Note 1 - Organization and Business

We have been engaged in the biodefense business through our predecessor entity since our inception in 2001.

We are incorporated under the laws of the State of Delaware and are a biodefense company focused on developing next generation medical countermeasures against biological and chemical threats. We are subject to those risks associated with any biopharmaceutical company that has substantial expenditures for research and development. In addition, we operate in an environment of rapid technological change and are largely dependent on the services and expertise of our employees, consultants and other third parties.

Since 2006, we were engaged in legal proceedings with SIGA Technologies, Inc. (“SIGA”). On December 23, 2015, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s judgment against SIGA which provided an estimated total award of approximately $208.7 million plus additional interest.

We received approximately $217.1 million from SIGA during the year ended December 31, 2016, comprised of principal payments of approximately $208.7 million as final satisfaction of the judgment and $8.4 million of payments calculated by SIGA as interest on the judgment.

On November 17, 2016, the Company’s Board of Directors declared a special one-time cash dividend of $2.91 per share of common stock, payable on February 3, 2017 to holders of record as of January 24, 2017. The special dividend, totaling an aggregate payment of approximately $200 million, which represents approximately 98% of the after tax net cash proceeds received from SIGA, was approved by the Company’s Board of Directors following the Company's receipt of $83.9 million as final payment from SIGA in satisfaction of the judgment owed by it to PharmAthene

On September 9, 2014, we signed a contract with the National Institutes of Allergy and Infectious Diseases (“NIAID") for the development of a next generation lyophilized anthrax vaccine (“SparVax-L”) based on the Company’s proprietary technology platform which contributes the recombinant protective antigen (“rPA”) bulk drug substance that is used in the liquid SparVax^® formulation. The contract is incrementally funded. Over the base period of the contract, we were awarded initial funding of approximately $5.2 million, which includes a cost reimbursement component and a fixed fee component payable upon achievement of certain milestones. NIAID has exercised four options under this agreement to provide additional funding of approximately $8.8 million and an extension of the period of performance through December 31, 2017. The contract has a total value of up to approximately $28.1 million, if all technical milestones are met and all eight contract options are exercised by NIAID. If NIAID exercises all options, the contract would last approximately five years. If NIAID does not exercise any additional options, the contract would expire by its terms on December 31, 2017.

On March 9, 2015, our Board of Directors approved our realignment plan (the “Realignment Plan”) with the goal of preserving and maximizing, for the benefit of our stockholders, the value of the proceeds from our litigation with SIGA and our existing anthrax vaccine programs. We intend to maintain sufficient resources and personnel so that we can seek partners, co-developers or acquirers for our anthrax vaccine programs and continue to execute under our government contract with NIAID.

On July 6, 2015, we signed a license agreement with ImmunoVaccine Technologies (“IMV”) for the exclusive use of the DepoVax^TM vaccine platform (“DPX”), to develop an anthrax vaccine utilizing PharmAthene’s rPA. On June 23, 2016, we terminated this license agreement.

As of December 31, 2016, our cash and cash equivalents balance was $154.0 million, our short-term investments balance was $66.8 million, our accounts receivable (billed and unbilled) balance was $1 million, and our current liabilities, which included dividends payable of $197.1 million, were $204.8 million. Our excess cash balances have been placed in low risk U.S. Government money market funds, short-term U.S. Treasury securities and short-term government-sponsored enterprise securities in an effort to preserve capital and fund the dividend payable when due on February 3, 2017.

Historically, the Company has performed under government contracts and grants and raised funds from investors (including additional debt and equity issued in 2015 and 2014) to sustain our operations. The Company has spent substantial funds in the research, development, clinical and preclinical testing in excess of revenues, to support the Company’s product candidates and to market and sell its products. We have incurred losses since we commenced operations, and have an accumulated deficit of $29.9 million as of December 31, 2016. The Company’s accumulated losses have been reduced by the SIGA related payments received in 2016.

We believe, based on the operating cash requirements and capital expenditures expected for 2017, the Company’s cash on hand at December 31, 2016, excluding amounts allocated to pay the one-time special dividend, is adequate to fund operations for at least twelve months from the date of this report.