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 ) 44 Consolidated Balance Sheets 46 Consolidated Statements of Operations and Comprehensive Income 47 Consolidated Statements of Changes in Stockholders’ Equity 48 Consolidated Statements of Cash Flows 49 Notes to Consolidated Financial Statements 50 43 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, 2023 and 2022, and the related consolidated statements of operations and comprehensive income, of changes in stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. 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. 44 Table of Contents Revenue Recognition As described in Note 2 to the consolidated financial statements, the Company’s revenue was $139.9 million for the year ended December 31, 2023. The Company’s performance obligations are satisfied at a point in time or over time as work progresses. As disclosed by management, revenue connected with performance obligations related to product delivery and supportive services are recognized at a point in time. 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. Management 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. The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition. 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 testing the effectiveness of controls relating to the revenue recognition process, including controls over the recording of revenue at the transaction price once the performance obligations are satisfied. These procedures also included, among others (i) testing the completeness, accuracy and occurrence of product sales and supportive services revenue recognized for a sample of revenue transactions by obtaining and inspecting source documents, such as contracts, invoices, shipping and delivery documents and subsequent cash receipts; (ii) for research and development revenue, testing management’s process for determining the estimated costs to completely satisfy each performance obligation for a sample of contracts by (a) comparing the underlying cost estimates to approved contracts or modifications; (b) comparing the underlying transaction price to original contracts or modifications; and (c) testing actual costs incurred and their eligibility for billing under the respective contracts; and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2023. /s/ PricewaterhouseCoopers LLP Florham Park, New Jersey March 12, 2024 We have served as the Company’s auditor since 1997. 45 Table of Contents SIGA TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2023 December 31, 2022 ASSETS Current assets Cash and cash equivalents $ 150,145,844 $ 98,790,622 Accounts receivable 21,130,951 45,406,960 Inventory 64,218,337 39,273,090 Prepaid expenses and other current assets 3,496,028 2,315,672 Total current assets 238,991,160 185,786,344 Property, plant and equipment, net 1,331,708 1,848,314 Deferred tax asset, net 11,048,118 6,250,385 Goodwill 898,334 898,334 Other assets 2,083,535 252,546 Total assets $ 254,352,855 $ 195,035,923 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 1,456,316 $ 3,355,268 Accrued expenses and other current liabilities 10,181,810 6,304,061 Deferred IV TPOXX® revenue 20,788,720 10,548,720 Income tax payable 21,690,899 1,309,672 Total current liabilities 54,117,745 21,517,721 Other liabilities 3,376,203 3,358,160 Total liabilities 57,493,948 24,875,881 Commitments and contingencies (Note 12) Stockholders' equity Common stock ($ .0001 par value, 600,000,000 shares authorized, 71,091,616 and 72,675,190 issued and outstanding at December 31, 2023 and December 31, 2022, respectively) 7,109 7,268 Additional paid-in capital 235,795,420 233,957,767 Accumulated deficit ( 38,943,622 ) ( 63,804,993 ) Total stockholders' equity 196,858,907 170,160,042 Total liabilities and stockholders' equity $ 254,352,855 $ 195,035,923 The accompanying notes are an integral part of these financial statements. 46 Table of Contents SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For the Years Ended December 31 2023 2022 2021 Revenues Product sales and supportive services $ 130,668,209 $ 86,661,583 $ 126,802,536 Research and development 9,249,011 24,114,027 6,867,918 Total revenues 139,917,220 110,775,610 133,670,454 Operating expenses Cost of sales and supportive services 17,825,090 10,432,561 16,601,880 Selling, general and administrative 22,043,023 35,117,241 18,033,581 Research and development 16,427,942 22,525,642 9,942,194 Total operating expenses 56,296,055 68,075,444 44,577,655 Operating income 83,621,165 42,700,166 89,092,799 Gain from change in fair value of warrant liability — 400,663 117,770 Other income, net 4,155,508 1,031,903 101,172 Income before income taxes 87,776,673 44,132,732 89,311,741 Provision for income taxes ( 19,707,847 ) ( 10,227,926 ) ( 19,860,975 ) Net and comprehensive income $ 68,068,826 $ 33,904,806 $ 69,450,766 Basic earnings per share $ 0.95 $ 0.46 $ 0.92 Diluted earnings per share $ 0.95 $ 0.46 $ 0.91 Weighted average shares outstanding: basic 71,362,209 72,929,550 75,322,194 Weighted average shares outstanding: diluted 71,679,270 73,546,501 76,402,716 The accompanying notes are an integral part of these financial statements. 47 Table of Contents SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2023, 2022 and 2021 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Stockholders’ Shares Amount Capital Deficit Income (Loss) Equity 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 Net income 33,904,806 33,904,806 Repurchase of common stock ( 1,823,738 ) ( 182 ) ( 13,006,149 ) ( 13,006,331 ) Issuance of common stock upon vesting of RSUs 132,396 13 ( 13 ) — Issuance of common stock upon exercise of warrants 824,903 83 6,120,695 6,120,778 Payment of common stock tendered for employee stock-based compensation tax obligations ( 1,973 ) ( 12,533 ) ( 12,533 ) Cash dividend ($ 0.45 per share) ( 32,940,395 ) ( 32,940,395 ) Stock-based compensation 1,779,310 1,779,310 Balances, December 31, 2022 72,675,190 $ 7,268 $ 233,957,767 $ ( 63,804,993 ) $ — $ 170,160,042 Net income 68,068,826 68,068,826 Issuance of common stock upon exercise of stock options 8,672 — Repurchase of common stock (including excise tax) ( 1,736,822 ) ( 174 ) ( 11,072,337 ) ( 11,072,511 ) Issuance of common stock upon vesting of RSUs 144,576 15 ( 15 ) — Payment of common stock tendered for employee stock-based compensation tax obligations ( 214,794 ) ( 214,794 ) Cash dividend ($ 0.45 per share) ( 32,135,118 ) ( 32,135,118 ) Stock-based compensation 2,052,462 2,052,462 Balances, December 31, 2023 71,091,616 $ 7,109 $ 235,795,420 $ ( 38,943,622 ) $ — $ 196,858,907 The accompanying notes are an integral part of these financial statements. 48 Table of Contents SIGA TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31 2023 2022 2021 Cash flows from operating activities: Net income $ 68,068,826 $ 33,904,806 $ 69,450,766 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization 538,293 517,643 522,368 Gain on change in fair value of warrant liability — ( 400,663 ) ( 117,770 ) Stock-based compensation 2,052,462 1,779,310 1,265,809 Write down of inventory, net 579,239 201,472 618,771 Deferred income taxes (benefit) provision ( 4,797,733 ) ( 3,827,778 ) 121,446 Changes in assets and liabilities: Accounts receivable 24,276,009 38,243,490 ( 80,310,187 ) Inventory ( 25,524,485 ) ( 19,964,183 ) 136,369 Prepaid expenses and other assets ( 3,011,346 ) 171,811 48,963 Accounts payable, accrued expenses and other liabilities 1,996,838 1,533,804 1,470,614 Income tax payable 20,381,228 ( 17,897,370 ) 18,287,487 Deferred IV TPOXX® revenue 10,240,000 7,348,720 — Net cash provided by operating activities 94,799,331 41,611,062 11,494,636 Cash flows from investing activities: Capital expenditures ( 21,686 ) — ( 50,620 ) Cash used in investing activities ( 21,686 ) — ( 50,620 ) Cash flows from financing activities: Payment of employee tax obligations for common stock tendered ( 214,794 ) ( 12,533 ) ( 173,918 ) Repurchase of common stock ( 11,072,511 ) ( 13,006,331 ) ( 26,021,519 ) Payment of dividend ( 32,135,118 ) ( 32,940,395 ) — Cash used in financing activities ( 43,422,423 ) ( 45,959,259 ) ( 26,195,437 ) Net increase/(decrease) in cash and cash equivalents 51,355,222 ( 4,348,197 ) ( 14,751,421 ) Cash and cash equivalents at the beginning of period 98,790,622 103,138,819 117,890,240 Cash and cash equivalents at end of period $ 150,145,844 $ 98,790,622 $ 103,138,819 Supplemental disclosure of cash flows information: Non-cash lease right-of-use asset and associated liability $ — $ — $ 733,715 Conversion of warrant to common stock $ — $ 6,120,778 $ — Issuance of common stock upon cashless exercise $ 87,540 $ — $ — Cash income taxes paid, net $ 3,500,873 $ 31,372,881 $ 1,063,744 The accompanying notes are an integral part of these financial statements 49 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 sells its lead product, TPOXX® (“oral TPOXX®,” also known as "tecovirimat" in certain international markets), to the U.S. government and international governments (including government affiliated entities). Additionally, the Company sells the intravenous formulation of TPOXX® ("IV TPOXX®") to the U.S. government. TPOXX® is an oral formulation antiviral drug for the treatment of human smallpox disease caused by variola virus. On July 13, 2018, the United States Food & Drug Administration (“FDA”) approved oral TPOXX® for the treatment of smallpox. The Company has been delivering oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile") since 2013. In connection with IV TPOXX®, SIGA announced on May 19, 2022 that the FDA approved this formulation for the treatment of smallpox. In addition to being approved by the FDA, oral TPOXX® (tecovirimat) has regulatory approval with the European Medicines Agency ("EMA"), Health Canada and the Medicines and Healthcare Products Regulatory Agency ("MHRA") of the United Kingdom. The EMA and MHRA approved label indication covers the treatment of smallpox, monkeypox ("mpox"), cowpox, and vaccinia complications following vaccination against smallpox. The Health Canada approved label indication covers the treatment of smallpox. With respect to the regulatory approvals by the EMA, MHRA and Health Canada, oral tecovirimat represents the same formulation that was approved by the FDA in July 2018 under the brand name TPOXX®. 2. Summary of Significant Accounting Policies Use of Estimates Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. The most significant estimates include the variables used in the calculation of reported amounts of revenue recognized over time, and the valuation of deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from these estimates. Basis of Presentation and Consolidation The accompanying consolidated financial statements include the accounts of SIGA Technologies, Inc. and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The consolidated financial statements and related disclosures are presented in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and reflect the consolidated financial position, results of operations and cash flows for all periods presented. Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year's presentation. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Concentration of Credit Risk The Company has cash in bank accounts that exceeds the Federal Deposit Insurance Corporation insured limits. The Company 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. Collection of all receivables from international government sales is coordinated through the International Promotion Agreement with Meridian (see Note 3 ), under which Meridian invoices and collects payments from international customers and remits such collections, less Meridian's fees, to the Company under a quarterly process specified in the International Promotion Agreement. 50 Table of Contents Accounts Receivable Accounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2023 and 2022 , 53 % and 16 %, respectively, of accounts receivable represent receivables from the U.S. Government. At December 31, 2023 , 47 % of accounts receivable represent receivables from international sales, which include sales to four European governments and a government in the Asia Pacific region. Collection of receivables from international government sales is coordinated through the International Promotion Agreement with Meridian (see Note 3 ), under which Meridian invoices and collects payments from international customers and remits such collections, less Meridian's fees, to the Company under a quarterly process specified in the International Promotion Agreement. An allowance for doubtful accounts is based on specific analysis of the receivables. At December 31, 2023 and 2022 , 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 do not 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 accounted for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Fair value was estimated using model-derived valuations. Any changes in the fair value of the derivative instruments were reported in earnings or loss as long as the derivative contracts were classified as assets or liabilities. During 2022, the warrant was fully exercised and therefore there were no remaining underlying shares as of December 31, 2022. The following table presents changes in the liability-classified warrant: Fair Value of liability-classified warrant Warrant liability at December 31, 2021 $ 6,521,441 Decrease in fair value of warrant liability ( 400,663 ) Exercise of warrants ( 6,120,778 ) Warrant liability at December 31, 2022 $ - Revenue Recognition 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, 2023 , 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; and five relate to manufacture and delivery 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. A portion of the Company’s revenue is derived from long-term contracts that span multiple years. All of the Company’s revenue related to current research and development performance obligations is recognized over time, because the customer simultaneously receives and consumes the benefits provided by the services as the Company performs these services. The Company recognizes revenue related to these services based on the progress toward complete satisfaction of the performance obligation and measures this progress under an input method, which is based on the Company’s cost incurred relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed (i.e., cost 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. The Company accounts for shipping and handling activities as fulfillment costs rather than as an additional promised service. 51 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 may be 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, 2023 , the accounts receivable balance in the balance sheet includes approximately $ 10.3 million of unbilled receivables. This amount primarily relates to international sales that are billed under the terms specified in the International Promotion Agreement with Meridian. Under typical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such payments occur within a short period of time from billing. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the year ended December 31, 2023 , the Company recognized revenue of $ 0.1 million that was included in deferred revenue at the beginning of the period. Remaining Performance Obligations . Remaining performance obligations represent the transaction price for which work has not been performed and excludes unexercised contract options. As of December 31, 2023 , the aggregate amount of transaction price allocated to remaining performance obligations was $ 92.1 million. The Company expects to recognize this amount as revenue within the next three years as the specific timing for satisfying the performance obligations is subjective and is often outside the Company’s control. Leases The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842” ). 52 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 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. 53 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, accounts receivable, accounts payable and accrued expenses and other current liabilities approximates fair value due to the relatively short maturity of these instruments. The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy: • 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 during 2023 or 2022 . As of December 31, 2023 and December 31, 2022 , the Company had approximately $ 95.1 million and less than $ 0.1 million, respectively, of cash and cash equivalents classified as Level 1 financial instruments. There were no Level 2 financial instruments as of December 31, 2023 . As of the December 31, 2022 , the Company had approximately $ 40.5 million of cash equivalents classified as Level 2 financial instruments. There were no Level 3 financial instruments as of December 31, 2023 or December 31, 2022 . For the years ended December 31, 2023, 2022 and 2021 , interest income of $ 4.2 million, $ 1.0 million and $ 0.1 million, respectively, was included in Other income, net on the Consolidated Statements of Operations and Comprehensive Income. Loss Contingencies The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to the extent that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that amount is accrued. Alternatively, 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. 54 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 November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (CODM). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition. In December 2023, the FASB issued ASU 2023 - 09, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption. These requirements are not expected to have an impact on our financial statements, but will impact our income tax disclosures. 3. Procurement Contracts and Research Agreements 19C BARDA Contract On September 10, 2018, the Company entered into a contract with the U.S. Biomedical Advanced Research and Development Authority ("BARDA") pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of IV TPOXX®. In October 2023, the contract was modified so that a course of IV TPOXX® was redefined within the contract from being 14 vials to being 28 vials; as such, the 19C BARDA Contract currently specifies 106,000 courses of IV TPOXX® (for the same payment amount as originally specified). In addition to the delivery of TPOXX® courses, the contract includes funding from BARDA for a range of activities, including: advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and procurement activities. As of December 31, 2023 , the contract with BARDA (as amended, modified, or supplemented from time to time, the "19C BARDA Contract") contemplates up to approximately $ 602.5 million of payments, of which approximately $ 51.7 million of payments are included within the base period of performance, approximately $ 407.1 million of payments are related to exercised options, and up to approximately $ 143.7 million of payments are currently specified as unexercised options. BARDA 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. The base period of performance specifies potential payments of approximately $ 51.7 million for the following activities: payments of approximately $ 11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $ 8.0 million for the manufacture of 10,000 courses (as currently defined within the contract as being 28 vials) of final drug product of IV TPOXX® ("IV FDP"), of which $ 3.2 million of payments are related to the manufacture of bulk drug substance ("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $ 32.0 million to fund reimbursed activities; and payments of approximately $ 0.6 million for supportive procurement activities. As of December 31, 2023 , the Company had received $ 11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $ 3.2 million for the manufacture of IV BDS, $ 4.3 million for the delivery of IV FDP to the Strategic Stockpile and $ 22.1 million for other base period activities. IV BDS has been used for the manufacture of courses of IV FDP. The $ 3.2 million received for the completed manufacture of IV BDS had been recorded as deferred revenue as of December 31, 2021, but with the delivery of IV FDP to the Strategic Stockpile during 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 and accepted by the Strategic Stockpile. The options that have been exercised to date provide for payments up to approximately $ 407.1 million. There are exercised options for the following activities: payments up to $ 337.7 million for the manufacture and delivery of up to 1.1 million courses of oral TPOXX®; payments up to $ 51.2 million for the manufacture of courses of IV FDP, of which $ 20.4 million of payments relate to the manufacture of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $ 3.6 million to fund post-marketing activities for IV TPOXX®; and payments of up to $ 14.6 million for funding of post-marketing activities for oral TPOXX®. As of December 31, 2023 , the Company has cumulatively delivered $ 323.0 million of oral TPOXX® to the Strategic Stockpile, of which $ 97.9 million was delivered in the fourth quarter of 2023; has cumulatively received $ 20.5 million for the completed manufacture of IV BDS, of which $ 20.5 million has been recorded as deferred revenue as of December 31, 2023 ; and has been cumulatively reimbursed $ 7.9 million in connection with post-marketing activities for oral and IV TPOXX®. In the first two months of 2024 ended February 29, 2024, approximately $ 15 million of oral TPOXX® was delivered to the Strategic Stockpile. Unexercised options specify potential payments up to approximately $ 143.7 million in total (if all such options are exercised), of which approximately $ 5.6 million relates to supportive activities that we currently do not expect to be required. There are options for the following activities: payments of up to $ 112.5 million for the delivery of oral TPOXX® to the Strategic Stockpile; and payments of up to $ 25.6 million for the manufacture of courses of IV FDP, of which up to $ 10.2 million of payments would be paid upon the manufacture of IV BDS to be used in the manufacture of IV FDP. 55 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 32,000 courses (as currently defined within the contract) of IV TPOXX®; and three separate IV FDP Options, each providing for 32,000 courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV FDP Options, or whether to exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV FDP Option). To date, BARDA has exercised two of the three IV BDS options and two of the three IV FDP options. If BARDA decides to only exercise the remaining IV BDS Option, then the Company would receive payments up to $ 10.2 million; alternatively, if BARDA decides to exercise the remaining IV BDS Option and IV FDP Option, then the Company would receive payments up to $ 25.6 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the same 32,000 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, 2023 and 2022 , the Company recognized revenues of $ 3.0 million and $ 6.2 million, respectively, on an over time basis. In contrast, revenue recognized for product delivery and therefore at a point in time for the years ended December 31, 2023 and 2022 , was $ 97.9 million and $ 7.2 million, respectively. U.S. Department of Defense Procurement Contracts On May 12, 2022, the Company announced a contract with the U.S. Department of Defense ("DoD") for the procurement of oral TPOXX® ("DoD Contract #1" ). The DoD Contract #1 included a firm commitment for the DoD to procure approximately $ 3.6 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD, for the procurement of an additional approximately $ 3.8 million of oral TPOXX®. In the second quarter of 2022, the Company delivered oral TPOXX® to the DoD and recognized revenue of $ 3.6 million, 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 in September 2022 and recognized the related revenue. On September 28, 2022, the Company and the DoD signed a new procurement contract ("DoD Contract #2" ). The DoD Contract #2 included a firm commitment for the DoD to procure approximately $ 5.1 million of oral TPOXX®, and an option, exercisable at the sole discretion of the DoD for the procurement of an additional approximately $ 5.5 million of oral TPOXX®. In March 2023, the Company fulfilled the firm commitment by delivering $ 5.1 million of oral TPOXX® to the DoD, and recognized the related revenue. Additionally, in March 2023 the DoD exercised the $ 5.5 million option in DoD Contract #2 for the procurement of oral TPOXX® and the Company delivered these courses to the DoD in the fourth quarter of 2023 and recognized the related revenue. In February 2024, DoD Contract #2 was amended and approximately $ 1 million of oral TPOXX® was ordered by the DoD. 56 Table of Contents International Procurement Contracts In 2023, the Company has delivered, and received acceptance for, approximately $ 21.3 million of oral TPOXX® to five European countries, one Middle Eastern country, and one Asia Pacific country. In the first two months of 2024 ending February 29, 2024, the Company delivered an additional approximately $ 7 million of oral TPOXX® to six countries in Europe, completing greater than 95 % of deliveries under the $ 18 million of firm commitment orders from 13 countries under the European Commission’s DG HERA (Health Emergency Preparedness and Response Authority) joint procurement mechanism, which was announced by the Company in October 2022. Additionally, $ 0.7 million of oral TPOXX® was delivered to the Canada Department of National Defence ("CDND") in February 2024. These deliveries were made in connection with orders and contracts under the International Promotion Agreement (defined and discussed below). Through the International Promotion Agreement, Meridian Medical Technologies, Inc. ("Meridian") is the counterparty to international contracts under which orders are placed for the purchase of oral TPOXX®. In addition to the above-mentioned orders and deliveries, the Company has a contract with the CDND under which the CDND has an option until December 31, 2025, exercisable at its sole discretion, for the purchase of up to an additional $ 6.7 million of oral TPOXX®. As an international contract, this contract is also administered under the International Promotion Agreement. The contract with the CDND (the "Canadian Military Contract"), issued in April of 2020 and subsequently amended, is option-based and initially specified that the CDND would purchase up to $ 14 million of oral TPOXX® if all options were exercised. In 2022, the Company 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 was for Canada and approximately $ 38 million was for jurisdictions in Europe, Asia-Pacific, and the Middle East. With respect to the $ 77 million of firm commitment orders that were received in 2022, approximately $ 71 million of oral TPOXX® was delivered and recorded as revenue in 2022, and the remainder was delivered and recorded as revenue in 2023. Under the International Promotion Agreement, Meridian is the counterparty in connection with international contracts for oral TPOXX® and SIGA is responsible for manufacture and delivery of any oral TPOXX® purchased thereunder. Under the terms of the International Promotion Agreement, as amended, which has an initial term that expires on May 31, 2024, Meridian was granted exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States (the “Territory”), and Meridian has 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. Sales to international customers pursuant to the International Promotion Agreement are invoiced and collected by Meridian, and such collections are remitted, less Meridian's fees, to the Company under a quarterly process specified in the International Promotion Agreement. The fee Meridian retains pursuant to the International Promotion Agreement is a specified percentage of the collected proceeds of sales of oral TPOXX®, net of certain expenses, for calendar years in which customer collected amounts net of such expenses are less than or equal to a specified threshold, and a higher specified percentage of such collected net proceeds for calendar years in which such net collected amounts exceed the specified threshold. We exceeded the specified threshold in 2022 and therefore recorded 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 year ended December 31, 2023 , the Company recognized $ 21.3 million of sales in connection with international contracts. During the year ended December 31, 2022 , the Company recognized $ 71.0 million of sales in connection with international contracts. Research Agreements and Grants In July 2019, the Company was awarded a multi-year research contract ultimately valued at approximately $ 27 million from the DoD to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). As of December 31, 2023 , the Company invoiced the full amount of available funding. As of December 31, 2023 , there is no remaining revenue to be recognized in the future under the PEP Label Expansion R&D Contract. Revenue from the performance obligation under the PEP Label Expansion R&D Contract was recognized over time using an input method using costs incurred to date relative to total estimated costs at completion. For the years ended December 31, 2023 and 2022 , the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $ 6.4 million and $ 17.9 million, respectively, on an over time basis. Contracts and grants include, among other things, options that 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. 57 Table of Contents 4. Inventory Inventory consisted of the following: As of December 31, 2023 December 31, 2022 Raw materials $ 8,061,800 $ 6,370,581 Work in-process 53,649,859 27,038,845 Finished goods 2,506,678 5,863,664 Inventory $ 64,218,337 $ 39,273,090 5. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of December 31, 2023 December 31, 2022 Leasehold improvements $ 2,420,028 $ 2,420,028 Computer equipment 468,937 449,143 Furniture and fixtures 347,045 347,045 Operating lease right-of-use asset 3,678,647 3,678,647 6,914,657 6,894,863 Less-accumulated depreciation ( 5,582,949 ) ( 5,046,549 ) Property, plant and equipment, net $ 1,331,708 $ 1,848,314 Depreciation and amortization expense on property, plant, and equipment was $ 0.5 million for each of the years ended December 31, 2023 , 2022 , and 2021 . 6. Accrued Expenses Accrued expenses and other current liabilities consisted of the following: As of December 31, 2023 December 31, 2022 Inventory $ 3,300,985 $ 31,160 Compensation 2,792,874 2,378,035 Other 2,659,608 1,277,779 Lease liability, current portion 564,009 528,170 Professional fees 445,653 536,997 Research and development vendor costs 418,681 1,551,920 Accrued expenses and other current liabilities $ 10,181,810 $ 6,304,061 58 Table of Contents 7. Per Share Data The Company computes, presents and discloses earnings per share in accordance with the authoritative guidance which specifies the computation, presentation and disclosure requirements for earnings per share of entities with publicly held common stock or potential common stock. The objective of basic EPS is to measure the performance of an entity over the reporting period by dividing income (loss) by the weighted average shares outstanding. The objective of diluted EPS is consistent with that of basic EPS, except that it also gives effect to all potentially dilutive common shares outstanding during the period. The following is a reconciliation of the basic and diluted earnings (loss) per share computation: Year Ended December 31, 2023 2022 2021 Net income for basic earnings per share $ 68,068,826 $ 33,904,806 $ 69,450,766 Less: Change in fair value of warrants — 400,663 117,770 Net income, adjusted for change in fair value of warrants for diluted earnings per share $ 68,068,826 $ 33,504,143 $ 69,332,996 Weighted-average shares 71,362,209 72,929,550 75,322,194 Effect of potential common shares 317,061 616,951 1,080,522 Weighted-average shares: diluted 71,679,270 73,546,501 76,402,716 Earnings per share: basic $ 0.95 $ 0.46 $ 0.92 Earnings per share: diluted $ 0.95 $ 0.46 $ 0.91 For the years ended December 31, 2023, December 31, 2022 and December 31, 2021, weighted-average diluted shares include the dilutive effect of in-the-money options and stock-settled RSUs. For the years ended December 31, 2022 and December 31, 2021, the diluted earnings per share calculation also reflects the effect of the exercise or assumed exercise of outstanding warrants and any corresponding elimination of the impact included in operating results from the change in fair value of the warrants. The dilutive effect of warrants, stock-settled RSUs and options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the average amount of compensation cost for future service that the Company 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 years ended December 31, 2023, 2022 and 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 these RSUs, would have been anti-dilutive. For the years ended December 31, 2023, 2022 and 2021, the weighted average number of shares under the cash-settled RSUs excluded from the calculation of diluted earnings per share was 32,660 , 17,388 , and 29,873 , respectively. 59 Table of Contents 8. Stockholders’ Equity On December 31, 2023 , the Company’s authorized share capital consisted of 620,000,000 shares, of which 600,000,000 are designated common shares and 20,000,000 are designated preferred shares. The Company’s Board of Directors is authorized to issue preferred shares in series with rights, privileges and qualifications of each series determined by the Board. As of December 31, 2023 and 2022 , no preferred shares were outstanding or issued. On August 2, 2021, the Company's Board of Directors authorized a share repurchase program ("Repurchase Authorization") under which the Company could repurchase up to $ 50 million of the Company's common stock through December 31, 2023. The Company started repurchasing shares under this program in the fourth quarter of 2021. Repurchases under the Repurchase Authorization were made from time to time at the Company's discretion. The timing and actual number of shares repurchased depended upon a variety of factors, including: timing of procurement orders under government contracts; alternative opportunities for strategic uses of cash; the stock price of the Company’s common stock; market conditions; alternative capital management uses of cash; and other corporate liquidity requirements and priorities. During the year ended December 31, 2023 , the Company repurchased 1.7 million shares of common stock under the Repurchase Authorization for approximately $ 11.0 million. In addition, during the year ended December 31, 2023 , the Company recorded approximately $ 0.1 million of excise tax associated with the repurchase of common stock. On December 31, 2023, the Repurchase Authorization expired. On May 4, 2023 , the Board of Directors declared a special dividend of $ 0.45 per share on the common stock of the Company, which resulted in an overall dividend payment of approximately $ 32 million. The special dividend was paid on June 1, 2023 to shareholders of record at the close of business on May 16, 2023 . 60 Table of Contents 9. 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, 2023, 2022 and 2021 , the Company recorded stock-based compensation expense, including stock options and RSUs, of approximately $ 2.1 million, $ 1.8 million and $ 1.3 million, respectively. Stock Options Stock option awards provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee, at the time of grant, and must have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant. The fair value of options granted is estimated at the date of grant. Expected volatility has been estimated using the historical volatility of the Company's common stock using historical periods equivalent to the options’ expected lives. The expected dividend yield assumption reflects that the Company does not have a recurring dividend program. The risk-free interest rate assumption is based upon observed interest rates for securities with maturities approximating the options’ expected lives. The expected life was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms of the award. A summary of the Company’s stock option activity is as follows: Weighted Weighted Average Average Aggregate Number of Exercise Remaining Life Intrinsic Options Price (in years) Value Outstanding at January 1, 2023 (1) 226,896 $ 6.58 Granted 25,000 6.07 Exercised ( 28,796 ) 3.04 Canceled/Expired ( 28,796 ) 5.12 Outstanding at December 31, 2023 194,304 $ 6.51 7.88 $ 14,266 Vested at December 31, 2023 194,304 $ 6.51 7.88 $ 14,266 Exercisable at December 31, 2023 194,304 $ 6.51 7.88 $ 14,266 ( 1 ) Balances as of January 1, 2023 differ from those as of December 31, 2022 presented in the Company's 2022 Form 10 -K due to the special dividend paid during 2023. In connection with the dividend, the number of options and the weighted average exercise price were adjusted pursuant to the terms of the Company's 2010 Plan. As of December 31, 2023 , 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, 2023 and 2022 was approximately $ 123,000 and $ 375,000 , respectively. The stock options exercised during the year ended December 31, 2023 had an intrinsic value of less than $ 0.1 million. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option. There were no stock options exercised during the years ended December 31, 2022 and December 31, 2021. 61 Table of Contents Restricted Stock Units RSUs awarded to employees vest on schedules of between one year and three years, 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, 2023 (1) 295,705 $ 8.56 Granted (2) 415,438 6.14 Vested and released ( 217,799 ) 8.77 Canceled/Expired ( 7,019 ) 7.63 Outstanding at December 31, 2023 (2) 486,325 $ 6.41 ( 1 ) includes 30,702 awards which were settled in cash. ( 2 ) includes 59,309 awards which were expected to be settled in cash. As of December 31, 2023 , $ 1.5 million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over the weighted-average remaining requisite service period of 0.8 years. The weighted average fair value at the date of grant for restricted stock awards granted during the years ended December 31, 2023 , 2022 and 2021 was $ 6.14 , $ 9.40 and $ 6.95 per share, respectively. Based on the grant date, the total fair value of restricted stock and restricted stock units vested and released during the years ended December 31, 2023, 2022 and 2021 was approximately $ 1.9 million, $ 1.2 million and $ 0.9 million, respectively. 10. Income Taxes The Company's provision (benefit) for income taxes comprises the following: For the year ended December 31, 2023 2022 2021 Current: Federal $ 23,698,658 $ 13,154,619 $ 19,211,782 State and local 792,477 897,285 513,753 Foreign 14,445 3,800 13,994 Total current provision 24,505,580 14,055,704 19,739,529 Deferred: Federal ( 4,711,556 ) ( 3,818,283 ) 89,947 State and local ( 86,177 ) ( 9,495 ) 31,499 Foreign — — — Total deferred (benefit) provision ( 4,797,733 ) ( 3,827,778 ) 121,446 Total provision $ 19,707,847 $ 10,227,926 $ 19,860,975 62 Table of Contents The Company’s deferred tax assets and liabilities comprise the following: As of December 31, 2023 2022 Deferred income tax assets: State net operating losses $ 1,194,814 $ 1,247,826 Inventory 777,146 336,333 Reserves and accruals 666,772 569,290 Amortization of intangible assets 7,852 24,532 Share-based compensation 506,451 510,058 Fixed Assets 34,546 — Deferred revenue 2,256,099 66,011 Capitalized R&D 6,198,455 4,194,106 Lease liability 319,074 443,902 Other 514,150 380,162 Deferred income tax assets 12,475,359 7,772,220 Less: valuation allowance ( 943,903 ) ( 985,783 ) Deferred income tax assets, net of valuation allowance $ 11,531,456 $ 6,786,437 Deferred income tax liabilities: Amortization of goodwill ( 192,130 ) ( 192,083 ) Property, plant and equipment — ( 59,727 ) Other ( 291,208 ) ( 284,242 ) Deferred income tax asset, net $ 11,048,118 $ 6,250,385 The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability which is inherently uncertain. The Company assesses all available positive and negative evidence to determine if its existing deferred tax assets are realizable on a more-likely-than- not basis. In making such assessment, the Company considered the reversal of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on the Company's generation of sufficient taxable income within the available net operating loss carryback and/or carryforward periods to utilize the deductible temporary differences. As of December 31, 2023 , the Company maintains a full valuation on its state and local net operating losses which the Company determined were not realizable on a more-likely-than- not basis. The Company's valuation allowance decreased by approximately $ 42,000 during the year ended December 31, 2023 . 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, 2023 2022 2021 Statutory federal income tax rate 21.0 % 21.0 % 21.0 % State and local taxes 0.1 % 1.6 % 0.5 % Change in fair value of common stock warrant — (0.2)% — Section 162(m) limitation 0.4 % 0.7 % 0.5 % Other 1.0 % 0.1 % 0.2 % Effective tax rate 22.5 % 23.2 % 22.2 % For the years ended December 31, 2023 and 2022 , the Company’s effective tax rate differs from the statutory rate of 21 % primarily as a result of certain permanent differences including non-deductible executive compensation under IRC Section 162 (m), shortfalls from stock-based compensation, and state and local taxes. For the year ended December 31, 2021 , the Company's effective tax rate differs from the statutory rate of 21 % primarily as a result of non-deductible executive compensation under IRC 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, 2023 2022 2021 Balance at beginning of year $ 5,103,548 $ 5,602,587 $ 5,591,587 Tax positions related to the current and prior years: Additions — — 11,000 Reductions ( 17,096 ) ( 68,792 ) — Settlements — — — Lapses in applicable statutes of limitation ( 4,842 ) ( 430,247 ) — Balance at the end of the year $ 5,081,610 $ 5,103,548 $ 5,602,587 Included in the balance of unrecognized tax benefits as of December 31, 2023 , are potential benefits of $ 5.1 million that, if recognized, would affect the effective tax rate. The total amount accrued for interest and penalties as of December 31, 2023 and December 31, 2022 , was $ 214,000 and $ 72,000 , respectively. For the years ended December 31, 2023 and December 31, 2022 , the Company recorded an income tax expense of $ 142,000 and an income tax benefit of $ 23,000 , respectively, related to the accrual of interest and penalties. There 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, 2023 . The Company files federal income tax returns and income tax returns in various state and local tax jurisdictions. The federal tax years open to examination are 2020 to 2023 . The Company's state and local tax years that are open to tax examination are generally 2019 to 2023 . 11. Revenues by Geographic Region Revenues by geographic region were as follows: For the year ended December 31, 2023 2022 2021 United States $ 118,650,253 $ 39,803,888 $ 120,656,294 International Asia-Pacific 966,633 14,853,233 — Canada — 38,875,657 13,014,160 Europe, Middle East and Africa (EMEA) 20,300,334 16,270,033 — Other — 972,799 — Total International 21,266,967 70,971,722 13,014,160 Total revenues $ 139,917,220 $ 110,775,610 $ 133,670,454 64 Table of Contents 12. Commitments and Contingencies Operating lease commitments The Company leases its Corvallis, Oregon, facilities and office space under an operating lease which was signed on November 3, 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 for each of the years ended December 31, 2023 and 2022 . Cash paid for amounts included in the measurement of lease liabilities from operating cash flows was $ 0.7 million and $ 0.6 million for the years ended December 31, 2023 and 2022 , respectively. As of December 31, 2023 , the weighted-average remaining lease term of the Company’s operating leases was 2.87 years while the weighted-average discount rate was 4.53 %. The following is a maturity analysis of the Company's lease liabilities as of December 31, 2023 : 2024 $ 622,638 2025 406,994 2026 409,971 2027 165,916 Total undiscounted cash flows under operating leases 1,605,519 Less: Imputed interest ( 113,642 ) Present value of lease liabilities $ 1,491,877 As of December 31, 2023 , approximately $ 0.9 million of the lease liability is included in Other liabilities on the consolidated balance sheet with the current portion included in accrued expenses. Legal Proceedings From time to time, we 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, 2023 , the Company has approximately $ 14.8 million of purchase commitments associated with manufacturing obligations. 65 Table of Contents 13. 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 previously used by the Company. The Company did not incur any expenses related to services provided by the outside counsel during the year ended December 31, 2023 or December 31, 2022 . During the year ended December 31, 2021 , the Company incurred expenses of approximately $ 0.1 million related to services provided by the outside counsel. The Company had no outstanding payables or accrued expenses related to services performed by the outside counsel as of December 31, 2023 and 2022 . Effective June 13, 2023, a director was elected to the Company's Board of Directors who provides consulting services to the Company. Under a consulting agreement, the director receives a monthly fee of $ 20,000 . During the year ended December 31, 2023 , the Company incurred $ 240,000 , respectively, under this agreement. The Company had no outstanding payables or accrued expenses related to the services performed by this vendor as of December 31, 2023 . Real Estate Leases On May 26, 2017, the Company and M&F Incorporated entered into the New HQ Lease, pursuant to which the Company agreed to lease 3,200 square feet 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 consisted 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, 2023 , the Company paid $ 0.4 million for rent and ancillary services associated with this lease. The Company had no outstanding payables or accrued expenses related to this lease as of December 31, 2023 and 2022 . 66 Table of Contents 14. Subsequent Event On March 12, 2024, the Board of Directors declared a special dividend of $ 0.60 per share on the common stock of the Company. The special dividend is payable on April 11, 2024 to shareholders of record at the close of business on March 26, 2024. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.