UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the Quarterly Period Ended September 30, 2019 | |
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)
(Exact name of registrant as specified in its charter)
Delaware | 13-3864870 |
(State or other jurisdiction of | (IRS Employer Identification. No.) |
incorporation or organization) | |
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 x No ¨.
Indicate by check mark whether the registrant has submitted electronically 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 such files). Yes x No ¨.
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer x | |
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 ¨ No x.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨.
As of November 1, 2019, the registrant had outstanding 81,074,280 shares of common stock, par value $.0001, per share.
SIGA TECHNOLOGIES, INC.
FORM 10-Q
FORM 10-Q
Table of Contents
Page No. | ||
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 78,095,231 | $ | 100,652,809 | |||
Restricted cash, short-term | 11,053,200 | 11,452,078 | |||||
Accounts receivable | 3,217,701 | 1,959,133 | |||||
Inventory | 3,931,161 | 2,908,210 | |||||
Prepaid expenses and other current assets | 2,324,439 | 4,317,615 | |||||
Total current assets | 98,621,732 | 121,289,845 | |||||
Property, plant and equipment, net | 2,749,758 | 171,274 | |||||
Restricted cash, long-term | 87,079,574 | 68,292,023 | |||||
Deferred tax assets, net | 12,799,060 | 11,733,385 | |||||
Goodwill | 898,334 | 898,334 | |||||
Other assets | 862,979 | 1,058,880 | |||||
Total assets | $ | 203,011,437 | $ | 203,443,741 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 2,251,814 | $ | 1,688,488 | |||
Accrued expenses and other current liabilities | 9,544,060 | 9,648,917 | |||||
Total current liabilities | 11,795,874 | 11,337,405 | |||||
Warrant liability | 6,433,427 | 12,380,939 | |||||
Other liabilities | 3,004,313 | 1,263,113 | |||||
Long-term debt | 78,911,307 | 75,547,597 | |||||
Total liabilities | 100,144,921 | 100,529,054 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity | |||||||
Common stock ($.0001 par value, 600,000,000 shares authorized, 81,074,280 and 80,763,350 issued and outstanding at September 30, 2019, and December 31, 2018, respectively) | 8,107 | 8,076 | |||||
Additional paid-in capital | 221,388,212 | 218,697,872 | |||||
Accumulated deficit | (118,529,803 | ) | (115,791,261 | ) | |||
Total stockholders’ equity | 102,866,516 | 102,914,687 | |||||
Total liabilities and stockholders’ equity | $ | 203,011,437 | $ | 203,443,741 | |||
The accompanying notes are an integral part of these financial statements.
4
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues | |||||||||||||||
Product sales and supportive services | $ | 3,915,335 | $ | 468,865,229 | $ | 11,057,735 | $ | 468,865,229 | |||||||
Research and development | 4,195,989 | 2,210,095 | 11,420,284 | 6,619,245 | |||||||||||
Total revenues | 8,111,324 | 471,075,324 | 22,478,019 | 475,484,474 | |||||||||||
Operating expenses | |||||||||||||||
Cost of sales and supportive services | 737,274 | 95,166,271 | 1,652,641 | 95,166,271 | |||||||||||
Selling, general and administrative | 3,196,370 | 3,114,678 | 9,755,165 | 9,051,617 | |||||||||||
Research and development | 3,343,521 | 3,723,198 | 9,379,125 | 10,043,205 | |||||||||||
Patent expenses | 173,580 | 186,028 | 543,806 | 582,833 | |||||||||||
Total operating expenses | 7,450,745 | 102,190,175 | 21,330,737 | 114,843,926 | |||||||||||
Operating income | 660,579 | 368,885,149 | 1,147,282 | 360,640,548 | |||||||||||
Gain (loss) from change in fair value of warrant liability | 981,923 | (2,328,674 | ) | 4,774,711 | (5,271,503 | ) | |||||||||
Interest expense | (3,971,952 | ) | (3,924,124 | ) | (11,871,401 | ) | (11,516,103 | ) | |||||||
Other income, net | 759,881 | 5,067 | 2,233,588 | 151,454 | |||||||||||
(Loss)/income before income taxes | (1,569,569 | ) | 362,637,418 | (3,715,820 | ) | 344,004,396 | |||||||||
Benefit for income taxes | 363,742 | 25,412,995 | 977,278 | 25,412,498 | |||||||||||
Net and comprehensive (loss)/income | $ | (1,205,827 | ) | $ | 388,050,413 | $ | (2,738,542 | ) | $ | 369,416,894 | |||||
Basic (loss)/income per share | $ | (0.01 | ) | $ | 4.85 | $ | (0.03 | ) | $ | 4.64 | |||||
Diluted (loss)/income per share | $ | (0.03 | ) | $ | 4.71 | $ | (0.09 | ) | $ | 4.53 | |||||
Weighted average shares outstanding: basic | 81,064,927 | 80,023,044 | 80,988,813 | 79,650,373 | |||||||||||
Weighted average shares outstanding: diluted | 82,181,858 | 82,929,476 | 82,148,333 | 82,744,227 | |||||||||||
The accompanying notes are an integral part of these financial statements.
5
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss)/income | $ | (2,738,542 | ) | $ | 369,416,894 | |||
Adjustments to reconcile net (loss)/income to net cash used in operating activities: | ||||||||
Depreciation and other amortization | 395,540 | 48,639 | ||||||
(Decrease)/increase in fair value of warrant liability | (4,774,711 | ) | 5,271,503 | |||||
Stock-based compensation | 1,717,380 | 1,866,279 | ||||||
Deferred income taxes benefit | (1,065,675 | ) | (25,520,615 | ) | ||||
Net realization of deferred revenue and costs due to FDA approval of oral TPOXX® | — | (281,950,853 | ) | |||||
Non-cash interest expense | 3,363,712 | 3,363,712 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (1,258,568 | ) | 369,872 | |||||
Inventory | (1,022,951 | ) | — | |||||
Prepaid expenses and other assets | 2,189,076 | 567,042 | ||||||
Accounts payable, accrued expenses and other liabilities | (697,325 | ) | (969,951 | ) | ||||
Deferred revenue | (47,939 | ) | — | |||||
Net cash (used in)/provided by operating activities | (3,940,003 | ) | 72,462,522 | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (29,092 | ) | (27,863 | ) | ||||
Net cash used in investing activities | (29,092 | ) | (27,863 | ) | ||||
Cash flows from financing activities: | ||||||||
Net proceeds from exercise of stock options | — | 252,679 | ||||||
Payment of employee tax obligations for common stock tendered | (199,810 | ) | (1,708,290 | ) | ||||
Net cash used in financing activities | (199,810 | ) | (1,455,611 | ) | ||||
Net (decrease)/increase in cash, cash equivalents and restricted cash | (4,168,905 | ) | 70,979,048 | |||||
Cash, cash equivalents and restricted cash at the beginning of period | 180,396,910 | 37,101,586 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 176,228,005 | $ | 108,080,634 | ||||
Supplemental disclosure of non-cash activities: | ||||||||
Conversion of warrants to common stock | $ | 1,172,801 | $ | 6,007,847 | ||||
Issuance of common stock upon cashless exercise | $ | 118,500 | $ | 1,582,420 | ||||
The accompanying notes are an integral part of these financial statements
6
SIGA TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Condensed Consolidated Financial Statements
The financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2018, included in the 2018 Annual Report on Form 10-K. All terms used but not defined elsewhere herein have the meaning ascribed to them in the Company’s 2018 Annual Report on Form 10-K filed on March 5, 2019. 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 have been included. The 2018 year-end condensed consolidated balance sheet data were derived from the audited financial statements but do not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full year.
2. Summary of Significant Accounting Policies
Adoption of ASC 842
On January 1, 2019, the Company adopted ASC 842, Leases (“ASC 842”) using the modified retrospective approach as of the effective date of the standard without revising prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward its historical lease classification. In addition, the Company elected the hindsight practical expedient to determine the lease term for existing leases. The Company’s election of the hindsight practical expedient resulted in the extension of the Oregon lease term as it was determined that the first renewal option under this lease was expected to be exercised with a reasonable degree of certainty. In the second quarter of 2019, the Company exercised the first renewal option under the Oregon lease.
The Company was required to record an operating lease right-of-use asset and a corresponding operating lease liability, equal to the present value of the lease payments at the adoption date. In the determination of future lease payments, the Company has elected to aggregate lease components such as payments for rent, taxes and insurance costs with non-lease components such as maintenance costs and account for these payments as a single lease component. The present value of the lease payments was determined using the Company's incremental borrowing rate. The impact of adopting ASC 842 as of January 1, 2019 was the recording of operating lease right-of-use assets of approximately $2.9 million; the recording of operating lease liabilities of approximately $3.3 million; and a decrease to deferred rent of approximately $0.4 million.
Revenue Recognition
All of the Company’s revenue is derived from long-term contracts that span multiple years. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). A contract’s transaction price is allocated to distinct performance obligations and recognized as revenue when, or as, a performance obligation is satisfied. As of September 30, 2019, the Company's active performance obligations, for the contracts outlined in Note 3, consist of the following: five performance obligations relate to research and development services; one relates to manufacture and delivery of product; and one is associated with storage of product. The aggregate amount of transaction price allocated to remaining performance obligations was $36.1 million as of September 30, 2019. Remaining performance obligations represent the transaction price for which work has not been performed and excludes unexercised contract options.
During the nine months ended September 30, 2019, the Company recognized a cumulative catch-up adjustment to revenue of approximately $3.3 million related to the conclusion of historical rate reconciliations in connection with the IV Formulation R&D Contract (defined in Note 3), and changes in the projected amount of contract funding expected to be available under the IV Formulation R&D Contract, which impacts the progress-towards-completion calculation required under ASC 606.
Contract Balances
The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the condensed consolidated balance sheets. Generally, amounts are billed as work progresses in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones. Under typical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such payments occur
7
within a short period of time. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the nine months ended September 30, 2019, the Company recognized revenue of $0.7 million that was included in deferred revenue at the beginning of the period.
Restricted Cash and Cash Equivalents
Under the terms of the Loan Agreement (as defined below), net cash proceeds from the Company's Priority Review Voucher ("PRV") sale on October 31, 2018 are restricted and are held in a reserve account. Cash and cash equivalents held in the reserve account is available to pay interest, fees and principal related to the Term Loan. See Note 8 for additional information. Prior to the second quarter of 2019, there was also a reserve account for certain proceeds of the Loan Agreement. This account was also restricted. Amounts in this reserve account were primarily used to pay interest on the Loan Agreement. This reserve account was closed in the second quarter 2019.
The following tables reconcile cash, cash equivalents and restricted cash per the condensed consolidated statements of cash flows to the condensed consolidated balance sheet for each respective period:
As of | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Cash and cash equivalents | $ | 78,095,231 | $ | 100,652,809 | ||||
Restricted cash-short term | 11,053,200 | 11,452,078 | ||||||
Restricted cash-long term | 87,079,574 | 68,292,023 | ||||||
Cash, cash equivalents and restricted cash | $ | 176,228,005 | $ | 180,396,910 | ||||
September 30, 2018 | December 31, 2017 | |||||||
Cash and cash equivalents | $ | 103,985,265 | $ | 19,857,833 | ||||
Restricted cash-short term | 4,095,369 | 10,701,305 | ||||||
Restricted cash-long term | — | 6,542,448 | ||||||
Cash, cash equivalents and restricted cash | $ | 108,080,634 | $ | 37,101,586 | ||||
Recent Accounting Pronouncements
On January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. The revised guidance will be applied prospectively, and is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed after January 1, 2017. The Company believes the adoption of ASU No. 2017-04 will not have a significant impact on its consolidated financial statements.
3. Procurement Contracts and Research Agreements
2018 BARDA Contract
On September 10, 2018, the Company entered into a contract with the U.S. Biomedical Advanced Research and Development Authority (“BARDA”) pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile"), and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of the intravenous (IV) formulation of TPOXX® ("IV TPOXX®"). Additionally, the contract includes funding from BARDA for advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and supportive procurement activities. The contract with BARDA (as amended, modified, or supplemented from time to time, the “2018 BARDA Contract”) contemplates, as of September 30, 2019, 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 $25.8 million of payments are related to exercised options and up to approximately $525.0 million of payments are currently classified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten years from the date of entry into the 2018 BARDA Contract and such options
8
could be exercised at any time during the contract term, including during the base period of performance. On May 20, 2019, an option for the manufacture and delivery of 363,070 courses of oral TPOXX® was modified to divide it into four procurement-related options. One of the four modified procurement-related options provides for the payment of $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®. This option was exercised simultaneously with the aforementioned modification. Each of the other three options individually specifies the delivery of approximately 121,000 courses of oral TPOXX® for consideration of approximately $34.0 million. In total, the four options under the May 2019 modification provide for the manufacture and delivery of 363,070 courses of oral TPOXX® for consideration of approximately $112.5 million. The option modification did not change the overall total potential value of the 2018 BARDA Contract, nor did it change the total amount to be paid in connection with the manufacture and delivery of oral TPOXX® courses.
The base period of performance provides for potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of 20,000 courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance ("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments of approximately $0.6 million for supportive procurement activities. As of September 30, 2019, the Company had received $11.1 million for the 2019 deliveries of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile and $3.2 million for the manufacture of IV BDS. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received in 2018 for the manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2018 and September 30, 2019.
The options that have been exercised to date provide for potential payments up to approximately $25.8 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-marketing and other activities for oral TPOXX®.
Unexercised options provide for potential payments up to approximately $525.0 million in total (if all such options are exercised). There are options for the following activities: payments of up to $439.0 million for the delivery of up to approximately 1,452,300 courses of oral TPOXX® to the Strategic Stockpile; payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid 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 2018 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 on whether to simultaneously exercise IV BDS Options and IV FDP Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
2011 BARDA Contract
On May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oral TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.
The contract with BARDA (as amended, modified, or supplemented from time to time, the “2011 BARDA Contract”) includes a base contract, as modified, (“2011 Base Contract”) as well as options. The 2011 Base Contract provides for approximately $508.7 million of payments, of which as of September 30, 2019, $459.8 million had been received by the Company for the manufacture and delivery of 1.7 million courses of oral TPOXX® and $45.0 million had been received for certain reimbursements in connection with development and supportive activities or expired. Approximately $3.9 million remains eligible to be received in the future for reimbursements of development and supportive activities.
For courses of oral TPOXX® that were physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product replacement obligations, including: (i) a product replacement obligation in the event that the final version of oral
9
TPOXX® approved by the FDA was different from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the “FDA Approval Replacement Obligation”); (ii) a product replacement obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a product replacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July 13, 2018, the FDA approved oral TPOXX® for the treatment of smallpox and there is no difference between the approved product and courses in the Strategic Stockpile. As such, the possibility of the FDA Approval Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.
The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relating to FDA approval of 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise, the 2011 BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all were exercised by BARDA, would result in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such as work on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-base manufacturing. BARDA may choose, in its sole discretion not to exercise any or all of the unexercised options.
The 2011 BARDA Contract expires in September 2020.
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 2018 BARDA Contract and a development contract with BARDA (“IV Formulation R&D Contract”). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As of September 30, 2019, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $4.0 million.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from the United States Department of Defense ("DoD") to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). The term of the initial award is five years. As of September 30, 2019 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the initial award of approximately $12.3 million.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts and grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at any time. As such, we may not be eligible to receive all available funds.
4. Inventory
Inventory includes costs related to the manufacture of TPOXX®. Inventory consisted of the following:
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Work in-process | $ | 2,970,182 | $ | 1,950,445 | |||
Finished goods | 960,979 | 957,765 | |||||
Inventory | $ | 3,931,161 | $ | 2,908,210 | |||
10
5. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Leasehold improvements | $ | 2,420,028 | $ | 2,420,028 | |||
Computer equipment | 601,797 | 618,248 | |||||
Furniture and fixtures | 377,859 | 377,859 | |||||
Operating lease right-of-use assets | 2,944,932 | — | |||||
6,344,616 | 3,416,135 | ||||||
Less - accumulated depreciation and amortization | (3,594,858 | ) | (3,244,861 | ) | |||
Property, plant and equipment, net | $ | 2,749,758 | $ | 171,274 | |||
Depreciation and amortization expense on property, plant, and equipment was $130,251 and $14,710 for the three months ended September 30, 2019 and 2018, respectively, and $395,540 and $48,639 for the nine months ended September 30, 2019 and 2018, respectively.
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Bonus | $ | 2,016,001 | $ | 2,600,839 | |||
Deferred revenue | 4,112,007 | 4,159,946 | |||||
Interest payable | 968,018 | 35,567 | |||||
Lease liability, current portion | 412,436 | — | |||||
Research and development vendor costs | 517,618 | 1,446,410 | |||||
Professional fees | 368,218 | 242,043 | |||||
Vacation | 297,103 | 294,794 | |||||
Other | 852,659 | 869,318 | |||||
Accrued expenses and other current liabilities | $ | 9,544,060 | $ | 9,648,917 | |||
7. Financial Instruments
2016 Warrant
On September 2, 2016, in connection with the entry into the Loan Agreement (see Note 8 for additional information), the Company issued a warrant (the “Warrant”) to the Lender to purchase a number of shares of the Company’s common stock equal to $4.0 million divided by the lower of (i) $2.29 per share and (ii) the subscription price paid in connection with the Rights Offering. The Warrant provides for weighted average anti-dilution protection and is exercisable in whole or in part for ten (10) years from the date of issuance. The per share subscription price paid was $1.50 in connection with the Rights Offering; accordingly, the exercise price of the Warrant was set at $1.50 per share, and there were 2.7 million shares underlying the Warrant. Subsequent to partial exercises of the Warrant, there are approximately 1.5 million shares underlying the Warrant as of September 30, 2019.
The Company accounted for the Warrant in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain anti-dilution and cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities. The Company classified the Warrant as a liability and reports the change in fair value in the statement of operations.
11
As of September 30, 2019, the fair value of the Warrant was $6.4 million. The fair value of the liability-classified Warrant was calculated using the following assumptions: risk free interest rate of 1.62%; no dividend yield; an expected life of 6.92 years; and a volatility factor of 60%.
8. Debt
On September 2, 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Loan Agreement”) with OCM Strategic Credit SIGTEC Holdings, LLC (“Lender”), pursuant to which the Company received $80.0 million (less fees and other items) on November 16, 2016 having satisfied certain pre-conditions. Such $80.0 million had been placed in an escrow account on September 30, 2016 (the “Escrow Funding Date”). Prior to the Escrow Release Date (November 16, 2016), the Company did not have access to, or any ownership interest in, the escrow account. Until the Escrow Release Date occurred, the Company did not have an obligation to make any payments under the Loan Agreement, no security was granted under the Loan Agreement and no affirmative or negative covenants or events of default were effective under the Loan Agreement. Amounts were held in the escrow account until the satisfaction of certain conditions including the closing of the Rights Offering (see Note 7) on November 16, 2016. As part of the satisfaction of the PharmAthene claim, funds were released from the escrow account (the date on which such transfer occurred, the “Escrow Release Date”).
The Loan Agreement provides for a first-priority senior secured term loan facility in the aggregate principal amount of $80.0 million (the “Term Loan”), of which (i) $25.0 million was placed in a reserve account (the “Reserve Account”) only to be utilized to pay interest on the Term Loan as it becomes due; (ii) an additional $5.0 million was also placed in the Reserve Account and up to the full amount of such $5.0 million was eligible to be withdrawn after June 30, 2018 upon the satisfaction of certain conditions, provided that any of such amount was required to fund any interest to the extent any interest in excess of the aforementioned $25.0 million was due and owing and any of such $5.0 million remained in the Reserve Account; and (iii) $50.0 million (net of fees and expenses then due and owing to the Lender) was paid as part of the final payment to satisfy a litigation claim. Interest on the Term Loan is at a per annum rate equal to the Adjusted LIBOR rate plus 11.5%, subject to adjustments as set forth in the Loan Agreement. At September 30, 2019, the effective interest rate on the Term Loan, which includes interest payments and accretion of unamortized costs and fees, was 19.2%. The Company incurred approximately $4.0 million of interest expense during the three months ended September 30, 2019, of which $1.1 million accreted to the Term Loan balance. On July 12, 2018, upon confirmation that there had been no events of default, $5 million was withdrawn by the Company from the Reserve Account and was placed in the Company's cash operating account. On October 31, 2018, the Loan Agreement was amended to expand the definition of permitted dispositions to include a sale of the PRV. In connection with the amendment, net cash proceeds from the sale of the PRV ($78.3 million) were placed in a restricted cash account; such restricted account is to be used only for interest, fees and principal payments (other than those in connection with an event of default) related to the Term Loan. The cash and cash equivalents balance in the restricted account was increased to $100.5 million as of July 24, 2019, in connection with an amendment to the Term Loan that allows the Company to diversify the financial institutions at which its remaining unrestricted cash and cash equivalents can be held. The balance in the restricted account represents an approximation of total payments that would be required pursuant to the Term Loan if it were to remain outstanding until its maturity.
The Term Loan matures on the earliest to occur of (i) the four-year anniversary of the Escrow Release Date, which will be November 16, 2020, and (ii) the acceleration of certain obligations pursuant to the Loan Agreement. At maturity, $80.0 million of principal will be repaid, and an additional $4.0 million will be paid (see below). Prior to maturity, there are no scheduled principal payments.
Through the three and one-half year anniversary of the Escrow Release Date, which will be May 16, 2020, any prepayment of the Term Loan is subject to a make-whole provision in which interest payments related to the prepaid amount are due (subject to a discount of treasury rate plus 0.50%).
In connection with the Term Loan, the Company has granted the Lender a lien on and security interest in all of the Company’s right, title and interest in substantially all of the Company’s tangible and intangible assets, including all intellectual property.
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants, among other things, require a minimum unrestricted cash balance throughout the term of the Term Loan and the achievement of regulatory milestones by certain dates, and contain certain limitations on the ability of the Company to incur unreimbursed research and development expenditures over a certain threshold, make capital expenditures over a certain threshold, incur indebtedness, dispose of assets outside of the ordinary course of business, make cash distributions and enter into certain merger or consolidation transactions. The minimum unrestricted cash requirement was $5.0 million until August 27, 2018 (45 days after FDA approval of oral TPOXX®), at which point the minimum unrestricted cash requirement became $20.0 million.
12
The Loan Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) the material inaccuracy of representations or warranties made thereunder, (iii) non-compliance with covenants thereunder, (iv) non-payment of amounts due under, or the acceleration of, other material indebtedness of the Company and (v) bankruptcy or insolvency events. Upon the occurrence and during the continuance of an event of default under the Loan Agreement, the interest rate may increase by 2.00% per annum above the rate of interest otherwise in effect, and the Lenders would be entitled to accelerate the maturity of the Company’s outstanding obligations thereunder.
As of September 30, 2019, the Company was in compliance with the Loan Agreement covenants.
In connection with the Loan Agreement, the Company incurred $8.2 million of costs (including interest on amounts held in the escrow account between September 30, 2016 and November 15, 2016). Furthermore, an additional $4.0 million will become payable when principal of the Term Loan is repaid. As part of the Company's entry into the Loan Agreement, the Company issued the Warrant (see Note 7) with a fair market value of $5.8 million. The fair value of the Warrant, as well as costs related to the Term Loan issuance, were recorded as deductions to the Term Loan balance on the Balance Sheet. These amounts are being amortized on a straight-line basis over the life of the related Term Loan. The Company compared the amortization under the effective interest method with the straight-line basis and determined the results were not materially different. The $4.0 million that will be paid when principal is repaid is being accreted to the Term Loan balance.
9. Fair Value of Financial Instruments
The carrying value of cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as a liability are recorded at their fair market value as of each reporting period.
The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
• | Level 1 – Quoted prices for identical instruments in active markets. |
• | Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable. |
• | Level 3 – Instruments where significant value drivers are unobservable to third parties. |
The Company uses model-derived valuations where certain inputs are unobservable to third parties to determine the fair value of certain common stock warrants on a recurring basis and classifies such liability-classified warrants in Level 3. As described in Note 7, the fair value of the liability classified warrant was $6.4 million at September 30, 2019.
At September 30, 2019, the fair value of the debt was $85.8 million and the carrying value of the debt was $78.9 million. The Company used a discounted cash flow model to estimate the fair value of the debt by applying a discount rate to future payments expected to be made as set forth in the Loan Agreement. The fair value of the loan was measured using Level 3 inputs. The discount rate was determined using market participant assumptions.
There were no transfers between levels of the fair value hierarchy for the nine months ended September 30, 2019. In addition, there were no Level 1 or Level 2 financial instruments as of September 30, 2019 and December 31, 2018.
The following table presents changes in the liability-classified warrant measured at fair value using Level 3 inputs:
Fair Value Measurements of Level 3 liability-classified warrant | |||
Warrant liability at December 31, 2018 | $ | 12,380,939 | |
Decrease in fair value of warrant liability | (4,774,711 | ) | |
Exercise of warrants | (1,172,801 | ) | |
Warrant liability at September 30, 2019 | $ | 6,433,427 | |
13
10. Per Share Data
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 September 30, | Nine months ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net (loss)/income for basic earnings per share | $ | (1,205,827 | ) | $ | 388,050,413 | $ | (2,738,542 | ) | $ | 369,416,894 | |||||
Less: Change in fair value of warrants | 981,923 | (2,328,674 | ) | 4,774,711 | (5,271,503 | ) | |||||||||
Net (loss)/income, adjusted for change in fair value of warrants for diluted earnings per share | $ | (2,187,750 | ) | $ | 390,379,087 | $ | (7,513,253 | ) | $ | 374,688,397 | |||||
Weighted-average shares | 81,064,927 | 80,023,044 | 80,988,813 | 79,650,373 | |||||||||||
Effect of potential common shares | 1,116,931 | 2,906,432 | 1,159,520 | 3,093,854 | |||||||||||
Weighted-average shares: diluted | 82,181,858 | 82,929,476 | 82,148,333 | 82,744,227 | |||||||||||
(Loss)/income per share: basic | $ | (0.01 | ) | $ | 4.85 | $ | (0.03 | ) | $ | 4.64 | |||||
(Loss)/income per share: diluted | $ | (0.03 | ) | $ | 4.71 | $ | (0.09 | ) | $ | 4.53 | |||||
For the three and nine months ended September 30, 2019, the diluted earnings per share calculation reflects the effect of the assumed exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. Weighted-average diluted shares include the dilutive effect of warrants. The dilutive effect of warrants is calculated based on the average share price for each fiscal period using the treasury stock method.
The Company incurred losses for the three and nine months ended September 30, 2019 and as a result, the equity instruments listed below were excluded from the calculation of diluted income (loss) per share as the effect of the exercise, conversion or vesting of such instruments would be anti-dilutive. The weighted average number of equity instruments excluded consisted of:
Three months ended September 30, | Nine months ended September 30, | ||||
2019 | 2019 | ||||
Stock Options | 332,861 | 353,801 | |||
Stock-Settled Stock Appreciation Rights | — | 2,227 | |||
Restricted Stock Units | 598,793 | 545,422 | |||
The appreciation of each stock-settled stock appreciation right was capped at a determined maximum value. As a result, the weighted average number shown in the table above for stock-settled stock appreciation rights reflects the weighted average maximum number of shares that could be issued.
11. Commitments and Contingencies
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
14
financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Purchase Commitments
In the course of our business, the Company regularly enters into agreements with third party organizations to provide contract manufacturing services and research and development services. Under these agreements, the Company issues purchase orders which obligate the Company to pay a specified price when agreed-upon services are performed. Commitments under the purchase orders do not exceed our planned commercial and research and development needs.
12. Related Party Transactions
Board of Directors and Outside Counsel
A member of the Company’s Board of Directors is a member of the Company’s outside counsel. During the three months ended September 30, 2019 and 2018, the Company incurred expenses of $117,450 and $115,628, respectively, related to services provided by the outside counsel. During the nine months ended September 30, 2019 and 2018, the Company incurred expenses of $352,803 and $335,350, respectively, related to services provided by the outside counsel. On September 30, 2019 the Company’s outstanding payables and accrued expenses included an approximate $78,230 liability to the outside counsel.
Board of Directors-Consulting Agreement
On October 13, 2018, the Company, entered into a consulting agreement with Dr. Eric A. Rose, a member, and former Executive Chairman, of the Company’s Board of Directors. Under the agreement, the consulting services will include assisting the Company on expanded indications for TPOXX® and other business development opportunities as requested by the Company. The term of the agreement is for two years, with compensation for such services at an annual rate of $200,000. During the three months ended September 30, 2019, the Company incurred $50,000 related to services under this agreement. During the nine months ended September 30, 2019, the Company incurred $150,000 related to services under this agreement. As of September 30, 2019, the Company’s outstanding payables and accrued expenses included a $50,000 liability associated with this agreement.
Real Estate Leases
On May 26, 2017 the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a ten-year Office Lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at 31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its new corporate headquarters. The Company's rental obligations consist of a fixed rent of $25,333 per month in the first sixty-three months of the term, subject to a rent abatement for the first six months of the term. From the first day of the sixty-fourth month of the term through the expiration or earlier termination of the lease, the Company's rental obligations consist of a fixed rent of $29,333 per month. In addition to the fixed rent, the Company will pay a facility fee in consideration of the landlord making available certain ancillary services, commencing on the first anniversary of entry into the lease. The facility fee will be $3,333 per month for the second year of the term and increasing by five percent each year thereafter, to $4,925 per month in the final year of the term.
On July 31, 2017, the Company and M&F entered into a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”), pursuant to which the Company and M&F agreed to terminate the sublease dated January 9, 2013 for 6,676 square feet of rental square footage located at 660 Madison Avenue, Suite 1700, New York, New York (such sublease being the “Old HQ Sublease” and the location being the “Old HQ”).
Effectiveness of the Old HQ Sublease Termination Agreement was conditioned upon the commencement of a sublease for the Old HQ between M&F and a new subtenant (the “Replacement M&F Sublease”), which occurred on August 2, 2017. The Old HQ Sublease Termination Agreement obligates the Company to pay, on a monthly basis, an amount equal to the discrepancy (the “Rent Discrepancy”) between the sum of certain operating expenses and taxes (“Additional Rent”) and fixed rent under the overlease between M&F and the landlord at 660 Madison Avenue and the sum of Additional Rent and fixed rent under the Replacement M&F Sublease. Under the Old HQ Sublease Termination Agreement, the Company and M&F release each other from any liability under the Old HQ Sublease.
Under the Old HQ Sublease, the Company was obligated to pay fixed rent of approximately $60,000 per month until August 2018 and approximately $63,400 per month thereafter until the Old HQ Sublease expiration date of August 31, 2020. Additionally, the Company was obligated to pay certain operating expenses and taxes ("Additional Rent"), such Additional Rent being specified in the overlease between M&F and the landlord at 660 Madison Avenue (the "Old HQ Overlease").
Under the Replacement M&F Sublease, the subtenant’s rental obligations were excused for the first two (2) months of the lease term (“Rent Concession Period”). Thereafter, the subtenant was obligated to pay fixed rent of $36,996 per month for the first
15
twelve (12) months, and is obligated to pay $37,831 per month for the next 12 months, and $38,665 per month until the scheduled expiration of the Replacement M&F Sublease on August 24, 2020. In addition to fixed rent, the subtenant is also obligated to pay, pursuant to the Replacement M&F Sublease, a portion of the Additional Rent specified in the Old HQ Overlease.
For the time period between August 2, 2017 and August 31, 2020 (the expiration date of the Old HQ Sublease), the Company estimates that it will pay a total of approximately $0.9 million combined in fixed rent and additional amounts payable under the New HQ Lease and a total of approximately $1.1 million in Rent Discrepancy under the Old HQ Sublease Termination Agreement, for a cumulative total of $2.0 million. In contrast, fixed rent and estimated Additional Rent under the Old HQ Sublease, for the aforementioned time period, would have been a total of approximately $2.4 million if each of the New HQ Lease, Replacement M&F Sublease and Old HQ Sublease Termination Agreement had not been entered into by each of the parties thereto. Because amounts such as operating expenses and taxes may vary, the foregoing totals can only be estimated at this time and are subject to change.
As a result of the above-mentioned transactions, the Company discontinued usage of Old HQ in the third quarter of 2017. As such, during the year ended December 31, 2017 the Company recorded a loss of approximately $1.1 million in accordance with Accounting Standards Codification (“ASC”) 420, Exit or Disposal Obligations. This loss primarily represented the discounted value of estimated Rent Discrepancy payments to occur in the future, and included costs related to the termination of the old HQ Sublease. The Company also wrote-off approximately $0.1 million of leasehold improvements and furniture and fixtures related to the Old HQ.
The following table summarizes activity relating to the liability that was recorded as a result of the lease termination:
Lease Termination liability | |||
Balance at December 31, 2018 | $ | 509,937 | |
Charges (included in selling, general and administrative expenses) | 30,764 | ||
Cash payments, net of sublease income | (294,351 | ) | |
Balance at September 30, 2019 | $ | 246,350 | |
As of September 30, 2019, the lease termination liability is included in Accrued expenses and other current liabilities on the condensed consolidated balance sheet.
13. Income Taxes
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.
ASC 740, Income Taxes requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. At each reporting date, the Company considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. During the quarter ended September 30, 2018, the Company received FDA approval and recorded revenue related to the delivery of its oral TPOXX® product. The Company also recorded revenue related to the FDA holdback payment and the payment for 84-month expiry. In addition, the Company entered into a new contract with BARDA for the purchase of up to 1.7 million courses of TPOXX®. Based on these factors, the Company determined during the quarter ended September 30, 2018 that sufficient positive evidence exists to conclude that substantially all of its deferred tax assets are realizable on a more-likely-than-not basis.
For the three and nine months ended September 30, 2018, we incurred pre-tax income of $362.6 million and $344.0 million and a corresponding income tax benefit of $25.4 million and $25.4 million, respectively, which included a discrete benefit of $25.8 million for both periods. For the three and nine month periods, the $25.8 million benefit primarily related to the Company’s assessment that its deferred tax assets were realizable on a more-likely-than-not basis as a result of the award of the 2018 BARDA Contract and then current forecasts of future pre-tax earnings.
The effective tax rate for the three months ended September 30, 2019 was 23.17% compared to (7.01)% in the comparable prior period. The effective tax rate for the three months ended September 30, 2019 differs from the U.S. statutory rate of 21% primarily
16
as a result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
The effective tax rate for the nine months ended September 30, 2019 was 26.30% compared to (7.39)% in the comparable prior period. The effective tax rate for the nine months ended September 30, 2019 differs from the U.S. statutory rate of 21% primarily as a result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
14. Equity
The tables below present changes in stockholders' equity for the three and nine months ended September 30, 2019 and 2018.
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders' Equity | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balances at June 30, 2019 | 81,046,524 | $ | 8,105 | $ | 220,770,338 | $ | (117,323,976 | ) | $ | — | $ | 103,454,467 | ||||||||||
Net loss | — | — | — | (1,205,827 | ) | — | (1,205,827 | ) | ||||||||||||||
Issuance of common stock | 53,332 | 5 | (5 | ) | — | — | — | |||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (25,576 | ) | (3 | ) | (143,217 | ) | — | — | (143,220 | ) | ||||||||||||
Stock-based compensation | — | — | 761,096 | — | — | 761,096 | ||||||||||||||||
Balances at September 30, 2019 | 81,074,280 | $ | 8,107 | $ | 221,388,212 | $ | (118,529,803 | ) | $ | — | $ | 102,866,516 | ||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders' Equity | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balances at December 31, 2018 | 80,763,350 | $ | 8,076 | $ | 218,697,872 | $ | (115,791,261 | ) | $ | — | $ | 102,914,687 | ||||||||||
Net loss | — | — | — | (2,738,542 | ) | — | (2,738,542 | ) | ||||||||||||||
Issuance of common stock upon exercise of stock options | 9,769 | 1 | (1 | ) | — | — | — | |||||||||||||||
Issuance of common stock upon vesting of RSUs and exercise of stock-settled appreciation rights | 121,771 | 12 | (12 | ) | — | — | — | |||||||||||||||
Issuance of common stock upon exercise of warrants | 159,782 | 16 | 1,172,785 | — | — | 1,172,801 | ||||||||||||||||
Issuance of common stock | 53,332 | 5 | (5 | ) | — | — | — | |||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (33,724 | ) | (3 | ) | (199,807 | ) | — | — | (199,810 | ) | ||||||||||||
Stock-based compensation | — | — | 1,717,380 | — | — | 1,717,380 | ||||||||||||||||
Balances at September 30, 2019 | 81,074,280 | $ | 8,107 | $ | 221,388,212 | $ | (118,529,803 | ) | $ | — | $ | 102,866,516 | ||||||||||
17
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders' Deficiency | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balances at June 30, 2018 | 79,160,058 | $ | 7,916 | $ | 214,906,962 | $ | (556,232,608 | ) | $ | — | $ | (341,317,730 | ) | |||||||||
Net loss | — | — | — | 388,050,413 | — | 388,050,413 | ||||||||||||||||
Issuance of common stock upon exercise of stock options | 395,663 | 39 | 252,640 | — | — | 252,679 | ||||||||||||||||
Issuance of common stock upon vesting of RSUs and exercise of stock-settled appreciation rights | 227,287 | 23 | (23 | ) | — | — | — | |||||||||||||||
Issuance of common stock upon exercise of warrants | 760,625 | 76 | 6,007,771 | — | — | 6,007,847 | ||||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (223,098 | ) | (22 | ) | (1,695,940 | ) | — | — | (1,695,962 | ) | ||||||||||||
Stock-based compensation | — | — | 1,176,558 | — | — | 1,176,558 | ||||||||||||||||
Balances at September 30, 2018 | 80,320,535 | $ | 8,032 | $ | 220,647,968 | $ | (168,182,195 | ) | $ | — | $ | 52,473,805 | ||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders' Deficiency | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balances at December 31, 2017 | 79,039,000 | $ | 7,904 | $ | 214,229,581 | $ | (537,375,776 | ) | $ | — | $ | (323,138,291 | ) | |||||||||
Net income | — | — | — | 369,416,894 | — | 369,416,894 | ||||||||||||||||
Issuance of common stock upon exercise of stock options | 408,698 | 41 | 252,638 | — | — | 252,679 | ||||||||||||||||
Issuance of common stock upon vesting of RSUs and exercise of stock-settled appreciation rights | 337,084 | 33 | (33 | ) | — | — | — | |||||||||||||||
Issuance of common stock upon exercise of warrants | 760,625 | 76 | 6,007,771 | — | — | 6,007,847 | ||||||||||||||||
Payment of common stock tendered for employee stock-based compensation tax obligations | (224,872 | ) | (22 | ) | (1,708,268 | ) | — | — | (1,708,290 | ) | ||||||||||||
Cumulative effect of accounting change | — | — | — | (223,313 | ) | — | (223,313 | ) | ||||||||||||||
Stock-based compensation | — | — | 1,866,279 | — | — | 1,866,279 | ||||||||||||||||
Balances at September 30, 2018 | 80,320,535 | $ | 8,032 | $ | 220,647,968 | $ | (168,182,195 | ) | $ | — | $ | 52,473,805 | ||||||||||
15. Leases
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 has two successive renewal options; one for two years and the other for three years. In the second quarter of 2019, the Company exercised the first renewal option, which extended the lease expiration date to December 31, 2021.
On May 26, 2017 the Company and M&F entered into a ten-year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet in New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company has no leases that qualify as finance leases.
Operating lease costs totaled $0.2 million and $0.2 million for the three months ended September 30, 2019 and 2018, respectively, and $0.4 million and $0.5 million for the nine months ended September 30, 2019 and 2018, respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.1 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively, and $0.4 million and $0.4 million for the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the weighted-average remaining lease term of the Company’s operating leases was 6.44 years while the weighted-average discount rate was 4.53%.
Future undiscounted cash flows under operating leases as of September 30, 2019 are expected to be as follows:
18
2019 | $ | 97,538 | ||
2020 | 591,108 | |||
2021 | 600,362 | |||
2022 | 368,467 | |||
2023 | 402,078 | |||
Thereafter | 1,387,139 | |||
Total undiscounted cash flows under leases | 3,446,692 | |||
Less: Imputed interest | (515,980 | ) | ||
Present value of lease liabilities | $ | 2,930,712 | ||
As of September 30, 2019, approximately $2.5 million of the lease liability is included in Other liabilities on the condensed consolidated balance sheet with the current portion included in accrued expenses.
As previously disclosed in the Company's 2018 Annual Report on Form 10-K and pursuant to ASC 840, Leases, the predecessor to ASC 842, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year as of December 31, 2018 was as follows:
2019 | $ | 541,376 | ||
2020 | 304,000 | |||
2021 | 304,000 | |||
2022 | 320,774 | |||
2023 | 352,000 | |||
Thereafter | 1,197,778 | |||
Total | $ | 3,019,928 | ||
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes to those statements and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties.
Overview
We are a commercial-stage pharmaceutical company focused on the health security market. Health security comprises countermeasures for biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and health preparedness. Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an antiviral drug for the treatment of human smallpox disease caused by variola virus.
BARDA Contracts-TPOXX®
2018 BARDA Contract
On September 10, 2018, the Company entered into a contract with the U.S. Biomedical Advanced Research and Development Authority (“BARDA”) pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile"), and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of the intravenous (IV) formulation of TPOXX® ("IV TPOXX®"). Additionally, the contract includes funding from BARDA for advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and supportive procurement activities. The contract with BARDA (as amended, modified, or supplemented from time to time, the “2018 BARDA Contract”) contemplates, as of September 30, 2019, 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 $25.8 million of payments are related to exercised options and up to approximately $525.0 million of payments are currently classified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten years from the date of entry into the 2018 BARDA Contract and such options could be exercised at any time during the contract term, including during the base period of performance. On May 20, 2019, an option for the manufacture and delivery of 363,070 courses of oral TPOXX® was modified to divide it into four procurement-related options. One of the four modified procurement-related options provides for the payment of $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 course of oral TPOXX®. This option was exercised simultaneously with the aforementioned modification. Each of the other three options individually specifies the delivery of approximately 121,000 courses of oral TPOXX® for consideration of approximately $34.0 million. In total, the four options under the May 2019 modification provide for the manufacture and delivery of 363,070 courses of oral TPOXX® for consideration of approximately $112.5 million. The option modification did not change the overall total potential value of the 2018 BARDA Contract, nor did it change the total amount to be paid in connection with the manufacture and delivery of oral TPOXX® courses.
The base period of performance provides for potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of 20,000 courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance ("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments of approximately $0.6 million for supportive procurement activities. As of September 30, 2019, the Company had received $11.1 million for the 2019 deliveries of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile and $3.2 million for the 2018 manufacture of IV BDS. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received for the manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2018 and September 30, 2019.
The options that have been exercised to date provide for potential payments up to approximately $25.8 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-marketing and other activities for oral TPOXX®.
Unexercised options provide for potential payments up to approximately $525.0 million in total (if all such options are exercised). There are options for the following activities: payments of up to $439.0 million for the delivery of up to approximately 1,452,300 courses of oral TPOXX® to the Strategic Stockpile; payments of up to $76.8 million for the manufacture of up to 192,000 courses
20
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 2018 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 on whether to simultaneously exercise IV BDS Options and IV FDP Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 2018 BARDA Contract and a development contract with BARDA (“IV Formulation R&D Contract”). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As of September 30, 2019, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $4.0 million.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from the United States Department of Defense ("DoD") to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). The term of the initial award is five years. As of September 30, 2019 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the initial award of approximately $12.3 million.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts and grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at any time. As such, we may not be eligible to receive all available funds.
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 Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2018 as filed on March 5, 2019. Our most critical accounting estimates include revenue recognition, the valuation of stock-based awards including options and warrants granted or issued by the Company and income taxes.
Results of Operations
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
For the three months ended September 30, 2019 and 2018, revenues from product sales and supportive services were $3.9 million and $468.9 million, respectively. Such revenues in the three months ended September 30, 2019 were associated with the delivery of approximately 12,700 courses of oral TPOXX® to the Strategic Stockpile under the 2018 BARDA Contract during such period. Such revenues in the three months ended September 30, 2018 were primarily associated with revenue recognition in such period of all cash consideration received in prior periods under the 2011 BARDA Contract that was related to the delivery to the Strategic Stockpile of courses of oral TPOXX® and related services, milestones and advance payments ($375.6 million in total). In prior periods, those receipts had been deferred on the balance sheet since revenue recognition had been constrained by the possibility of a product replacement obligation being applicable. Following FDA approval of oral TPOXX® in the third quarter 2018, the possibility of replacement had been quantified and deemed to be remote, thus resulting in the recognition of revenues that previously had been deferred. In addition to the above-mentioned amounts, 2018 product sale revenues also included $91
21
million received in the third quarter of 2018 under the 2011 BARDA Contract in connection with a $41 million holdback payment and a $50 million payment for achieving 84-month expiry for oral TPOXX® (see Note 3 in the financial statements for further detail on these payments).
Revenues from research and development activities for the three months ended September 30, 2019 and 2018, were $4.2 million and $2.2 million, respectively. The increase in revenue of approximately $2.0 million, or 90%, primarily reflects an increase in revenues from our federal contracts supporting the development of IV TPOXX®. Revenue in connection with the development of IV TPOXX® has increased because the scope and cost of development activities related to IV TPOXX® have increased.
Cost of sales and supportive services for the three months ended September 30, 2019 and 2018, were $0.7 million and $95.2 million, respectively. Such costs in 2019 are associated with the delivery of approximately 12,700 courses of oral TPOXX® during the three months ended September 30, 2019. In contrast, following FDA approval on July 13, 2018, all costs incurred in previous periods which had been deferred in connection with the deferral of related revenues were recognized in the third quarter 2018.
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2019 and 2018, were $3.2 million and $3.1 million, respectively, reflecting an increase of approximately $0.1 million, or 2.6%. The increase is primarily attributable to an approximate $0.2 million increase in equity compensation expense partially offset by lower professional service fees.
Research and development (“R&D”) expenses for the three months ended September 30, 2019 and 2018 were $3.3 million and $3.7 million, respectively, reflecting a decrease of approximately $0.4 million, or 10%. The decrease is primarily attributable to a $0.6 million decrease in employee compensation associated with the vesting in the third quarter of 2018 of restricted stock awards that had been contingent upon the FDA approval of oral TPOXX®, partially offset by an increase in direct vendor-related expenses supporting the development of oral and IV TPOXX®.
Patent expenses were $0.2 million, in each case, for the three months ended September 30, 2019 and 2018. These expenses reflect our ongoing efforts to protect our lead drug candidates in various geographic territories.
Interest expense for the three months ended September 30, 2019 and 2018 was $4.0 million and $3.9 million, respectively. The $4.0 million of interest for the three months ended September 30, 2019 includes $1.1 million of accretion of unamortized costs and fees related to the Term Loan balance. The increase in interest expense is attributable to LIBOR rates being higher this quarter versus LIBOR rates in the same period last year.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded within the income statement. For the three months ended September 30, 2019, we recorded a gain of approximately $1.0 million, reflecting a decrease in the fair value of the liability-classified warrant primarily due to the decrease in our stock price. For the three months ended September 30, 2018 we recorded a loss of approximately $2.3 million, reflecting an increase in the fair value of the liability-classified warrant primarily due to the increase in our stock price.
Other income of $0.8 million for the three months ended September 30, 2019 reflects interest income on the Company's cash balance held in restricted and unrestricted accounts.
For the three months ended September 30, 2019 and 2018, we incurred pre-tax (loss)/income of $(1.6) million and $362.6 million, respectively, and a corresponding income tax benefit of $0.4 million and $25.4 million, respectively. The income tax benefit for the three months ended September 30, 2018 includes a discrete benefit of $25.8 million associated with the Company's assessment that its deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate during the three months ended September 30, 2019 and 2018 was 23.2% and (7.0%), respectively. Our effective tax rate for the period ended September 30, 2019 differs from the statutory rate primarily as a result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant. Our effective tax rate for the period ended September 30, 2018 differs from the statutory rate primarily as a result of the reduction in our valuation allowance.
ASC 740, Income Taxes requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. At each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. During the quarter ended September 30, 2018, we received FDA approval and recorded revenue related to the delivery of our oral TPOXX® product. We also recorded revenue related to the FDA holdback payment and the payment for 84-month expiry. In addition, we entered into a new contract with BARDA for the purchase of up to 1.7 million courses of TPOXX®. Based on these factors, we determined during the quarter
22
ended September 30, 2018 that sufficient positive evidence existed to conclude that substantially all of our deferred tax assets were realizable on a more-likely-than-not basis.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Revenues from product sales and supportive services for the nine months ended September 30, 2019 and 2018, were $11.1 million and $468.9 million, respectively. Such revenues in the nine months ended September 30, 2019 were associated with the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile under the 2018 BARDA Contract in such period. Such revenues in the nine months ended September 30, 2018 were primarily associated with revenue recognition in such period of all cash consideration received in prior periods under the 2011 BARDA Contract that was related to the delivery to the Strategic Stockpile of courses of oral TPOXX® and related services, milestones and advance payments ($375.6 million in total). In prior periods, those receipts had been deferred on the balance sheet since revenue recognition had been constrained by the possibility of a product replacement obligation being applicable. Following FDA approval of oral TPOXX® in the third quarter 2018, the possibility of replacement had been quantified and deemed to be remote, thus resulting in the recognition of revenues that previously had been deferred. In addition to the above-mentioned amounts, 2018 product sale revenues also included $91 million received in the third quarter of 2018 under the 2011 BARDA Contract in connection with a $41 million holdback payment and a $50 million payment for achieving 84-month expiry for oral TPOXX® (see Note 3 in the financial statements for further detail on these payments).
Revenues from research and development activities for the nine months ended September 30, 2019 and 2018, were $11.4 million and $6.6 million, respectively. The increase in revenue of approximately $4.8 million, or 74%, primarily reflects the conclusion of historical rate reconciliations under the IV Formulation R&D Contract and a change in the projected amount of contract funding expected to be available for future activities under the IV Formulation R&D Contract. Such events impacted the progress-towards-completion calculation as required under ASC 606, and resulted in a cumulative catch-up adjustment to revenue of approximately $3.3 million. The revenue increase also reflects an increase of approximately $1.5 million in revenues from our federal contracts supporting the development of IV TPOXX®. Revenue in connection with the development of IV TPOXX® has increased because the scope and cost of development activities related to IV TPOXX® have increased.
Cost of sales and supportive services for the nine months ended September 30, 2019 and 2018, were $1.7 million and $95.2 million, respectively. Such costs in 2019 are associated with the delivery of approximately 35,700 courses of oral TPOXX® during the nine months ended September 30, 2019. In contrast, following FDA approval on July 13, 2018, all costs incurred in previous periods which had been deferred in connection with the deferral of related revenues were recognized in the third quarter 2018.
Selling, general and administrative (“SG&A”) expenses for the nine months ended September 30, 2019 and 2018, were $9.8 million and $9.1 million, respectively, reflecting an increase of approximately $0.7 million, or 8%. The increase is primarily attributable to an approximate $0.5 million increase in equity compensation expense and an approximate $0.2 million increase in consulting costs associated with new initiatives, partially offset by the non-recurrence of Nasdaq application fees that were incurred in 2018.
Research and development (“R&D”) expenses for the nine months ended September 30, 2019 and 2018 were $9.4 million and $10.0 million, respectively, reflecting a decrease of approximately $0.6 million, or 7%. The decrease is primarily attributable to a $0.7 million decrease in direct vendor-related expenses supporting the development of IV and oral TPOXX® and a decrease of $0.3 million in compensation expense, partially offset by an increase in FDA annual fees. Compensation expense decreased as a result of the vesting of one-time equity grants in 2018 in connection with the FDA approval of oral TPOXX®.
Patent expenses were $0.5 million and $0.6 million, for the nine months ended September 30, 2019 and 2018, respectively. These expenses reflect our ongoing efforts to protect our lead drug candidates in various geographic territories.
Interest expense for the nine months ended September 30, 2019 and 2018 was $11.9 million and $11.5 million, respectively. The $11.9 million of interest for the nine months ended September 30, 2019 includes $3.4 million of accretion of unamortized costs and fees related to the Term Loan balance. The increase in interest expense for the nine months ended September 30, 2019 is attributable to LIBOR rates being higher this period versus LIBOR rates in the same period last year.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded within the income statement. For the nine months ended September 30, 2019, we recorded a gain of approximately $4.8 million reflecting a decrease in the fair value of the liability-classified warrant primarily due to the decrease in our stock price. For the nine months ended
23
September 30, 2018, we recorded a loss of approximately $5.3 million reflecting an increase in fair value of the liability-classified warrant primarily due to the increase in our stock price.
Other income of $2.2 million for the nine months ended September 30, 2019 reflects interest income on the Company's cash balance held in restricted and unrestricted accounts.
For the nine months ended September 30, 2019 and 2018, we incurred pre-tax (loss)/income of $(3.7) million and $344.0 million, respectively, and a corresponding income tax benefit of $1.0 million and $25.4 million, respectively. The income tax benefit for the nine months ended September 30, 2018 includes a discrete benefit of $25.8 million associated with the Company's assessment that its deferred tax assets were realizable on a more-likely-than-not basis.The effective tax rate during the nine months ended September 30, 2019 and 2018 was 26.3% and (7.4%), respectively. Our effective tax rate for the period ended September 30, 2019 differs from the statutory rate primarily as a result of non-deductible executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant. Our effective tax rate for the period ended September 30, 2018 differs from the statutory rate primarily as a result of the reduction in our valuation allowance.
Liquidity and Capital Resources
As of September 30, 2019, we had $78.1 million in cash and cash equivalents compared with $100.7 million at December 31, 2018. Additionally, as of September 30, 2019, we had $98.1 million of restricted cash compared with $79.7 million at December 31, 2018. The restricted cash is available to pay interest, fees and principal related to the Term Loan.
The cash and cash equivalents balance in the restricted account increased from $79.7 million to $100.5 million, as of July 24, 2019, in connection with an amendment to the Term Loan that allowed the Company to diversify the financial institutions at which its remaining unrestricted cash and cash equivalents are held. The balance in the restricted account represents an approximation of total payments that would be required pursuant to the Term Loan if it were to remain outstanding until its maturity.
Operating Activities
We prepare our condensed consolidated statement of cash flows using the indirect 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, non-cash interest expense and changes in the fair value of our warrant liability; gains and losses from various transactions and changes in the condensed consolidated balance sheet for working capital from the beginning to the end of the period.
Net cash (used in)/provided by operations for the nine months ended September 30, 2019 and 2018 was $(3.9) million and $72.5 million, respectively. For the nine months ended September 30, 2019, we incurred $8.5 million of cash interest expense on the Term Loan and used approximately $0.8 million in support of ordinary course working capital (accounts receivable, accounts payable, prepaids, among other items). Additionally, cash was used for customary operating activities. These cash uses were partially offset by the receipt of approximately $11.1 million from BARDA for product delivery; $11.4 million from R&D contracts; and $2.2 million of interest income. For the nine months ended September 30, 2018, the primary sources of cash inflows were a $41 million holdback payment under the 2011 BARDA Contract (see Note 3), and a $50 million payment from BARDA for a modification made to the 2011 BARDA Contract, in which BARDA exercised an option relating to FDA approval of 84-month expiry for oral TPOXX®. These receipts were partially offset by net operating costs and $8.2 million of cash interest expense on the Term Loan.
Investing Activities
For the nine months ended September 30, 2019 and 2018 we used cash in the amounts of $29,092 and $27,863, respectively, for capital expenditures.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2019 was $0.2 million which was attributable to the payment of tax obligations for employee common stock tendered. Net cash used in financing activities for the nine months ended September 30, 2018 was $1.5 million, which was attributable to the payment of tax obligations for employee common stock tendered, partially offset by $0.2 million of proceeds received from option exercises.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
Recently Issued Accounting Standards
For discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company's condensed consolidated financial statements, as well as those standards that were adopted, see Note 2, Summary of Significant Accounting Policies, of Notes to Condensed Consolidated Financial Statements.
Safe Harbor Statement
Certain statements in this Quarterly Report on Form 10-Q, including certain statements contained in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the progress of SIGA’s development programs and timelines for bringing products to market, delivering products to the U.S Strategic National Stockpile and the enforceability of the 2011 BARDA Contract and the 2018 BARDA Contract (each as defined previously, and collectively, the "BARDA Contracts") with BARDA. The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of SIGA is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that BARDA elects, in its sole discretion as permitted under the BARDA Contracts, not to exercise all, or any, of the remaining unexercised options under those contracts, (ii) the risk that SIGA may not complete performance under the BARDA Contracts on schedule or in accordance with contractual terms, (iii) the risk that the BARDA Contracts are modified or canceled at the request or requirement of the U.S. government, (iv) the risk that the nascent international biodefense market does not develop to a degree that allows SIGA to successfully market TPOXX® internationally, (v) the risk that potential products, including the IV formulation of TPOXX®, or potential alternative uses 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, (vi) the risk that SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products or uses, (vii) the risk that SIGA may not be able to secure or enforce sufficient legal rights in its products, including intellectual property protection, (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, (ix) the risk that regulatory requirements applicable to SIGA’s products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products, (x) the risk that changes in domestic or foreign economic and market conditions may affect SIGA’s ability to advance its research or may affect its products adversely, (xi) the effect of federal, state, and foreign regulation, including drug regulation and international trade regulation, on SIGA’s businesses and (xii) the risk that the U.S. government’s responses (including inaction) to the national or global economic situation may affect SIGA’s business adversely, as well as the risks and uncertainties included in Item 1A “Risk Factors” on Form 10-K for the fiscal year ended December 31, 2018. 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.
24
More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in the presentation, is set forth in SIGA's filings with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q and SIGA's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in other documents that SIGA has filed with the SEC. SIGA urges investors and security holders to read those documents free of charge at the SEC's Web site at http://www.sec.gov. Forward-looking statements are current only as of the date on which such statements were made, and except for our ongoing obligations under the United States of America federal securities laws, we undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our investment portfolio includes cash and cash equivalents. Our main investment objectives are the preservation of investment capital. We believe that our investment policy is conservative, both in the duration of our investments and the credit quality of the investments we hold. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposure to interest rate changes. As such, we believe that, the securities we hold are subject to market risk, changes in the financial standing of the issuer of such securities and our interest income is sensitive to changes in the general level of U.S. interest rates. Additionally, we are also subject to the risk of rising LIBOR rates; whenever the minimum rates for one-month, two-month, three-month and six-month LIBOR rates (“minimum LIBOR rate”) are 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 0.5% in the minimum LIBOR rate (e.g., an increase from a LIBOR rate of 2.50% to 3.00%), annual interest payments on the Term Loan would increase by approximately $0.4 million. Furthermore, we are subject to the impact of stock price fluctuations of our common stock in that we have a liability-classified warrant in which 1.5 million shares of SIGA common stock can be purchased at a strike price of $1.50 per share. For every $1 increase in the stock price of SIGA, the intrinsic value of the liability-classified warrant will increase by approximately $1.5 million.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2019. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2019 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although such claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any, will not have a material adverse effect on our business, condensed consolidated financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Item 1A. Risk Factors
Our results of operations and financial condition are subject to numerous risks and uncertainties described in our 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
No disclosure is required pursuant to this item.
Item 5. Other Information
No disclosure is required pursuant to this item.
26
Item 6. Exhibits
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. | ||
Amendment of Solicitation/Modification of Contract 0003, dated September 9, 2019, to Agreement, dated September 10, 2018 by and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed). | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGA TECHNOLOGIES, INC. | ||||
(Registrant) | ||||
Date: | November 5, 2019 | By: | /s/ Daniel J. Luckshire | |
Daniel J. Luckshire | ||||
Executive Vice President and | ||||
Chief Financial Officer | ||||
(Principal Financial Officer and | ||||
Principal Accounting Officer) | ||||
28
Exhibit 10.1
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | 1. CONTRACT ID CODE | PAGE OF PAGES | ||||||||||||
1 | 5 | |||||||||||||
2. AMENDMENT/MODIFICATION NO P00003 | 3. EFFECTIVE DATE See Block 16C | 4. REQUISITION/PURCHASE REQ NO. OS243619 | 5. PROJECT NO (If applicable) ASPR-19-03461 | |||||||||||
6. ISSUED BY CODE | ASPR-BARDA | 7. ADMINISTERED BY (If other than Item 6) CODE | ||||||||||||
ASPR-BARDA 200 Independence Ave., S.W. Room 640-G Washington DC 20201 | ||||||||||||||
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) | (x) | 9A. AMENDMENT OF SOLICITATION NO | ||||||||||||
SIGA TECHNOLOGIES, INC. 1385150 | ||||||||||||||
Attn: Daniel Luckshire | 9B. DATED (SEE ITEM 11) | |||||||||||||
SIGA TECHNOLOGIES, INC. | ||||||||||||||
31 East 62nd street NEW YORK NY 100658446 | x | 10A. MODIFICATION OF CONTRACT/ORDER NO HHSO100201800019C | ||||||||||||
CODE 1385150 | FACILITY CODE | 10B. DATED (SEE ITEM 13) 09/10/2018 | ||||||||||||
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS | ||||||||||||||
☐The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers ☐is extended, ☐ is not extended Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____________ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or electronic communication which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by letter or electronic communication, provided each letter or electronic communication makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. | ||||||||||||||
12. ACCOUNTING AND APPROPRIATION DATA (If required) See Schedule | Net Increase: | $2,425,815.00 | ||||||||||||
13. THIS ITEM ONLY APPLIES TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. | ||||||||||||||
CHECK ONE | A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A. | |||||||||||||
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b). | ||||||||||||||
x | C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: FAR 43.103(a) Bilateral Modification; FAR17.207(c) (1) Exercise of Options with Available Funds | |||||||||||||
D. OTHER (Specify type of modification and authority) | ||||||||||||||
E. IMPORTANT: | Contractor | ☐ is not | ☒ is required to sign this document and return 1 copies to the issuing office | |||||||||||
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.) | ||||||||||||||
Tax ID Number: 13-3864870 DUNS Number: 932651516 The purpose of this modification P00003 to CPFF Contract HHSO100201800019C is to (1) provide CLIN 0007 supplemental funding in the amount of $2,425,815.00, (2) modify Appendix D to accommodate FDA required PH IV post-marketing study option; this revises the Statement of Work specific to CLINs 0003 and 0007 as indicated in the attached revised Appendix D, dated 08/27/2019. (3) Change in Contracting Officer from Christopher Scott to George J. Keane, Jr. All other terms and conditions in the contract remain unchanged. Continued … | ||||||||||||||
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. | ||||||||||||||
15A. NAME AND TITLE OF SIGNER (Type or print) Daniel Luckshire, CFO, for Dennis Hruby | 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) GEORGE J. KEANE | |||||||||||||
15B. CONTRACTOR/OFFEROR /s/ Daniel Luckshire _________________________________ (Signature of person authorized to sign) | 15C. DATE SIGNED 9/6/19 | 16B. UNITED STATES OF AMERICA /s/ George J. Keane _________________________________ (Signature of Contracting Officer) | 16C. DATE SIGNED 9/9/19 | |||||||||||
Previous edition unusable | STANDARD FORM 30 (REV 11/2016) Prescribed by GSA FAR (48 CFR) 53 243 |
CONTINUATION SHEET | REFERENCE NO. OF DOCUMENT BEING CONTINUED HHSO100201800019C/P00003 | PAGE OF | ||||||
2 | 5 | |||||||
NAME OF OFFEROR OR CONTRACTOR SIGA TECHNOLOGIES, INC. 1385150 | ||||||||
ITEM NO. | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||
(A) | (B) | (C) | (D) | (E) | (F) | |||
Base Award Amt: $51,641,805.00 Mod 0001 Amt: $12,186,975.00 Mod P00002 Amt: $11,255,170.00 Mod P00003 Amt: $ 2,425,815.00 Revised CX Amt: $77,509,765.00 Period of Performance: 09/10/2018 to 09/09/2028 Change Item 1 to read as follows (amount shown is the obligated amount): | ||||||||
1 | Base period funds for Procurement and Late-Stage Development of Smallpox Antiviral Drug(s) | 0.00 | ||||||
Accounting Info: 2018.199TWNP.26402 Appr. Yr.: 2018 CAN: 199TWNP Object Class: 26402 Funded: $0.00 | ||||||||
CLIN 0003 under the Base period is changed with no funding changes as follows: | ||||||||
{Removed from Contract: Post-marketing field study, bioanalytical support for emergency use of TPOXX and post‑marketing field study, TPOXX susceptibility evaluation, pharmacokinetic support for post-marketing field study, PK evaluation in subjects with bodyweight >120 kg, TPOXX-phosphate binders DDI evaluation, environmental impact of TPOXX use, technical transfer to increase manufacturing capacity for surge capacity, stability of existing BDS and FDP batches, and maintenance and support of NDA and electronic IND and NDA submissions for oral formulation.} | ||||||||
{Added to Contract: Procurement of BDS for manufacturing of IV TPOXX} | ||||||||
Change Item 2 to read as follows (amount shown is the obligated amount): | ||||||||
2 | ASPR-19-00662 -- Exercise of Option CLIN 0007 to SIGA Technologies Inc. for Phase IV post-marketing commitment studies under contract HHSO100201899919C | 2,425,815.00 | ||||||
Accounting Info: 2019.1990051.25505 Appr. Yr.: 2019 CAN: 1990051 Object Class: 25505 Funded: $0.00 | ||||||||
Accounting Info: 2019.1990051.25505 Appr. Yr.: 2019 CAN: 1990051 Object Class: 25505 Funded: $2,425,815.00 | ||||||||
CLIN 0007 is changed as follows in accordance with attached revised Statement of Work, Appendix D, dated 08/27/2019: | ||||||||
CLIN0007 (Option): {removed from contract: Storage of BDS for manufacturing of IV TPOXX} Continued ... | ||||||||
NSN 7540-01-152-8067 | OPTIONAL FORM 336 (4-86) Sponsored by GSA FAR (48 CFR) 53.110 |
Exhibit 10.1
CONTINUATION SHEET | REFERENCE NO. OF DOCUMENT BEING CONTINUED HHSO100201800019C/P00003 | PAGE OF | ||||||
3 | 5 | |||||||
NAME OF OFFEROR OR CONTRACTOR SIGA TECHNOLOGIES, INC. 1385150 | ||||||||
ITEM NO. | SUPPLIES/SERVICES | QUANTITY | UNIT | UNIT PRICE | AMOUNT | |||
(A) | (B) | (C) | (D) | (E) | (F) | |||
{Added to Contract: Post-marketing field study, bioanalytical support for emergency use of TPOXX and post-marketing field study, TPOXX susceptibility evaluation, pharmacokinetic support for post-marketing field study, PK evaluation in subjects with bodyweight >120 kg, TPOXX-phosphate binders DDI evaluation, stability of existing BDS and FDP batches, pediatric formulation development for subjects <13 kg of weight, and maintenance and support of NDA and electronic IND and NDA submissions for oral formulation.} | ||||||||
- | ||||||||
PSC: AN13 NAICS: 541714 HHS/BARDA COR is David Simon, David.Simon@hhs.gov, (202) 260-1101 | ||||||||
NSN 7540-01-152-8067 | OPTIONAL FORM 336 (4-86) Sponsored by GSA FAR (48 CFR) 53.110 |
Exhibit 10.1
Appendix D, Revised 8/27/2019 Overall Page 93 of 167
Statement of Work
SIGA will furnish all the necessary services, qualified personnel, materials, supplies, equipment, facilities, transportation and travel not otherwise provided by the USG as required to fulfill the programmatic objectives. SIGA has completed the New Drug Application and has manufactured and delivered a total of 2 million courses of nonparenteral (oral) smallpox antiviral formulation to the USG, and has advanced the early stage development activities for parenteral (IV) formulation. The overall goal of this proposal is to complete the late-stage development of the parenteral formulation and to supply the USG with both parenteral and nonparenteral formulations.
The scope of this proposal includes the following activities:
1. | CLIN0001 (Base): Method transfer and validation for incoming analytical testing of BDS, process validation support studies and manufacturing, stability studies, electronic regulatory submissions for IV formulation, and if needed, Phase 3 multiple dose study for IV formulation |
2. | CLIN0002 (Base): Immediate delivery of approximately 23,000 treatment courses of oral formulation |
3. | CLIN0003 (Base): {Removed from Contract: Post-marketing field study, bioanalytical support for emergency use of TPOXX and post-marketing field study, TPOXX susceptibility evaluation, pharmacokinetic support for post-marketing field study, PK evaluation in subjects with bodyweight >120 kg, TPOXX-phosphate binders DDI evaluation, environmental impact of TPOXX use, technical transfer to increase manufacturing capacity for surge capacity, stability of existing BDS and FDP batches, and maintenance and support of NDA and electronic IND and NDA submissions for oral formulation.} |
{Added to Contract: Procurement of BDS for manufacturing of IV TPOXX}
4. | CLIN0004 (Base): Manufacture/fill/package/stability IV TPOXX |
5. | CLIN0005 (Base): Storage of packaged IV TPOXX in VMI for up to 5 years |
6. | CLIN0006 (Base): Delivery of up to 20,000 treatment courses of IV TPOXX to SNS |
7. | CLIN0007 (Option): {Removed from Contract: Storage of BDS for manufacturing of IV TPOXX} |
{Added to Contract: Post-marketing field study, bioanalytical support for emergency use of TPOXX and post-marketing field study, TPOXX susceptibility evaluation, pharmacokinetic support for post‑marketing field study, PK evaluation in subjects with bodyweight >120 kg, TPOXX-phosphate binders DDI evaluation, stability of existing BDS and FDP batches, pediatric formulation development for subjects <13 kg of weight, and maintenance and support of NDA and electronic IND and NDA submissions for oral formulation.}
8. | CLIN0008 (Option): Post-marketing field study, maintenance and support of NDA and electronic IND and NDA submissions for IV formulation, and relabeling (if needed) |
9. | CLIN0009 (Option): Delivery of up to 363,070 treatment courses of oral TPOXX to SNS |
10. | CLIN0010 (Option): Delivery of up to 363,070 treatment courses of oral TPOXX to SNS |
11. | CLIN0011 (Option): Delivery of up to 363,070 treatment courses of oral TPOXX to SNS |
12. | CLIN0012 (Option): Delivery of up to 363,072 treatment courses of oral TPOXX to SNS |
13. | CLIN0013 (Option): Procurement of BDS for manufacturing of IV TPOXX |
14. | CLIN0014 (Option): Storage of BDS for manufacturing of IV TPOXX |
Exhibit 10.1
15. | CLIN0015 (Option): Manufacture/fill/package/stability IV TPOXX |
16. | CLIN0016 (Option): Storage of packaged IV TPOXX in VMI for up to 5 years |
17. | CLIN0017 (Option): Delivery of up to 64,000 treatment courses of IV TPOXX to SNS |
18. | CLIN0018 (Option): Procurement of BDS for manufacturing of IV TPOXX |
19. | CLIN0019 (Option): Storage of BDS for manufacturing of IV TPOXX |
20. | CLIN0020 (Option): Manufacture/fill/package/stability IV TPOXX |
Exhibit 10.1
Appendix D, Revised 8/27/2019 Overall Page 94 of 167
21. | CLIN0021 (Option): Storage of packaged IV TPOXX in VMI for up to 5 years |
22. | CLIN0022 (Option): Delivery of up to 64,000 treatment courses of IV TPOXX to SNS |
23. | CLIN0023 (Option): Procurement of BDS for manufacturing of IV TPOXX |
24. | CLIN0024 (Option): Storage of BDS for manufacturing of IV TPOXX |
25. | CLIN0025 (Option): Manufacture/fill/package/stability IV TPOXX |
26. | CLIN0026 (Option): Storage of packaged IV TPOXX in VMI for up to 5 years |
27. | CLIN0027 (Option): Delivery of up to 64,000 treatment courses of IV TPOXX to SNS |
28. | CLIN0028 (Option): Delivery of up to 50,000 treatment courses of IV TPOXX to SNS |
A detailed plan indicating how each aspect of the Statement of Objectives shall be accomplished, information pertaining to project organization, staffing, and management, including the management and coordination of consultant and sub-contractor effort, and Deliverables Table are located in the technical section of the proposal. Where applicable, the technical proposal denotes activities already accomplished against a given objective. The project plan, Work Breakdown Structure, and critical milestones are located in the Integrated Master Project Plan.
Exhibit 31.1
Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Phillip L. Gomez, Ph.D., certify that:
1. | I have reviewed this quarterly report on Form 10-Q of SIGA Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 5, 2019 |
/s/ Phillip L. Gomez, Ph.D. |
Phillip L. Gomez, Ph.D. |
Chief Executive Officer |
Exhibit 31.2
Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel J. Luckshire, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of SIGA Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 5, 2019 |
/s/ Daniel J. Luckshire |
Daniel J. Luckshire |
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SIGA Technologies, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip L. Gomez, Ph. D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Phillip L. Gomez, Ph.D. |
Phillip L. Gomez, Ph.D. |
Chief Executive Officer |
November 5, 2019 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SIGA Technologies, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel J. Luckshire, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Daniel J. Luckshire |
Daniel J. Luckshire |
Executive Vice President and Chief Financial Officer |
November 5, 2019 |