Nature of the Business and Liquidity

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of the Business and Liquidity

Nature of the Business and Liquidity

Nature of the Business

Teligent, Inc. and its subsidiaries (collectively the “Company”), is a specialty generic pharmaceutical company. Our mission is to become a leader in the specialty generic pharmaceutical market in alternate dosage forms. Under our own label, we currently market and sell generic topical and generic and branded generic injectable pharmaceutical products in the United States and Canada. In the United States, we currently market 36 generic topical pharmaceutical products and four branded generic injectable pharmaceutical products. In Canada, we sell 32 generic and branded generic injectable products and medical devices. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to the pharmaceutical, over the counter ("OTC"), and cosmetic markets. We operate our business under one reportable segment. Our common stock is traded on the Nasdaq Global Select Market under the trading symbol “TLGT.”  Our principal executive office, laboratories and manufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. We have additional offices located in Iselin, New Jersey, Mississauga, Canada, and Tallinn, Estonia.

Liquidity

On December 13, 2018, the Company and Ares Management LLC entered into: (i) a First Lien Revolving Credit Agreement, by and among the Company, as the borrower, certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and ACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among us, as the borrower, certain subsidiaries of ours, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the “Second Lien Credit Agreement” and, together with the Revolver Credit Agreement, the “Senior Credit Facilities”).

The Senior Credit Facilities consist of (i) a $25.0 million senior revolving credit facility governed by the Revolver Credit Agreement (the “Revolver”); (ii) a $50.0 million second lien initial term loan (the “Initial Term Loan”); (iii) a $30.0 million second lien delayed draw term loan A (the “Delayed Draw Term Loan A”) and (iv) a $15.0 million second lien delayed draw term loan B (the “Delayed Draw Term Loan B” and the “Delayed Draw Term Loan A”, are hereto referred to as the “Delayed Draw Term Loans” and the Delayed Draw Term Loans together with the Initial Term Loan, hereto referred to as the “2023 Term Loans”). The Term Loans are governed by the Second Lien Credit Agreement. The Company's ability to borrow under the Revolver is subject to a “borrowing base” to be determined based upon eligible inventory, eligible equipment, eligible real estate and eligible receivables. As of June 30, 2019, the Company has an additional $25.0 million available on its 2023 Term Loans, as part of the credit facilities executed with Ares Capital Management, of which $15.0 million relates to funding earmarked to further increase manufacturing capacity in the newly expanded Buena manufacturing facility. The Senior Credit Facilities contain financial covenants consisting of a minimum revenue test, a minimum adjusted EBITDA test and a maximum total net leverage ratio. The minimum adjusted EBITDA test increases each quarter for the next five consecutive quarters. A material change in the Company’s results from operations compared to forecasted results could impact its ability to meet the financial covenants within the next 12 month period.

The Company's capital resources were comprised of cash and cash equivalents of $4.1 million and $9.7 million as of June 30, 2019 and December 31, 2018, respectively. The reduction in cash and cash equivalents during the six months ended June 30, 2019 was largely due to the additional year-to-date investment of $5.1 million for the new manufacturing facility located in Buena, New Jersey and the hiring and training of employees needed for the anticipated FDA prior approval inspection later this year. The negative cash flows from operating activities were primarily driven by the timing of collections from lower than typical revenues realized in the first quarter of 2019. The Company had an accumulated deficit of $109.1 million as of June 30, 2019, incurred a $12.7 million net loss and used $10.3 million in net cash from operating activities during the six months ended June 30, 2019.

The Company has incurred losses and negative cash flows from operations in recent years. The Company's liquidity needs have typically arisen from the funding of our new manufacturing facility, product manufacturing costs, research and development programs and the launch of new products. In the past, we have met these cash requirements through cash inflows from operations, working capital management, and proceeds from borrowings such as our Convertible Senior Notes and credit facilities with Ares Capital Management discussed in Note 7. We expect to continue to incur significant expenditures for the development of new products in our pipeline, and the manufacturing and sales and marketing of our existing products. While we rely heavily on cash flows from operating activities and borrowings from outside sources to execute our operational strategy and meet our financial commitments and other short-term financial needs, we cannot be

certain that sufficient capital will be generated through operations or will be available to the Company to the extent required and on acceptable terms over the next 12 months.

In June 2019, the Company received a de-listing notice from the NASDAQ due to its share price being below $1 for 30 consecutive trading days. The Company believes that successful execution of its business plan will increase the share price above $1 for ten consecutive trading days, bringing the Company back into compliance with the NASDAQ share price requirements. If the share price does not increase for ten consecutive trading days within the 180 day period or until December 2, 2019, the Company can request an additional 180 day extension to achieve compliance with the share price requirement. If the share price still has not increased above $1 for ten consecutive trading days within that extended time period or if the extension request is denied, the Company has additional potential remedies.

Notwithstanding these matters, the Company continues to evaluate various actions, including the following:

•The Company is closely managing its recurring operating expenses and limiting its non-recurring operating expenses over the next twelve-month period.

•The Company has the ability to delay capital projects until such time that its liquidity improves, or it receives funding from its outside sources.

•The Company is nearing the end of its preparation for the FDA’s prior approval inspection of its injectable facility. Depending on the timing of the inspection and obtaining the FDA's approval, the Company intends to launch its first US manufactured injectable product before year end.

•The Company's second-lien credit facility with Ares Capital Management provides the option to defer interest payments until December 13, 2020.

•The Company continually receives and is willing to entertain unsolicited inbound interest to convert its tangible and intangible assets into cash via contract manufacturing, private label, outright sales and licensing agreements.

•The Company was unable to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2018  with the SEC by the required filing date. The delayed filing suspended the Company's ability to offer up to $50.0  million in debt or equity securities through its existing shelf registration statement on file with the SEC for a  period of twelve months. This period ends in December 2019, at which time the Company will again have the  ability to utilize its shelf registration and to raise cash in the equity markets, if necessary.

•The Company has a variety of options available for it to collaborate with unsecured bondholders interested in assisting the Company in maintaining the short-term liquidity needed to maintain ongoing operations.