TELIGENT This "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates and on management's beliefs and assumptions. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on current expectations of management and are not guarantees of future performance, and involve certain risks, uncertainties, and assumptions, which are difficult to predict. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, the general economic conditions in the markets in which the Company operates, levels of industry research and development spending, the Company's ability to continue to attract and retain qualified personnel, the fixed price nature of product development agreements or the loss of customers and other factors described in the Company's filings with theSecurities and Exchange Commission , including the "Risk Factors" section as set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , as updated below in this Quarterly Report on Form 10-Q. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The forward-looking statements set forth herein speak only as of the date of this report. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. The Company operates its business under one reportable segment.
Company Overview
Strategic Overview
Teligent, Inc. and its subsidiaries (collectively the "Company") is a specialty generic pharmaceutical company. All references to "Teligent ," the "Company," "we," "us," and "our" refer toTeligent, Inc. Our mission is to become a leader in the specialty generic pharmaceutical market. Our platform for growth is centered around the development, manufacturing and marketing a portfolio of generic pharmaceutical products in our own label in topical, injectable, complex and ophthalmic dosage forms. We believe that expanding our development and commercial base beyond topical generics, historically the cornerstone of our expertise, to include injectable generics, complex generics and ophthalmic generics (what we call our "TICO" strategy"), will leverage our existing expertise and capabilities, and broaden our platform for more diversified strategic growth. We currently market and sell generic topical and generic and branded generic injectable pharmaceutical products inthe United States andCanada . Inthe United States , we currently market 36 generic topical pharmaceutical products and four branded injectable pharmaceutical products. We have received FDA approvals for 36 topical generic products from our internally developed pipeline and we have 17 Abbreviated New Drug Applications, ("ANDAs") submitted to the FDA that are awaiting approval. InCanada , we sell 32 generic and branded generic injectable products and medical devices. In addition, we have 45 product candidates at various stages of our development pipeline. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to the pharmaceutical, ("OTC"), and cosmetic markets. We operate our business under one 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 at105 Lincoln Avenue ,Buena, New Jersey . We have additional offices located inIselin, New Jersey ,Mississauga, Canada , andTallinn, Estonia .
The manufacturing and commercialization of generic specialty pharmaceutical markets is competitive, and there are established manufacturers, suppliers and distributors actively engaged in all phases of our business. We currently manufacture and sell topical generic pharmaceutical products under our own label.
The three large wholesale drug distributors are AmerisourceBergen Corporation
("ABC"); Cardinal Health, Inc. ("Cardinal"); and McKesson Drug Company ,
("McKesson"). ABC , Cardinal and McKesson are key distributors of our products,
as well as a broad range of health care products for many other companies. None
of these distributors is an end user of our products. Generally, if sales to any
one of these distributors were to diminish or cease, we believe that the end
users of our products would likely find little difficulty obtaining our products
either directly from us or from another distributor. However, the loss of one or
more of these distributors, together with a delay or inability to secure an
alternative distribution source for end users, could have a material negative
impact on our revenue, business, financial condition and results of operations.
There are generally three major negotiating entities in the US market. Walgreens
Boot Alliance, Inc. consists of Walgreens, Amerisource
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Bergen's PRxO Generics program, and Econdisc members. Red Oak Sourcing consists
of CVS and Cardinal's source program. Finally, ClarusOne consists of Walmart,
RiteAid and McKesson's OneStop program. A loss of any of these major entities
could result in a significant reduction in revenue.
We consider our business relationships with ABC , Cardinal and McKesson to be in
good standing and have fee for services contracts with each of them. However, a
change in purchasing patterns, a decrease in inventory levels, an increase in
returns of our products, delays in purchasing products and delays in payment for
products by one or more of these distributors could have a material negative
impact on our revenue, business, financial condition and results of operations.
We continue to analyze the market for other specialty generic drug products
through internal research and development. In addition, we continue to explore
business development opportunities to add additional products and/or
capabilities to our existing portfolio.
For the three months ended March 31, 2020 , we had sales to one customer, which
individually accounted for 10% or more of our total revenue. Total sales to this
customer represented 16.9% of total revenues. Accounts receivable related to the
Company's major customers comprised 12% of all accounts receivable as of March
31, 2020 . For the three months ended March 31, 2019 , we had sales to two
customers which individually accounted for more than 10% of our total revenue.
Total sales to these customers represented 30%, 18%, respectively, and
represented 48% of total revenues. Accounts receivable related to the Company's
major customers comprised 37% of all accounts receivable as of March 31, 2019 .
Our customers in the contract manufacturing business generally consist of
pharmaceutical companies, as well as cosmetic and OTC product marketers, who
require product development/manufacturing support. For the three months ended
March 31, 2020 , approximately 39% of our contract manufacturing revenue was
derived from pharmaceutical projects, as compared to 73% of total contract
manufacturing revenue for the three months ended March 31, 2019 . None of our
contract manufacturing services customers represented greater than 10% of total
revenue for both the three months ended March 31, 2020 and 2019.
From late March to the end of April 2020 , several data sources suggested that
patient visits to the dermatologist in the United States were down more than 50%
in comparison to the typical number of dermatologist visits realized prior to
shelter-in-place guidelines. These percentages vary by state. In May, as some
states began to relax shelter-in-place guidelines there are signs that suggest
patients are beginning to return to the dermatologist and demand for our US
topical products will follow. Given the level of uncertainty and potential
consequences of less stringent guidelines, it is still extremely challenging to
predict the pace of the anticipated ramp and whether or not there might be a
second wave of decline.
Product and Pipeline Approvals
There were no significant approvals announced in 2020 to date.
OnApril 4, 2019 , we announced approval of an ANDA for Fluocinonide Cream USP, 0.1%. This was our fourth approval of 2019, and our thirty-sixth approval from its internally developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the second half of 2021.
Results of Operations
Three months ended
We had a net loss of$26.8 million , or$0.50 per share, for the Three months endedMarch 31, 2020 ("Current Year"), compared to a net loss of$8.7 million , or$0.16 per share, for the Three months endedMarch 31, 2019 ("Prior Year"). Product Sales, net, include Company Product Sales and Contract Manufacturing Sales, as follows: Revenues: Three months ended March 31, Increase/(Decrease) Components of Revenue: 2020 2019 $ % Product sales, net$ 7,336 $ 13,037 $ (5,701) (44) % Research and development services and other income 111 85 26 31 % Total Revenues$ 7,447 $ 13,122 $ (5,675) (43) %
Total revenues decreased by (43)% to
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and incremental price erosion, a decrease of $1.6 million in Canadian revenues
due to supply constraints, and a $.3 million decline in contract manufacturing
sales..
Research and development services and other revenues will not be consistent and
will vary, from period to period, depending on the required timeline of each
development project and/or agreement.
Costs and Expenses:
Three months ended March 31, Increase/(Decrease)
2020 2019 $ %
Cost of revenues $ 8,610 $ 7,360 $ 1,250 17 %
Selling, general and administrative
expenses 6,717 5,513 1,204 22 %
Impairment charge 8,373 - 8,373 100 %
Product development and research
expenses 1,800 2,989 (1,189) (40) %
Totals costs and expenditures $ 25,500 $ 15,862 $ 9,638 61 %
Cost of revenues increased by 17% to $8.6 million for the Current Year from $7.4
million from the Prior Year. Gross margin decreased to (16)% in the Current Year
from 44% from the Prior Year. The increase is attributable to inventory reserve
build of $1.4 million , decreased volume lowering fixed cost absorption and
product mix.
Selling, general and administrative expenses in the Current Year increased by
$1.2 million as compared to the Prior Year. The increase was primarily due to
(i) $0.8 million increase in personnel costs, (ii) $0.5 million increase in
legal fees, (iii) $0.3 million increase in bad debt expense offset by a $0.4
million decrease in professional fees.
An impairment charge was recorded in the Current Year of $8.4 million related to
trademark and technology of $4.9 million and product acquisition costs of $3.5
million . There were no impairment charges in the Prior Year.
Product development and research expenses decreased by $1.2 million as compared
to the Prior Year. The decrease in product development and research expenses was
primarily due to (i) $0.5 million decrease in exhibit and pilot batch costs,
(ii) $0.3 million decrease in personnel costs, (iii) $0.3 million decrease in
clinical studies, and (iv) $0.1 million decrease in GDUFA fees and associated
Abbreviated New Drug Applications filings.
Other (Expense) Income, net:
Three months ended March 31, (Increase)/Decrease
2020 2019 $ %
Interest and other expense, net $ (5,876) $ (4,947) $ (929) 19 %
Foreign currency exchange loss (1,597) (844) (753) 89 %
Change in the fair value of
derivative liability (1,258) - (1,258) 100 %
Debt partial extinguishment of 2019
Notes - (185) 185 (100) %
$ (8,731) $ (5,976) $ (2,755) 46 %
Interest and other expense, net increased in the Current Year primarily as a
result of an increase in interest expense of $0.9 million related to the current
debt structure.
Foreign exchange loss of $1.6 million in the Current Year was related to the
foreign currency translation of our intercompany loans denominated in U.S.
dollars to our foreign subsidiaries to be repaid in November 2022 . Depending on
the changes in foreign currency exchange rates, we will continue to record a
non-cash gain or loss on translation for the remaining term of these loans.
The charge in the fair value of derivatives of $1.3 million relates to the
recorded liability of $5.3 million during the first quarter of 2020 pertaining
to the Company's Senior Credit Facility, offset by the 2023 Series B Note gain
of $4.0 million in the Current Year.
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Debt partial extinguishment of the 2019 Notes was zero in the Current Year
compared to
Net loss attributable to common stockholders (in thousands, except per share
numbers):
Three months ended March 31, Increase/(Decrease)
2020 2019 $ %
Net loss attributable to common
stockholders $ (26,836) $ (8,724) $ 18,112 208 %
Basic and diluted loss per share
213 %
Net loss for the Current Year was $26.8 million as compared to net loss of $8.7
million for the Prior Year. The decline was primarily due to a decrease in
revenues of $5.7 million , an increase in costs and expenses of $9.6 million , an
increase in interest expense of $0.9 million , the derivative liability increase
pertaining to the Senior Credit Facility of $5.3 million and foreign exchange
movement of $1.6 million , partially offset by the Series B Notes derivative
liability gain of $4.0 million .
Liquidity and Capital Resources
The Company has incurred significant losses and generated negative cash flows from operations in recent years and expects to continue to incur losses and generate negative cash flow for the foreseeable future. As a result, we had an accumulated deficit of$148.3 million , total principal amount of outstanding borrowings of$190.3 million , and limited capital resources to fund ongoing operations atMarch 31, 2020 . These capital resources were comprised of cash and equivalents of$11.7 million atMarch 31, 2020 and the generation of cash inflows from working capital. The Company's available capital resources may not be sufficient for it to continue to meet its obligations as they become due over the next twelve months if the Company cannot improve its operating results or increase its operating cash inflows. In the event these capital resources are not sufficient, the Company may need to raise additional capital through the sale of equity or debt securities, enter into strategic business collaboration agreements with other companies, seek other funding facilities, or sell assets. However, the Company cannot provide assurances that additional capital will be available on acceptable terms or at all. Moreover, if the Company is unable to meet its obligations when they become due over the next twelve months through its available capital resources, or obtain new sources of capital when needed, the Company may have to delay expenditures, reduce the scope of its manufacturing operations, reduce or eliminate one or more of its development programs, make significant changes to its operating plan or cease its operations. Our 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 discussed in Note 6. Although the construction of our new manufacturing facility was substantially completed in October of 2018, additional investment was made in order to prepare the facility and our employees for a prior approval inspection from the FDA for our injectable line. In addition, we expect to continue to incur significant expenditures for the development of new products in our pipeline, and the manufacturing, sales and marketing of our existing product. While we rely heavily on cash flows from operating activities and borrowings from outside sources to execute our operational strategy, 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. The$4.5 million decrease in our cash during the three months endedMarch 31, 2020 was mainly to support our operational activities. In addition, we had an accumulated deficit of$148.3 million as ofMarch 31, 2020 and incurred a$26.8 million net loss. In the beginning of 2019, the Company used a total of$2.7 million of proceeds from the Senior Credit Facilities to repurchase a portion of the remaining 2019 Notes. The repurchase of the 2019 Notes is considered a debt extinguishment under ASC 470-50. The 2019 Notes are accounted for under cash conversion guidance ASC 470-20, which requires the Company to allocate the fair value of the consideration transferred upon settlement to the extinguishment of the liability component and the reacquisition of the equity component upon derecognition. In accordance with the guidance above, the Company allocated a portion of the$2.7 million to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment and recognized a$0.2 million extinguishment loss in the Consolidated Statement of Operations to measure the difference between (i) the fair value of the liability component and (ii) the net carrying value amount of the liability component (which is already net of any unamortized debt issuance costs). The reduction of Additional Paid in Capital in connection with this extinguishment was immaterial. The Company settled the remaining 2019 Notes of$13.0 million in principal upon its maturity inDecember 2019 . 43 -------------------------------------------------------------------------------- The Initial Term Loan of$50.0 million and$15.0 million of the Revolver were drawn by the Company onDecember 13, 2018 . OnDecember 21, 2018 , the Company drew$20.0 million of the Delayed Draw Term Loan A. InJanuary 2019 , the Company drew$5.0 million and subsequently the remaining$5.0 million under the Revolver were drawn down by the Company inApril 2019 . OnSeptember 18, 2019 , pursuant to the Protective Advance clause in the Company's First Lien Credit Agreement with Ares Capital, the Company borrowed an incremental$2.5 million from its existing revolving credit facility. Consistent with the terms of the revolving credit facility, Protective Advances are secured by the Administrative Agent's liens, constitute Obligations pursuant to the First Lien Credit Agreement, and bear interest at the rate applicable to the outstanding revolving credit facility balances, however, the Protective Advance is repayable on demand. The liability was subsequently paid off inNovember 2019 along with repayment fee of$0.1 million . The Company drew down the remaining$10 million under its borrowing capacity of Delayed Draw Term Loan A before its expiry in December of 2019.The$15 million Delayed Draw Term Loan B expired upon the issuance of the Series B Notes, prior to the Company drawing down any monies. The Term Loans are governed by the Second Lien Credit Agreement. The Term Loans include a 24-month paid-in-kind interest option available to the Company should it choose to defer cash payments in order to maintain the liquidity needed to continue launching new products, and preparing for an FDA prior approval inspection of its new injectable manufacturing facility. The Company has elected the paid-in-kind interest option and increased the principal balance of Term Loans by$2.4 million and$10.9 million for the three months and since inception through the period endedMarch 31, 2020 , respectively. OnOctober 31, 2019 , the Company closed its Series B Notes offering in the aggregate principal amount of$34.4 million . The Series B Notes will mature inMay 2023 and are convertible at the option of the holder at any time prior to maturity at an initial conversion price of$0.72 per share, subject to adjustment under certain circumstances. The Series B Notes and any shares of common stock issuable upon conversion of the Series B Notes (the "Conversion Shares") have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state or other jurisdiction's securities laws, and the New 2023 Notes and the Conversion Shares may not be offered or sold inthe United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions' securities laws. The Company does not intend to file a registration statement for the resale of the Series B Notes or any Conversion Shares. As part of the offering, the Company entered into agreements with certain holders of its existing 2023 Notes to exchange$9.0 million of the 2023 Series A Unsecured Convertible Notes for$5.1 million of the Series B Senior Unsecured Convertible Notes. The gross cash proceeds of approximately$29.3 million from the financing were used to extinguish the Company's existing 2019 Notes inDecember 2019 and intended to pay amounts owing with respect to other indebtedness and to fund general corporate and working capital requirements. The Series B Notes bear interest at a rate of 7.00% per annum if paid in cash, semiannually in arrears onMay 1 andNovember 1 of each year, beginning onMay 1, 2020 . The Company also has an option, and has agreed with its senior lender, to PIK the interest at 8.00% per annum, to defer cash payments. The net proceeds from the financing were$26.9 million after deducting a total of$2.3 million of the initial purchasers' discounts and professional fees associated with the transaction. Under ASC 470-60, Troubled Debt Restructurings by Debtors, the exchange of the$9.0 million of the 2023 Notes for the$5.1 million of the 2023 Series B Notes represents a troubled debt restructuring ("TDR"). The TDR did not result in a gain recognition. As a result, a new effective interest rate was established based on the$7.2 million carrying value of the original debt, net of the$2.0 million fair value of the embedded derivative liability related to the new debt issued in the TDR and$0.2 million issuance costs, getting accreted to$6.8 million representing the total amount of the future undiscounted cash flows related to the$5.1 million of the 2023 Series B Notes. In accordance with ASC 815-15, Derivatives and hedging, Embedded Derivatives, the embedded conversion option should be bifurcated and separately accounted for as a derivative instrument, because the Company did not have enough authorized shares available to share-settle the conversion option. Such derivative instruments should be initially and subsequently measured at fair value, with changes in fair value recognized in earnings (see Note 7). The derivative liability recorded at the issuance date was$13.5 million , including the$2.0 million above accounted for in the TDR, which was subsequently remeasured to$2.8 million as ofMarch 31, 2020 , with$4.0 million recognized as a gain on change in fair value of derivative in the Company's statement of operations during the first quarter of 2020. Further, the$0.9 million of allocated issuance costs associated with the bifurcated conversion features embedded in the notes was recognized as a loss on debt restructuring in the Company's statement of operations for the year endedDecember 31, 2019 . In accordance with ASC 470-20, the initial carrying amount of the liability component of the 2023 Series B Notes, excluding the$5.1 million portion above is accounted for as a TDR, upon issuance is the residual amount between total proceeds from the transaction and the derivative liability net of allocated issuance costs. The$1.4 million debt issuance costs attributable to the liability component were recorded as a direct deduction from the liability component of the 2023 Series B Notes and are being amortized to interest expense using the effective interest method through the maturity date. The discount from the par amount of the 2023 Series B Notes will be accreted to par utilizing the effective-interest rate method over the term of the Notes from the issuance date throughMay 2023 . The effective interest rate of the 2023 Notes, inclusive of the debt discount and issuance costs is 27.4%. 44 -------------------------------------------------------------------------------- OnApril 6, 2020 , the Company entered (i) Amendment No. 2 of the Revolver and Amendment No. 4 of the Term Loans, effective as ofDecember 31, 2019 . The amendments collectively among other things, (i) increase the interest rates, (ii) reset certain prepayment premiums and modify the terms of certain mandatory prepayments and (iii) modify certain financial covenant levels inclusive of the disposition of prior covenants as of and for the period endedDecember 31, 2019 . These financial covenants include a trailing twelve months ("TTM") Minimum Revenue covenant that is required to be met each quarterly period fromMarch 31, 2020 throughDecember 31, 2020 , a TTM Minimum Adjusted EBITDA that is required to be met each quarterly period fromMarch 31, 2021 through maturity, and a minimum liquidity covenant tested at all times through the term of the agreement. These amendments supersede the financial covenants included in the original and amended agreements. Pursuant to the amended Ares Credit Agreements, in the event the Company is unable to comply with these covenants, or obtain a waiver from its lenders, the lender shall have the right, but not the obligation, to permanently reduce the commitment in whole or in part or to declare all or any portion of the outstanding balance due and payable. Furthermore, in the event that outstanding balances under the Ares Credit agreements are declared due and payable by the lender, the lenders of the 2023 Series A and Series B Unsecured Convertible Notes shall have the right, but not the obligation, to declare all of the outstanding balance due and payable as well. The Company does not currently have available liquidity to repay these outstanding borrowings in the event of a default. If the Company is unable to raise additional capital to meet these obligations, the Company may have to seek other strategic alternatives, including ceasing its operations. InJune 2019 , the Company received a de-listing notice from the NASDAQ due to its share price being below$1.00 for 30 consecutive trading days. The notice specified that the Company's share price must trade above$1.00 per share for ten consecutive trading days prior toDecember 2, 2019 in order to prevent its common stock from being de-listed. For the 180 days precedingDecember 2, 2019 the Company's share price remained below$1.00 . The Company requested a second 180-day extension. NASDAQ denied its request and the Company chose to file for an appeal. The Company was granted a hearing date for the end ofJanuary 2020 . Subsequent to the appeal hearing, NASDAQ set a deadline ofApril 17, 2020 for the Company to regain compliance with NASDAQ's continuing listing requirements. In earlyMarch 2020 the COVID-19 global pandemic triggered a significant decline in global capital markets, including NASDAQ. In light of this significant decline, the Company requested NASDAQ to reconsider theApril 17, 2020 deadline. NASDAQ agreed to the Company's request and set a new deadline to regain compliance byJune 1, 2020 . In response to the COVID-19 pandemic and related extraordinary market conditions, NASDAQ provided additional temporary relief ("Relief") from the continued listing bid price and market value of publicly held shares listing requirements throughAugust 17, 2020 . Under the Relief, the company will have additional time to regain compliance with the NASDAQ throughAugust 17, 2020 . InJanuary 2020 , the Company's Board of Directors and shareholders approved a reverse stock split in the range of any whole number between five (5) and ten (10) to one (1). While the Company believes that the reverse stock split will ultimately increase its share price above$1.00 for the required ten consecutive trading days, it can provide no assurances that its shares will trade above$1.00 per share for the required time period. A de-listing from the NASDAQ would be a "Fundamental Change" under the Company's 2023 Series A and Series B Unsecured Convertible Notes which triggers a right by the holders to require the Company repurchase the Convertible Notes. In such an event, the Company would need to seek financing to repurchase the Convertible Notes and there is no guarantee that such financing would be available or on terms acceptable to the Company. If noteholders demanded a repurchase of the notes and the Company could not finance the repurchase, it would be in default under the Indentures governing the Convertible Notes, and in that event the lenders of the Ares Credit agreements would have the right, but not the obligation, to declare all of the outstanding balance under those agreements due and payable as well. Therefore, in the event of the Company's shares are de-listed from the NASDAQ, the Company would likely have to seek some combination of waivers from its lenders and noteholders and seek new capital through the sale of equity or debt securities. If the Company is unable to obtain such waivers or raise new capital to meet these obligations if they become due, it may have to seek other strategic alternatives, including ceasing operations.
The negative financial conditions described above raise substantial doubt about
our ability to continue as a going concern as of
Our cash flows from operating, investing and financing activities, as reflected
in the condensed Consolidated Statements of Cash Flows, are summarized in the
following table:
Three months ended March 31,
2020 2019
Net cash provided by (used in)
Operating Activities $ (2,946) $ (6,051)
Investing Activities $ (880) $ (2,129)
Financing Activities $ (3) $ 2,202
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Operating Activities
Our operating activities used$2.9 million and$6.1 million of cash and cash equivalents in the three months endedMarch 31, 2020 and 2019, respectively, mainly to support our operational activities, which includes a$6.5 million build in inventory to help avoid failure-to-supply fees and normal timing differences in working capital balances.
Investing Activities
Our investing activities used$0.9 million of cash and equivalents during the three months endedMarch 31, 2020 , compared to$2.1 million used during the same period last year, which was used for the continued facility expansion inBuena, NJ . Financing Activities Our financing activities neither provided nor used cash and cash equivalents during the three months endedMarch 31, 2020 , Our financing activities provided$2.2 million of cash and cash equivalents during the three months endedMarch 31, 2019 . The cash provided during the three months endedMarch 31, 2019 consisted of$5.0 million of proceeds from the Revolver offset by$2.7 million used to repurchase a portion of the remaining 2019 Notes.
Our capital resources were comprised of cash and cash equivalents of
In order to continue normal business operations and execution of the Company's growth strategy, the Company may exercise its ability to significantly defer or reduce planned discretionary investments in research and development and capital projects or seek other financing alternatives. Other financing alternatives may include raising additional capital through the sale of its equity, a strategic alliance with a third party or securing debt. If additional acquisition and growth opportunities arise, external financing will be required. OnNovember 12, 2018 , the Company secured a credit agreement for$120.0 million . The facility includes three tranches of funding, an asset based revolving credit facility of$25.0 million dueNovember 2022 ("Revolver"), a term loan of$80.0 million dueFebruary 2023 ("2023 Term Loan"), and a delayed draw term loan of$15.0 million also due inFebruary 2023 ("2023 Delayed Draw Term Loan"). The interest rate under the Revolver is calculated, at the option of the Company, at either the one, two, three or six-month LIBOR plus 3.75% or the base rate plus 2.75%. The interest rate on the 2023 Term Loan and the 2023 Delayed Draw Term Loan bear interest, at the option of the Company, at either the one, two, three or six-month LIBOR plus 8.75% or the base rate plus 7.75%, with a 24-month paid-in-kind interest option available to the Company should it choose to defer cash payments in order to maintain the liquidity needed to continue launching new products, build inventory, and prepare for the FDA prior approval inspection. As ofMarch 31, 2020 , the Company elected the paid-in-kind interest option which increased the principal balance of the 2023 Term Loan by$2.4 million to$90.8 million .
Off Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our shareholders.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance withU.S. generally accepted accounting principles, which require management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Please refer to our Annual Report on Form 10-K for the year endedDecember 31, 2019 for a complete list of all Critical Accounting Policies and Estimates. See also Item 1 for our Condensed Consolidated Financial Statements.
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