siga20220930

siga20220930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the Quarterly Period Ended September 30, 2022
	Or
☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ________ to ___________

Commission File No. 0-23047

SIGA Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-3864870
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

31 East 62nd Street	10065
New York, NY	(zip code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (212) 672-9100

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
common stock, $.0001 par value	SIGA	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒.

As of October 21, 2022, the registrant had outstanding 73,024,147 shares of common stock, par value $.0001, per share.

Table of Contents

SIGA TECHNOLOGIES, INC.
FORM 10-Q

Table of Contents

		Page No.
PART I-FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22

PART II-OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
SIGNATURES		25

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PART I - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements

SIGA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	*September 30, 2022*			*December 31, 2021*
ASSETS
Current assets
Cash and cash equivalents	$	109,749,555		$	103,138,819
Accounts receivable		54,925,558			83,650,450
Inventory		31,261,346			19,510,379
Prepaid expenses and other current assets		964,065			2,453,444
Total current assets		196,900,524			208,753,092

Property, plant and equipment, net		1,979,517			2,365,957
Deferred income taxes, net		4,183,886			2,422,607
Goodwill		898,334			898,334
Other assets		261,814			286,585
Total assets	$	204,224,075		$	214,726,575
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	2,445,390		$	2,028,004
Accrued expenses and other current liabilities		15,887,359			9,252,812
Income tax payable		9,123,153			19,207,042
Total current liabilities		27,455,902			30,487,858

Warrant liability		—			6,521,441
Other liabilities		3,630,046			3,402,869
Total liabilities		31,085,948			40,412,168
Commitments and contingencies
Stockholders’ equity
Common stock ($.0001 par value, 600,000,000 shares authorized, 73,024,147 and 73,543,602, issued and outstanding at September 30, 2022 and December 31, 2021, respectively)		7,302			7,354
Additional paid-in capital		233,271,351			226,070,308
Accumulated deficit		(60,140,526	)		(51,763,255	)
Total stockholders’ equity		173,138,127			174,314,407
Total liabilities and stockholders’ equity	$	204,224,075		$	214,726,575

The accompanying notes are an integral part of these financial statements.

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SIGA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Revenues
Product sales and supportive services	$	65,621,511		$	2,346,110		$	81,558,148		$	12,793,615
Research and development		6,589,616			2,500,062			17,859,323			5,519,591
Total revenues		72,211,127			4,846,172			99,417,471			18,313,206

Operating expenses
Cost of sales and supportive services		3,948,974			83,276			9,551,186			1,330,114
Selling, general and administrative		19,656,138			4,471,640			29,241,565			14,113,384
Research and development		5,732,982			3,235,145			16,119,858			7,801,901
Total operating expenses		29,338,094			7,790,061			54,912,609			23,245,399
Operating income/(loss)		42,873,033			(2,943,889	)		44,504,862			(4,932,193	)
Gain/(loss) from change in fair value of warrant liability		—			(1,066,522	)		400,663			294,548
Other income, net		258,975			26,252			354,670			76,055
Income/(loss) before income taxes		43,132,008			(3,984,159	)		45,260,195			(4,561,590	)
(Provision)/benefit for income taxes		(10,091,420	)		870,801			(10,543,595	)		805,328
Net and comprehensive income/(loss)	$	33,040,588		$	(3,113,358	)	$	34,716,600		$	(3,756,262	)
Basic income/(loss) per share	$	0.45		$	(0.04	)	$	0.48		$	(0.05	)
Diluted income/(loss) per share	$	0.45		$	(0.04	)	$	0.47		$	(0.05	)
Weighted average shares outstanding: basic		73,024,147			74,840,846			72,924,178			75,822,713
Weighted average shares outstanding: diluted		73,259,272			74,840,846			73,616,837			76,634,963

The accompanying notes are an integral part of these financial statements.

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SIGA TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	*Nine Months Ended September 30,*
	*2022*			*2021*
Cash flows from operating activities:
Net income (loss)	$	34,716,600		$	(3,756,262	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and other amortization		386,440			393,667
Gain on change in fair value of warrant liability		(400,663	)		(294,548	)
Stock-based compensation		1,092,893			957,320
Write down of inventory, net		168,446			548,551
Deferred income taxes, net		(1,761,279	)		(408,233	)
Changes in assets and liabilities:
Accounts receivable		28,724,892			(482,561	)
Inventory		(11,919,413	)		(9,956,076	)
Prepaid expenses and other assets		1,514,150			(139,984	)
Accounts payable, accrued expenses and other liabilities		914,139			9,095,055
Income tax payable		(10,083,889	)		(871,298	)
Deferred revenue		6,364,971			306,443
Net cash provided by/(used in) operating activities		49,717,287			(4,607,926	)
Cash flows from investing activities:
Capital expenditures		—			(24,424	)
Cash used in investing activities		—			(24,424	)
Cash flows from financing activities:
Payment of employee tax obligations for common stock tendered		(12,533	)		(173,918	)
Repurchase of common stock		(10,149,704	)		(20,264,547	)
Payment of dividend		(32,944,314	)		—
Cash used in financing activities		(43,106,551	)		(20,438,465	)
Net increase/(decrease) in cash and cash equivalents		6,610,736			(25,070,815	)
Cash and cash equivalents at the beginning of period		103,138,819			117,890,240
Cash and cash equivalents at end of period	$	109,749,555		$	92,819,425

Supplemental disclosure of non-cash financing activities:
Conversion of warrant to common stock	$	6,120,778		$	—

The accompanying notes are an integral part of these financial statements

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SIGA TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Condensed Consolidated Financial Statements

The financial statements of SIGA Technologies, Inc. (“we,” “our,” “us,” “SIGA” or the “Company”) are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2021, included in the Company's 2021 Annual Report on Form 10-K filed on March 3, 2022 (the "2021 Form 10-K"). All terms used but not defined elsewhere herein have the meaning ascribed to them in the 2021 Form 10-K. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results of the interim periods have been included. The 2021 year-end condensed consolidated balance sheet data were derived from the audited financial statements but do not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results expected for the full year.

2. Summary of Significant Accounting Policies

Revenue Recognition

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). In all transactions, the Company is the principal as it controls the specified good or service before it is transferred to the customer and therefore recognizes revenue on a gross basis. A contract’s transaction price is allocated to distinct performance obligations and recognized as revenue when, or as, a performance obligation is satisfied. The Company accounts for shipping and handling activities as fulfillment costs rather than as an additional promised service. As of September 30, 2022, the Company's active contractual performance obligations are referenced in Note 3 and consist of the following: five performance obligations relate to research and development services; and five relate to manufacture and delivery of product. The aggregate amount of the transaction price allocated to remaining performance obligations was $82.9 million as of September 30, 2022. Remaining performance obligations represent the transaction price for which work has not been performed and excludes unexercised contract options. The Company expects to recognize this amount as revenue within the next three years as the specific timing for satisfying performance obligations is subjective and largely outside the Company's control.

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 ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

Contract modifications may occur 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 are not 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. 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 of third-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 include third-party services performed, direct labor hours, and material consumed.

Contract Balances

The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the condensed 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 September 30, 2022, the accounts receivable balance in the condensed balance sheet includes approximately $46.3 million of unbilled receivables. This amount includes net proceeds, net of Meridian fee (as defined below) from international sales, which will be billed and collected by Meridian and paid to SIGA. 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 general and administrative 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 nine months ended September 30, 2022, the Company recognized $3.5 million of revenue that was included in deferred revenue at the beginning of the period.

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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).

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 the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, 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 September 30, 2022, 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 of five years, approximately $268.9 million of payments are related to exercised options and up to approximately $281.9 million of payments are currently specified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten years from the date of entry into the 19C BARDA Contract and such options could be exercised at any time during the contract term, including during the base period of performance.

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 20,000 courses 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 advanced development of IV TPOXX®; and payments of approximately $0.6 million for supportive procurement activities. As of September 30, 2022, the Company has 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 $17.1 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 during the nine months ended September 30, 2022, $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 the Strategic Stockpile.

The options that have been exercised to date provide for payments up to approximately $268.9 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials used in the 2020 manufacture of certain courses of oral TPOXX®; payments up to $213.9 million for the delivery of up to 726,140 courses of oral TPOXX®; payments up to $25.6 million for the manufacture of courses of IV FDP, of which $10.2 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 September 30, 2022, the Company has received $225.1 million for the delivery (and related procurement of raw materials) of oral TPOXX® to the Strategic Stockpile; received $10.2 million for the completed manufacture of IV BDS, which has been recorded as deferred revenue as of September 30, 2022; and received or billed $8.1 million in connection with post-marketing activities for oral TPOXX®.

Unexercised options specify potential payments up to approximately $281.9 million in total (if all such options are exercised). There are options for the following activities: payments of up to $225.1 million for the delivery of oral TPOXX® to the Strategic Stockpile; payments of up to $51.2 million for the manufacture of courses of IV FDP, of which up to $20.5 million of payments would be paid upon the manufacture of IV BDS to be used in the manufacture of IV FDP; and payments of up to approximately $5.6 million for supportive procurement activities.

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The options related to IV TPOXX® are divided into two 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 may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing for 64,000 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 but not the IV FDP Option). To date, BARDA has exercised one of the three IV BDS options and one of the three IV FDP options, both of which were exercised simultaneously in 2022. If BARDA decides to only exercise the remaining IV BDS Options, then the Company would receive payments up to $20.5 million; alternatively, if BARDA decides to exercise all the remaining IV BDS Options and IV FDP Options, then the Company would receive payments up to $51.2 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 same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.

Revenues in connection with the 19C 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 the 19C BARDA Contract are recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the three months ended September 30, 2022 and 2021, the Company recognized revenues of $2.7 million and $1.1 million, respectively, on an over time basis. For the nine months ended September 30, 2022 and 2021, the Company recognized revenues of $4.6 million and $2.8 million, respectively, on an over time basis. Revenue recognized for product delivery, and therefore at a point in time, for the nine months ended September 30, 2022 was $7.2 million. In contrast, no revenue was recognized for product delivery, and therefore no revenue was recognized at a point in time, for the three months ended September 30, 2022 or for the three and nine months ended September 30, 2021.

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 approximately $3.8 million of oral TPOXX®. In the second quarter of 2022, the Company delivered and recognized revenue of $3.6 million for the delivery of oral TPOXX® to the DoD, fulfilling the firm commitment in DoD Contract #1. In the third quarter of 2022, the DoD exercised the option for $3.8 million of oral TPOXX® and the Company satisfied its obligation by delivering product and recognized the related revenue in September 2022.

On September 28, 2022, the Company and the DoD signed a new procurement contract ("DoD Contract #2"). The DoD Contract #2 includes a firm commitment for the DoD to procure approximately $5.2 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD for the procurement of approximately $5.5 million of oral TPOXX®.

International Procurement Contracts

This year, through October 31, 2022, the Company has received firm commitment orders from 13 international customers (including Canada) for the delivery of approximately $77 million of oral TPOXX®, of which approximately $39 million is for Canada and approximately $38 million is for jurisdictions in Europe, Asia-Pacific, and the Middle East. Additionally, the contract with CDND (defined below) has an option until March 31, 2024, exercisable at the sole discretion of CDND, for the purchase of up to an additional $6 million of oral TPOXX®. With respect to the $77 million of firm commitment orders that have been received this year, approximately $66 million of oral TPOXX® was delivered and recorded as revenue in the nine months ended September 30, 2022. Through an International Promotion Agreement (defined below), Meridian Medical Technologies, Inc. (“Meridian”) is the counterparty to international contracts under which orders are placed for the purchase of oral TPOXX®. The Public Health Agency of Canada (“PHAC”) and the Canadian Department of National Defence (“CDND”) are among the contracting parties for the purchase of oral TPOXX® (see below for a summary description of these contracts).

On January 13, 2021, PHAC awarded a contract to Meridian (the “PHAC Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. In March 2022 and July 2022, PHAC executed amendments in which total procurement of oral TPOXX® under the PHAC Contract was increased to an amount of approximately $45 million. Prior to 2022, approximately $10 million of oral TPOXX® had been ordered and delivered to PHAC. No courses of oral TPOXX® were delivered under this contract for the first six months of 2022. During the three months ended September 30, 2022, approximately $35 million of oral TPOXX® was delivered to PHAC and recognized as revenue. Including the deliveries in the third quarter of 2022, there are no current remaining amounts specified in the PHAC Contract.

On April 3, 2020, the Company announced that the CDND awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND would purchase up to approximately $14 million of oral TPOXX® over four years. Prior to 2022, approximately $4 million of oral TPOXX® had been ordered and delivered to CDND. No courses of oral TPOXX® were delivered under this contract for the first nine months of 2022. As of September 30, 2022, an approximate firm commitment order of $4 million remains to be delivered under this contract. Additionally, there are approximately $6 million of unexercised options, exercisable at the sole discretion of CDND, remaining under this contract.

The above-listed contract awards were coordinated between SIGA and Meridian under the international promotion agreement (as amended, the "International Promotion Agreement") that was entered into by the parties on June 3, 2019. 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, 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 agreed not 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.

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. It is probable that we will exceed the specified threshold in 2022 and, as a result, the Company has recorded and will continue to record the higher specified percentage for all International Promotion Agreement sales in 2022.

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 three and nine months ended September 30, 2022, the Company recognized $61.3 million and $66.2 million of sales, respectively, in connection with international contracts. During the three and nine months ended September 30, 2021, the Company recognized $2.3 million and $12.7 million of sales, respectively, for deliveries to PHAC and CDND.

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Research Agreements and Grants

In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 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"). In subsequent modifications, the DoD increased the scope and the available funding under the PEP Label Expansion R&D Contract to approximately $27 million. The period of performance for this contract, as modified, terminates on January 31, 2025. As of September 30, 2022, remaining revenue to be recognized in the future under the PEP Label Expansion R&D Contract is up to $11.2 million. Revenue from the performance obligation under the PEP Label Expansion R&D Contract is recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the three months ended September 30, 2022 and 2021, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $4.2 million and $1.3 million, respectively, on an over time basis. For the nine months ended September 30, 2022 and 2021, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $13.1 million and $2.0 million, respectively, on an over time basis.

Contracts and grants include, among other things, options that may or may not 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 may not 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:

	*As of*
	*September 30, 2022*		*December 31, 2021*
Raw materials	$	22,047	$	22,047
Work in-process		25,075,163		17,453,358
Finished goods		6,164,136		2,034,974
Inventory	$	31,261,346	$	19,510,379

5. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	*As of*
	*September 30, 2022*			*December 31, 2021*
Leasehold improvements	$	2,420,028		$	2,420,028
Computer equipment		471,286			511,062
Furniture and fixtures		347,045			377,859
Operating lease right-of-use assets		3,678,647			3,678,647
		6,917,006			6,987,596
Less - accumulated depreciation and amortization		(4,937,489	)		(4,621,639	)
Property, plant and equipment, net	$	1,979,517		$	2,365,957

Depreciation and amortization expense on property, plant, and equipment was $0.4 million for each of the nine months ended September 30, 2022 and 2021.

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	*As of*
	*September 30, 2022*		*December 31, 2021*
Deferred revenue	$	10,129,667	$	3,764,696
Compensation		1,997,717		2,811,700
Research and development vendor costs		1,107,791		256,397
Professional fees		900,205		527,026
Other		852,370		938,082
Lease liability, current portion		519,198		466,830
Inventory		380,411		488,081
Accrued expenses and other current liabilities	$	15,887,359	$	9,252,812

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7. Financial Instruments

2016 Warrant

On September 2, 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Loan Agreement”) with OCM Strategic Credit SIGTEC Holdings, LLC (“Lender”). The Company voluntarily prepaid this Loan Agreement in 2020. Upon such prepayment and release, the Loan Agreement was terminated. In connection with the entry into the Loan Agreement, the Company issued a warrant (the “Warrant”) to the Lender on September 2, 2016 to purchase a number of shares of the Company’s common stock equal to $4.0 million divided by the lower of (i) $2.29 per share and (ii) the subscription price paid in connection with the Rights Offering. The Warrant provides for weighted average anti-dilution protection and is exercisable in whole or in part for ten (10) years from the date of issuance. The per share subscription price paid was $1.50 in connection with the Rights Offering; accordingly, the exercise price of the Warrant was set at $1.50 per share, and there were 2.7 million shares underlying the Warrant. Taking into account partial exercises of the Warrant, there were approximately 1.0 million shares underlying the outstanding Warrant as of December 31, 2021.

In the second quarter of 2022, the Warrant was fully exercised, and therefore there are no remaining underlying shares as of September 30, 2022. See Note 8. For the nine months ended September 30, 2022, we recorded a gain of approximately $0.4 million, reflecting a decrease in the fair value of the liability-classified warrant primarily due to the decrease in our stock price prior to the exercise of the Warrant.

As of December 31, 2021, there were approximately 1.0 million shares underlying the outstanding Warrant and the fair value of the Warrant was $6.5 million. The fair value of the liability-classified Warrant was calculated using the following assumptions: risk-free interest rate of 1.21%; no dividend yield; an expected life of 4.7 years; and a volatility factor of 55%.

8. Fair Value of Financial Instruments

The carrying value of 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:

•

Level 1 – Quoted prices for identical instruments in active markets.

•

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations where inputs are observable or where significant value drivers are observable.

•

Level 3 – Instruments where significant value drivers are unobservable to third parties.

There were no transfers between levels of the fair value hierarchy for the nine months ended September 30, 2022. As of each of September 30, 2022 and December 31, 2021, the Company had approximately $0.1 million of cash equivalents classified as Level 1 financial instruments. As of September 30, 2022, the Company had approximately $35.1 million of cash equivalents classified as Level 2 financial instruments. There were no Level 2 financial instruments as of December 31, 2021.

The following table presents changes in the liability-classified warrant measured at fair value using Level 3 inputs:

	*Fair Value Measurements of Level 3 liability-classified warrant*
Warrant liability at December 31, 2021	$	6,521,441
Decrease in fair value of Warrant liability		(400,663	)
Exercise of Warrant		(6,120,778	)
Warrant liability at September 30, 2022	$	-

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9. 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:

	*Three Months Ended September 30,*					*Nine Months Ended September 30,*
	*2022*		*2021*			*2022*		*2021*
Net income/(loss) for basic earnings per share	$	33,040,588	$	(3,113,358	)	$	34,716,600	$	(3,756,262	)
Less: Change in fair value of warrants		—		—			400,663		294,548
Net income/(loss), adjusted for change in fair value of warrants for diluted earnings per share	$	33,040,588	$	(3,113,358	)	$	34,315,937	$	(4,050,810	)
Weighted-average shares		73,024,147		74,840,846			72,924,178		75,822,713
Effect of potential common shares		235,125		—			692,659		812,250
Weighted-average shares: diluted		73,259,272		74,840,846			73,616,837		76,634,963
Income/(loss) per share: basic	$	0.45	$	(0.04	)	$	0.48	$	(0.05	)
Income/(loss) per share: diluted	$	0.45	$	(0.04	)	$	0.47	$	(0.05	)

For the nine months ended September 30, 2022, the diluted earnings per share calculation reflects the effect of the exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. Weighted-average diluted shares include the dilutive effect of in-the-money options, stock-settled RSUs and 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 has not 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 three and nine months ended September 30, 2022 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 three and nine months ended September 30, 2022, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share were 32,180 and 12,901, respectively.

For the three and nine months ended September 30, 2021, the Company incurred losses and as a result, the equity instruments listed below were excluded from the calculation of diluted earnings (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:

	*Three Months Ended September 30,*		*Nine Months Ended September 30,*
	*2021*		*2021*
Warrants		1,047,296		—
Stock options		150,000		153,055
Restricted stock units		204,591		181,730

10. Commitments and Contingencies

From time to time, we may be 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, will not 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 with third 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 do not exceed our planned commercial and research and development needs. As of September 30, 2022, the Company had approximately $21.8 million of purchase commitments associated with manufacturing obligations.

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11. Related Party Transactions

Board of Directors and Outside Counsel

A former member of the Company’s Board of Directors who did not stand for re-election at the Company's 2021 annual meeting of stockholders is a partner at a law firm used by the Company. The Company did not incur any expenses related to services provided by the outside counsel during the three months ended September 30, 2022 and 2021 or the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company incurred $0.1 million of expenses related to services provided by the outside counsel. The Company had no outstanding payables or accrued expenses related to services performed by the outside counsel as of September 30, 2022.

Real Estate Leases

On May 26, 2017, the Company and MacAndrews & Forbes Incorporated (“M&F”) entered into a ten-year Office Lease agreement (the “HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at 31 East 62^nd Street, New York, New York. The Company is utilizing premises leased under the HQ Lease as its new corporate headquarters. The Company's rental obligations consist of a fixed rent of $25,333 per month in the first sixty-three months of the term, subject to a rent abatement for the first six months of the term. From the first day of the sixty-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 the first anniversary of entry into the lease. The facility fee was $3,333 per month for the second year of the term and increases by five percent each year thereafter, to $4,925 per month in the final year of the term. During the three and nine months ended September 30, 2022, the Company paid expenses associated with this lease of $0.1 million and $0.3 million, respectively.

12. Revenues by Geographic Region

Revenues by geographic region were as follows:

	*Three Months Ended September 30,*				*Nine Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*
United States	$	10,925,562	$	2,475,689	$	33,180,163	$	5,387,145

International
Asia-Pacific		8,946,221		—		13,875,644		—
Canada		35,120,212		2,370,483		35,120,212		12,926,061
Europe, Middle East and Africa (EMEA)		16,255,715		—		16,278,035		—
Other		963,417		—		963,417		—
Total International		61,285,565		2,370,483		66,237,308		12,926,061

Total revenues	$	72,211,127	$	4,846,172	$	99,417,471	$	18,313,206

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13. 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 the three months ended September 30, 2022 and 2021, we recorded pre-tax income of $43.1 million and losses of ($4.0) million, respectively, and a corresponding income tax (provision)/benefit of ($10.1) million and $0.9 million, respectively.

For the nine months ended September 30, 2022 and 2021, we recorded pre-tax income of $45.3 million and losses of ($4.6) million, respectively, and a corresponding income tax (provision)/benefit of ($10.5) million and $0.8 million, respectively.

The effective tax rate for the three months ended September 30, 2022 was 23.4% compared to 21.9% for the three months ended September 30, 2021. The effective tax rate for the three months ended September 30, 2022 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 Section 162(m).

The effective tax rate for the nine months ended September 30, 2022 was 23.3% compared to 17.7% for the nine months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 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 Section 162(m).

The Inflation Reduction Act of 2022 (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 a three-year period in excess of $1 billion. The Company does not expect the Act to materially impact its consolidated financial statements.

14. Equity

The tables below present changes in stockholders' equity for the three and nine months ended September 30, 2022 and 2021.

	*Common Stock*				*Additional Paid-in*		*Accumulated*			*Other Comprehensive*		*Total Stockholders'*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Income*		*Equity*
Balances at June 30, 2022		73,024,147	$	7,302	$	232,942,666	$	(93,181,114	)	$	—	$	139,768,854
Net income		—		—		—		33,040,588			—		33,040,588
Stock-based compensation		—		—		328,685		—			—		328,685
Balances at September 30, 2022		73,024,147	$	7,302	$	233,271,351	$	(60,140,526	)	$	—	$	173,138,127

	*Common Stock*						*Additional Paid-in*			*Accumulated*			*Other Comprehensive*		*Total Stockholders'*
	*Shares*			*Amount*			*Capital*			*Deficit*			*Income*		*Equity*
Balances at December 31, 2021		73,543,602		$	7,354		$	226,070,308		$	(51,763,255	)	$	—	$	174,314,407
Net income		—			—			—			34,716,600			—		34,716,600
Repurchase of common stock		(1,474,781	)		(147	)		—			(10,149,557	)		—		(10,149,704	)
Payment of common stock tendered for employee stock-based compensation tax obligations		(1,973	)		—			(12,533	)		—			—		(12,533	)
Issuance of common stock upon vesting of RSUs		132,396			13			(13	)		—			—		—
Issuance of common stock upon exercise of warrants		824,903			82			6,120,696			—			—		6,120,778
Cash dividend ($0.45 per share)		—			—			—			(32,944,314	)		—		(32,944,314	)
Stock-based compensation		—			—			1,092,893			—			—		1,092,893
Balances at September 30, 2022		73,024,147		$	7,302		$	233,271,351		$	(60,140,526	)	$	—	$	173,138,127

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	*Common Stock*						*Additional Paid-in*			*Accumulated*			*Other Comprehensive*		*Total Stockholders'*
	*Shares*			*Amount*			*Capital*			*Deficit*			*Income*		*Equity*
Balances at June 30, 2021		75,389,417		$	7,539		$	225,678,876		$	(108,965,453	)	$	—	$	116,720,962
Net loss		—			—			—			(3,113,358	)		—		(3,113,358	)
Repurchase of common stock		(1,110,763	)		(111	)		—			(7,134,577	)		—		(7,134,688	)
Payment of common stock tendered for employee stock-based compensation tax obligations		(25,203	)		(2	)		(160,554	)		—			—		(160,556	)
Issuance of common stock upon vesting of RSUs		53,334			5			(5	)		—			—		—
Stock-based compensation		—			—			243,502			—			—		243,502
Balances at September 30, 2021		74,306,785		$	7,431		$	225,761,819		$	(119,213,388	)	$	—	$	106,555,862

	*Common Stock*						*Additional Paid-in*			*Accumulated*			*Other Comprehensive*		*Total Stockholders'*
	*Shares*			*Amount*			*Capital*			*Deficit*			*Income*		*Equity*
Balances at December 31, 2020		77,195,704		$	7,720		$	224,978,430		$	(95,192,881	)	$	—	$	129,793,269
Net loss		—			—			—			(3,756,262	)		—		(3,756,262	)
Repurchase of common stock		(3,024,690	)		(302	)		—			(20,264,245	)		—		(20,264,547	)
Payment of common stock tendered for employee stock-based compensation tax obligations		(27,105	)		(3	)		(173,915	)		—			—		(173,918	)
Issuance of common stock upon vesting of RSUs		162,876			16			(16	)		—			—		—
Stock-based compensation		—			—			957,320			—			—		957,320
Balances at September 30, 2021		74,306,785		$	7,431		$	225,761,819		$	(119,213,388	)	$	—	$	106,555,862

On August 2, 2021, the Company's Board of Directors authorized a share repurchase program ("New Repurchase Authorization") under which the Company may repurchase up to $50 million of the Company's common stock through December 31, 2023. The Company started repurchasing shares under this program in the fourth quarter of 2021. Repurchases under the New Repurchase Authorization may be made from time to time at the Company's discretion in open market transactions, through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company's management in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise. The timing and actual number of shares repurchased will depend 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 the nine months ended September 30, 2022, the Company repurchased approximately 1.5 million shares of common stock under the New Repurchase Authorization for approximately $10.1 million. No shares were repurchased in the three months ended September 30, 2022.

Prior to the effective date of the New Repurchase Authorization, the Company repurchased shares under a program that was announced in March 2020. Under this program, $50 million of the Company's common stock was repurchased, including approximately 1.1 million shares of common stock for approximately $7.1 million that was repurchased during the three months ended September 30, 2021, and 3.0 million shares of common stock for approximately $20.3 million that was repurchased during the nine months ended September 30, 2021.

On May 5, 2022, 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 $32.9 million. The special dividend was paid on June 2, 2022 to shareholders of record at the close of business on May 17, 2022.

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15. Leases

The Company leases its Corvallis, Oregon, facilities and office space under an operating lease, which was signed on November 3, 2017 and commenced on January 1, 2018. The initial term of this lease was to expire on December 31, 2019 after which the Company had two successive renewal options; one for two years and the other for three years. In the second quarter of 2019, the Company exercised the first renewal option, which extended the lease expiration date to December 31, 2021. In the second quarter of 2021, the Company exercised the second renewal option, which extended the lease expiration date to December 31, 2024. In connection with the exercise of the second renewal option, the Company recorded an increase to operating lease right-of-use assets and operating lease liabilities of approximately $0.7 million in the second quarter of 2021.

On May 26, 2017 the Company and M&F entered into the HQ Lease, a ten-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 HQ Lease as its corporate headquarters. The Company has no leases that qualify as finance leases.

Operating lease costs totaled $0.2 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively. Operating lease costs totaled $0.5 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.2 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $0.5 million and $0.4 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the weighted-average remaining lease term of the Company’s operating leases was 3.88 years while the weighted-average discount rate was 4.53%.

Future cash flows under operating leases as of September 30, 2022 are expected to be as follows:

2022	$	110,340
2023		669,048
2024		678,627
2025		406,994
2026		409,971
Thereafter		165,916
Total undiscounted cash flows under leases		2,440,896
Less: Imputed interest		(224,813	)
Present value of lease liabilities	$	2,216,083

As of September 30, 2022, approximately $1.7 million of the lease liability is included in Other liabilities on the condensed consolidated balance sheet with the current portion included in accrued expenses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes to those statements and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K filed on March 3, 2022 (the "2021 Form 10-K"). In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors. See the factors set forth under the heading “Safe Harbor Statement” at the end of this Item 2.

Overview

We are a commercial-stage pharmaceutical company. Our lead product, TPOXX® (“oral TPOXX®”, also known as "tecovirimat" in certain international markets), 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") since 2013.

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, 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®.

For the intravenous formulation of TPOXX® ("IV TPOXX®"), SIGA announced on May 19, 2022 that the FDA approved this formulation for the treatment of smallpox.

Monkeypox Outbreak

Starting in June 2022, procurement orders for oral TPOXX® from new international jurisdictions, as well as orders under existing contracts, have occurred as SIGA has received ongoing inquiries about accessing oral TPOXX® in connection with a global monkeypox outbreak. The Company believes that a portion of the courses of oral TPOXX® delivered under these orders are being used for the treatment of active monkeypox cases as part of a response to this outbreak by the global health community.

Monkeypox is a disease caused by infection with the monkeypox virus. The monkeypox virus is part of the same family of viruses as smallpox. Monkeypox symptoms are similar to smallpox but are not as severe, with historical fatality in Africa of less than 1% to 10% depending on region and clade. The first human case of monkeypox was recorded in 1970. Since then, monkeypox has been reported in several central and western African countries, with case numbers greatly increasing in recent years. Prior to the ongoing 2022 outbreak, nearly all monkeypox cases in people outside of Africa were linked to international travel to countries where the disease commonly occurs, or through imported animals, including two cases in the United States in 2021. These cases are currently occurring on multiple continents. On July 23, 2022, the World Health Organization declared the monkeypox outbreak as a public health emergency of international concern. On August 4, 2022, the U.S. Government declared the monkeypox outbreak as a public health emergency.

Starting in the third quarter of 2022, in connection with the monkeypox outbreak, randomized, placebo-controlled clinical trials have been initiated in the United States, United Kingdom and Democratic Republic of Congo ("DRC") to further assess the safety and efficacy of TPOXX® in participants with monkeypox. These randomized clinical trials are now enrolling patients to collect data on the potential benefits of using TPOXX® as an antiviral treatment for active monkeypox disease.

Study of Tecovirimat for Human Monkeypox Virus (STOMP; A5418) is a U.S.-based clinical trial sponsored by the National Institute of Allergy and Infectious Diseases ("NIAID"), part of the National Institutes of Health. The NIAID-funded AIDS Clinical Trials Group is leading the study, which may later expand to international sites. Study investigators aim to enroll more than 500 participants, including children and those who are pregnant or breastfeeding, from clinical research sites. The trial will also include an open label arm that will include children, pregnant/breastfeeding individuals and those who are immunocompromised or have severe monkeypox disease.

PLATINUM is a U.K.-based clinical trial commissioned and funded by the National Institute for Health Care and Research. The trial is led by researchers at Oxford University and aims to recruit at least 500 participants, including children weighing ≥13 kg, across the U.K.

PALM 007 is a DRC-based clinical trial sponsored by NIAID and Institute National de Recherche Biomédicale. Study investigators aim to enroll more than 450 participants, including children weighing ≥3 kg and women who are pregnant or breastfeeding, at clinical sites in the DRC.

COVID-19 Pandemic

The COVID-19 pandemic has caused significant societal and economic disruption. The continuing direct and indirect impacts of the pandemic are significant and broad-based, including supply chain disruptions and labor shortages that started during the pandemic and continue to represent business and financial risks. As such, the Company is continually coordinating with service providers and vendors, in particular Contract Manufacturing Organizations ("CMOs") that constitute our supply chain, with respect to risks and mitigating actions.

As of the filing date of this report, the Company has not identified or been notified by government customers of impediments to the continued full performance of their government contracts. With regard to day-to-day operations, the COVID-19 pandemic, and the secondary effects of the pandemic, have at times slowed the pace of execution of government contracts as well as new contract generation. Additionally, the COVID-19 pandemic, and the secondary effects of the pandemic have increased the risk of delays in connection with a broad range of operational activities, including: supply chain procurement of raw materials and manufacturing; and certain research and development activities, such as those that involve clinical trials. Furthermore, the pandemic and related secondary effects could result in a slower pace of future product deliveries if there are shortages or delays in the receipt by the supply chain of raw materials or supplies, or if labor shortages become more acute. While the Company does not currently expect such delays to have a material adverse impact on the financial condition of the Company or its long-term operating performance, and while the COVID-19 pandemic has not adversely affected the liquidity position of the Company, the Company cannot give assurances as to the full extent of the impact at this time.

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Procurement Contracts with the U.S. Government

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 the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, 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 September 30, 2022, 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 of five years, approximately $268.9 million of payments are related to exercised options and up to approximately $281.9 million of payments are currently specified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten years from the date of entry into the 19C BARDA Contract and such options could be exercised at any time during the contract term, including during the base period of performance.

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 20,000 courses 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 advanced development of IV TPOXX®; and payments of approximately $0.6 million for supportive procurement activities. As of September 30, 2022, the Company has 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 $17.1 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 during the nine months ended September 30, 2022, $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 the Strategic Stockpile.

The options that have been exercised to date provide for payments up to approximately $268.9 million. There are exercised options for the following activities: payments up to $11.2 million for the procurement of raw materials used in the 2020 manufacture of certain courses of oral TPOXX®; payments up to $213.9 million for the delivery of up to 726,140 courses of oral TPOXX®; payments up to $25.6 million for the manufacture of courses of IV FDP, of which $10.2 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 September 30, 2022, the Company has received $225.1 million for the delivery (and related procurement of raw materials) of oral TPOXX® to the Strategic Stockpile; received $10.2 million for the completed manufacture of IV BDS, which has been recorded as deferred revenue as of September 30, 2022; and received or billed $8.1 million in connection with post-marketing activities for oral TPOXX®.

The options related to IV TPOXX® are divided into two 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 may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing for 64,000 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 but not the IV FDP Option). To date, BARDA has exercised one of the three IV BDS options and one of the three IV FDP options, both of which were exercised simultaneously in 2022. If BARDA decides to only exercise the remaining IV BDS Options, then the Company would receive payments up to $20.5 million; alternatively, if BARDA decides to exercise all the remaining IV BDS Options and IV FDP Options, then the Company would receive payments up to $51.2 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 same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP. The Company estimates that sales of the IV formulation under this contract (under current terms), assuming the IV FDP Options were exercised, would have a gross margin (sales less cost of sales, as a percentage of sales) that is less than 40%.

Under the terms of this contract, exercise of procurement options is at the sole discretion of BARDA. The request for proposal that preceded the award of the 19C BARDA Contract indicated that the expected purpose of the contract was to maintain the level of smallpox antiviral preparedness in the Strategic Stockpile. Based on prior product delivery activity, and current FDA-approved shelf life of oral TPOXX®, the Company estimates that approximately 940,000 courses of smallpox antiviral treatment would need to be delivered to the U.S. Government between 2022 and 2024 in order to maintain stockpile levels of unexpired smallpox antiviral treatment during this period.

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 approximately $3.8 million of oral TPOXX®. In the second quarter of 2022, the Company delivered and recognized revenue of $3.6 million for the delivery of oral TPOXX® to the DoD, fulfilling the firm commitment in DoD Contract #1. In the third quarter of 2022, the DoD exercised the option for $3.8 million of oral TPOXX® and the Company satisfied its obligation by delivering product and recognized the related revenue in September 2022.

On September 28, 2022, the Company and the DoD signed a new procurement contract ("DoD Contract #2"). The DoD Contract #2 includes a firm commitment for the DoD to procure approximately $5.2 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD for the procurement of approximately $5.5 million of oral TPOXX®.