SIGA TECHNOLOGIES INC 10-K

Item 8. Financial Statements and Supplementary Data   Index to the Consolidated Financial Statements   Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 43     Consolidated Balance Sheets 45     Consolidated Statements of Operations and Comprehensive Income (Loss) 46     Consolidated Statements of Changes in Stockholders’ Equity/(Deficiency) 47     Consolidated Statements of Cash Flows 48     Notes to Consolidated Financial Statements 49   42 Table of Contents   Report of Independent Registered Public Accounting Firm     To the Board of Directors and Stockholders of SIGA Technologies, Inc.   Opinions on the Financial Statements and Internal Control over Financial Reporting   We have audited the accompanying consolidated balance sheets of SIGA Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholders' equity/(deficiency) and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).   In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.   Changes in Accounting Principles   As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.   Basis for Opinions   The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.   Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.   Definition and Limitations of Internal Control over Financial Reporting   A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Critical Audit Matter   The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.   43 Table of Contents   Revenue Recognition – Estimated Costs to Complete the Research and Development Services ( “ R&D ” ) Performance Obligations for the 19C BARDA and PEP Label Expansion R&D Contracts   As discussed in Notes 2 and 3 to the consolidated financial statements, all of the Company’s revenue for the year ended December 31, 2021 was generated from long-term contracts. For these contracts, all revenue associated with current research and development performance obligations for the 19C BARDA and PEP Label Expansion R&D Contracts, which totaled approximately $4.8 million and $2.5 million respectively, 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 costs incurred relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed compared to the total estimated costs to completely satisfy the performance obligation. As disclosed by management, due to the nature of the work required to be performed on many of the performance obligations, management’s estimation of total revenue and costs to satisfy the obligations is complex, subject to many variables, and requires significant judgment. The incurred and estimated costs used in the measure of progress include third-party services performed, direct labor hours, and material consumed.     The principal considerations for our determination that performing procedures relating to revenue recognition – estimated costs to complete the R&D performance obligations for the 19C BARDA and PEP Label Expansion R&D Contracts is a critical audit matter are the significant judgments by management when determining the estimated costs to completely satisfy the performance obligations. This in turn led to significant auditor judgment, subjectivity and effort in performing procedures and in evaluating the estimates of the costs to complete related to management’s estimates of total forecasted costs.      Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, evaluating and testing management’s process for determining the estimated costs to completely satisfy each performance obligation for the 19C BARDA and PEP Label Expansion R&D Contracts, which included evaluating the reasonableness of management’s estimates of total forecasted costs. Evaluating the reasonableness of management’s estimates of total forecasted costs involved assessing management’s ability to reasonably estimate costs to complete the performance obligation by (i) comparing, on a test basis, the underlying cost estimates to approved contracts or modifications; (ii) comparing, on a test basis, the underlying transaction price to original contracts or modifications; and (iii) testing actual costs incurred and their eligibility for billing under the research and development performance obligations.     /s/ PricewaterhouseCoopers LLP   Florham Park, New Jersey March 3, 2022   We have served as the Company’s auditor since 1997.   44 Table of Contents     SIGA TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS As of       December 31, 2021     December 31, 2020   ASSETS                 Current assets                 Cash and cash equivalents   $ 103,138,819     $ 117,890,240   Accounts receivable     83,650,450       3,340,263   Inventory     19,510,379       20,265,519   Prepaid expenses and other current assets     2,453,444       2,112,069   Total current assets     208,753,092       143,608,091                     Property, plant and equipment, net     2,365,957       2,103,990   Deferred tax asset, net     2,422,607       2,544,053   Goodwill     898,334       898,334   Other assets     286,585       676,923   Total assets   $ 214,726,575     $ 149,831,391   LIABILITIES AND STOCKHOLDERS' EQUITY                 Current liabilities                 Accounts payable   $ 2,028,004     $ 1,278,217   Accrued expenses and other current liabilities     9,252,812       8,285,738   Income tax payable     19,207,042       919,555   Total current liabilities     30,487,858       10,483,510   Warrant liability     6,521,441       6,639,211   Other liabilities     3,402,869       2,915,401   Total liabilities     40,412,168       20,038,122   Commitments and contingencies (Note 13)                     Stockholders' equity                 Common stock ( $.0001 par value, 600,000,000 shares authorized, 73,543,602 and 77,195,704 issued and outstanding at December 31, 2021 and December 31, 2020, respectively)     7,354       7,720   Additional paid-in capital     226,070,308       224,978,430   Accumulated deficit     ( 51,763,255 )     ( 95,192,881 ) Total stockholders' equity     174,314,407       129,793,269   Total liabilities and stockholders' equity   $ 214,726,575     $ 149,831,391     The accompanying notes are an integral part of these financial statements.   45 Table of Contents     SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31       2021     2020     2019   Revenues                         Product sales and supportive services   $ 126,802,536     $ 115,471,071     $ 11,190,064   Research and development     6,867,918       9,488,233       15,552,021   Total revenues     133,670,454       124,959,304       26,742,085                             Operating expenses                         Cost of sales and supportive services     16,601,880       14,797,419       1,782,838   Selling, general and administrative     17,323,429       14,003,184       13,252,136   Research and development     9,942,194       10,938,930       13,303,149   Patent expenses     710,152       719,141       726,105   Total operating expenses     44,577,655       40,458,674       29,064,228   Operating income (loss)     89,092,799       84,500,630       ( 2,322,143 ) Gain (loss) from change in fair value of warrant liability     117,770       ( 3,525,846 )     5,091,256   Loss on extinguishment of Term Loan     —       ( 4,981,461 )     —   Interest expense     —       ( 3,016,817 )     ( 15,769,768 ) Other income, net     101,172       532,085       2,822,232   Income (loss) before income taxes     89,311,741       73,508,591       ( 10,178,423 ) (Provision) benefit for income taxes     ( 19,860,975 )     ( 17,166,581 )     2,937,276   Net and comprehensive income (loss)   $ 69,450,766     $ 56,342,010     $ ( 7,241,147 ) Basic earnings (loss) per share   $ 0.92     $ 0.71     $ ( 0.09 ) Diluted earnings (loss) per share   $ 0.91     $ 0.71     $ ( 0.15 ) Weighted average shares outstanding: basic     75,322,194       79,259,000       81,031,254   Weighted average shares outstanding: diluted     76,402,716       79,437,306       82,175,023     The accompanying notes are an integral part of these financial statements.   46 Table of Contents     SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY) For the Years Ended December 31, 2021, 2020 and 2019                                       Accumulated                               Additional             Other     Total       Common Stock     Paid-In     Accumulated     Comprehensive     Stockholders’       Shares     Amount     Capital     Deficit     Income (Loss)     Equity/ (Deficiency)   Balances, December 31, 2018     80,763,350     $ 8,076     $ 218,697,872     $ ( 115,791,261 )   $ —     $ 102,914,687   Net loss                         ( 7,241,147 )           ( 7,241,147 ) Issuance of common stock upon exercise of stock options     9,769       1       ( 1 )                 —   Issuance of common stock upon vesting of RSUs and exercise of stock-settled appreciation rights     515,888       52       ( 52 )                 —   Issuance of common stock to employees     53,332       5       ( 5 )                 —   Issuance of common stock upon exercise of warrants     159,782       16       1,172,785                   1,172,801   Payment of common stock tendered for employee stock-based compensation tax obligations     ( 232,253 )     ( 23 )     ( 1,176,556 )                 ( 1,176,579 ) Stock-based compensation                   2,113,994                   2,113,994   Balances, December 31, 2019     81,269,868     $ 8,127     $ 220,808,037     $ ( 123,032,408 )   $ —     $ 97,783,756   Net income                         56,342,010             56,342,010   Repurchase of common stock     ( 4,628,473 )     ( 463 )           ( 28,502,483 )           ( 28,502,946 ) Issuance of common stock upon exercise of stock options     11,822       1       ( 1 )                 —   Issuance of common stock upon vesting of RSUs     177,876       18       ( 18 )                 —   Issuance of common stock upon exercise of warrants     393,646       40       3,003,477                   3,003,517   Payment of common stock tendered for employee stock-based compensation tax obligations     ( 29,035 )     ( 3 )     ( 184,013 )                 ( 184,016 ) Stock-based compensation                   1,350,948                   1,350,948   Balances, December 31, 2020     77,195,704     $ 7,720     $ 224,978,430     $ ( 95,192,881 )   $ —     $ 129,793,269   Net income                         69,450,766             69,450,766   Repurchase of common stock     ( 3,787,683 )     ( 379 )           ( 26,021,140 )           ( 26,021,519 ) Issuance of common stock upon vesting of RSUs     162,876       16       ( 16 )                 —   Payment of common stock tendered for employee stock-based compensation tax obligations     ( 27,295 )     ( 3 )     ( 173,915 )                 ( 173,918 ) Stock-based compensation                   1,265,809                   1,265,809   Balances, December 31, 2021     73,543,602     $ 7,354     $ 226,070,308     $ ( 51,763,255 )   $ —     $ 174,314,407     The accompanying notes are an integral part of these financial statements.   47 Table of Contents     SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31       2021     2020     2019   Cash flows from operating activities:                         Net income (loss)   $ 69,450,766     $ 56,342,010     $ ( 7,241,147 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                         Depreciation and other amortization     522,368       529,814       526,997   (Gain) loss on change in fair value of warrant liability     ( 117,770 )     3,525,846       ( 5,091,256 ) Stock-based compensation     1,265,809       1,350,948       2,113,994   Write down of inventory, net     618,771       —       —   Deferred income taxes provision (benefit)     121,446       11,606,949       ( 2,417,617 ) Loss on extinguishment of Term Loan     —       4,981,461       —   Non-cash interest expense     —       887,132       4,497,271   Changes in assets and liabilities:                         Accounts receivable     ( 80,310,187 )     827,733       ( 2,208,863 ) Inventory     136,369       ( 8,009,992 )     ( 6,744,644 ) Prepaid expenses and other assets     48,963       699,102       ( 714,272 ) Accounts payable, accrued expenses and other liabilities     986,865       ( 3,116,843 )     936,839   Income tax payable     18,287,487       912,462       —   Deferred revenue     483,749       982,606       ( 1,861,605 ) Net cash provided by (used in) operating activities     11,494,636       71,519,228       ( 18,204,303 ) Cash flows from investing activities:                         Capital expenditures     ( 50,620 )     ( 15,501 )     ( 29,094 ) Cash used in investing activities     ( 50,620 )     ( 15,501 )     ( 29,094 ) Cash flows from financing activities:                         Payment of employee tax obligations for common stock tendered     ( 173,918 )     ( 184,016 )     ( 1,176,579 ) Repurchase of common stock     ( 26,021,519 )     ( 28,502,946 )     —   Repayment of Term Loan     —       ( 85,913,459 )     —   Cash used in financing activities     ( 26,195,437 )     ( 114,600,421 )     ( 1,176,579 ) Net decrease in cash and cash equivalents     ( 14,751,421 )     ( 43,096,694 )     ( 19,409,976 ) Cash, cash equivalents and restricted cash at the beginning of period     117,890,240       160,986,934       180,396,910   Cash, cash equivalents and restricted cash at end of period   $ 103,138,819     $ 117,890,240     $ 160,986,934                             Supplemental disclosure of cash flows information:                         Non-cash lease right-of-use asset and associated liability (net of deferred rent in 2019)   $ 733,715     $ —     $ 2,944,932   Conversion of warrant to common stock   $ —     $ 3,003,517     $ 1,172,801   Issuance of common stock upon cashless exercise   $ —     $ 97,250     $ 118,500   Cash income taxes paid (refund), net   $ 1,063,744     $ 3,718,581     $ ( 1,276,129 )   The accompanying notes are an integral part of these financial statements   48 Table of Contents   SIGA TECHNOLOGIES, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     1. Organization and Basis of Presentation   Description of Business SIGA Technologies, Inc. (“SIGA” or the “Company”) is a commercial-stage pharmaceutical company. The Company's lead product, TPOXX® (“oral TPOXX®”) is a United States Food & Drug Administration ("FDA")-approved oral formulation antiviral drug for the treatment of human smallpox disease caused by variola virus. On July 13, 2018, the FDA approved oral TPOXX®.   Oral TPOXX® is a novel, patented drug that is easy to store, transport and administer. Oral TPOXX® labeling, approved by the FDA, limits sales of oral TPOXX® in the U.S. to those for the U.S. Strategic National Stockpile ("Strategic Stockpile"). The Company has been delivering oral TPOXX® to the Strategic Stockpile since 2013.   On December 1, 2021, the Company announced that Health Canada approved oral tecovirimat as an extraordinary use drug.   On January 10, 2022, a Marketing Authorisation Application ("MAA") with the European Medicines Agency ("EMA") for oral tecovirimat was approved. The MAA was filed under the centralized application process, which authorized the sale of oral tecovirimat in European Union member states, as well as Norway (which granted separate follow-on approval), Iceland, and Liechtenstein. The EMA approved label indication covers the treatment of smallpox, monkeypox, cowpox, and vaccinia complications following vaccination against smallpox.   With respect to the regulatory approvals by Health Canada and the EMA, oral tecovirimat represents the same formulation that was approved by the FDA in  July 2018  under the brand name TPOXX®.     2. Summary of Significant Accounting Policies   Use of Estimates Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. The most significant estimates include the variables used in the calculation of fair value of warrants granted or issued by the Company, reported amounts of revenue, and the valuation of deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from these estimates.   Basis of Presentation The consolidated financial statements and related disclosures are presented in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and reflect the consolidated financial position, results of operations and cash flows for all periods presented.   Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.   Restricted Cash and Cash Equivalents Cash and cash equivalents held in restricted accounts were available to pay interest, fees and principal related to the Term Loan (see Note 7  for additional information). As this Term Loan was repaid on March 13, 2020, the restricted accounts were closed in the second quarter of 2020. There was no restricted cash or cash equivalents as of December 31, 2021 or  2020.   The following table reconciles cash, cash equivalents and restricted cash per the consolidated statements of cash flows to the consolidated balance sheet for each respective period:       As of December 31,       2019     2018   Cash and cash equivalents   $ 65,249,072     $ 100,652,809   Restricted cash - short-term     95,737,862       11,452,078   Restricted cash - long-term     —       68,292,023   Cash, cash equivalents and restricted cash   $ 160,986,934     $ 180,396,910     Concentration of Credit Risk The Company has cash in bank accounts that exceeds the Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses on its cash accounts and no allowance has been provided for potential credit losses because management believes the potential for losses is remote.   49 Table of Contents   Accounts Receivable Accounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2021 and 2020 , 98 % and 100 %, respectively, of accounts receivable represented receivables from the U.S. Government. An allowance for doubtful accounts is based on specific analysis of the receivables. At December 31, 2021 and 2020 , the Company had no allowance for doubtful accounts.   Inventory Inventory is stated at the lower of cost or net realizable value. The cost is determined using the first -in, first -out (FIFO) method. The Company capitalizes inventory costs associated with the Company’s products when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment periodically to identify inventory that may expire prior to expected sale or has a cost basis in excess of its net realizable value. If certain batches or units of product no longer meet quality specifications or become obsolete due to expiration, the Company records a charge to write down such unmarketable inventory to its net realizable value.   Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation and amortization are provided on a straight-line method over the estimated useful lives of the various asset classes. The estimated useful lives are as follows: five years for laboratory equipment; three years for computer equipment; and seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the lease term. Maintenance, repairs and minor replacements are charged to expense as incurred.   Warrant Liability The Company accounts for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Fair value is estimated using model-derived valuations. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities.   Revenue Recognition All of the Company’s revenue is derived from long-term contracts that span multiple years. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606” ).   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. As of December 31, 2021 , the Company's active performance obligations, for the contracts outlined in Note 3 , consist of the following: five  performance obligations relate to research and development services; two  relate to manufacture and delivery of product; and one is associated with storage of product.   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.   50 Table of Contents   Contract Estimates . Accounting for long-term contracts and grants involves the use of various techniques to estimate total contract revenue and costs.   Contract estimates are based on various assumptions to project the outcome of future events that often span multiple years. These assumptions include: labor productivity; the complexity of the work to be performed; external factors such as customer behavior and potential regulatory outcomes; and the performance of subcontractors, among other variables.   The nature of the work required to be performed on many of the Company’s performance obligations and the estimation of total revenue and cost at completion are complex, subject to many variables and require significant judgment. The consideration associated with research and development services is variable as the total amount of services to be performed has not been finalized. The Company estimates variable consideration as the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur and when any uncertainty associated with variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our historical and anticipated performance, external factors, trends and all other information (historical, current and forecasted) that is reasonably available to us.   A significant change in one or more of these estimates could affect the profitability of the Company’s contracts. As such, the Company reviews and updates its contract-related estimates regularly. The Company recognizes adjustments in estimated revenues, research and development expenses and cost of sales and supportive services under the cumulative catch-up method. Under this method, the impact of the adjustment on revenues, research and development expenses and cost of sales and supportive services recorded to date on a contract is recognized in the period the adjustment is identified.   Contract Balances . The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) in the consolidated balance sheets. Generally, amounts are billed as work progresses in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones; as of December 31, 2021 , the accounts receivable balance in the balance sheet includes approximately $ 2.2 million of unbilled receivables. Under typical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such payments occur within a short period of time from billing. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the year ended December 31, 2021 , the Company recognized revenue of $ 0.1 million that was included in deferred revenue at the beginning of the period.   Remaining Performance Obligations . Remaining performance obligations represent the transaction price for which work has not been performed and excludes unexercised contract options. As of December 31, 2021 , the aggregate amount of transaction price allocated to remaining performance obligations was $ 61.8 million. The Company expects to recognize this amount as revenue within the next three years as the specific timing for satisfying the performance obligations is subjective and outside the Company’s control.   Leases The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842” ).   Adoption of ASC 842 . On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach as of the effective date of the standard without revising prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward its historical lease classification. In addition, the Company elected the hindsight practical expedient to determine the lease term for existing leases. The Company’s election of the hindsight practical expedient resulted in the extension of the Oregon lease term as it was determined that the first renewal option under this lease was expected to be exercised with a reasonable degree of certainty. In the second quarter of 2019, the Company exercised the first renewal option under the Oregon lease. The Company was required to record an operating lease right-of-use ("ROU") asset and a corresponding operating lease liability, equal to the present value of the lease payments at the adoption date. In the determination of future lease payments, the Company has elected to aggregate lease components such as payments for rent, taxes and insurance costs with non-lease components such as maintenance costs and account for these payments as a single lease component. The present value of the lease payments was determined using the Company's incremental borrowing rate. The impact of adopting ASC 842 as of January 1, 2019 was the recording of operating lease right-of-use assets of approximately $ 2.9 million; the recording of operating lease liabilities of approximately $ 3.3 million; and a decrease to deferred rent of approximately $ 0.4 million.   51 Table of Contents   The Company determines if an arrangement is a lease at inception. Leases with an initial term less than one year are not recorded on the balance sheet and the lease costs are recorded as an expense on a straight-line basis over the lease term. Operating leases with terms greater than one year result in a lease liability recorded in other liabilities with a corresponding right-of-use ("ROU") asset recorded in property, plant and equipment.   Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU assets are recognized based on the corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and unamortized lease incentives. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease. Lease terms may include options to extend or terminate the lease which are incorporated into the Company's measurement when it is reasonably certain that the Company will exercise the option.   Research and Development Research and development expenses include costs directly and indirectly attributable to the conduct of research and development programs, and performance pursuant to certain customer contracts, including employee related costs, materials, supplies, depreciation on and maintenance of equipment, the cost of services provided by outside contractors, including services related to the Company’s clinical trials and facility costs, such as rent, utilities, and general support services. All costs associated with research and development are expensed as incurred. Costs related to the acquisition of technology rights, for which development work is still in process, and that have no alternative future uses, are expensed as incurred.   Goodwill The Company evaluates goodwill for impairment at least annually or as circumstances warrant. The impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. The Company operates as one business and one reporting unit. Therefore, the goodwill impairment analysis is performed on the basis of the Company as a whole, using the market capitalization of the Company as an estimate of its fair value.   Share-based Compensation Stock-based compensation expense for all share-based payment awards made to employees and directors is determined on the grant date; for option awards, fair value was estimated using the Black-Scholes model. These compensation costs are recognized net of an estimated forfeiture rate over the requisite service periods of the awards. Forfeitures are estimated on the date of the respective grant and revised if actual or expected forfeiture activity differs from original estimates.   The fair value of cash-settled restricted stock unit ("RSU") awards is determined by the value of our common stock and is recognized based on the portion of the requisite service period satisfied as of each valuation date. The fair valuation of the cash-settled awards changes based on changes in our common stock price. The portion of cash-settled RSUs that is recognized based on service period is reflected in accrued expenses and other current liabilities in our consolidated balance sheet. Increases (or decreases) in accrued expenses result in adjustments to earnings for the associated valuation updates.   Income Taxes The Company recognizes income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities at enacted tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is established if it is more likely than not that some or the entire deferred tax asset will not be realized. The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability which are inherently uncertain. The Company may recognize tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company re-evaluates uncertain tax positions and considers factors, including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken on tax returns, and changes in circumstances related to a tax position. The Company recognizes interest and penalties related to income tax matters in income tax expense.   52 Table of Contents   Repurchase of shares When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. The excess of the purchase price above par value of repurchased shares that are retired is presented as an increase to accumulated deficit (or a reduction of retained earnings, if any).   Earnings (Loss) per Share Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, assuming potentially dilutive common shares from option exercises, RSUs, warrants and other incentives had been issued and any proceeds received in respect thereof were used to repurchase common stock at the average market price during the period. The assumed proceeds used to repurchase common stock is the sum of the amount to be paid to the Company upon exercise of options and warrants and the amount of compensation cost attributed to future services not yet recognized.   Fair Value of Financial Instruments The carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilities are 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.   The Company uses model-derived valuations where certain inputs are unobservable to third parties to determine the fair value of common stock warrants on a recurring basis and classifies the liability-classified warrant as Level 3.   There were no transfers between levels of the fair value hierarchy during 2021 or 2020 . As of December 31, 2021  and  December 31, 2020 , the Company had approximately $ 0.1 million and $ 0.1 million, respectively, of cash and cash equivalents classified as Level 1 financial instruments. There were no Level 2 financial instruments as of December 31, 2021  or December 31, 2020 .    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, 2020   $ 6,639,211   Decrease in fair value of warrant liability     ( 117,770 ) Exercise of warrants     —   Warrant liability at December 31, 2021   $ 6,521,441     Loss Contingencies The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to the extent that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is accrued. The Company expenses legal costs associated with loss contingencies as incurred. We record anticipated recoveries under existing insurance contracts when recovery is assured.   53 Table of Contents   Segment Information The Company is managed and operated as one business. The entire business is managed by a single management team that reports to the chief executive officer, who is the Chief Operating Decision Maker. The Company does not operate separate lines of business or separate business entities with respect to any of its product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product areas or by location and has only one reportable segment.   Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019 - 12, Simplifying the Accounting for Income Taxes , as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. The adoption of this standard in the first quarter of 2021 had no impact on the consolidated financial statements.     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 December 31, 2021 , 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 $ 239.7 million of payments are related to exercised options and up to approximately $ 311.1 million of payments are currently specified as unexercised options. The $239.7 million of payments related to exercised options includes an option exercised on September 7, 2021 for the manufacture and delivery of approximately $ 112.6 million of oral TPOXX®. 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 December 31, 2021 , the Company has received $ 11.1 million for the successful delivery of approximately  35,700 courses of oral TPOXX® to the Strategic Stockpile, $ 3.2 million for the manufacture of IV BDS and $ 13.8 million for other base period activities. IV BDS is expected to be used for the manufacture of  20,000 courses of IV FDP. The $ 3.2 million received for the completed manufacture of IV BDS has been recorded as deferred revenue as of  December 31, 2021 and December 31, 2020 ; such amount is expected to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-managed inventory.   The options that have been exercised to date provide for payments up to approximately $ 239.7 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®; and payments of up to $ 14.6 million for funding of post-marketing activities for oral TPOXX®. As of December 31, 2021 , the Company has delivered approximately $ 225.1  million (including the value of raw materials) of oral TPOXX® to the Strategic Stockpile, of which approximately $ 112.5 million was delivered in 2021 (including approximately $ 79.7 million of oral TPOXX® that was delivered and invoiced in December 2021, for which full payment was received in January 2022); and $ 7.3 million has been received or billed for in connection with post-marketing activities for oral TPOXX®.    Unexercised options specify potential payments up to approximately $ 311.1 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 $ 76.8 million for the manufacture of courses of IV FDP, of which up to $ 30.7 million of payments would be paid upon 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 approximately $ 5.6 million for supportive procurement activities.   54 Table of Contents   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). If BARDA decides to only exercise IV BDS Options, then the Company would receive payments up to $ 30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive payments up to $ 76.8 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 years ended December 31, 2021 and 2020 , the Company recognized revenues of $ 4.8 million and $ 7.5  million, respectively, on an over time basis. In contrast, revenue recognized for product delivery and therefore at a point in time for the years ended December 31, 2021 and 2020 , was $ 112.5 million and $ 112.6 million, respectively.    1C BARDA Contract ( 2011 BARDA Contract)     On May 13, 2011, the Company signed a contract with BARDA ( "1C BARDA Contract" or "2011 BARDA Contract") pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oral TPOXX®, as well as provide development funding for certain activities.   The 1C  BARDA Contract specifies approximately $ 508.4 million of payments, of which, as of December 31, 2021 , $ 459.8 million had been received by the Company for the manufacture and delivery of oral TPOXX® and $ 45.9 million had been received for certain reimbursements in connection with development and supportive activities. Approximately $ 2.7 million remains eligible to be received in the future for reimbursements of development and supportive activities.   The 1C  BARDA Contract expires in December 2024.   Remaining performance obligations under the 1C  BARDA Contract generate revenue over time. For the years ended December 31, 2021  and  2020 , the Company recognized revenue of $ 0.2  million and $ 0.2 million, respectively, on an over time basis. In contrast, no revenue was recognized for product delivery and supportive services and therefore at a point in time for the year ended December 31, 2021.  Revenue recognized for product delivery and supportive services and therefore at a point in time for the year ended December 31, 2020, was $ 0.4 million.   55 Table of Contents   International Procurement Contracts On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian”) (the “Contract”) for the purchase of up to approximately $ 33  million of oral TPOXX® (tecovirimat) within five years. In January 2022, PHAC published a proposed amendment in which total procurement of oral TPOXX® under the Contract would be increased to an amount of up to $ 38 million, with firm commitments for the cumulative purchase of approximately $ 23  million of oral TPOXX® by March 31, 2023; the remaining courses under the Contract are targeted for delivery after March 31, 2023 and are subject to option exercise by PHAC. As of December 31, 2021, approximately $ 10 million of oral TPOXX® courses had been delivered to and accepted by PHAC. Such courses were delivered in the first six months of 2021.   On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $ 14 million of oral TPOXX® over four years. In the second quarter 2020, CDND purchased approximately $ 2  million of oral TPOXX®. In the third quarter of 2021, CDND purchased another approximately $ 2 million of oral TPOXX® courses. The remaining purchases are at the option of the CDND. Meridian is the CDND's counterparty under the Canadian Military Contract, and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder.   The PHAC and CDND contract awards were both 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 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 years in which customer invoiced 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 years in which such net invoiced amounts exceed the specified threshold.   Revenue in connection with international procurement contracts for the delivery of product are recognized at a point in time on a gross basis, as the Company acts as the principal in the transaction. During the year ended December 31, 2021 , the Company recognized $ 12.7 million of revenue for deliveries to PHAC and CDND. During the year ended  December 31, 2020 , the Company recognized $ 2.3 million of revenue for delivery to CDND.    Research Agreements and Grants The Company has an R&D program for IV TPOXX®. This program is funded by the 19C BARDA Contract and a separate development contract with BARDA ("IV Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates in February 2024. As of December 31, 2021 , the IV Formulation R&D Contract provided for future aggregate research and development funding of up to approximately $ 0.5 million. Revenues in connection with the IV Formulation R&D Contract are recognized over time. For the years ended December 31, 2021 and 2020 , the Company recognized revenue of $ 0.8  million and $ 1.4 million, respectively, under this contract.   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 U.S. Department of Defense ("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 $ 26 million. The period of performance for this contract, as modified, terminates on April 30, 2024. As of December 31, 2021 , the PEP Label Expansion R&D Contract provided for future aggregate research and development funding under the award, as modified, of up to $ 23.3 million. For the years ended December 31, 2021 and 2020 , the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $ 2.5 million and $ 0.3 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.   56 Table of Contents     4. Inventory   Inventory consisted of the following:       As of       December 31, 2021     December 31, 2020   Raw materials   $ 22,047     $ 2,628,153   Work in-process     17,453,358       15,415,425   Finished goods     2,034,974       2,221,941   Inventory   $ 19,510,379     $ 20,265,519     For the year ended December 31, 2021, cost of goods sold included a net inventory-related loss of $ 0.6  million. This loss related to a $ 0.9 million inventory write-down, partially offset by credits received from contract manufacturing organizations ("CMOs") in connection with the inventory write-down.     5. Property, Plant and Equipment   Property, plant and equipment consisted of the following:       As of       December 31, 2021     December 31, 2020   Leasehold improvements   $ 2,420,028     $ 2,420,028   Computer equipment     511,062       532,125   Furniture and fixtures     377,859       377,859   Operating lease right-of-use asset     3,678,647       2,944,932         6,987,596       6,274,944   Less-accumulated depreciation     ( 4,621,639 )     ( 4,170,954 ) Property, plant and equipment, net   $ 2,365,957     $ 2,103,990     Depreciation and amortization expense on property, plant, and equipment was $ 0.5  million for each of the years ended December 31, 2021 , 2020 , and 2019 .        6. Accrued Expenses   Accrued expenses and other current liabilities consisted of the following:       As of       December 31, 2021     December 31, 2020   Deferred revenue   $ 3,764,696     $ 3,280,947   Compensation     2,811,700       2,933,738   Other     558,362       486,158   Professional fees     527,026       251,824   Inventory     488,081       150,349   Lease liability, current portion     466,830       449,940   Vacation     379,720       405,176   Research and development vendor costs     256,397       327,606   Accrued expenses and other current liabilities   $ 9,252,812     $ 8,285,738     57 Table of Contents     7. Debt   On March 13, 2020, the Company voluntarily prepaid the Loan Agreement (as defined below) in an approximate aggregate amount of $ 87.2 million. The prepayment was made from restricted cash, including $ 80.0 million in respect of outstanding principal of the Term Loan, $ 4.0 million that was payable upon the repayment of the Loan Agreement, approximately $ 1.2 million of accrued interest, and a prepayment premium amount of approximately $ 1.9 million. The prepayment was made upon the Company and the Lender agreeing to and entering into customary mutual releases reflecting that, subject to such prepayment in accordance with the terms of the Loan Agreement, all of the obligations under the Loan Agreement were released, discharged and satisfied in full. Upon such prepayment and release, the Loan Agreement was terminated. For the year ended December 31, 2020, the Company recognized approximately $ 5.0 million of a loss on the extinguishment of the Term Loan related to the remaining unamortized discount and the prepayment premium.   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”), pursuant to which the Company received $ 80.0 million (the "Term Loan") (less fees and other items) on November 16, 2016 having satisfied certain pre-conditions.   The Term Loan had a maturity date on the earliest to occur of (i) the four -year anniversary of the Escrow Release Date, and (ii) the acceleration of certain obligations pursuant to the Loan Agreement.   58 Table of Contents       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 earnings (loss) per share computation:       Year Ended December 31,       2021     2020     2019   Net income (loss) for basic earnings per share   $ 69,450,766     $ 56,342,010     $ ( 7,241,147 ) Less: Change in fair value of warrants     117,770       —       5,091,256   Net income (loss), adjusted for change in fair value of warrants for diluted earnings per share   $ 69,332,996     $ 56,342,010     $ ( 12,332,403 ) Weighted-average shares     75,322,194       79,259,000       81,031,254   Effect of potential common shares     1,080,522       178,306       1,143,769   Weighted-average shares: diluted     76,402,716       79,437,306       82,175,023   Earnings (loss) per share: basic   $ 0.92     $ 0.71     $ ( 0.09 ) Earnings (loss) per share: diluted   $ 0.91     $ 0.71     $ ( 0.15 )   For the year ended December 31, 2021, the diluted earnings per share calculation reflects the effect of the assumed exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. Weighted-average diluted shares include the dilutive effect of in-the-money options and warrants, unvested restricted stock and unreleased RSUs. The dilutive effect of warrants 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 year ended December 31, 2021 because the net effect of their inclusion, including the elimination of the impact in the operating results of the change in fair value of the warrants, would have been anti-dilutive. For the year ended December 31, 2021, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share was  29,873 .   For the year ended December 31, 2020, diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock and unreleased RSUs. The dilutive effect of 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. Warrants were presumed to be cash-settled and therefore excluded from the diluted earnings per share calculations for the year ended December 31, 2020 because the net effect of their inclusion, including the elimination of the impact in the operating results of the change in fair value of the warrants, would have been anti-dilutive. For the year ended December 31, 2020, the weighted average number of shares under the warrant excluded from the calculation of diluted earnings per share was 1,124,585 .   59 Table of Contents   The Company incurred losses for the year ended December 31, 2019  and as a result, for such year 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 consisted of:       Year Ended December 31,       2019   Stock Options     340,284   Stock-Settled Stock Appreciation Rights     1,666   Restricted Stock Units     525,741       9. Financial Instruments   2016 Warrant On September 2, 2016, in connection with the entry into the Loan Agreement (see Note 7  for additional information), the Company issued a warrant (the “Warrant”) to the Lender 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 completed on November 16, 2016. The 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. During the year ended December 31, 2021 , no shares on the warrant were exercised. During the year ended December 31, 2020, 0.5  million shares on the warrant were exercised. Subsequent to partial exercises of the Warrant, there are approximately 1.0  million shares underlying the Warrant as of December 31, 2021 . 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 Company accounted for the Warrant in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain anti-dilution and cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities. Accordingly, the Company classified the Warrant as a liability and reports its change in fair value in the consolidated statement of operations.   On September 2, 2016, the issuance date of the Warrant, the fair value of the liability-classified Warrant was $ 5.8 million. The Company applied a Monte Carlo Simulation-model to calculate the fair value of the Warrant and compared the Monte Carlo simulation model calculation to a Black-Scholes model calculation as of December 31, 2016. These models generated substantially equivalent fair values for the Warrant. As such, the Company utilized a Black-Scholes model at December 31, 2021 and 2020 to determine the fair value of the Warrant.   As of December 31, 2021 , the fair value of the Warrant was $ 6.5  million. A Black Scholes model was applied to calculate the fair value of the Warrant 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 %.   As of December 31, 2020 , the fair value of the Warrant was $ 6.6  million. A Black Scholes model was applied to calculate the fair value of the Warrant using the following assumptions: risk free interest rate of 0.46%; no dividend yield; an expected life of 5.7 years; and a volatility factor of 80 %.   At December 31, 2021 , pursuant to the Warrant agreement, there were no conditions under which current assets would have been required to satisfy the Warrant obligation.       10. Stockholders’ Equity   On December 31, 2021 , the Company’s authorized share capital consisted of 620,000,000 shares, of which 600,000,000 are designated common shares and 20,000,000 are designated preferred shares. The Company’s Board of Directors is authorized to issue preferred shares in series with rights, privileges and qualifications of each series determined by the Board. As of December 31, 2021 and 2020 , no preferred shares were outstanding or issued.   On March 5, 2020, the Company announced that the Board of Directors authorized a share repurchase program under which the Company may repurchase, from time to time, up to an aggregate of $ 50 million of the Company’s common stock through December 31, 2021. During the year ended December 31, 2021, the Company repurchased 3.2  million shares of common stock for approximately $ 21.5 million under this program. This program has been fulfilled with the maximum amount being used to repurchase shares.   On August 2, 2021, the Company's Board of Directors authorized an additional 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 Exchange Act or otherwise. The timing and actual number of shares repurchased will depend on a variety of factors, including: timing of exercise of procurement options under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; and other corporate liquidity requirements and priorities. During the year ended  December 31, 2021 ,  0.6 million shares of common stock have been repurchased under the New Repurchase Authorization for approximately $ 4.5 million.     60 Table of Contents       11. Stock Compensation Plans   The Company’s 2010 Stock Incentive Plan (the “2010 Plan”) was initially adopted in May 2010. The 2010 Plan provided for the issuance of stock options, restricted stock and unrestricted stock with respect to an aggregate of 2,000,000 shares of the Company’s common stock to employees, consultants and outside directors of the Company. On May 17, 2011, the 2010 Plan was amended to provide for the issuance of RSUs and on February 2, 2012, the 2010 Plan was amended to provide for the issuance of stock-settled stock appreciation rights ("SSARs"). Effective April 25, 2012 and May 23, 2017, the 2010 Plan was amended to increase the maximum number of shares of common stock available for issuance to an aggregate of 4,500,000 shares and 8,500,000 shares, respectively. The vesting period for awards granted under the 2010 Plan is determined by the Compensation Committee of the Board of Directors. The Compensation Committee also determines the expiration date of each equity award; however, stock options  may not be exercisable more than ten years after the date of grant as the maximum term of equity awards issued under the 2010 Plan is ten years.   For the years ended December 31, 2021, 2020 and 2019 , the Company recorded stock-based compensation expense, including stock options and RSUs, of approximately $ 1.3  million, $ 1.4  million and $ 2.1 million, respectively.   Stock Options Stock option awards provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee, at the time of grant, and must have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant.   The fair value of options granted is estimated at the date of grant. Expected volatility has been estimated using a combination of the historical volatility of the Company's common stock and the historical volatility of a group of comparable companies’ common stock, both using historical periods equivalent to the options’ expected lives. The expected dividend yield assumption is based on the Company’s intent not to issue a dividend in the foreseeable future. The risk-free interest rate assumption is based upon observed interest rates for securities with maturities approximating the options’ expected lives. The expected life was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms of the award.   A summary of the Company’s stock option activity is as follows:               Weighted     Weighted     Aggregate               Average     Average     Intrinsic       Number of     Exercise     Remaining Life     Value       Options     Price     (in years)     (in thousands)   Outstanding at January 1, 2021     253,000     $ 9.78                   Granted     50,000       6.57                   Exercised     —       —                   Canceled/Expired     ( 153,000 )     12.53                   Outstanding at December 31, 2021     150,000     $ 5.90       8.18     $ 243,000   Vested at December 31, 2021     150,000     $ 5.90       8.18     $ 243,000   Exercisable at December 31, 2021     150,000     $ 5.90       8.18     $ 243,000     As of December 31, 2021 , there is no remaining unrecognized stock-based compensation cost related to stock options expected to be recognized. The total fair value of stock options which vested during the years ended December 31, 2021 and 2020 was approximately $ 258,000  and $ 383,000 , respectively.   There were no stock options exercised during the year ended December 31, 2021. The total intrinsic value of stock options exercised was approximately $ 87,000 and $ 76,000  for the years ended December 31, 2020 and December 31, 2019, respectively. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option.   61 Table of Contents   Restricted Stock Awards/Restricted Stock Units RSUs awarded to employees vest in equal annual installments over a two or three -year period and RSUs awarded to directors of the Company vest over a one -year period. A summary of the Company’s RSU activity is as follows:               Weighted               Average       Number of     Grant-Date       RSUs     Fair Value   Outstanding at January 1, 2021     167,416     $ 5.86   Granted (1)     324,793       6.95   Vested and released     ( 162,876 )     5.82   Canceled/Expired     —       —   Outstanding at December 31, 2021 (1)     329,333     $ 6.95     ( 1 )  includes 54,792 awards which are expected to be settled in cash.   As of December 31, 2021 , $ 1.4  million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over the weighted-average remaining requisite service period of 0.9  years. The weighted average fair value at the date of grant for restricted stock awards granted during the years ended December 31, 2021 , 2020 and 2019 was $ 6.95 , $ 5.95 and $ 5.84 per share, respectively. Based on the grant date, the total fair value of restricted stock and restricted stock units vested and released during the years ended December 31, 2021, 2020 and 2019 was approximately $ 0.9  million, $ 1.0  million and $ 1.6  million, respectively.     12. Income Taxes   The Company's provision (benefit) for income taxes comprises the following:       For the year ended December 31,       2021     2020     2019   Current:                         Federal   $ 19,211,782     $ 5,111,667     $ ( 663,114 ) State and local     513,753       447,965       143,455   Foreign     13,994       —       —   Total current provision (benefit)     19,739,529       5,559,632       ( 519,659 ) Deferred:                         Federal     89,947       11,375,962       ( 2,092,585 ) State and local     31,499       230,987       ( 325,032 ) Foreign     —       —       —   Total deferred provision (benefit)     121,446       11,606,949       ( 2,417,617 ) Total provision (benefit)   $ 19,860,975     $ 17,166,581     $ ( 2,937,276 )   62 Table of Contents   The Company’s deferred tax assets and liabilities comprise the following:       As of December 31,       2021     2020 (1)   Deferred income tax assets:                 Net operating losses   $ 1,293,912     $ 1,293,842   Inventory     184,046       224,656   Reserves and accruals     741,684       725,875   Amortization of intangible assets     50,107       80,930   Share-based compensation     280,396       398,165   Deferred revenue     702,617       709,480   Lease liability     570,446       520,830   Other     267,050       191,174   Deferred income tax assets     4,090,258       4,144,952   Less: valuation allowance     ( 1,022,191 )     ( 1,022,135 ) Deferred income tax assets, net of valuation allowance   $ 3,068,067     $ 3,122,817   Deferred income tax liabilities:                 Amortization of goodwill     ( 197,245 )     ( 199,172 ) Property, plant and equipment     ( 156,289 )     ( 81,065 ) Other     ( 291,926 )     ( 298,527 ) Deferred income tax asset, net   $ 2,422,607     $ 2,544,053     ( 1 )  Certain prior year amounts were reclassed to conform with current year presentation.   The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability which is inherently uncertain. The Company assesses all available positive and negative evidence to determine if its existing deferred tax assets are realizable on a more-likely-than- not basis. In making such assessment, the Company considered the reversal of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on the Company's generation of sufficient taxable income within the available net operating loss carryback and/or carryforward periods to utilize the deductible temporary differences. As of December 31, 2021 , the Company has a valuation allowance on certain state and local net operating losses which the Company determined were not realizable on a more-likely-than- not basis. The Company's valuation allowance did not change materially from prior years.    63 Table of Contents   The benefit for income taxes differs from the expected amount calculated by applying the Company's statutory rate to the income or loss before benefit for income taxes as follows:       As of December 31,       2021     2020     2019   Statutory federal income tax rate     21.0 %     21.0 %     21.0 % State and local taxes     0.5 %     0.7 %     1.3 % Change in fair value of common stock warrant     —       1.0 %     10.5 % Section 162(m) limitation     0.5 %     0.5 %     ( 6.0 )% Other     0.2 %     0.2 %     2.1 % Effective tax rate     22.2 %     23.4 %     28.9 %   For the year ended December 31, 2021 , the Company’s effective tax rate differs from the statutory rate of 21 % primarily as a result of non-deductible executive compensation under IRC Section 162 (m) and state and local taxes. For the year ended December 31, 2020 , the Company's effective tax rate differs from the statutory rate of 21 % primarily as a result of non-deductible executive compensation under IRC Section 162 (m), a non-taxable adjustment for the fair market value of the Warrant, and state and local taxes.   A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:       For the year ended December 31,       2021     2020     2019   Balance at beginning of year   $ 5,591,587     $ 5,649,188     $ 5,738,964   Tax positions related to the current and prior years:                         Additions     11,000       —       —   Reductions     —       ( 57,601 )     ( 89,776 ) Settlements     —       —       —   Lapses in applicable statutes of limitation     —       —       —   Balance at the end of the year   $ 5,602,587     $ 5,591,587     $ 5,649,188     Included in the balance of unrecognized tax benefits as of December 31, 2021 , are potential benefits of $ 5.6  million that, if recognized, would affect the effective tax rate. For the years ended  December 31, 2021 and December 31, 2020 , interest and penalties on unrecognized tax benefits were $ 95,000 and $ 65,000 , respectively. There are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized benefits will significantly increase or decrease within twelve months from December 31, 2021 .   The Company files federal income tax returns and income tax returns in various state and local tax jurisdictions. The federal tax years open to examination are 2018  to 2021 . The Company's state and local tax years that are open to tax examination are generally 2017 to 2021 .       13. Commitments and Contingencies   Operating lease commitments The Company leases its Corvallis, Oregon, facilities and office space under an operating lease which was signed on November 3, 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 2021. The Company had a lease for the same location prior to this lease. On May 26, 2017 the Company and MacAndrews & Forbes Incorporated ("M&F") entered into a ten -year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feet at 31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company has no leases that qualify as finance leases.   Operating lease costs totaled $ 0.6  million and $ 0.7  million for the years ended December 31, 2021 and 2020 , respectively. Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $ 0.6 million and $ 0.6 million for the years ended December 31, 2021 and 2020 , respectively. As of December 31, 2021 , the weighted-average remaining lease term of the Company’s operating leases was 4.6  years while the weighted-average discount rate was 4.53 %.   64 Table of Contents   The following is a maturity analysis of the Company's lease liabilities as of December 31, 2021 :   2022     577,473   2023     669,048   2024     678,627   2025     406,994   2026     409,971   Thereafter     165,916   Total undiscounted cash flows under operating leases     2,908,029   Less: Imputed interest     ( 309,991 ) Present value of lease liabilities   $ 2,598,038     As of December 31, 2021 , approximately $ 2.1 million of the lease liability is included in Other liabilities on the consolidated balance sheet with the current portion included in accrued expenses.   Legal Proceedings   From time to time, we 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. Commitments under the purchase orders do not exceed our planned commercial and research and development needs. As of December 31, 2021 , the Company has approximately $ 20.1  million of purchase commitments associated with manufacturing obligations.   65 Table of Contents     14. 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. During the years ended December 31, 2021, 2020 and 2019 , the Company incurred expenses of approximately $ 0.1  million, $ 0.5  million and $ 0.5  million respectively, 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 December 31, 2021.   Real Estate Leases On May 26, 2017, the Company and M&F Incorporated entered into the New HQ Lease, pursuant to which the Company agreed to lease 3,200 square feet at 31 East 62nd 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 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 year ended December 31, 2021, the Company paid $ 0.3 million of expenses associated with this lease.   66 Table of Contents     Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   None.