SIGA TECHNOLOGIES INC

1. Organization and Basis of Presentation

Description of Business

SIGA Technologies, Inc. (“SIGA” or the “Company”) is a commercial-stage pharmaceutical company. The Company sells its lead product, TPOXX® (“oral TPOXX®,” also known as "tecovirimat" in certain international markets), to the U.S. government and international governments (including government affiliated entities). Additionally, the Company sells the intravenous formulation of TPOXX® ("IV TPOXX®") to the U.S. government.

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. The Company has been delivering oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile") since2013.*

In connection with IV TPOXX®, SIGA announced on* May 19, 2022*that the FDA approved this formulation for the treatment of smallpox.

In addition to being approved by the FDA, oral TPOXX® (tecovirimat) has regulatory approval with the European Medicines Agency ("EMA"), Health Canada and the Medicines and Healthcare Products Regulatory Agency ("MHRA") of the United Kingdom. The EMA and MHRA approved label indication covers the treatment of smallpox, monkeypox ("mpox"), cowpox, and vaccinia complications following vaccination against smallpox. The Health Canada approved label indication covers the treatment of smallpox.

With respect to the regulatory approvals by the EMA, MHRA and Health Canada, oral tecovirimat represents the same formulation that was approved by the FDA in* July 2018*under the brand name TPOXX®.

2. Summary of Significant Accounting Policies

Use of Estimates

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. The most significant estimates include the variables used in the calculation of reported amounts of revenue recognized over time, and the valuation of deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from these estimates.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of SIGA Technologies, Inc. and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The consolidated financial statements and related disclosures are presented in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and reflect the consolidated financial position, results of operations and cash flows for all periods presented.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year's presentation.

Cash Equivalents

The Company considers all highly liquid investments with original maturities ofthree months or less to be cash equivalents.

Concentration of Credit Risk

The Company has cash in bank accounts that exceeds the Federal Deposit Insurance Corporation insured limits. The Company hasnot experienced any losses on its cash accounts andno allowance has been provided for potential credit losses because management believes the potential for losses is remote.

Collection of all receivables from international government sales is coordinated through the International Promotion Agreement with Meridian (see Note3), under which Meridian invoices and collects payments from international customers and remits such collections, less Meridian's fees, to the Company under a quarterly process specified in the International Promotion Agreement.

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Accounts Receivable

Accounts receivable are recorded net of provisions for doubtful accounts. At* December 31, 2023and2022*,53% and 16%, respectively, of accounts receivable represent receivables from the U.S. Government. At* December 31, 2023*,47% of accounts receivable represent receivables from international sales, which include sales tofour European governments anda government in the Asia Pacific region. Collection of receivables from international government sales is coordinated through the International Promotion Agreement with Meridian (see Note3), under which Meridian invoices and collects payments from international customers and remits such collections, less Meridian's fees, to the Company under a quarterly process specified in the International Promotion Agreement. An allowance for doubtful accounts is based on specific analysis of the receivables. At* December 31, 2023and2022*, the Company hadno allowance for doubtful accounts.

Inventory

Inventory is stated at the lower of cost or net realizable value. The cost is determined using thefirst-in,first-out (FIFO) method. The Company capitalizes inventory costs associated with the Company’s products when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment periodically to identify inventory that* mayexpire prior to expected sale or has a cost basis in excess of its net realizable value. If certain batches or units of product donot* meet quality specifications or become obsolete due to expiration, the Company records a charge to write down such unmarketable inventory to its net realizable value.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization are provided on a straight-line method over the estimated useful lives of the various asset classes. The estimated useful lives are as follows: five years for laboratory equipment; three years for computer equipment; andseven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the lease term. Maintenance, repairs and minor replacements are charged to expense as incurred.

Warrant Liability

The Company accounted for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Fair value was estimated using model-derived valuations. Any changes in the fair value of the derivative instruments were reported in earnings or loss as long as the derivative contracts were classified as assets or liabilities. During2022, the warrant was fully exercised and therefore there wereno remaining underlying shares as of* December 31, 2022.*

The following table presents changes in the liability-classified warrant:

Revenue Recognition

The Company accounts for revenue in accordance with ASC Topic606, Revenue from Contracts with Customers (“ASC606”).

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 ASC606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. As of* December 31, 2023*, the Company's active performance obligations, for the contracts outlined in Note3, consist of the following: five performance obligations relate to research and development services; andfive relate to manufacture and delivery of product.

Contract modifications* mayoccur 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 arenot* 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. A portion of the Company’s revenue is derived from long-term contracts that span multiple years. 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 ofthird-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 includethird-party services performed, direct labor hours, and material consumed. The Company accounts for shipping and handling activities as fulfillment costs rather than as an additional promised service.

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Contract Estimates. Accounting for long-term contracts and grants involves the use of various techniques to estimate total contract revenue and costs.

Contract estimates are based on various assumptions to project the outcome of future events that often span multiple years. These assumptions include: labor productivity; the complexity of the work to be performed; external factors such as customer behavior and potential regulatory outcomes; and the performance of subcontractors, among other variables.

The nature of the work required to be performed on many of the Company’s performance obligations and the estimation of total revenue and cost at completion* maybe complex, subject to many variables and require significant judgment. The consideration associated with research and development services is variable as the total amount of services to be performed hasnot* been finalized. The Company estimates variable consideration as the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized willnot occur and when any uncertainty associated with variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our historical and anticipated performance, external factors, trends and all other information (historical, current and forecasted) that is reasonably available to us.

A significant change inone or more of these estimates could affect the profitability of the Company’s contracts. As such, the Company reviews and updates its contract-related estimates regularly. The Company recognizes adjustments in estimated revenues, research and development expenses and cost of sales and supportive services under the cumulative catch-up method. Under this method, the impact of the adjustment on revenues, research and development expenses and cost of sales and supportive services recorded to date on a contract is recognized in the period the adjustment is identified.

Contract Balances. The timing of revenue recognition, billings and cash collections* mayresult in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the 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 December 31, 2023*, the accounts receivable balance in the balance sheet includes approximately $10.3 million of unbilled receivables. This amount primarily relates to international sales that are billed under the terms specified in the International Promotion Agreement with Meridian. Under typical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such payments occur within a short period of time from billing. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the year ended* December 31, 2023*, the Company recognized revenue of $0.1 million that was included in deferred revenue at the beginning of the period.

Remaining Performance Obligations. Remaining performance obligations represent the transaction price for which work hasnot been performed and excludes unexercised contract options. As of* December 31, 2023*, the aggregate amount of transaction price allocated to remaining performance obligations was $92.1 million. The Company expects to recognize this amount as revenue within the nextthree years as the specific timing for satisfying the performance obligations is subjective and is often outside the Company’s control.

Leases

The Company accounts for leases in accordance with ASC842, Leases (“ASC842”).

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The Company determines if an arrangement is a lease at inception. Leases with an initial term less thanone year arenot recorded on the balance sheet and the lease costs are recorded as an expense on a straight-line basis over the lease term. Operating leases with terms greater thanone year result in a lease liability recorded in other liabilities with a corresponding right-of-use ("ROU") asset recorded in property, plant and equipment.

Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU assets are recognized based on the corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and unamortized lease incentives. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease. Lease terms* may*include options to extend or terminate the lease which are incorporated into the Company's measurement when it is reasonably certain that the Company will exercise the option.

Research and Development

Research and development expenses include costs directly and indirectly attributable to the conduct of research and development programs, and performance pursuant to certain customer contracts, including employee related costs, materials, supplies, depreciation and maintenance of equipment, the cost of services provided by outside contractors, including services related to the Company’s clinical trials and facility costs, such as rent, utilities, and general support services. All costs associated with research and development are expensed as incurred. Costs related to the acquisition of technology rights, for which development work is still in process, and that haveno alternative future uses, are expensed as incurred.

Goodwill

The Company evaluates goodwill for impairment at least annually or as circumstances warrant. The impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. The Company operates asone business andone reporting unit. Therefore, the goodwill impairment analysis is performed on the basis of the Company as a whole, using the market capitalization of the Company as an estimate of its fair value.

Share-based Compensation

Stock-based compensation expense for all share-based payment awards made to employees and directors is determined on the grant date; for option awards, fair value was estimated using the Black-Scholes model. These compensation costs are recognized net of an estimated forfeiture rate over the requisite service periods of the awards. Forfeitures are estimated on the date of the respective grant and revised if actual or expected forfeiture activity differs from original estimates.

The fair value of cash-settled restricted stock unit ("RSU") awards is determined by the value of our common stock and is recognized based on the portion of the requisite service period satisfied as of each valuation date. The fair valuation of the cash-settled awards changes based on changes in our common stock price. The portion of cash-settled RSUs that is recognized based on service period is reflected in accrued expenses and other current liabilities in our consolidated balance sheet. Increases (or decreases) in accrued expenses result in adjustments to earnings for the associated valuation updates.

Income Taxes

The Company recognizes income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities at enacted tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is established if it is more likely thannot that some or the entire deferred tax asset willnot be realized. The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability which are inherently uncertain. The Company* mayrecognize tax benefits from an uncertain tax position only if it is more likely thannot* that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater thanfifty percent likelihood of being realized upon ultimate settlement. The Company re-evaluates uncertain tax positions and considers factors, including, butnot limited to, changes in tax law, the measurement of tax positions taken or expected to be taken on tax returns, and changes in circumstances related to a tax position. The Company recognizes interest and penalties related to income tax matters in income tax expense.

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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).

Earnings (Loss) per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, assuming potentially dilutive common shares from option exercises, RSUs, warrants and other incentives had been issued and any proceeds received in respect thereof were used to repurchase common stock at the average market price during the period. The assumed proceeds used to repurchase common stock is the sum of the amount to be paid to the Company upon exercise of options and warrants and the amount of compensation cost attributed to future servicesnot yet recognized.

Fair Value of Financial Instruments

The carrying value of cash and 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.

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:

There wereno transfers between levels of the fair value hierarchy during2023 or2022. As of* December 31, 2023* and* December 31, 2022*, the Company had approximately $95.1 million and less than $0.1 million, respectively, of cash and cash equivalents classified as Level1 financial instruments. There wereno Level2 financial instruments as of* December 31, 2023*. As of the* December 31, 2022*, the Company had approximately $40.5 million of cash equivalents classified as Level2 financial instruments. There wereno Level3 financial instruments as of* December 31, 2023* or* December 31, 2022*.

For the years ended* December 31, 2023,*2022 and2021, interest income of $4.2 million, $1.0 million and $0.1 million, respectively, was included in Other income, net on the Consolidated Statements of Operations and Comprehensive Income.

Loss Contingencies

The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to the extent that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. Alternatively, whenno amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued. The Company expenses legal costs associated with loss contingencies as incurred. We record anticipated recoveries under existing insurance contracts when recovery is assured.

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Segment Information

The Company is managed and operated asone business. The entire business is managed by a single management team that reports to the chief executive officer, who is the Chief Operating Decision Maker. The Company doesnot operate separate lines of business or separate business entities with respect to any of its product candidates. Accordingly, the Company doesnot prepare discrete financial information with respect to separate product areas or by location and has onlyone reportable segment.

Recent Accounting Pronouncements

In* November 2023,the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU)No. 2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (CODM). The ASU doesnot change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024,with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We expect this ASU to only impact our disclosures withno* impacts to our results of operations, cash flows and financial condition.

In* December 2023,the FASB issued ASU2023*-09, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024,** maybe applied prospectively or retrospectively, and allows for early adoption. These requirements arenot* expected to have an impact on our financial statements, but will impact our income tax disclosures.

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 1,488,000 courses of oral TPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of IV TPOXX®. In October 2023,the contract was modified so that a course of IV TPOXX® was redefined within the contract from being 14 vials to being 28 vials; as such, the19C* BARDA Contract currently specifies 106,000 courses of IV TPOXX® (for the same payment amount as originally specified). In addition to the delivery of TPOXX® courses, the contract includes funding from BARDA for a range of activities, including: advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and procurement activities. As of* December 31, 2023*, 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, approximately $407.1 million of payments are related to exercised options, and up to approximately $143.7 million of payments are currently specified as unexercised options. BARDA* maychoose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up toten years from the date of entry into the19C* BARDA Contract and such options could be exercised at any time during the contract term.

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 10,000 courses (as currently defined within the contract as being28 vials) 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 reimbursed activities; and payments of approximately $0.6 million for supportive procurement activities. As of* December 31, 2023*, the Company had received $11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS, $4.3 million for the delivery of IV FDP to the Strategic Stockpile and $22.1 million for other base period activities. IV BDS has been used for the manufacture of courses of IV FDP. The $3.2 million received for the completed manufacture of IV BDS had been recorded as deferred revenue as of* December 31, 2021,but with the delivery of IV FDP to the Strategic Stockpile during2022,* $2.9 million was recognized as revenue. The remaining $0.3 million of deferred revenue will be recognized as IV FDP containing such IV BDS is delivered to and accepted by the Strategic Stockpile.

The options that have been exercised to date provide for payments up to approximately $407.1 million. There are exercised options for the following activities: payments up to $337.7 million for the manufacture and delivery of up to 1.1 million courses of oral TPOXX®; payments up to $51.2 million for the manufacture of courses of IV FDP, of which $20.4 million of payments relate to 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 $14.6 million for funding of post-marketing activities for oral TPOXX®. As of* December 31, 2023*, the Company has cumulatively delivered $323.0 million of oral TPOXX® to the Strategic Stockpile, of which $97.9 million was delivered in thefourth quarter of2023; has cumulatively received $20.5 million for the completed manufacture of IV BDS, of which $20.5 million has been recorded as deferred revenue as of* December 31, 2023*; and has been cumulatively reimbursed $7.9 million in connection with post-marketing activities for oral and IV TPOXX®. In thefirst two months of2024 ended* February**29,* 2024, approximately $15 million of oral TPOXX® was delivered to the Strategic Stockpile.

Unexercised options specify potential payments up to approximately $143.7 million in total (if all such options are exercised), of which approximately $5.6 million relates to supportive activities that we currently donot expect to be required. There are options for the following activities: payments of up to $112.5 million for the delivery of oral TPOXX® to the Strategic Stockpile; and payments of up to $25.6 million for the manufacture of courses of IV FDP, of which up to $10.2 million of payments would be paid upon the manufacture of IV BDS to be used in the manufacture of IV FDP.

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The options related to IV TPOXX® are divided intotwo 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* maychoose to exercise any, all, ornone* of these options in its sole discretion. The19C BARDA Contract includes: three separate IV BDS Options, each providing for the bulk drug substance equivalent of 32,000 courses (as currently defined within the contract) of IV TPOXX®; andthree separate IV FDP Options, each providing for 32,000 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 butnot the IV FDP Option). To date, BARDA has exercisedtwo of thethree IV BDS options andtwo of thethree IV FDP options. If BARDA decides to only exercise the remaining IV BDS Option, then the Company would receive payments up to $10.2 million; alternatively, if BARDA decides to exercise the remaining IV BDS Option and IV FDP Option, then the Company would receive payments up to $25.6 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 same32,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.

Revenues in connection with the19C 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 the19C BARDA Contract are recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the years ended* December 31, 2023and2022*, the Company recognized revenues of $3.0 million and $6.2 million, respectively, on an over time basis. In contrast, revenue recognized for product delivery and therefore at a point in time for the years ended* December 31, 2023and2022*, was $97.9 million and $7.2 million, respectively.

On* May 12, 2022,the Company announced a contract with the U.S. Department of Defense ("DoD") for the procurement of oral TPOXX® ("DoD Contract#1"). The DoD Contract#1* included a firm commitment for the DoD to procure approximately $3.6 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD, for the procurement of an additional approximately $3.8 million of oral TPOXX®. In thesecond quarter of2022, the Company delivered oral TPOXX® to the DoD and recognized revenue of $3.6 million, fulfilling the firm commitment in DoD Contract*#1.* In thethird quarter of2022, the DoD exercised the option for $3.8 million of oral TPOXX® and the Company satisfied its obligation by delivering product in* September 2022*and recognized the related revenue.

On* September 28, 2022,the Company and the DoD signed a new procurement contract ("DoD Contract#2"). The DoD Contract#2* included a firm commitment for the DoD to procure approximately $5.1 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD for the procurement of an additional approximately $5.5 million of oral TPOXX®.

In* March 2023,the Company fulfilled the firm commitment by delivering $5.1 million of oral TPOXX® to the DoD, and recognized the related revenue. Additionally, in March 2023the DoD exercised the $5.5 million option in DoD Contract#2* for the procurement of oral TPOXX® and the Company delivered these courses to the DoD in thefourth quarter of2023 and recognized the related revenue.

In* February 2024,DoD Contract#2* was amended and approximately $1 million of oral TPOXX® was ordered by the DoD.

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International Procurement Contracts

In2023, the Company has delivered, and received acceptance for, approximately $21.3 million of oral TPOXX® tofive European countries,one Middle Eastern country, andone Asia Pacific country. In thefirst two months of2024 ending* February**29,* 2024, the Company delivered an additional approximately $7 million of oral TPOXX® tosix countries in Europe, completing greater than 95% of deliveries under the $18 million of firm commitment orders from13 countries under the European Commission’s DG HERA (Health Emergency Preparedness and Response Authority) joint procurement mechanism, which was announced by the Company in* October 2022.Additionally, $0.7 million of oral TPOXX® was delivered to the Canada Department of National Defence ("CDND") in February 2024.*These deliveries were made in connection with orders and contracts under the International Promotion Agreement (defined and discussed below). Through the International Promotion Agreement, Meridian Medical Technologies, Inc. ("Meridian") is the counterparty to international contracts under which orders are placed for the purchase of oral TPOXX®.

In addition to the above-mentioned orders and deliveries, the Company has a contract with the CDND under which the CDND has an option until* December 31, 2025,exercisable at its sole discretion, for the purchase of up to an additional $6.7 million of oral TPOXX®. As an international contract, this contract is also administered under the International Promotion Agreement. The contract with the CDND (the "Canadian Military Contract"), issued in Aprilof2020* and subsequently amended, is option-based and initially specified that the CDND would purchase up to $14 million of oral TPOXX® if all options were exercised.

In2022, the Company received firm commitment orders from13 international customers (including Canada) for the delivery of approximately $77 million of oral TPOXX®, of which approximately $39 million was for Canada and approximately $38 million was for jurisdictions in Europe, Asia-Pacific, and the Middle East. With respect to the $77 million of firm commitment orders that were received in2022, approximately $71 million of oral TPOXX® was delivered and recorded as revenue in2022, and the remainder was delivered and recorded as revenue in2023.

Under the International Promotion Agreement, Meridian is the counterparty in connection with international contracts for oral TPOXX® and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder.

Under the terms of the International Promotion Agreement, as amended, which has an initial term that expires on* May 31, 2024,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 agreednot* 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.

Sales to international customers pursuant to the International Promotion Agreement are invoiced and collected by Meridian, and such collections are remitted, less Meridian's fees, to the Company under a quarterly process specified in 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 calendar years in which customer collected 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 calendar years in which such net collected amounts exceed the specified threshold. We exceeded the specified threshold in2022 and therefore recorded the higher specified percentage for all International Promotion Agreement sales in2022.

Revenue in connection with international procurement contracts for the delivery of product are recognized at a point in time on a gross basis, as the Company acts as the principal in the transaction. During the year ended* December 31, 2023*, the Company recognized $21.3 million of sales in connection with international contracts. During the year ended* December 31, 2022*, the Company recognized $71.0 million of sales in connection with international contracts.

Research Agreements and Grants

In* July 2019,the Company was awarded a multi-year research contract ultimately valued at approximately $27 million from the DoD to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). As of December 31, 2023*, the Company invoiced the full amount of available funding. As of* December 31, 2023*, there isno remaining revenue to be recognized in the future under the PEP Label Expansion R&D Contract. Revenue from the performance obligation under the PEP Label Expansion R&D Contract was recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the years ended* December 31, 2023and2022*, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $6.4 million and $17.9 million, respectively, on an over time basis.

Contracts and grants include, among other things, options that* mayor maynot* 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* maynot* be eligible to receive all available funds.

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4. Inventory

Inventory consisted of the following:

5. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

Depreciation and amortization expense on property, plant, and equipment was $0.5 million for each of the years ended* December 31, 2023*,2022, and2021.

6. Accrued Expenses

Accrued expenses and other current liabilities consisted of the following:

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7. Per Share Data

The Company computes, presents and discloses earnings per share in accordance with the authoritative guidance which specifies the computation, presentation and disclosure requirements for earnings per share of entities with publicly held common stock or potential common stock. The objective of basic EPS is to measure the performance of an entity over the reporting period by dividing income (loss) by the weighted average shares outstanding. The objective of diluted EPS is consistent with that of basic EPS, except that it also gives effect to all potentially dilutive common shares outstanding during the period.

The following is a reconciliation of the basic and diluted earnings (loss) per share computation:

For the years ended* December 31, 2023,** December 31, 2022and December 31, 2021,weighted-average diluted shares include the dilutive effect of in-the-money options and stock-settled RSUs. For the years ended December 31, 2022and December 31, 2021,the diluted earnings per share calculation also reflects the effect of the exercise or assumed exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. The dilutive effect of warrants, stock-settled RSUs and 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 hasnot* 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. Cash-settled RSUs were presumed to be cash-settled and therefore excluded from the diluted earnings per share calculations for the years ended* December 31, 2023,2022 and2021 because the net effect of their inclusion, including the elimination of the impact in the operating results of the change in fair value of these RSUs, would have been anti-dilutive. For the years ended December 31, 2023,*2022 and2021, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share was 32,660,17,388, and 29,873, respectively.

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8. Stockholders’ Equity

On* December 31, 2023*, the Company’s authorized share capital consisted of 620,000,000 shares, of which 600,000,000 are designated common shares and 20,000,000 are designated preferred shares. The Company’s Board of Directors is authorized to issue preferred shares in series with rights, privileges and qualifications of each series determined by the Board. As of* December 31, 2023and2022*, no preferred shares were outstanding or issued.

On* August 2, 2021,the Company's Board of Directors authorized a share repurchase program ("Repurchase Authorization") under which the Company could repurchase up to $50 million of the Company's common stock through December 31, 2023.The Company started repurchasing shares under this program in thefourth* quarter of2021. Repurchases under the Repurchase Authorization were made from time to time at the Company's discretion. The timing and actual number of shares repurchased depended upon a variety of factors, including: timing of procurement orders under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; alternative capital management uses of cash; and other corporate liquidity requirements and priorities. During the year ended* December 31, 2023*, the Company repurchased 1.7 million shares of common stock under the Repurchase Authorization for approximately $11.0 million. In addition, during the year ended* December 31, 2023*, the Company recorded approximately $0.1 million of excise tax associated with the repurchase of common stock.

On* December 31, 2023,*the Repurchase Authorization expired.

On* May 4, 2023*, the Board of Directors declared a special dividend of $0.45 per share on the common stock of the Company, which resulted in an overall dividend payment of approximately $32 million. The special dividend was paid on* June 1, 2023* to shareholders of record at the close of business on* May 16, 2023*.

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9. Stock Compensation Plans

The Company’s2010 Stock Incentive Plan (the*“2010* Plan”) was initially adopted in* May 2010.The2010* Plan provided for the issuance of stock options, restricted stock and unrestricted stock with respect to an aggregate of 2,000,000 shares of the Company’s common stock to employees, consultants and outside directors of the Company. On* May 17, 2011,the2010* Plan was amended to provide for the issuance of RSUs and on* February 2, 2012,the2010* Plan was amended to provide for the issuance of stock-settled stock appreciation rights ("SSARs"). Effective* April 25, 2012and May 23, 2017,the2010* Plan was amended to increase the maximum number of shares of common stock available for issuance to an aggregate of 4,500,000 shares and 8,500,000 shares, respectively. The vesting period for awards granted under the2010 Plan is determined by the Compensation Committee of the Board of Directors. The Compensation Committee also determines the expiration date of each equity award; however, stock options* may**not* be exercisable more thanten years after the date of grant as the maximum term of equity awards issued under the2010 Plan isten years.

For the years ended* December 31, 2023,*2022 and2021, the Company recorded stock-based compensation expense, including stock options and RSUs, of approximately $2.1 million, $1.8 million and $1.3 million, respectively.

Stock Options

Stock option awards provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee, at the time of grant, and must have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant.

The fair value of options granted is estimated at the date of grant. Expected volatility has been estimated using the historical volatility of the Company's common stock using historical periods equivalent to the options’ expected lives. The expected dividend yield assumption reflects that the Company doesnot have a recurring dividend program. The risk-free interest rate assumption is based upon observed interest rates for securities with maturities approximating the options’ expected lives. The expected life was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms of the award.

A summary of the Company’s stock option activity is as follows:

(1) Balances as of* January 1, 2023differ from those as of December 31, 2022presented in the Company's2022* Form10-K due to the special dividend paid during2023. In connection with the dividend, the number of options and the weighted average exercise price were adjusted pursuant to the terms of the Company's2010 Plan.

As of* December 31, 2023*, there isno remaining unrecognized stock-based compensation cost related to stock options expected to be recognized. The total fair value of stock options which vested during the years ended* December 31, 2023and2022* was approximately $123,000 and $375,000, respectively.

The stock options exercised during the year ended* December 31, 2023had an intrinsic value of less than $0.1 million. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option. There wereno stock options exercised during the years ended December 31, 2022and December 31, 2021.*

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Restricted Stock Units

RSUs awarded to employees vest on schedules of betweenone year andthree years, and RSUs awarded to directors of the Company vest over aone-year period. A summary of the Company’s RSU activity is as follows:

(1)includes 30,702 awards which were settled in cash.

(2)includes 59,309 awards which were expected to be settled in cash.

As of* December 31, 2023*, $1.5 million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over the weighted-average remaining requisite service period of 0.8 years. The weighted average fair value at the date of grant for restricted stock awards granted during the years ended* December 31, 2023*,2022 and2021 was $6.14, $9.40 and $6.95 per share, respectively. Based on the grant date, the total fair value of restricted stock and restricted stock units vested and released during the years ended* December 31, 2023,*2022 and2021 was approximately $1.9 million, $1.2 million and $0.9 million, respectively.

10. Income Taxes

The Company's provision (benefit) for income taxes comprises the following:

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The Company’s deferred tax assets and liabilities comprise the following:

The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability which is inherently uncertain. The Company assesses all available positive and negative evidence to determine if its existing deferred tax assets are realizable on a more-likely-than-not basis. In making such assessment, the Company considered the reversal of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on the Company's generation of sufficient taxable income within the available net operating loss carryback and/or carryforward periods to utilize the deductible temporary differences. As of* December 31, 2023*, the Company maintains a full valuation on its state and local net operating losses which the Company determined werenot realizable on a more-likely-than-not basis. The Company's valuation allowance decreased by approximately $42,000 during the year ended* December 31, 2023*.

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The benefit for income taxes differs from the expected amount calculated by applying the Company's statutory rate to the income or loss before benefit for income taxes as follows:

For the years ended* December 31, 2023and2022*, the Company’s effective tax rate differs from the statutory rate of 21% primarily as a result of certain permanent differences including non-deductible executive compensation under IRC Section162(m), shortfalls from stock-based compensation, and state and local taxes. For the year ended* December 31, 2021*, the Company's effective tax rate differs from the statutory rate of 21% primarily as a result of non-deductible executive compensation under IRC Section162(m), a non-taxable adjustment for the fair market value of the Warrant, and state and local taxes.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:

Included in the balance of unrecognized tax benefits as of* December 31, 2023*, are potential benefits of $5.1 million that, if recognized, would affect the effective tax rate. The total amount accrued for interest and penalties as of* December 31, 2023* and* December 31, 2022*, was $214,000 and $72,000, respectively. For the years ended* December 31, 2023* and* December 31, 2022*, the Company recorded an income tax expense of $142,000 and an income tax benefit of $23,000, respectively, related to the accrual of interest and penalties. There areno uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized benefits will significantly increase or decrease withintwelve months from* December 31, 2023*.

The Company files federal income tax returns and income tax returns in various state and local tax jurisdictions. The federal tax years open to examination are 2020 to2023. The Company's state and local tax years that are open to tax examination are generally 2019 to2023.

11. Revenues by Geographic Region

Revenues by geographic region were as follows:

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12. Commitments and Contingencies

Operating lease commitments

The Company leases its Corvallis, Oregon, facilities and office space under an operating lease which was signed on* November 3, 2017and commenced on January 1, 2018.The initial term of this lease was to expire on December 31, 2019,after which the Company hadtwo successive renewal options;one fortwo years and the other forthree years. In thesecond* quarter of2019, the Company exercised thefirst renewal option, which extended the lease expiration date to* December 31, 2021.In thesecond* quarter of2021, the Company exercised thesecond renewal option, which extended the lease expiration date to* December 31, 2024.In connection with the exercise of thesecond* renewal option, the Company recorded an increase to operating lease right-of-use assets and operating lease liabilities of approximately $0.7 million in thesecond quarter2021. The Company had a lease for the same location prior to this lease. On* May 26, 2017the Company and MacAndrews & Forbes Incorporated ("M&F") entered into aten-year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at31* East62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company hasno leases that qualify as finance leases.

Operating lease costs totaled $0.6 million for each of the years ended* December 31, 2023and2022*. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.7 million and $0.6 million for the years ended* December 31, 2023and2022*, respectively. As of* December 31, 2023*, the weighted-average remaining lease term of the Company’s operating leases was 2.87 years while the weighted-average discount rate was 4.53%.

The following is a maturity analysis of the Company's lease liabilities as of* December 31, 2023*:

As of* December 31, 2023*, approximately $0.9 million of the lease liability is included in Other liabilities on the consolidated balance sheet with the current portion included in accrued expenses.

Legal Proceedings

From time to time, we* maybe 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, willnot* 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 withthird party organizations to provide contract manufacturing services and research and development services. Under these agreements, the Company issues purchase orders which obligate the Company to pay a specified price when agreed-upon services are performed. Commitments under the purchase orders donot exceed our planned commercial and research and development needs. As of* December 31, 2023*, the Company has approximately $14.8 million of purchase commitments associated with manufacturing obligations.

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13. Related Party Transactions

Board of Directors and Outside Counsel

A former member of the Company’s Board of Directors who didnot stand for re-election at the Company's2021 annual meeting of stockholders is a partner at a law firm previously used by the Company. The Company didnot incur any expenses related to services provided by the outside counsel during the year ended* December 31, 2023* or* December 31, 2022*. During the year ended* December 31, 2021*, the Company incurred expenses of approximately $0.1 million related to services provided by the outside counsel. The Company hadno outstanding payables or accrued expenses related to services performed by the outside counsel as of* December 31, 2023and2022*.

Effective* June 13, 2023,a director was elected to the Company's Board of Directors who provides consulting services to the Company. Under a consulting agreement, the director receives a monthly fee of $20,000. During the year ended December 31, 2023*, the Company incurred $240,000, respectively, under this agreement. The Company hadno outstanding payables or accrued expenses related to the services performed by this vendor as of* December 31, 2023*.

Real Estate Leases

On* May 26, 2017,the Company and M&F Incorporated entered into the New HQ Lease, pursuant to which the Company agreed to lease 3,200 square feet at31* East62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company's rental obligations consisted of a fixed rent of $25,333 per month in thefirst sixty-three months of the term, subject to a rent abatement for thefirst six months of the term. From thefirst day of thesixty-fourth month of the term through the expiration or earlier termination of the lease, the Company's rental obligations consist of a fixed rent of $29,333 per month. In addition to the fixed rent, the Company will pay a facility fee in consideration of the landlord making available certain ancillary services, commencing on thefirst anniversary of entry into the lease. The facility fee was $3,333 per month for thesecond year of the term and increases byfive percent each year thereafter, to $4,925 per month in the final year of the term. During the year ended* December 31, 2023*, the Company paid $0.4 million for rent and ancillary services associated with this lease. The Company hadno outstanding payables or accrued expenses related to this lease as of* December 31, 2023and2022*.

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14. Subsequent Event

On* March 12,2024, the Board of Directors declared a special dividend of $0.60 per share on the common stock of the Company. The special dividend is payable on April 11,2024 to shareholders of record at the close of business on March 26,*2024.