Siga Technologies Inc 10-Q for FY2021 Q3
Siga Technologies Inc (SIGA)
About this 10-Q
Siga Technologies Inc filed this 10-Q on November 4, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.85M
- down 89.1% from $44.26M a year earlier
- Net loss
- $3.11M
- compared with net income of $24.19M a year earlier
- Diluted EPS
- -$0.04
- compared with $0.31 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the Quarterly Period Ended |
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| | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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| For the transition period from ________ to ___________ |
Commission File No.
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
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 ☐ |
| | Smaller reporting company |
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
As of October 20, 2021, the registrant had outstanding
SIGA TECHNOLOGIES, INC.
FORM 10-Q
Table of Contents
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| Management's Discussion and Analysis of Financial Condition and Results of Operations |
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PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Deferred income taxes, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Warrant liability | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Common stock ( par value, shares authorized, and , issued and outstanding at September 30, 2021 and December 31, 2020, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2021 |
2020 |
2021 |
2020 |
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| Revenues |
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| Product sales and supportive services |
$ | $ | $ | $ | ||||||||||||
| Research and development |
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| Total revenues |
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| Operating expenses |
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| Cost of sales and supportive services |
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| Selling, general and administrative |
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| Research and development |
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| Patent expenses |
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| Total operating expenses |
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| Operating (loss)/income |
( |
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| (Loss)/gain from change in fair value of warrant liability |
( |
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| Loss on extinguishment of Term Loan |
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| Interest expense |
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| Other income, net |
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| (Loss)/income before income taxes |
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| Benefit/(provision) for income taxes |
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| Net and comprehensive (loss)/income |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| Basic (loss)/income per share |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| Diluted (loss)/income per share |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| Weighted average shares outstanding: basic |
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| Weighted average shares outstanding: diluted |
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The accompanying notes are an integral part of these financial statements.
SIGA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30, |
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| 2021 |
2020 |
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| Cash flows from operating activities: |
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| Net (loss)/income |
$ | ( |
) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation and other amortization |
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| (Gain)/loss on change in fair value of warrant liability |
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| Stock-based compensation |
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| Loss on inventory, net |
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| Deferred income taxes, net |
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| Loss on extinguishment of Term Loan |
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| Non-cash interest expense |
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| Changes in assets and liabilities: |
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| Accounts receivable |
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| Inventory |
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| Prepaid expenses and other assets |
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| Accounts payable, accrued expenses and other liabilities |
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| Deferred revenue |
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| Net cash (used in)/provided by operating activities |
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| Cash flows from investing activities: |
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| Capital expenditures |
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| Net cash used in investing activities |
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| Cash flows from financing activities: |
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| Payment of employee tax obligations for common stock tendered |
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| Repurchase of common stock |
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| Repayment of Term Loan |
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| Net cash used in financing activities |
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| Net decrease in cash, cash equivalents and restricted cash |
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| Cash, cash equivalents and restricted cash at the beginning of period |
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| Cash and cash equivalents at end of period |
$ | $ | ||||||
The accompanying notes are an integral part of these financial statements
SIGA TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Condensed Consolidated Financial Statements
The financial statements of SIGA Technologies, Inc. (“we,” “our,” “us,” “SIGA” or the “Company”) are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020, included in the Company's 2020 Annual Report on Form 10-K filed on March 4, 2021 (the "2020 Form 10-K"). All terms used but not defined elsewhere herein have the meaning ascribed to them in the 2020 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results of the interim periods have been included. The 2020 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, 2021 are not necessarily indicative of the results expected for the full year, or any other interim period.
2. Summary of Significant Accounting Policies
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”). In all transactions, the Company is the principal as it controls the specified good or service before it is transferred to the customer and therefore recognizes revenue on a gross basis. 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, 2021, the Company's active performance obligations, for the contracts outlined in Note 3, consist of the following: six performance obligations relate to research and development services; three relate to manufacture and delivery of product; and one is associated with storage of product. The aggregate amount of the transaction price allocated to remaining performance obligations was $
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
Contract modifications may occur during the course of performance of our contracts. Contracts are often modified to account for changes in contract specifications or requirements. In most instances, contract modifications are for services that are not distinct, and, therefore, are accounted for as part of the existing contract.
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. All of the Company’s revenue related to current research and development performance obligations is recognized over time, because the customer simultaneously receives and consumes the benefits provided by the services as the Company performs these services. The Company recognizes revenue related to these services based on the progress toward complete satisfaction of the performance obligation and measures this progress under an input method, which is based on the Company’s cost incurred relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed (i.e., cost of third-party services performed, cost of direct labor hours incurred, and cost of materials consumed) compared to the total estimated costs to completely satisfy the performance obligation. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. The incurred and estimated costs used in the measure of progress include third-party services performed, direct labor hours, and material consumed.
Contract Balances
The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the condensed consolidated balance sheets. Generally, amounts are billed as work progresses in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones; as of September 30, 2021, the accounts receivable balance in the condensed balance sheet includes approximately $
Repurchase of shares
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. The excess of the purchase price above par value of repurchased shares that are retired is presented as an increase to accumulated deficit (or a reduction of retained earnings, if any).
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. The adoption of this standard in the first quarter of 2021 had no impact on the condensed consolidated financial statements.
3. Procurement Contracts and Research Agreements
19C 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
The base period of performance specifies potential payments of approximately $
The options that have been exercised to date provide for payments up to approximately $
Unexercised options specify potential payments up to approximately $
The options related to IV TPOXX® are divided into primary manufacturing steps. There are options related to the manufacture of bulk drug substance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP Options”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: separate IV BDS Options, each providing for the bulk drug substance equivalent of
Revenues in connection with the 19C BARDA Contract are recognized either over time or at a point in time. Performance obligations related to product delivery generate revenue at a point in time. Revenue from other performance obligations under the 19C BARDA Contract are recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the three months ended September 30, 2021 and 2020, the Company recognized revenues of $
International Procurement Contracts
On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian,” a Pfizer Company) (the “Contract”) for the purchase of up to approximately $
On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $
The PHAC and CDND contract awards were both coordinated between SIGA and Meridian under the international promotion agreement (as amended, the "International Promotion Agreement") that was entered into by the parties on June 3, 2019.
Under the terms of the International Promotion Agreement, Meridian was granted exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States (the “Territory”), and Meridian has agreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified field of use in the Territory. SIGA retains ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with TPOXX®, and, in the United States market, also retains sales and marketing rights with respect to oral TPOXX®. SIGA’s consent is required for the entry into any sales arrangement pursuant to the International Promotion Agreement.
The fee Meridian retains pursuant to the International Promotion Agreement is a specified percentage of the collected proceeds of sales of oral TPOXX® net of certain expenses, for years in which customer invoiced amounts net of such expenses are less than or equal to a specified threshold, and a higher specified percentage of such collected net proceeds for years in which such net invoiced amounts exceed the specified threshold.
Revenue in connection with international procurement contracts for the delivery of product are recognized at a point in time. During the three and nine months ended September 30, 2021, the Company recognized $
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 19C BARDA Contract and a separate development contract with BARDA ("IV Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates in February 2024. As of September 30, 2021, the IV Formulation R&D Contract provided for future aggregate research and development funding of up to approximately $
In July 2019, the Company was awarded a multi-year research contract valued at a total of $
On May 13, 2011, the Company signed a contract with BARDA ("2011 BARDA Contract") pursuant to which BARDA agreed to buy from the Company
The 2011 BARDA Contract specifies approximately $
The 2011 BARDA Contract expires in December 2024.
Remaining performance obligations under the 2011 BARDA Contract generate revenue over time. For the three months ended September 30, 2021 and 2020, the Company recognized revenue of less than $
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, the Company may not be eligible to receive all available funds.
Inventory includes costs related to the manufacture of TPOXX®. Inventory consisted of the following:
| As of |
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| September 30, 2021 |
December 31, 2020 |
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| Raw materials |
$ | $ | ||||||
| Work in-process |
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| Finished goods |
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| Inventory |
$ | $ | ||||||
For the nine months ended September 30, 2021, cost of goods sold included a net inventory-related loss of $
5. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
| As of |
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| September 30, 2021 |
December 31, 2020 |
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| Leasehold improvements |
$ | $ | ||||||
| Computer equipment |
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| Furniture and fixtures |
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| Operating lease right-of-use assets |
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| Less - accumulated depreciation and amortization |
( |
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| Property, plant and equipment, net |
$ | $ | ||||||
Depreciation and amortization expense on property, plant, and equipment was $
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| As of |
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| September 30, 2021 |
December 31, 2020 |
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| Deferred revenue |
$ | $ | ||||||
| Compensation |
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| Research and development vendor costs |
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| Professional fees |
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| Lease liability, current portion |
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| Inventory |
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| Other |
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| Vacation |
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| Income tax payable |
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| Accrued expenses and other current liabilities |
$ | $ | ||||||
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 (as defined in Note 8) to purchase a number of shares of the Company’s common stock equal to $
The Company accounts 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.
As of September 30, 2021, the fair value of the Warrant was $
As of December 31, 2020, the fair value of the Warrant was $
On March 13, 2020, the Company voluntarily prepaid the Loan Agreement (as defined below) in an approximate aggregate amount of $
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 $
The Term Loan had a maturity date on the earliest to occur of (i) the -year anniversary of the Escrow Release Date, and (ii) the acceleration of certain obligations pursuant to the Loan Agreement.
9. Fair Value of Financial Instruments
The carrying value of cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants, which are classified as 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 $
There were no transfers between levels of the fair value hierarchy for the nine months ended September 30, 2021. As of September 30, 2021 and December 31, 2020, the Company had approximately $
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, 2020 | $ | |||
| Decrease in fair value of warrant liability | ( | ) | ||
| Exercise of warrants | ||||
| Warrant liability at September 30, 2021 | $ | |||
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, |
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| 2021 |
2020 |
2021 |
2020 |
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| Net (loss)/income for basic earnings per share |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| Less: Change in fair value of warrants |
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| Net (loss)/income, adjusted for change in fair value of warrants for diluted earnings per share |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| Weighted-average shares |
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| Effect of potential common shares |
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| Weighted-average shares: diluted |
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| (Loss)/income per share: basic |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
| (Loss)/income per share: diluted |
$ | ( |
) | $ | $ | ( |
) | $ | ||||||||
For the three and nine months ended September 30, 2020, diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock and unreleased restricted stock units. The dilutive effect of options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the average amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumed to be used to repurchase shares. Warrants were presumed to be cash-settled and therefore excluded from the diluted earnings per share calculations for the three and nine months ended September 30, 2020 because the net effect of their inclusion, including the elimination of the impact in the operating results of the change in fair value of the warrants, would have been anti-dilutive. For the three and nine months ended September 30, 2020, the weighted average number of shares under the warrant excluded from the calculation of diluted earnings per share were
For the three and nine months ended September 30, 2021, the Company incurred losses and as a result, the equity instruments listed below were excluded from the calculation of diluted earnings (loss) per share as the effect of the exercise, conversion or vesting of such instruments would have been anti-dilutive. The weighted average number of equity instruments excluded consists of:
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2021 |
2021 |
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| Warrants |
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| Stock options |
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| Restricted stock units |
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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 financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Purchase Commitments
In the course of our business, the Company regularly enters into agreements with third party organizations to provide contract manufacturing services and research and development services. Under these agreements, the Company issues purchase orders, which obligate the Company to pay a specified price when agreed-upon services are performed. In connection with many CMO purchase orders, reimbursement by CMOs for inventory losses is limited. Commitments under the purchase orders do not exceed our planned commercial and research and development needs. As of September 30, 2021, the Company had approximately $
12. Related Party Transactions
Board of Directors and Outside Counsel
A former member of the Company’s Board of Directors who did not stand for re-election at the Company's 2021 annual meeting of stockholders is a partner at a law firm used by the Company. The Company did incur any expenses related to services provided by the outside counsel during the three months ended September 30, 2021. During the three months ended September 30, 2020, the Company incurred $
Real Estate Leases
On May 26, 2017, the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a -year Office Lease agreement (the “HQ Lease”), pursuant to which the Company agreed to lease
The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.
For the three months ended September 30, 2021 and 2020, we incurred pre-tax (loss)/income of ($
For the nine months ended September 30, 2021 and 2020, we incurred a pre-tax (loss)/income of ($
The effective tax rate for the three months ended September 30, 2021 was
The effective tax rate for the nine months ended September 30, 2021 was
The tables below present changes in stockholders' equity for the three and nine months ended September 30, 2021 and 2020.
| Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balances at June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Payment of common stock tendered for employee stock-based compensation tax obligations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Issuance of common stock upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balances at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balances at December 31, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Payment of common stock tendered for employee stock-based compensation tax obligations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Issuance of common stock upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balances at September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balances at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Payment of common stock tendered for employee stock-based compensation tax obligations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Issuance of common stock upon exercise of stock options | ( | ) | ||||||||||||||||||||||
| Issuance of common stock upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balances at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
| Balances at December 31, 2019 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Repurchase of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Payment of common stock tendered for employee stock-based compensation tax obligations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Issuance of common stock upon exercise of stock options | ( | ) | ||||||||||||||||||||||
| Issuance of common stock upon vesting of RSUs | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Balances at September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
On March 5, 2020, the Company announced that the Company's Board of Directors had authorized a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $
On August 2, 2021, the Company's Board of Directors authorized an additional share repurchase program ("New Repurchase Authorization") under which the Company may repurchase up to $
The Company leases its Corvallis, Oregon, facilities and office space under an operating lease, which was signed on November 3, 2017 and commenced on January 1, 2018. The initial term of this lease was to expire on December 31, 2019 after which the Company had two successive renewal options; one for years and the other for years. In the second quarter of 2019, the Company exercised the first renewal option, which extended the lease expiration date to December 31, 2021. In the second quarter of 2021, the Company exercised the second renewal option, which extended the lease expiration date to December 31, 2024. In connection with the exercise of the second renewal option, the Company recorded an increase to operating lease right-of-use assets and operating lease liabilities of approximately $
On May 26, 2017 the Company and M&F entered into the HQ Lease, a -year office lease agreement, pursuant to which the Company agreed to lease
Operating lease costs totaled $
Future cash flows under operating leases as of September 30, 2021 are expected to be as follows:
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total undiscounted cash flows under leases | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
As of September 30, 2021, approximately $
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 and in the Company's Annual Report on Form 10-K filed on March 4, 2021 (the "2020 Form 10-K"). In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors. See the factors set forth under the heading “Safe Harbor Statement” at the end of this Item 2.
Overview
We are a commercial-stage pharmaceutical company. Our lead product, TPOXX® (“oral TPOXX®”), is an oral formulation antiviral drug for the treatment of human smallpox disease caused by variola virus. On July 13, 2018, the United States Food & Drug Administration (“FDA”) approved oral TPOXX® for the treatment of smallpox.
COVID-19 Pandemic
The COVID-19 pandemic has caused significant societal and economic disruption. Such disruption, and the associated risks and costs, are expected to continue for an indeterminate period of time. Given the uncertain future course of the COVID-19 pandemic, and the uncertain scale and scope of its future direct and indirect impact, the Company is continually reviewing business and financial risks related to the pandemic and seeking coordination with its government partners with respect to the performance of current and future government contracts. Additionally, the Company is continually coordinating with service providers and vendors, in particular Contract Manufacturing Organizations that constitute our supply chain, with respect to actions and risks caused by the COVID-19 pandemic.
As of the filing date of this document, the Company has not identified or been notified by government customers of impediments to the continued full performance of their government contracts. Additionally, the Company’s supply chain for the manufacture of TPOXX® has remained operational on current projects without material COVID-19 related disruption, and in the ordinary course of operations, the supply chain has secured, or is in the process of securing, sufficient raw materials and supplies to support manufacture and product delivery activities on current projects. With regard to day-to-day operations, the COVID-19 pandemic, and the secondary effects of the pandemic, have at times slowed the daily pace of execution of government contracts as well as new contract generation. For example, U.S. and foreign government staffs overseeing health security preparedness have been involved directly or indirectly in governmental responses to the pandemic, which has diverted government staff time that would normally be directed toward contract matters involving SIGA. The Company expects to experience delays, or slower-than-usual pace, in connection with certain research and development activities, such as those that involve clinical trials. The Company does not currently expect any pandemic-related delays in research and development activities to have a material adverse impact on the financial condition or annual financial results of the Company, or its long-term performance, but cannot give assurances as to the full extent of the impact at this time.
Overall, the COVID-19 pandemic has not adversely affected the liquidity position of the Company, nor is it currently expected to have a material adverse effect on the financial condition of the Company. Given that the pandemic has diverted foreign government staff time normally directed toward contract matters involving SIGA, the COVID-19 pandemic has and could continue to affect the timing of international contract awards for oral TPOXX®. Additionally, the pandemic could result in a slower pace of product deliveries if the pandemic results in shortages or delays in the receipt by the supply chain of raw materials or supplies. Furthermore, Executive Order 14042 by the President of the United States, which subjects federal prime contractors and subcontractors to certain vaccination requirements and other COVID-19 related safety measures, could have a material impact on the availability and/or timing of services provided to SIGA by certain vendors for supply chain activities and research and development activities. Otherwise, the pandemic is not currently expected to have a material adverse effect on the 2021 financial results of the Company. The pandemic has resulted in almost all of our employees working from home; however, the shift in location for employees has not had a material adverse impact on the day-to-day operations of the Company. If the general negative effect of the COVID-19 pandemic becomes more acute or is prolonged, including due to resurgences in infections or lack of vaccination, there could be potential risks to our business and cash flows.
Lead Product-TPOXX®
19C 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 procurement activities. As of September 30, 2021, the contract with BARDA (as amended, modified, or supplemented from time to time, the "19C BARDA Contract") contemplates up to approximately $602.5 million of payments, of which approximately $51.7 million of payments are included within the base period of performance (five years as of the award date of September 10, 2018), approximately $239.7 million of payments are related to exercised options and up to approximately $311.1 million of payments are currently specified as unexercised options. The $239.7 million of payments related to exercised options includes an option exercise on September 7, 2021 for the manufacture and delivery of approximately $112.6 million of oral TPOXX®. 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 19C BARDA Contract and such options could be exercised at any time during the contract term, including during the base period of performance.
The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® 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, 2021, the Company had received or billed for $11.1 million for the successful delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $11.8 million for other base period activities. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received for the completed manufacture of IV BDS has been recorded as deferred revenue as of September 30, 2021 and December 31, 2020; such amount is expected to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-managed inventory.
The options that have been exercised to date provide for payments up to approximately $239.7 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®; payments up to $213.9 million for the delivery of up to 726,140 courses of oral TPOXX®; and payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®. As of September 30, 2021, the Company has received the following payments in connection with exercised options: $112.5 million was received in connection with the deliveries made in 2020 of courses of oral TPOXX®; and $7.1 million has been received or billed for in connection with post-marketing activities for oral TPOXX®. On October 20, 2021, approximately $33 million of oral TPOXX® was delivered to the Strategic Stockpile.
Unexercised options specify potential payments up to approximately $311.1 million in total (if all such options are exercised). There are options for the following activities: payments of up to $225.1 million for the delivery of oral TPOXX® to the Strategic Stockpile; payments of up to $76.8 million for the manufacture of courses of IV FDP, of which up to $30.7 million of payments would be paid upon the manufacture of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV TPOXX®; and payments of up to approximately $5.6 million for supportive procurement activities.
The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drug substance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP Options”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing for 64,000 courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV FDP Options, or whether to exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV FDP Option). If BARDA decides to only exercise IV BDS Options, then the Company would receive payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP. The Company estimates that sales of the IV formulation under this contract (under current terms), assuming the IV FDP Options were exercised, would have a gross margin (sales less cost of sales, as a percentage of sales) that is less than 40%.
Under the terms of this contract, exercise of procurement options is at the sole discretion of BARDA. The request for proposal that preceded the award of the 19C BARDA Contract indicated that the expected purpose of the contract was to maintain the level of smallpox antiviral preparedness in the Strategic Stockpile. Based on prior product delivery activity, and current FDA-approved shelf life of oral TPOXX®, the Company estimates that approximately one million courses of smallpox antiviral treatment would need to be delivered to the U.S. Government between 2021 and 2023 in order to maintain stockpile levels of unexpired smallpox antiviral treatment during this period.
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 2011 BARDA Contract specifies approximately $508.4 million of payments, of which, as of September 30, 2021, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of oral TPOXX® and $45.8 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $2.8 million remains eligible to be received in the future for reimbursements of development and supportive activities.
The 2011 BARDA Contract expires in December 2024.
International Procurement Contracts
Contract with Public Health Agency of Canada
On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian," a Pfizer Company) (the “Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. The Contract specifies firm commitments for the cumulative purchase of approximately $17 million of oral TPOXX® by March 31, 2023; the remaining courses under the Contract are targeted for delivery after March 31, 2023 and are subject to option exercise by PHAC. As of September 30, 2021, $10.3 million of oral TPOXX® courses have been delivered to and accepted by PHAC. Such courses were delivered in the first six months of 2021. The contract award was coordinated between SIGA and Meridian under an international promotion agreement (as amended, the "International Promotion Agreement") that was entered into by the parties on June 3, 2019. As such, Meridian is the PHAC's counterparty under the Contract, and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder.
Canadian Military Contract
On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $14 million of oral TPOXX® over four years. In the second quarter 2020, CDND purchased $2.3 million of oral TPOXX®. In the third quarter of 2021, CDND purchased another $2.3 million of oral TPOXX® courses. The remaining purchases are at the option of the CDND and are expected to primarily occur after regulatory approval of oral TPOXX® in Canada.
International Promotion Agreement
Under the terms of the International Promotion Agreement, Meridian was granted exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States (the “Territory”), and Meridian has agreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified field of use in the Territory. SIGA retains ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with TPOXX®, and, in the United States market, also retains sales and marketing rights with respect to oral TPOXX®. SIGA’s consent is required for the entry into any sales arrangement pursuant to the International Promotion Agreement.
The fee Meridian retains pursuant to the International Promotion Agreement is a specified percentage of the collected proceeds of sales of oral TPOXX® net of certain expenses, for years in which customer invoiced amounts net of such expenses are less than or equal to a specified threshold, and a higher specified percentage of such collected net proceeds for years in which such net invoiced amounts exceed the specified threshold. Taking into account Meridian’s fee and manufacturing costs of oral TPOXX®, it is currently estimated by the Company that international sales of oral TPOXX® will have a contribution margin (as expressed as a percentage of product sales, and before any consideration of expenses not directly related to manufacturing or Meridian activities) of between approximately 65% and 80%.
TPOXX Regulatory Summary
On July 13, 2018, the FDA approved oral TPOXX® for the treatment of smallpox.
For IV TPOXX®, SIGA filed a new drug application ("NDA") with the FDA for IV TPOXX® on April 30, 2021. Based on its review of the NDA, the FDA will decide whether to approve IV TPOXX® and whether to impose any marketing restrictions or require additional post-approval clinical studies. The Company is targeting the first quarter of 2022 for completion of this review process. There can be no assurance that any approval will be granted on a timely basis, if at all.
The Company is also seeking regulatory approval of oral TPOXX® in Europe and Canada. In July 2020, the Company filed a Marketing Authorisation Application ("MAA") with the European Medicines Agency ("EMA") for oral tecovirimat, the same formulation that was approved by the FDA in July 2018 under the name TPOXX®. The MAA was filed under the centralized application process, which, upon approval, will enable sales and marketing of oral tecovirimat in all European Union member states, as well as Norway, Iceland, and Liechtenstein. SIGA has filed its application for oral tecovirimat seeking a broader label indication covering the treatment of smallpox, monkeypox, cowpox, and complications from Vaccinia infection. In December 2020, the Company filed an application for marketing authorization in Canada for oral tecovirimat. Based on a typical regulatory review timeline, SIGA currently estimates that the review processes for oral TPOXX® in both Europe and Canada will be completed by the first quarter of 2022. There can be no assurance that any approval will be granted on a timely basis, if at all.
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 2020 Form 10-K. Our most critical accounting estimates include revenue recognition over time, the valuation of stock-based awards including options and warrants granted or issued by the Company and income taxes.
Results of Operations
Three Months Ended September 30, 2021 and 2020
For the three months ended September 30, 2021, revenues from product sales and supportive services were $2.3 million, which primarily relate to the acceptance of courses of oral TPOXX® delivered to CDND. For the three months ended September 30, 2020, revenues from product sales and supportive services were $41.8 million, which primarily relate to the delivery and acceptance of courses of oral TPOXX® delivered under the 19C BARDA Contract.
Revenues from research and development activities for the three months ended September 30, 2021 and 2020, were $2.5 million and $2.5 million, respectively. An increase of $1.1 million of revenue in connection with the PEP Label Expansion R&D Contract was offset by a decrease of $1.1 million in revenue associated with the development of IV TPOXX®.
Cost of sales and supportive services for the three months ended September 30, 2021 and 2020 were $0.1 million and $5.6 million, respectively. Such costs in 2021 were primarily associated with the manufacture and delivery of courses of oral TPOXX® to CDND. Such costs in 2020 were mostly associated with the manufacture and delivery of courses of oral TPOXX® under the 19C BARDA Contract.
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2021 and 2020 were $4.3 million and $3.6 million, respectively. The increase of approximately $0.7 million or 21% primarily reflects promotion fees paid in connection with courses delivered to PHAC in April 2021, as well as an increase in certain insurance, consulting, and professional service costs.
Research and development (“R&D”) expenses for the three months ended September 30, 2021 and 2020 were $3.2 million and $2.1 million, respectively, reflecting an increase of approximately $1.1 million, or 56%. The increase is primarily attributable to an increase in direct vendor-related expenses incurred under the PEP Label Expansion R&D Contract and the performance of post-marketing regulatory activities for oral TPOXX®.
Patent expenses were $0.2 million and $0.2 million for the three months ended September 30, 2021 and 2020, respectively. These expenses reflect our ongoing efforts to protect our lead drug candidates in various geographic territories.
Changes in the fair value of the liability-classified warrant to acquire common stock were recorded within the statement of operations. For the three months ended September 30, 2021, we recorded a loss of approximately $1.1 million, reflecting an increase in the fair value of the liability-classified warrant primarily due to the increase in our stock price. For the three months ended September 30, 2020, we recorded a loss of approximately $1.3 million, reflecting an increase in the fair value of the liability-classified warrant primarily due to the increase in our stock price.
For the three months ended September 30, 2021 and 2020, we incurred pre-tax (loss)/income of ($4.0) million and $31.6 million, respectively, and a corresponding income tax benefit/(provision) of $0.9 million and ($7.5) million, respectively. The effective tax rates during the three months ended September 30, 2021 and 2020 were 21.9% and 23.6%, respectively. Our effective tax rate for the three months ended September 30, 2021 differs from the statutory rate primarily as a result of state taxes, non-deductible executive compensation under Internal Revenue Code Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant.
Nine Months Ended September 30, 2021 and 2020
For the nine months ended September 30, 2021 and 2020, revenues from product sales and supportive services were $12.8 million and $80.5 million, respectively. Such revenues in 2021 primarily relate to the delivery and acceptance of courses of oral TPOXX® delivered to PHAC and CDND. Such revenues in 2020 include $77.7 million of revenue related to the delivery and acceptance of courses of oral TPOXX® under the 19C BARDA Contract and $2.3 million of revenue related to the delivery and acceptance of courses of oral TPOXX® to the CDND.
Revenues from research and development activities for the nine months ended September 30, 2021 and 2020, were $5.5 million and $6.7 million, respectively. The decrease in revenue of approximately $1.2 million, or 17%, primarily reflects a decrease in revenue in connection with a decrease in direct vendor-related costs for IV TPOXX® and post-marketing regulatory activities for oral TPOXX®, partially offset by higher revenues associated with the PEP Label Expansion R&D Contract.
Cost of sales and supportive services for the nine months ended September 30, 2021 and 2020 were $1.3 million and $10.5 million, respectively. Such costs in 2021 were associated with the manufacture and delivery of courses of oral TPOXX® to PHAC and CDND as well as an inventory-related loss of $0.5 million. Such costs in 2020 were mostly associated with the delivery and acceptance of courses of oral TPOXX® to the U.S. government.
SG&A expenses for the nine months ended September 30, 2021 and 2020 were $13.6 million and $10.6 million, respectively. The increase of approximately $3.0 million or 28% primarily reflects promotion fees paid in connection with courses delivered to PHAC and CDND in 2021, as well as an increase in certain insurance and consulting costs.
R&D expenses for the nine months ended September 30, 2021 and 2020 were $7.8 million and $7.9 million, respectively, reflecting a decrease of approximately $0.1 million, or 2%. The decrease is primarily attributable to a decrease in direct vendor-related expenses incurred under the BARDA 19C Contract in connection with supporting the development of IV TPOXX® and the performance of post-marketing regulatory activities for oral TPOXX®, partially offset by higher costs associated with the PEP Label Expansion R&D Contract.
Patent expenses were $0.5 million and $0.5 million, respectively, for the nine months ended September 30, 2021 and 2020. 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, 2020 was $3.0 million. The $3.0 million of interest for the nine months ended September 30, 2020 included $0.9 million of accretion of unamortized costs and fees (prior to repayment of the Term Loan). There was no interest expense recognized for the nine months ended September 30, 2021 as our Term Loan was paid off in March 2020.
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, 2021, we recorded a gain of approximately $0.3 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 September 30, 2020, we recorded a loss of approximately $2.9 million, reflecting an increase in fair value of the liability-classified warrant primarily due to the increase in our stock price.
Other income of less than $0.1 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively, reflects interest income on the Company's cash and cash equivalent balances held in restricted and unrestricted accounts.
For the nine months ended September 30, 2021 and 2020, we incurred pre-tax (loss)/income of ($4.6) million and $47.3 million, respectively, and a corresponding income tax benefit/(provision) of $0.8 million and ($11.1) million, respectively. The effective tax rates during the nine months ended September 30, 2021 and 2020 were 17.7% and 23.4%, respectively. Our effective tax rate for the nine months ended September 30, 2021 differs from the statutory rate primarily as a result of state taxes, non-deductible executive compensation under Internal Revenue Code Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant. The effective tax rate also includes a discrete income tax provision of $0.2 million primarily related to the expiration of stock options.
Liquidity and Capital Resources
As of September 30, 2021, we had $92.8 million in cash and cash equivalents compared with $117.9 million at December 31, 2020.
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, loss on the extinguishment of the Term Loan, deferred income taxes, non-cash interest expense and changes in the fair value of our warrant liability, inventory write offs, 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 operating activities for the nine months ended September 30, 2021 and 2020 was ($4.6) million and $25.6 million, respectively. For the nine months ended September 30, 2021, net cash usage relates to support of ordinary working capital (accounts receivable, accounts payable, inventory, and prepaids, among other items) and customary operating activity, partially offset by the receipt of cash from international sales. For the nine months ended September 30, 2020, net cash provided relates to the receipt of approximately $33 million from BARDA for product delivery, partially offset by cash usage related to support of ordinary working capital and customary operating activity.
Investing Activities
For the nine months ended September 30, 2021 and 2020, we used cash in the amounts of $24,424 and $15,501, respectively, for capital expenditures.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2021 was $20.4 million, which was substantially all attributable to our repurchase of approximately 3.0 million shares of common stock. Net cash used by financing activities for the nine months ended September 30, 2020 was $107.9 million, which was attributable to our voluntary prepayment of the Term Loan, of which approximately $85.9 million was recorded as a financing activity, and our repurchase of approximately 3.7 million shares of common stock for approximately $21.8 million.
Future Cash Requirements
As of September 30, 2021, we had outstanding purchase orders associated with manufacturing obligations in the aggregate amount of approximately $4.9 million.
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 adopted on the Company's condensed consolidated financial statements, 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 the foregoing “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, 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 19C BARDA Contract (each as defined previously, and collectively, the "BARDA Contracts") with BARDA. The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and any forward-looking information provided herein is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that BARDA elects, in its sole discretion as permitted under the BARDA Contracts, not to exercise all, or any, of the remaining unexercised options under those contracts, (ii) the risk that SIGA may not complete performance under the BARDA Contracts on schedule or in accordance with contractual terms, (iii) the risk that the BARDA Contracts are modified or canceled at the request or requirement of the U.S. government, (iv) the risk that the nascent international biodefense market does not develop to a degree that allows SIGA to successfully market TPOXX® internationally, (v) the risk that potential products, including potential alternative uses or formulations of TPOXX® that appear promising to SIGA or its collaborators, cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (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 the volatile and competitive nature of the biotechnology industry may hamper SIGA’s efforts to develop or market its products, (xi) the risk that changes in domestic or foreign economic and market conditions may affect SIGA’s ability to advance its research or may affect its products adversely, (xii) the effect of federal, state, and foreign regulation, including drug regulation and international trade regulation, on SIGA’s businesses, (xiii) the risk that the COVID-19 pandemic could impact SIGA’s operations by disrupting SIGA’s supply chain for the manufacture of TPOXX®, causing delays in SIGA’s research and development activities, causing delays or the re-allocation of funding in connection with SIGA’s government contracts, or diverting the attention of government staff overseeing SIGA’s government contracts and (xiv) the risk that the U.S. or foreign governments' responses (including inaction) to national or global economic conditions or infectious diseases such as COVID-19 are ineffective and may affect SIGA’s business adversely, as well as the risks and uncertainties included in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 and SIGA's subsequent filings with the Securities and Exchange Commission. SIGA urges investors and security holders to read those documents free of charge at the SEC's website at http://www.sec.gov. All such forward-looking statements are current only as of the date on which such statements were made. SIGA does not undertake any obligation to update 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.
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 and changes in the financial standing of the issuers of such securities and our interest income is sensitive to changes in the general level of U.S. interest rates. Additionally, we are subject to the impact of stock price fluctuations of our common stock in that we have a liability-classified warrant in which 1.0 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 $1.0 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, 2021. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.
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, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business, including collections claims, breach of contract claims, labor and employment claims, tax related matters and other matters. Although such claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any, will not have a material adverse effect on our business, condensed consolidated financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Our results of operations and financial condition are subject to numerous risks and uncertainties described in our 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2020. There have been no material changes to the risk factors described in Part I, Item 1A "Risk Factors" of our 2020 Form 10-K, except as identified below.
Our business has been and will continue to be affected by the COVID-19 pandemic. The full extent and nature to which the COVID-19 pandemic, and any related consequences, will impact our business, financial condition and results of operations is uncertain and cannot be predicted.
On September 9, 2021, President Biden directed the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) to issue an Emergency Temporary Standard (“ETS”) requiring that all employers with at least 100 employees ensure that their employees are fully vaccinated for COVID-19 or obtain a negative COVID-19 test at least once a week. President Biden also issued an Executive Order requiring certain COVID-19 precautions for government contractors and their subcontractors, including mandatory employee vaccination (subject to medical and religious exemptions) that directly impacts SIGA given its government contracts. It is not currently possible to predict with any certainty the exact impact on us given the requirements for government contractors and their subcontractors. SIGA does not expect any impact from any requirement to mandate COVID-19 vaccination of our workforce, however such requirements could result in employee attrition and difficulty securing future labor needs at our subcontractors, and therefore have an adverse effect on the amount and timing of future profits. In addition, any requirement to impose obligations on our suppliers under the Executive Order covering government contractors and their subcontractors could impact the price and continuity of services provided in connection with the supply chain, commercial activities and research and development activities, which in turn could impact the Company’s performance under government contracts and the amount and timing of future profits.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES
| Period |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Programs |
Dollar Value of Shares That May Yet Be Purchased Under the Programs |
||||||||||||
| July 1, 2021 to July 31, 2021 |
399,366 | $ | 6.06 | 399,366 | $ | 5,947,933 | ||||||||||
| August 1, 2021 to August 31, 2021 |
382,000 | 6.43 | 382,000 | 53,492,895 | ||||||||||||
| September 1, 2021 to September 30, 2021 |
329,397 | 6.86 | 329,397 | 51,232,507 | ||||||||||||
| 1,110,763 | $ | 6.42 | 1,110,763 | |||||||||||||
On March 5, 2020, the Company announced that the Board of Directors had authorized a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $50 million of the Company’s common stock through December 31, 2021. The timing and actual number of shares repurchased will depend on a variety of factors, including: exercise of procurement options under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; and other corporate liquidity requirements and priorities.
On August 2, 2021, the Company's Board of Directors authorized an additional share repurchase program ("New Repurchase Authorization") under which the Company may repurchase up to $50 million of the Company's common stock through December 31, 2023. Shares can be repurchased under the New Repurchase Authorization once the maximum amount allowed to be repurchased under the program authorized in March 2020 has been repurchased, or once such program has expired. Repurchases under the New Repurchase Authorization may be made from time to time at the Company's discretion in open market transactions, through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company's management in accordance with Rule 10b5-1 under the Exchange Act or otherwise. The timing and actual number of shares repurchased will depend on a variety of factors, including: exercise of procurement options under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; and other corporate liquidity requirements and priorities.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
No disclosure is required pursuant to this item.
No disclosure is required pursuant to this item.
| Exhibit No. |
Description |
| 3.1 | Amended and Restated Certificate of Incorporation of SIGA Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on April 14, 2016). |
| 3.2 | Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of the Company filed on April 14, 2016). |
| 3.3 | Amendment to Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company filed on December 13, 2016). |
| 10.1 | Amendment of Solicitation/Modification of Contract 0007, dated September 8, 2021, 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. |
| Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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SIGA TECHNOLOGIES, INC. |
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(Registrant) |
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| Date: |
November 4, 2021 |
By: |
/s/ Daniel J. Luckshire |
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Daniel J. Luckshire |
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Executive Vice President and Chief Financial Officer |
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(Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer) |
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