risks associated with responding to the current monkeypox outbreak, as well as the risks and uncertainties included in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and SIGA's business adversely,subsequent filings with the Securities and (xiv)Exchange Commission. SIGA urges investors and security holders to read those documents free of charge at the risk that some amounts received and recorded as deferred revenue ultimately many not be recognized as revenue.SEC's website at http://www.sec.gov. 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.
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 and changes in the financial standing of the issuerissuers 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
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 SeptemberJune 30, 2017.2022. 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.Act. 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 SeptemberJune 30, 2017 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 SeptemberJune 30, 20172022 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, including collections claims, breach of contract claims, labor and employment claims, tax related matters 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, 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.
Our results of operations and financial conditionscondition are subject to numerous risks and uncertainties described in our 20162021 Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
On May 12, 2022, the Company issued 824,903 shares of its common stock to OCM Strategic Credit SIGTEC Holdings, LLC (the “Investor”) on a net basis upon the full exercise of a warrant to purchase common stock of the Company. To exercise the warrant, the Investor surrendered to the Company 222,393 shares of common stock otherwise issuable under the warrant in order to effect the full warrant exercise. The exercise price of the warrant was $1.50 per share. Such shares were issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, and the issuance did not involve any underwriters, underwriting discounts or commissions, or any public offering. The Investor is an accredited investor, and the Company issued the shares without any general solicitation or advertisement.
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 Programs | Dollar Value of Shares That May Yet Be Purchased Under the Programs | ||||||||||||
April 1, 2022 to April 30, 2022 | 304,100 | $ | 7.03 | 304,100 | $ | 36,763,812 | ||||||||||
May 1, 2022 to May 31, 2022 | 190,879 | 7.53 | 190,879 | 35,325,830 | ||||||||||||
June 1, 2022 to June 30, 2022 | - | - | - | 35,325,830 | ||||||||||||
494,979 | $ | 7.23 | 494,979 |
On August 5, 2021, the Company announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase up to $50 million of the Company's common stock through December 31, 2023. The Company started repurchasing shares under this program in the fourth quarter of 2021. The timing and actual number of shares repurchased will depend on a variety of factors, including: the timing of 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; alternative capital management uses of cash; and other corporate liquidity requirements and priorities.
None.
No disclosure is required pursuant to this item.
No disclosure is required pursuant to this item.
Exhibit No. Description 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 Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 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: August 4, 2022 By: Daniel J. Luckshire Executive Vice President and (Duly Authorized Officer, Principal Financial Officer and3.1 Amended and Restated Certificate of Incorporation of SIGA Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on June 16, 2022). ExhibitNo.DescriptionAmended and Restated By-laws of SIGA Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on December 15, 2021). Amendment to Credit Agreement dated August 29, 2017Commercial Lease Agreement for Corvallis, Oregon date November 3, 2017101.INS104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). November 7, 2017/s/ Daniel J. Luckshire Chief Financial Officer Principal Accounting Officer)