SIGA TECHNOLOGIES INC

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 U.S. Strategic National Stockpile ("Strategic Stockpile"), and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of 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* March**31,* 2024, 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* March 31, 2024*, 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 $23.0 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 as of* March 31, 2024*, provide for payments up to approximately $407.1 million. As of* March 31, 2024*, 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 $20.5 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* March 31, 2024*, the Company has cumulatively delivered $337.7 millionof oral TPOXX® to the Strategic Stockpile, of which approximately $15 million was delivered in thefirst quarter of2024; 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* March 31, 2024*; and has been cumulatively reimbursed$8.2 million in connection with post-marketing activities for oral and IV TPOXX®.

Unexercised options specify potential payments up to approx imately $143.7 million in total (if all such options are exercised), of which approxim ately$5.6 million relates to supportive activities that we currently donot expect to be required. The remaining unexercised options specify potential payments 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 only to 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. BARDA* mayalso decidenot* to exercise either remaining option. 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 thethree months ended* March 31, 2024and2023*, the Company recognized revenues of $1.6 million and $1.6 million, respectively, on an over time basis. In contrast, revenue recognized for product delivery, and therefore at a point in time, for thethree months ended* March 31, 2024* was $14.7 million. No revenue was recognized for product delivery, and thereforeno revenue was recognized at a point in time, forthree months ended* March 31, 2023*.

U.S. Department of Defense Procurement Contracts

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 2023,the 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, with delivery fulfilled in thefirst quarter of2024.

International Procurement Contracts

In thefirst quarter of2024, the Company delivered approximately $7 million of oral TPOXX® toseven European countries, substantially completing 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 thefirst* quarter of2024. 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 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.

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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, 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 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 prior to the entry by Meridian 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.

On* March 27, 2024,SIGA and Meridian entered into an amendment (the “Amendment”) to the International Promotion Agreement. The changes to the International Promotion Agreement contemplated by the Amendment are effective as of June 1, 2024.Under the terms of the International Promotion Agreement, as amended (the “Amended International Promotion Agreement”), the Company will assume primary responsibility for the advertising, promotion and sale of oral TPOXX® in all geographic regions. Meridian will retain limited, non-exclusive rights to continue to advertise, promote, offer for sale and sell oral TPOXX® in the European Economic Area, Australia, Japan, Switzerland and the United Kingdom (collectively, the “New Territory”). Meridian will also continue to perform non-promotional activities under specified existing contracts withthird* parties providing for the sale of oral TPOXX®. The Amended International Promotion Agreement provides that Meridian is entitled to receive a reduced promotion fee equal to a high single digit percentage of collected proceeds (whether collected by Meridian or the Company), net of certain expenses, of sales of oral TPOXX® in the New Territory in the field of use specified in the Amended International Promotion Agreement. The Amended International Promotion Agreement has a fixed term that expires on* May 31, 2026,withno* automatic renewal.

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 thethree months ended* March 31, 2024*, the Company recognized approximately $8.0 million of sales in connection with international contracts. During thethree months ended* March 31, 2023*, the Company didnot recognize any revenue related to 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, and 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. The Company didnot recognize any revenue for thethree months ended* March 31, 2024* related to the PEP Label Expansion R&D Contract. For thethree months ended* March 31, 2023*, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $1.4 million 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 includes costs related to the manufacture of TPOXX®. 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 $0.1 million for each of thethree months ended* March 31, 2024and2023*.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

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7. Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities, and income tax payable approximates fair value due to the relatively short maturity of these instruments. Prior to being fully exercised, common stock warrants, which were classified as a liability, were recorded at their fair market value as of each reporting period.

The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:

There wereno transfers between levels of the fair value hierarchy for thethree months ended* March 31, 2024*. As of* March 31, 2024* and* December 31, 2023*, the Company had $96.3 million and $95.1 million, respectively, of cash equivalents classified as Level1 financial instruments. There wereno Level2 or Level3 financial instruments as of* March 31, 2024* or* December 31, 2023*.

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8. 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 loss per share computation:

For thethree months ended* March 31, 2024*, weighted-average diluted shares include the dilutive effect of in-the-money options and stock-settled RSUs. The dilutive effect of 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 thethree months ended* March 31, 2024* 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 thethree months ended* March 31, 2024*, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share were 59,312.

For thethree months ended* March 31, 2023*, the Company incurred a loss and as a result, the equity instruments listed below were excluded from the calculation of diluted loss per share as the effect of the exercise, conversion or vesting of such instruments would have been anti-dilutive. The weighted average number of equity instruments excluded consists of:

(1) For thethree months ended* March 31, 2023*, the total includes a weighted average of 30,702 units which were settled in cash.

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9. Commitments and Contingencies

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. In connection with many CMO purchase orders, reimbursement by CMOs for inventory losses is limited. Commitments under the purchase orders donot exceed our planned commercial and research and development needs. As of* March 31, 2024*, the Company had approximately $13.6 million of purchase commitments associated with manufacturing obligations.

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10. Related Party Transactions

Real Estate Leases

On* May 26, 2017,the 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'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 pays 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 each of thethree months ended* March 31, 2024and2023*, the Company paid $0.1 million, respectively, for rent and ancillary services associated with this lease. The Company hadno outstanding payables or accrued expenses related to this lease as of* March 31, 2024*.

Board of Directors and Outside Consultant

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 thethree* months ended* March 31, 2024*, the Company incurred $60,000 under this agreement. The Company hadno outstanding payables or accrued expenses related to the services performed by this vendor as of* March 31, 2024*.

11. Revenues by Geographic Region

Revenues by geographic region were as follows:

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12. Income Taxes

The Company’s provision for income taxes consists of federal and state taxes, as applicable, in amounts necessary to align the Company’s year-to-date tax provision with the effective rate that it expects to achieve for the full year. Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

For thethree months ended* March 31, 2024and2023*, we recorded pre-tax income/(losses) of $13.2 million and ($1.2) million, respectively, and a corresponding income tax (provision)/benefit of ($2.9) million and $0.3 million, respectively.

The effective tax rate for thethree months ended* March 31, 2024* was 22.2% compared to 24.6% for thethree months ended* March 31, 2023*. The effective tax rate for thethree months ended* March 31, 2024* differs from the U.S. statutory rate of 21% primarily as a result of state taxes, and various non-deductible expenses, including executive compensation under Internal Revenue Code Section162(m).

The Inflation Reduction Act of2022 (the “Act”) was signed into U.S. law on* August 16, 2022.The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S. corporations with average adjusted annual financial statement income over athree*-year period in excess of*$1* billion. The Company doesnot expect the Act to materially impact its consolidated financial statements.

Effective beginning in fiscal2022, the U.S. Tax Cuts and Job Act of2017 ("TCJA") requires the Company to deduct U.S. and international research and development expenditures ("R&D") for tax purposes over5 to15 years, instead of in the current fiscal year. The Company concurrently records a deferred tax benefit for the future amortization of the research and development for tax purposes. The requirement to expense R&D as incurred is unchanged for U.S. GAAP purposes and the impact to pre-tax R&D expense isnot affected by this provision.

13. Equity

The tables below present changes in stockholders' equity for thethree months ended* March 31, 2024* and2023.

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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 on 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 thethree months ended* March 31, 2024*, the Company didnot repurchase any shares. During thethree months ended* March 31, 2023*, the Company repurchased approximately 1.1 million shares of common stock under the Repurchase Authorization for approximately $7.5 million. In addition, during thethree months ended* March 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* March 12, 2024,the Board of Directors declared a special dividend of $0.60 per share on the common stock of the Company, which resulted in an overall dividend payment of approximately $43 million. The special dividend was paid on April 11, 2024to shareholders of record at the close of business on March 26, 2024.*

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14. Leases

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, 2019after 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 quarter of2021.

On* May 26, 2017,the Company and M&F entered into the New HQ Lease, aten-year office lease agreement, pursuant to which the Company agreed to lease 3,200 square feet in 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 $0.1 million for each of thethree months ended* March 31, 2024and2023*, respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.2 million for each of thethree months ended* March 31, 2024and2023*. As of* March 31, 2024*, the weighted-average remaining lease term of the Company’s operating leases was 2.70 years while the weighted-average discount rate was 4.53%.

Future cash flows under operating leases as of* March 31, 2024* are expected to be as follows:

As of* March 31, 2024*, approximately $0.8 million of the lease liability is included in Other liabilities on the condensed consolidated balance sheet with the current portion included in accrued expenses.