SIGA Annual Report 2018 | Quarterlytics

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549FORM 10-K(Mark One)xAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2018 OroTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ___________Commission File No. 0-23047Table of ContentsSIGA Technologies, Inc. (Exact name of registrant as specified in its charter)Delaware13-3864870(State or other jurisdiction of(IRS Employer Identification. No.)incorporation or organization) 31 East 62nd Street10065New York, NY(zip code)(Address of principal executive offices) Registrant’s telephone number, including area code: (212) 672-9100Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredcommon stock, $.0001 par valueThe Nasdaq Global MarketSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes o No x. Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act Yes o No x. Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under thoseSections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o. Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost such files). Yes x No o. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. Seedefinition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (check one): Largeaccelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o. If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13 (a) of the Exchange Act. oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x.Indicate by check mark whether the registrant has filed all documents and reports required by section 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to thedistribution of securities under a plan confirmed by a court. Yes o No o.The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 30,2018 as reported on The Nasdaq Global Market was approximately $314,197,559. As of February 15, 2019 the registrant had outstanding 80,941,524 shares of common stock. DOCUMENTS INCORPORATED BY REFERENCEThe following document is incorporated herein by reference: Table of ContentsDocumentParts Into Which IncorporatedProxy Statement for the Company’s 2019 AnnualPart IIIMeeting of Stockholders Table of ContentsSIGA TECHNOLOGIES, INC. FORM 10-KTable of Contents Page No.PART I Item 1.Business2Item 1A.Risk Factors14Item 1B.Unresolved Staff Comments28Item 2.Properties28Item 3.Legal Proceedings28Item 4.Mine Safety Disclosures28 PART II Item 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities29Item 6.Selected Financial Data31Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations32Item 7A.Quantitative and Qualitative Disclosures About Market Risk42Item 8.Financial Statements and Supplementary Data43Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure69Item 9A.Controls and Procedures69Item 9B.Other Information69 PART III Item 10.Directors, Executive Officers and Corporate Governance70Item 11.Executive Compensation70Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters70Item 13.Certain Relationships and Related Transactions, and Director Independence70Item 14.Principal Accounting Fees and Services70 PART IV Item 15.Exhibits, Financial Statement Schedules71Item 16.Form 10-K Summary76 SIGNATURES 77Table of ContentsPart IForward-Looking StatementsCertain statements in this Annual Report on Form 10-K, including certain statements contained in “Business” and “Management’s Discussion andAnalysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Actof 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the progress of SIGA’sdevelopment programs and timelines for bringing products to market, delivering products to the U.S Strategic National Stockpile and the enforceability ofthe 2011 BARDA Contract and the 2018 BARDA Contract (each as defined below, and collectively, the "BARDA Contracts") with the U.S. BiomedicalAdvanced Research and Development Authority (“BARDA”). The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,”“project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to variousknown and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of SIGA is not aguarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number offactors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that BARDA elects, in its sole discretion as permitted under theBARDA Contracts, not to exercise all, or any, of the options under those contracts, (ii) the risk that SIGA may not complete performance under the BARDAContracts on schedule or in accordance with contractual terms, (iii) the risk that the BARDA Contracts are modified or canceled at the request or requirementof the U.S. government, (iv) the risk that the nascent international biodefense market does not develop to a degree that allows SIGA to successfully marketTPOXX® internationally, (v) the risk that potential products, including the IV formulation of TPOXX®, or potential alternative uses of TPOXX® that appearpromising to SIGA or its collaborators, cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (vi) the risk that SIGA or itscollaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products or uses, (vii) the risk that SIGA maynot be able to secure or enforce sufficient legal rights in its products, including intellectual property protection, (viii) the risk that any challenge to SIGA’spatent and other property rights, if adversely determined, could affect SIGA’s business and, even if determined favorably, could be costly, (ix) the risk thatregulatory requirements applicable to SIGA’s products may result in the need for further or additional testing or documentation that will delay or preventseeking or obtaining needed approvals to market these products, (x) the risk that one or more protests could be filed and upheld in whole or in part or othergovernmental action taken, in either case leading to a delay of performance under the 2018 BARDA Contract or other governmental contracts, (xi) the riskthat the volatile and competitive nature of the biotechnology industry may hamper SIGA’s efforts to develop or market its products, (xii) the risk that changesin domestic or foreign economic and market conditions may affect SIGA’s ability to advance its research or may affect its products adversely, (xiii) the effectof federal, state, and foreign regulation, including drug regulation and international trade regulation, on SIGA’s businesses, (xiv) the risk that the U.S.government’s responses (including inaction) to the national or global economic situation may affect SIGA’s business adversely and (xv) the risk that SIGA’sinternal controls will not be effective in detecting or preventing a misstatement in SIGA’s financial statements, as well as the risks and uncertainties includedin Item 1A “Risk Factors” of this Form 10-K. All such forward-looking statements are current only as of the date on which such statements were made. SIGAdoes not undertake any obligation to update publicly any forward-looking statement to reflect events or circumstances after the date on which any suchstatement is made or to reflect the occurrence of unanticipated events. Item 1. BusinessOverview SIGA Technologies, Inc. is referred to throughout this report as “SIGA,” “the Company,” “we” or “us.” We are a commercial-stage pharmaceutical company focused on the health security market. Health security comprises countermeasures forbiological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and health preparedness.Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an 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. Oral TPOXX® is anovel small-molecule drug that has been delivered to the U.S. Strategic National Stockpile (“Strategic Stockpile”) under the Project BioShield Act of 2004(“Project BioShield”). Concurrent with the approval, the FDA granted the Company's request for a Priority Review Voucher (“PRV”). A PRV is a voucher thatmay be used to obtain an accelerated FDA review of a product candidate. On October 31, 2018, the Company sold its PRV for cash consideration of $80.0million. BARDA Contracts-TPOXX® 2Table of Contents2018 BARDA ContractOn September 10, 2018, the Company entered into a contract with BARDA pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oralTPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 coursesof the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, the contract includes funding from BARDA for advanced development of IVTPOXX®; post-marketing activities for oral and IV TPOXX®, and supportive procurement activities. The contract with BARDA (as amended, modified, orsupplemented from time to time, the “2018 BARDA Contract”) currently contemplates, as of February 28, 2019, up to approximately $600.1 million ofpayments, of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately $12.2 millionof payments are related to exercised options and up to approximately $536.2 million of payments are currently specified as unexercised options. BARDAmay 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 fromthe date of entry into the 2018 BARDA Contract and such options could be exercised at any time during the contract term, including during the base periodof performance. Initially, the 2018 BARDA Contract specified payments of up to approximately $628.7 million; on February 21, 2019, a cost-reimbursementplus fixed fee option for post-marketing, and other activities for oral TPOXX® was modified to $12.2 million (from $40.8 million) based on updatedplanning. As such, total potential payments currently specified under the 2018 BARDA Contract are $600.1 million.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 of20,000 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 ("IVBDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments ofapproximately $0.6 million for supportive procurement activities. As of December 31, 2018, the Company has received $3.2 million for the manufacture ofIV BDS; such bulk drug substance is expected to be used for the manufacture of 20,000 courses of IV FDP.Exercised options specify potential payments up to approximately $12.2 million for funding of post-marketing activities for oral TPOXX®.Unexercised options specify potential payments up to approximately $536.2 million in total (if all options are exercised). There are options for thefollowing activities: payments of up to $450.2 million for the delivery of up to approximately 1,452,300 courses of oral TPOXX® to the Strategic Stockpile;payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon themanufacture 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 IVTPOXX®; and payments of up to approximately $5.6 million for supportive procurement activities.The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drugsubstance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDPOptions”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 2018 BARDA Contract includes: three separate IVBDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providingfor 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 FDPOptions, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive paymentsup 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 64,000courses), BARDA has the option to independently purchase IV BDS or IV FDP. 2011 BARDA ContractOn May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses oforal TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract”) includes a base contract, asmodified, (“2011 Base Contract”) as well as options. The 2011 Base Contract specifies approximately $508.7 million of payments (including exercisedoptions), of which, as of December 31, 2018, $459.8 million has been received3Table of Contentsby the Company for the manufacture and delivery of 1.7 million courses of oral TPOXX® and $43.9 million has been received for certain reimbursements inconnection with development and supportive activities. Approximately $5.0 million remains eligible to be received in the future for reimbursements ofdevelopment and supportive activities.For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are productreplacement obligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the FDA wasdifferent from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the "FDA Approval Replacement Obligation"); (ii) a productreplacement obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a productreplacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July, 13, 2018, the FDA approved oral TPOXX® for thetreatment of smallpox and there is no difference between the approved product and courses in the Strategic Stockpile. As such, the possibility of the FDAApproval Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relatingto FDA approval of 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise, the 2011BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all would be exercised by BARDA, wouldresult in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such aswork on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-basemanufacturing. BARDA may choose in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised two optionsrelated to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was minimal.The 2011 BARDA Contract expires in September 2020.Lead Product-TPOXX®SIGA believes that TPOXX® is among the first new small-molecule drugs delivered to the Strategic Stockpile under Project BioShield. OralTPOXX® is a novel, patented drug that is easy to store, transport and administer. On July 13, 2018, the FDA approved oral TPOXX® for the treatment ofsmallpox. Oral TPOXX® labeling, approved by the FDA, limits sales of oral TPOXX® in the U.S. to those for the Strategic Stockpile. Under the 2011 BARDAContract, 1.7 million courses of oral TPOXX® were sold to BARDA and delivered to the Strategic Stockpile between 2013 and 2017. Courses deliveredunder the 2011 BARDA Contract have an FDA-approved shelf life of seven years. Under the 2018 BARDA Contract, SIGA can deliver up to 1.7 millioncourses of TPOXX® (of which 1,488,000 courses would be oral TPOXX® and 212,000 courses would be IV TPOXX®) to the Strategic Stockpile, at theoption of BARDA.For IV TPOXX®, SIGA initiated a phase I single ascending dose safety and pharmacokinetic study in the first quarter of 2016 and completed theenrollment and dosing of the final cohort of the study in March 2017. The Company initiated a phase I multiple ascending dose safety and pharmaceuticalstudy in the 3rd quarter of 2018 and completed enrollment and dosing of the final cohort in December 2018.ManufacturingSIGA does not have a manufacturing infrastructure and does not intend to develop one for the manufacture of TPOXX®. SIGA relies on and usesthird parties known as Contract Manufacturing Organizations (“CMOs”) to procure commercial raw materials and supplies, and to manufacture TPOXX®.SIGA's CMOs apply methods and controls in facilities that are used for manufacturing, processing, packaging, testing, analyzing and holdingpharmaceuticals which conform to current good manufacturing practices (“cGMP”), the standard set by the FDA for manufacture of pharmaceuticals intendedfor human use.Oral TPOXX®:For the manufacture of oral TPOXX® under the BARDA contracts, the Company uses the following CMOs: Albemarle Corporation (“Albemarle”);Powdersize, LLC (“Powdersize”); Catalent Pharma Solutions LLC (“Catalent”); and Packaging Coordinators, LLC ("PCI").In August 2011, SIGA entered into an agreement with Albemarle. Such agreement was amended in April 2015 and expired in April 2018. On October1, 2018, SIGA entered into a new agreement with Albemarle. Albemarle manufactures, tests and supplies4Table of Contentsactive pharmaceutical ingredient (“API”) for use in TPOXX®. SIGA agreed that, during the term of the new agreement, SIGA will purchase 100% of itsinternal and external API requirements for TPOXX® from Albemarle until the later of (i) September 30, 2021 and (ii) such time as SIGA has purchased twelvemetric tons of API from Albemarle under the new agreement. From and after the later of: (i) September 30, 2021, or (ii) such time as SIGA has purchasedtwelve metric tons of API from Albemarle, SIGA will purchase at least 70% of its internal and external API requirements for TPOXX® from Albemarle untilthe end of the term of the new agreement (as described below), unless the Company receives an offer to purchase API at a price that Albemarle is unable tomatch, in which event SIGA will purchase at least 30% of its internal and external API requirements for TPOXX® from Albemarle until September 30, 2023.There is no minimum amount of API kilograms that must be used or acquired by SIGA. The following events are excluded from the “100% API” requirement:(i) if a contract entered into by SIGA for the sale of final drug product (“FDP”) requires that the product used as the API for such FDP be manufactured outsidethe U.S. and Albemarle is unwilling or unable to subcontract such manufacture to a party or parties that meet the terms of the agreement; (ii) if a contractentered into by SIGA for the sale of FDP in an intravenous formulation requires different specifications than those provided for under the agreement and theparties are not able to reach agreement on the necessary changes to the specifications or on pricing; or (iii) if Albemarle fails to perform any of its obligationsunder the agreement and does not cure such failure within 30 days of written notice from SIGA. SIGA is required to pay Albemarle within 45 days of itsinvoice date. Pricing for API is at a fixed price per kilogram, subject to adjustment for increases in raw material costs and/or general manufacturing costs.Albemarle is required to deliver API that conforms with specifications outlined in the agreement; the Company is not required to pay for API that does notmeet specifications. The Company has 120 days to reject any shipments that do not meet such specifications or are damaged. In addition to receivingpayments for API deliveries, Albemarle is also paid for related services, such as stability testing. The Company’s agreement with Albemarle is currentlyscheduled to expire upon the earlier of: (i) September 30, 2023, or (ii) the fulfillment of delivery obligations under the 2018 BARDA Contract. Thereafter, theagreement shall renew for successive one-year renewal terms until either the Company or Albemarle provide notice of non-renewal at least 90 days prior tothe expiration date of a term.Powdersize micronizes and tests API for use in oral TPOXX®. The Company’s agreement with Powdersize was amended on January 11, 2019. Theamended term ends on the tenth anniversary of the amendment date.Catalent granulates, encapsulates, and tests oral TPOXX®. In addition, Catalent provides services related to commercial stability testing of drugproduct and preparation for tabulated stability and trend analysis for each time point. The Company’s agreement with Catalent has an initial term that endson June 28, 2021. Thereafter, this agreement automatically renews for three years unless either party provides six months' notice of its desire to terminate theagreement prior to the expiration of the term. During the term of the agreement, SIGA will purchase all of its requirements for bulk product under the 2018BARDA contract from Catalent.PCI provides packaging services in connection with oral TPOXX®. The Company’s agreement with PCI has an initial term that ends on March 1,2022. Thereafter, this agreement automatically renews for successive one-year periods unless either party provides 120 days' notice of its desire to terminatethe agreement prior to the expiration of the term. The agreement can be terminated earlier than March 1, 2022 under certain conditions.Intravenous (IV) formulation of TPOXX®:The Company is currently negotiating with CMOs with respect to raw material procurement and services in connection with the manufacture of IVTPOXX®. There is no assurance that the Company will be able to enter into agreements with service providers in connection with the manufacture of IVTPOXX® or the procurement of raw materials.Market for Biological Defense Programs The market for biodefense countermeasures reflects continued awareness of the threat of global terror and biowarfare activity. The U.S. governmentis the largest source of development and procurement funding for academic institutions and biopharmaceutical companies conducting biodefense research ordeveloping vaccines, anti-infectives and immunotherapies directed at potential agents of bioterror or biowarfare. U.S. government spending on biodefenseprograms includes development funding awarded by the National Institute of Allergy and Infectious Diseases, BARDA and the Department of Defense(“DoD”), and procurement of countermeasures by BARDA, the Centers for Disease Control and Prevention (“CDC”) and the DoD. For the fiscal year endingSeptember 30, 2019, the budget for the U.S. Department of Health and Human Services provides an annual appropriation of more than $1.9 billion foractivities related to advanced development and procurement of medical countermeasures for biological and other threats to civilian populations.5Table of ContentsIn addition to the U.S. government, we believe that potential additional markets for the sale of biodefense countermeasures include:•foreign governments, including both defense and public health agencies;•non-governmental organizations and multinational companies, including transportation and security companies•healthcare providers, including hospitals and clinics; and•state and local governments, which may be interested in these products to protect, among others, emergency responders, such as police, fire andemergency medical personnel.At present, oral TPOXX® is not approved for sale beyond the Strategic Stockpile. The Company would need to meet regulatory requirements beforesales were made in the U.S. beyond the Strategic Stockpile.Research Agreements and Grants The Company has an R&D program for IV TPOXX®. This program is funded by the 2018 BARDA Contract and a separate development contractwith BARDA ("IV Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As ofDecember 31, 2018, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $15.1 million. SeeNote 3 in the consolidated financial statements regarding the 2018 BARDA Contract.Contracts and grants include, among other things, options that may or may not be exercised at BARDA’s discretion. Moreover, contracts and grantscontain customary terms and conditions including BARDA’s right to terminate or restructure a contract or grant for convenience at any time. As such, we maynot receive all available funds.GeneralWe receive cash payments from BARDA on a monthly basis, as services are performed or goods are purchased. Amounts under contract and grantagreements are not guaranteed and can be canceled at any time for reasons such as non-performance or convenience of the U.S. government and, if canceled,we will not receive funds for additional work under the agreements.Competition The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and intense competition. Our competitorsinclude many major pharmaceutical companies, each of which has financial, technical and marketing resources significantly greater than ours.Biotechnology and other pharmaceutical competitors in the biodefense space include, but are not limited to, Emergent BioSolutions, Bavarian Nordic AS,and Chimerix Inc. Academic institutions, governmental agencies and other public and private research organizations are also conducting research activitiesand seeking patent protection and may commercialize products on their own or through joint ventures. TPOXX® faces significant competition for U.S. government funding for both development and procurement of medical countermeasures forbiological, chemical, radiological and nuclear threats, diagnostic testing systems, and other emergency preparedness countermeasures. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer side effects, are more convenient or are less expensive than products that we may develop. In addition, we may not be able to compete effectivelyif our product candidates do not satisfy governmental procurement requirements, particularly requirements of the U.S. government with respect to biodefenseproducts.Human Resources and Research Facilities As of February 15, 2019, we had 41 full-time employees. None of our employees are covered by a collective bargaining agreement, and we considerour employee relations to be satisfactory. Our research and development facilities are located in Corvallis, Oregon, where we lease approximately 10,276square feet under a lease agreement that commenced on January 1, 2018 and which expires in December 2019. This lease has two successive renewal options- the first for two years and the second for three years.Intellectual Property and Proprietary Rights6Table of ContentsSIGA’s commercial success will depend in part on its ability to obtain and maintain patent protection in the U.S. and the rest of the world for itsproprietary technologies, drug targets, and potential products and to preserve its trade secrets. Because of the substantial length of time and expenseassociated with bringing potential products through the development and regulatory clearance processes to reach the marketplace, the pharmaceuticalindustry places considerable importance on obtaining patent and trade secret protection. The patent positions of pharmaceutical and biotechnologycompanies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed inbiotechnology patents across various jurisdictions has emerged to date. Accordingly, SIGA cannot predict the type and extent of claims that will be allowedin pending patent applications.SIGA also relies upon trade secret protection for its confidential and proprietary information. No assurance can be given that other companies willnot independently develop substantially equivalent proprietary information and techniques or otherwise gain access to SIGA’s trade secrets or that SIGA canmeaningfully protect its trade secrets.SIGA exclusively owns its key patent portfolios, which relate to its leading drug candidate TPOXX® (also known as ST-246, tecovirimat). As ofFebruary 28, 2019, the TPOXX® patent portfolio has seven patent families consisting of 21 U.S. utility patents, 57 issued foreign patents, five U.S. utilitypatent applications, and 41 foreign patent applications.The principal and material issued patents covering TPOXX® are described in the table below.Patent NumberCountryProtection ConferredIssue DateExpiration DateUS 7737168United StatesMethod of treating orthopoxvirus infection with ST-246June 15, 2010May 3, 2027^US 8039504United StatesPharmaceutical compositions and unit dosage forms containing ST-246October 18, 2011July 23, 2027US 7687641United StatesMethod of manufacturing ST-246March 30, 2010September 27, 2024US 8124643United StatesComposition of matter for the ST-246 compound andPharmaceutical compositions containing ST-246February 28, 2012June 18, 2024^US 7956197United StatesMethod of manufacturing ST-246June 7, 2011June 18, 2024US 8530509United StatesPharmaceutical compositions containing a mixture of compoundsincluding ST-246September 10, 2013June 18, 2024US 8802714United StatesMethod of treating orthopoxvirus infection with a mixture ofcompounds including ST-246August 12, 2014June 18, 2024US 9045418United StatesMethod of manufacturing ST-246June 2, 2015June 18, 2024US 9233097United StatesLiquid Pharmaceutical formulations containing ST-246January 12, 2016August 2, 2031US 9339466United StatesCertain polymorph of ST-246, method of preparation of thepolymorph and pharmaceutical compositions containing thepolymorphMay 17, 2016March 23, 2031US 9546137United StatesMethods of preparing ST-246January 17, 2017August 14, 2033US 9744154United StatesPolymorphic forms of ST-246 and methods of preparationAugust 29, 2017March 23, 2031US 9862683United StatesMethods of preparing TecovirimatJanuary 9, 2018August 14, 2033US 9670158United StatesAmorphous Tecovirimat preparationJune 6, 2017July 11, 2034US 9889119United StatesAmorphous Tecovirimat preparationFebruary 13, 2018July 11, 2034US 9907859United StatesST-246 liquid formulations and methodsMarch 6, 2018August 2, 2031US 10029985United StatesMethods of preparing TecovirimatJuly 24, 2018August 14, 2033US 10045963United StatesAmorphous Tecovirimat preparationAugust 14, 2018July 11, 2034US 10045964United StatesCertain polymorphs of ST-246, method of preparation of thepolymorphs and pharmaceutical compositions containing thepolymorphsAugust 14, 2018March 23, 2031US 10124071United StatesST-246 liquid formulations and methodsNovember 13, 2018August 2, 2031US 10155723United StatesMethods of preparing TecovirimatDecember 18, 2018August 14, 2033SG 184201SingaporeCertain polymorphs of ST-246, method of preparation of thepolymorphs and pharmaceutical compositions containing thepolymorphsJune 22, 2015March 23, 2031RU 2578606RussiaCertain polymorphs of ST-246, method of preparation of thepolymorphs and their use in treating orthopoxvirusMarch 27, 2016March 23, 2031OA 16109OAPI/AfricaCertain polymorphs of ST-246, method of preparation of thepolymorphs and their use in treating orthopoxvirusOctober 31, 2013March 23, 2031NZ 602578New ZealandCertain polymorphs of ST-246, method of preparation of thepolymorphs and their use in treating orthopoxvirusDecember 2, 2014March 23, 20317Table of ContentsMX 326231MexicoPharmaceutical compositions containing ST-246 and one or moreadditional ingredients and dosage unit forms containing ST-246December 11, 2014April 23, 2027MX 348481MexicoCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesJune 15, 2017April 23, 2027MX 347795MexicoST-246 liquid formulations and methodsMay 15, 2017August 2, 2031MX 361428MexicoPolymorphic forms of ST-246 and methods of preparationDecember 6, 2018March 23, 2031KR 101868117KoreaST-246 liquid formulations and methodsJune 8, 2018August 2, 2031JP 4884216JapanTherapeutic agent for treating orthopoxvirus including ST-246,pharmaceutical composition of matter for the ST-246 compound andmethod of manufacturing ST-246December 16, 2011June 18, 2024JP 5657489JapanMethod of manufacturing ST-246December 5, 2014June 18, 2024JP 5898196JapanLiquid Pharmaceutical formulations containing ST-246March 11, 2016August 2, 2031JP 6018041JapanCertain polymorphs of ST-246, method of preparation of thepolymorphs and pharmaceutical compositions containing thepolymorphsOctober 7, 2016March 23, 2031JP 6188802JapanMethods of preparing TecovirimatAugust 10, 2017August 14, 2033JP 6444460JapanMethods of preparing TecovirimatDecember 7, 2018August 14, 2033CN 2011800245893ChinaCertain polymorphs of ST-246, method of preparation of thepolymorphs and pharmaceutical compositions containing thepolymorphsAugust 26, 2015March 23, 2031CN 2013800429237ChinaMethods of preparing TecovirimatJune 20, 2017August 14, 2033CA 2529761CanadaUse of ST-246 to treat orthopoxvirus infection, pharmaceuticalcompositions containing ST-246 and composition of matter for theST-246 compoundAugust 13, 2013June 18, 2024CA 2685153CanadaPharmaceutical compositions containing ST-246 and one or moreadditional ingredients and dosage unit forms containing ST-246December 16, 2014April 23, 2027CA 2866037CanadaChemicals, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesMay 16, 2017April 23, 2027CA 2807528CanadaLiquid Pharmaceutical formulations containing ST-246September 25, 2018August 2, 2031AU 2004249250AustraliaMethod of treating orthopoxvirus infection, pharmaceuticalcomposition containing ST-246 and composition of matter for theST-246 compoundMarch 29, 2012June 18, 2024AU 2007351866AustraliaPharmaceutical compositions containing ST-246 and one or moreadditional ingredients and dosage unit forms containing ST-246January 10, 2013June 18, 2024AU 2011232551AustraliaCertain polymorphs of ST-246, method of preparation of thepolymorphs and their use in treating orthopoxvirusFebruary 26, 2015March 23, 2031AU 2011285871AustraliaLiquid Pharmaceutical formulations containing ST-246August 6, 2015August 2, 2031AU 2013302764AustraliaMethods of preparing TecovirimatApril 5, 2018August 14, 2033AU 2012268859AustraliaPharmaceutical compositions containing ST-246 and one or moreadditional ingredients and dosage unit forms containing ST-246August 18, 2016June 18, 2024AU 2014290333AustraliaAmorphous Tecovirimat preparationFebruary 21, 2019July 11, 2034AP 3221ARIPO*/AfricaCertain polymorphs of ST-246, method of preparation of thepolymorphs and their use in treating orthopoxvirusApril 3, 2015March 23, 2031ZA 2012/07141South AfricaCertain polymorphs of ST-246, method of preparation of thepolymorphs and pharmaceutical compositions containing thepolymorphsJune 29, 2016March 23, 20318Table of ContentsZA 2013/00930South AfricaLiquid Pharmaceutical formulations containing ST-246November 25, 2015August 2, 2031IL 201736IsraelPharmaceutical compositions containing ST-246 and one or moreadditional ingredients and dosage unit forms containing ST-246October 1, 2016April 23, 2027IL 236944IsraelMethods of preparing TecovirimatFebruary 1, 2017August 14, 2033IL 242666IsraelCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesDecember 1, 2018April 23, 2027AT 1638938AustriaCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024BE 1638938BelgiumCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024BE 2549871BelgiumPolymorphic forms of ST-246August 22, 2018March 23, 2031CH 1638938SwitzerlandCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024CH 2549871SwitzerlandPolymorphic forms of ST-246August 22, 2018March 23, 2031DE 1638938GermanyCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024DE 2549871GermanyPolymorphic forms of ST-246August 22, 2018March 23, 2031DE 2887938GermanyMethods of preparing TecovirimatJanuary 10, 2018August 14, 2033DK 1638938DenmarkCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024DK 2549871DenmarkPolymorphic forms of ST-246August 22, 2018March 23, 2031ES 1638938SpainCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024FI 1638938FinlandCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024FR 1638938FranceCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024FR 2887938FranceMethods of preparing TecovirimatJanuary 10, 2018August 14, 2033FR 2549871FrancePolymorphic forms of ST-246August 22, 2018March 23, 2031GB 1638938United KingdomCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024GB 2887938United KingdomMethods of preparing TecovirimatJanuary 10, 2018August 14, 2033GB 2549871United KingdomPolymorphic forms of ST-246August 22, 2018March 23, 2031IE 1638938IrelandCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024IT 502017000078377ItalyCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 20249Table of ContentsNL 1638938NetherlandsCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024PL 1638938PolandCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024SE 1638938SwedenCompounds, compositions and methods for treatment and preventionof orthopoxvirus infections and associated diseasesApril 12, 2017June 18, 2024^ A Patent Term Extension Application is pending for US 7737168, which would change the expiration date from May 3, 2027 to September 4, 2031. APatent Term Extension Application is also pending for US 8124643, which would change the expiration date from June 18, 2024 to December 13, 2027. Inthe event that both US 7737168 and US 8124643 are found to be eligible for a patent term extension, SIGA would only be able to elect one of the two patentsfor which the extension is sought and would elect to extend US 7737168.* ARIPO has 19 member African States as follows: Botswana, The Gambia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Sierra Leone, Liberia,Rwanda, Sao Tome and Principe, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. In addition to the patents listed in the above chart, the principal and material patent applications covering TPOXX® include patent filings inmultiple jurisdictions, including the United States, Europe, Asia, Africa, Australia, and other commercially significant markets. We hold 46 patentapplications currently pending with respect to various compositions of TPOXX®, methods of manufacturing, methods of treatment, and dosage forms.Expiration dates for pending patent applications, if granted, will fall between 2024 and 2037.FDA regulations require that patented drugs be sold under brand names that comply with various regulations. SIGA must develop and make effortsto protect these brand names for each of its products in order to avoid product piracy and to secure exclusive rights to these brand names. SIGA may expendsubstantial funds in developing and securing rights to adequate brand names for our products. SIGA currently has proprietary trademark rights in SIGA®,TPOXX® and other brands used by us in the United States and certain foreign countries, but we may have to develop additional trademark rights in order tocomply with regulatory requirements. SIGA considers securing adequate trademark rights to be important to its business.Government Regulation Regulatory Approval ProcessRegulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of anybiopharmaceutical product that we may develop. The nature and the extent to which such regulations may apply to us will vary depending on the nature ofany particular product. Virtually all of our potential pharmaceutical products will require regulatory approval by governmental agencies prior to non-governmental commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approvalprocedures by the FDA and similar health authorities in foreign countries. Various federal statutes and regulations also govern or regulate the manufacturing,safety, labeling, storage, record keeping and marketing of such products. The process of obtaining these approvals and the subsequent compliance withappropriate federal and foreign statutes and regulations is complex and requires the expenditure of substantial resources. In order to test clinically, and to manufacture and market products for diagnostic or therapeutic use, a company must comply with mandatoryprocedures and safety standards established by the FDA and comparable agencies in foreign countries. Before beginning human clinical testing of a potentialnew drug in the United States, a company must file an IND application and receive clearance from the FDA. An IND application is a summary of the pre-clinical studies that were conducted to characterize the drug, including toxicity and safety studies, information on the drug’s composition and themanufacturing and quality control procedures used to produce the drug, as well as a discussion of the human clinical studies that are being proposed toevaluate the safety and efficacy of the product.The pre-marketing clinical program required for approval by the FDA for a new drug typically involves a time-consuming and costly three-phaseprocess. In Phase I, trials are conducted with a small number of healthy subjects to determine the early safety profile, the pattern of drug distribution,metabolism and elimination. In Phase II, trials are conducted with small groups of10Table of Contentspatients afflicted with a target disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase III, large scale,multi-center comparative trials, which may include both controlled and uncontrolled studies, are conducted with patients afflicted with a target disease inorder to provide enough data for statistical proof of efficacy and safety required by the FDA and other authorities. Additional trials may be required toevaluate how a new drug interacts with other drugs as well as if the drug has any impact on cardio-vascular or other potential risks. The FDA closely monitors the progress of each of the three phases of clinical testing and may, in its discretion, reevaluate, alter, suspend orterminate the testing based on the data that have been accumulated to that point and its assessment of the risk/benefit ratio to the patients involved in thetesting. Estimates of the total time typically required for carrying out such clinical testing vary between two and 10 years. Upon completion of such clinicaltesting, a company typically submits a new drug application ("NDA") to the FDA that summarizes the results and observations of the drug during the clinicaltesting. Based on its review of the NDA, the FDA will decide whether to approve the drug and whether to impose any marketing restrictions or requireadditional post-approval clinical studies. This review process can be quite lengthy, and approval for the production and marketing of a new pharmaceuticalproduct can require a number of years and substantial funding. There can be no assurance that any approval will be granted on a timely basis, if at all. The FDA amended its regulations, effective June 30, 2002, to include the “Animal Rule” in circumstances that would permit the typical clinicaltesting regime to approve certain new drug and biological products used to reduce or prevent the toxicity of chemical, biological, radiological, or nuclearagents not otherwise naturally present for use in humans based on evidence of safety in healthy subjects and evidence of effectiveness derived only fromappropriate animal studies and any additional supporting data. The FDA has indicated that approval for therapeutic use of TPOXX® was determined underthe “Animal Rule.” Once the product is approved for sale, FDA regulations govern the manufacturing and marketing activities, and a post-marketing testing andsurveillance program may be required to monitor a product’s usage and effects. Product approvals may be withdrawn if compliance with regulatory standardsis not maintained. Many other countries in which products developed by us may be marketed impose similar regulatory processes. FDA regulations also make available an alternative regulatory mechanism that may lead to use of the product under limited circumstances. TheEmergency Use Authorization (“EUA”) authority allows the FDA Commissioner to strengthen the public health protections against biological, chemical,radiological and nuclear agents that may be used to attack the American people or the U.S. armed forces. Under this authority, the FDA Commissioner mayallow medical countermeasures to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions caused by suchagents when appropriate findings are made concerning the nature of the emergency, the availability of adequate and approved alternatives, and the quality ofavailable data concerning the drug candidate under consideration for emergency use. Legislation and Regulation Related to Bioterrorism Counteragents and Pandemic PreparednessBecause some of our drug candidates are intended for the treatment of diseases that may result from acts of bioterrorism or biowarfare or forpandemic preparedness, they may be subject to the specific legislation and regulation described below and elsewhere in this Annual Report on Form 10-K. Project BioShieldProject BioShield and related 2006 federal legislation provide procedures for biodefense-related procurement and awarding of research grants,making it easier for the U.S. Department of Health and Human Services (“HHS”) to commit funds to countermeasure projects. Project BioShield providesalternative procedures under the Federal Acquisition Regulation, the general rubric for acquisition of goods and services by the U.S. government, forprocuring property or services used in performing, administering or supporting biomedical countermeasure research and development. In addition, if theSecretary of HHS deems that there is a pressing need, Project BioShield authorizes the Secretary of HHS to use an expedited award process, rather than thenormal peer review process, for grants, contracts and cooperative agreements related to biomedical countermeasure research and development activity.Under Project BioShield, the Secretary of HHS, with the concurrence of the Secretary of the U.S. Department of Homeland Security and upon theapproval of the President, can contract to purchase unapproved countermeasures for the Strategic Stockpile in specified circumstances. The U.S. Congress isnotified of a recommendation for a Strategic Stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying thecountermeasure to the Strategic Stockpile is paid on delivery of a substantial portion of the countermeasure. To be eligible for purchase under theseprovisions, the Secretary of HHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, frompre-clinical11Table of Contentsand clinical trials, to support a reasonable conclusion that the countermeasure will qualify for approval or licensing within eight years. Project BioShield alsoallows the Secretary of HHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this authority, theSecretary of HHS must conclude that:•the agent for which the countermeasure is designed can cause serious or life-threatening disease; •the product may reasonably be believed to be effective in detecting, diagnosing, treating or preventing the disease; •the known and potential benefits of the product outweigh its known and potential risks; and •there is no adequate alternative to a product that is approved and available.Although this provision permits the Secretary of HHS to circumvent FDA approval (entirely, or in part) for procurement and use, its use in thismanner would likely be limited to rare circumstances. Prior to the award of the BARDA Contract in May 2011, the Secretary of HHS concluded that TPOXX®would qualify within eight years for approval by the FDA for therapeutic use against smallpox.Public Readiness and Emergency Preparedness ActThe Public Readiness and Emergency Preparedness Act (the "PREP Act"), provides immunity for manufacturers from claims under state or federallaw for “loss” arising out of the administration or use of a “covered countermeasure” in the United States. However, injured persons may still bring a suit for“willful misconduct” against the manufacturer under some circumstances. “Covered countermeasures” include security countermeasures and “qualifiedpandemic or epidemic products,” including products intended to diagnose or treat pandemic or epidemic disease, as well as treatments intended to addressconditions caused by such products. For these immunities to apply, the Secretary of HHS must issue a declaration in cases of public health emergency or“credible risk” of a future public health emergency. Since 2007, the Secretary of HHS has issued eight declarations under the PREP Act to protect fromliability countermeasures that are necessary to prepare the nation for potential pandemics or epidemics, including a declaration on October 10, 2008 thatprovides immunity from tort liability as it relates to smallpox. The PREP Act was amended in 2015 to extend protection for smallpox and othercountermeasures from December 31, 2015 to December 31, 2022. Foreign RegulationAs noted above, in addition to regulations in the United States, we might be subject to a variety of foreign regulations governing clinical trials andcommercial sales and distribution of our drug candidates. Even if we obtain FDA approval for a product, we may have to obtain approval of that product bythe comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The actualtime required to obtain clearance to market a product in a particular foreign jurisdiction varies substantially, based upon the type, complexity and novelty ofthe pharmaceutical drug candidate, the specific requirements of that jurisdiction, and in some countries whether the FDA has previously approved the drugfor marketing. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary from country to country.Certain foreign jurisdictions, including the European Union, have adopted certain biodefense-specific regulations akin to that available in the United Statessuch as a procedure similar to the “Animal Rule” promulgated by the FDA for review and potential approval of biodefense products. Regulations Regarding Government ContractingThe status of an organization as a government contractor in the United States and elsewhere means that the organization is also subject to variousstatutes and regulations, including the Federal Acquisition Regulation, which governs the procurement of goods and services by agencies of the UnitedStates. These governing statutes and regulations can impose stricter penalties than those normally applicable to commercial contracts, such as criminal andcivil damages liability and suspension and debarment from future government contracting. In addition, pursuant to various statutes and regulations,government contracts can be subject to unilateral termination or modification by the government for convenience in the United States and elsewhere,detailed auditing requirements, statutorily controlled pricing, sourcing and subcontracting restrictions and statutorily mandated processes for adjudicatingcontract disputes.Availability of Reports and Other Information We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities Exchange Act of 1934. Thepublic may read and copy any material that we file with the SEC at the SEC’s Public Reference Room12Table of Contentsat 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800)SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers,including us, that file electronically with the SEC. The public can obtain any document that we file with or furnish to the SEC at www.sec.gov. In addition, our website can be found on the internet at www.siga.com. The website contains information about us and our operations. Copies ofeach of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of chargeas soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, accesswww.siga.com, click on “Investor Relations” and “Financial Information.” The following corporate governance related documents are also available on our website:•Audit Committee Charter; •Compensation Committee Charter; •Nominating and Corporate Governance Committee Charter; •Code of Ethics and Business Conduct;•Procedure for Sending Communications to the Board of Directors; •Procedures for Security Holder Submission of Nominating Recommendations; •Policy on Confidentiality of Information and Securities Trading; and•Conflict of Interest Policy.To review these documents, access www.siga.com and click on “Investor Relations” and “Corporate Governance.” Any of the above documents can also be obtained in print by any shareholder upon request to the Secretary, SIGA Technologies, Inc., 31 E 62nd Street, 5thfloor, New York, New York 10065.13Table of ContentsItem 1A. Risk Factors This report contains forward-looking statements and other prospective information relating to future events. These forward-looking statements and otherinformation are subject to risks and uncertainties that could cause our actual results to differ materially from our historical results or currently anticipatedresults including the following:Risks Related to Our Dependence on U.S. Government ContractsU.S. government contracts require ongoing funding decisions by the government, and the majority of the potential revenue under the 2018 BARDAContract is tied to options which may or may not be exercised, at the sole discretion of BARDA. Reduced or discontinued BARDA funding, or the non-exercise of contract options under the 2018 BARDA contract, could cause our business, financial condition and operating results, to suffer materially.The funding of government programs, which fund BARDA’s purchases under the 2018 BARDA Contract, is subject to Congressional appropriations,generally made on a fiscal year basis even though a program may continue for several years. Our government customers are subject to political considerationsand budgetary constraints. Our government customers are also subject to uncertainties as to continued funding of their budgets.Additionally, government-funded contracts typically consist of a base period of performance and options for the performance of certain futureactivities. The value of goods and services subject to options may constitute the majority of the total value of the underlying contract, as in the case of the2018 BARDA Contract.The 2018 BARDA Contract is primarily option-based, with more than 80% of contract value tied to options which are exercisable in the solediscretion of BARDA. There is no guarantee that any options will be exercised, or how many options will be exercised. If some or all of the options under the2018 BARDA Contract are not exercised, whether because levels of government expenditures and authorizations for biodefense decrease or shift to programsother than those under which BARDA purchases are funded for any reason, our business, financial condition and operating results, our business developmentefforts or our product development efforts may suffer materially.Government procurement contracts are mostly set at fixed prices and such pricing is based on estimates of the time, resources and expenses required toperform these contracts. If our estimates are not accurate, we may not be able to earn an adequate return or may incur a loss under these arrangements.The remaining unexercised options under the 2018 BARDA Contract are predominately fixed-price. We expect that our future contracts with theU.S. government for TPOXX® as well as contracts for other biodefense product candidates would also be fixed-price arrangements. Under a fixed-pricecontract, we are required to deliver our products at a fixed price regardless of the actual costs we incur and to absorb any costs incurred in satisfaction of ourobligations. Estimating costs that are related to performance in accordance with contract specifications can be difficult, particularly where the period ofperformance is over several years. Our failure to anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-pricecontract could reduce the profitability of such contract or cause a loss, which could in turn negatively affect our operating results.We expect future operating revenues to come primarily from contracts with BARDA for the provision and maintenance of the U.S. Government’s stockpileof TPOXX®. If BARDA does not enter into additional contracts after the 2018 BARDA Contract to maintain or expand the stockpile of TPOXX®, ourlong-term business, financial condition and operating results could be materially harmed.The success of our business and our operating results for the foreseeable future will be substantially dependent on the U.S. government’scommitment to maintaining or expanding its stockpile of TPOXX®. Failure to secure and perform additional contracts after the 2018 BARDA Contract tomaintain or expand the stockpile of TPOXX® could have a material adverse effect on our long-term business, financial condition and operating results.Additionally, the 2018 BARDA Contract does not necessarily increase the likelihood that we will secure future comparable contracts with the U.S.government.The success of our business with the U.S. government depends on our compliance with laws, regulations and obligations under our U.S. governmentcontracts and various federal statutes and authorities.Our business with the U.S. government is subject to specific procurement regulations and a variety of other legal and compliance obligations. Theselaws and rules include those related to:•procurement integrity;14Table of Contents•rates and pricing of services and goods to be reimbursed by the U.S. government;•export control;•government security regulations;•employment practices;•protection of the environment;•accuracy of records and the recording and reporting of costs; and•foreign corrupt practices.Compliance with these obligations increases our performance and compliance costs. A finding that we have failed to comply with these regulationsand requirements could lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. The termination of agovernment contract or grant or relationship as a result of our failure to satisfy any of these obligations would have a material negative impact on ouroperations and harm our reputation and ability to procure other government contracts or grants in the future.Unfavorable provisions in government contracts and grants, some of which may be customary, may harm our future business, financial condition andpotential operating results.Government contracts and grants customarily contain provisions that give the government substantial rights and remedies, many of which are nottypically found in commercial contracts, including (but not limited to) provisions that allow the government to:•terminate existing contracts or grants, in whole or in part, for any reason or no reason;•unilaterally reduce or modify grants, contracts or subcontracts, including through the use of equitable price adjustments;•cancel multi-year contracts or grants and related orders if funds for performance for any subsequent year become unavailable;•decline to exercise an option to renew a contract or grant;•exercise an option to purchase only the minimum amount specified in a contract or grant;•decline to exercise an option to purchase the maximum amount specified in a contract or grant;•claim rights to products, including intellectual property, developed under a contract or grant;•take actions that result in a longer development timeline or higher costs than expected;•suspend or debar the contractor from doing business with the government or a specific government agency due to regulatory or compliance failures;•pursue criminal or civil remedies under the False Claims Act and the False Statements Accountability Act; and•control or prohibit the export of products.Generally, government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the government’sconvenience. Under general principles of government contracting law, if the government terminates a contract or grant for convenience, the terminatedcompany may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the governmentterminates a contract or grant for default, the defaulting company is entitled to recover costs incurred and associated profits on accepted items only and maybe liable for excess costs incurred by15Table of Contentsthe government in procuring undelivered items from another source. Our government contracts and grants, including the 2018 BARDA Contract, could beterminated under these circumstances.Some government contracts and grants permit the government the right to use, for or on behalf of the U.S. government, any technologies developedby the contractor under a government contract. For any technology we develop under a contract or grant with such a provision, we might not be able toprohibit third parties, including our competitors, from using that technology in providing products and services to the government.Changing political or social factors and opposition, including protests and potential related litigation, may delay or impair our ability to marketTPOXX® and any other biodefense product candidates and may require us to spend time and money to address these issues.Products developed to treat diseases caused by or to combat the threat of bioterrorism or biowarfare will be subject to changing political and socialenvironments. The political and social responses to bioterrorism and biowarfare have been unpredictable and much debated. Changes in the perception of therisk that military personnel or civilians could be exposed to biological agents as weapons of bioterrorism or biowarfare may delay or cause resistance tobringing investigational products to market or limit pricing or purchases of approved products, any of which could materially harm our business.Lawsuits, publicity campaigns or other negative publicity may adversely affect the degree of market acceptance of, and thereby limit the demandfor, TPOXX® and our biodefense product candidates. In such event, our ability to market and sell such products may be hindered, the commercial success ofTPOXX® and other products we develop may be harmed and we may need to expend time, attention and resources addressing such legal or publicity issues,thereby reducing our revenues and having a material adverse impact on us.A U.S. Government shutdown could negatively impact our business and liquidityEach year, the U.S. Congress must pass all spending bills in the federal budget. If any such spending bill is not timely passed, a governmentshutdown may close many federally run operations, and halt work for federal employees unless they are considered essential or such work is separatelyfunded by industry. If a government shutdown were to occur, we could experience a delay in contract funding decisions by the government. Additionally, wecould be materially and permanently harmed by any prolonged government shutdown.Risks Related to Sales of Biodefense Products to the U.S. GovernmentOur business could be adversely affected by a negative audit by the U.S. government.U.S. government agencies such as the Defense Contract Audit Agency (the “DCAA”), routinely audit and investigate government contractors. Theseagencies review a contractor’s performance under its contracts and grants, cost structure, and compliance with applicable laws, regulations and standards.The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’spurchasing, property, estimating, compensation and management information systems. Any cost found to be improperly allocated to a specific contract willnot be reimbursed, and such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil andcriminal penalties and administrative sanctions, including:•termination of contracts;•forfeiture of profits;•suspension of payments;•fines; and•suspension, debarment or prohibition from doing business with the U.S. government.Such actions would also negatively affect our reputation.16Table of ContentsLaws and regulations affecting government contracts and grants might make it more costly and difficult for us to conduct our business.We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts and grants,which can make it more difficult for us to retain our rights under these contracts. These laws and regulations affect how we do business with federal, state andlocal governmental agencies. Among the most significant government contracting regulations that affect our business are:•the Federal Acquisition Regulation and other agency-specific regulations supplemental to the Federal Acquisition Regulation, whichcomprehensively regulate the procurement, formation, administration and performance of government contracts;•the business ethics and public integrity obligations, which govern conflicts of interest and the hiring offormer government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as theAnti-Kickback Act and the Foreign Corrupt Practices Act;•export and import control laws and regulations; and•laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and theexportation of certain products and technical data.Risks Related to Regulatory ApprovalsIf we are not able to obtain regulatory approvals for certain additional indications or formulations of TPOXX® from the FDA, we may not be able torealize the full benefits of any BARDA contracts and may not be able to commercialize such formulations or indications other than through sales toBARDA, and our ability to generate revenue could be materially impaired.The development and full commercialization of additional indications or formulations of TPOXX® in the U.S., including the testing, manufacture,safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDAand other regulatory agencies in the United States and by comparable authorities in other countries and jurisdictions. We could fail to achieve FDA or otherregulatory approval of certain indications or formulations of TPOXX®, or there could be delays in such approval of TPOXX®, or the approved version ofTPOXX® may differ from expectations. Failure to obtain regulatory approval of certain indications or formulations for TPOXX® may prevent us from fullycommercializing TPOXX® in the United States other than through sales to BARDA under Project BioShield or from commercializing TPOXX® in othercountries at all, and delays or alterations to regulatory applications could also have a material adverse effect on the Company.Failure to obtain regulatory approval in international jurisdictions could prevent us from marketing our products abroad.To market our products in the European Union and many other foreign jurisdictions, we may need to obtain separate regulatory approvals andcomply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The timerequired to obtain approval may differ from that required to obtain FDA approval.The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatoryapprovals on a timely basis, if at all. Approval by FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval byone foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA. In addition,failure to obtain approval in one jurisdiction may impact our ability to obtain approval elsewhere. We may not be able to file for regulatory approvals andmay not receive necessary approvals to commercialize our products in any non-U.S. market. If we fail to obtain the non-U.S. approvals required to market ourproduct candidates outside the United States or if we fail to comply with applicable non-U.S. regulatory requirements, our target market may be reduced andour ability to realize the full market potential of our product candidates may be harmed and our business, financial condition, results of operations andprospects may be adversely affected.Risks Related to Commercial ActivitiesBecause we must obtain regulatory clearance or otherwise operate under strict legal requirements in order to manufacture and market our products in theU.S., we cannot predict whether or when we will be permitted to commercialize our products other than the oral formulation of TPOXX® for smallpoxantiviral treatment.17Table of ContentsWhile we have received FDA approval for oral TPOXX® for use in smallpox treatment, we have not received FDA approval for the IV formulation ofTPOXX® or any other indications for TPOXX®. FDA approval is limited only to those conditions for which a product is demonstrated through clinical trialsto be safe and efficacious as set forth in its approved product label. We cannot ensure that the IV formulation of TPOXX® or any other compound developedby us, alone or with others, will prove to be safe and efficacious in pre-clinical or clinical trials or animal efficacy studies, or that oral TPOXX® will prove tobe safe and efficacious in pre-clinical or clinical trials or animal efficacy studies for other indications, nor whether all of the applicable regulatoryrequirements needed to receive full marketing clearance for other indications or other formulations will be met.Our ability to grow our business may depend in part on our ability to achieve sales of TPOXX® to customers other than the U.S. government.An element of our business strategy is to sell TPOXX® to customers other than the U.S. government. These potential customers include foreigngovernments, as well as state and local governments, non-governmental organizations focused on global health like the World Health Organization, healthcare institutions like hospitals (domestic and foreign) and certain large business organizations interested in protecting their employees against global threatsand protecting first responders in cases of emergencies.To the extent we seek such non-government sales in the U.S., we will need to meet additional regulatory requirements in light of the current labelingapproved by the FDA for the Strategic Stockpile only.The market for sales of TPOXX® to customers other than the U.S. government is undeveloped, and we may not be successful in generatingmeaningful sales of TPOXX®, if any, to these potential customers.If we fail to increase our sales of TPOXX® to customers other than the U.S. government, our business and opportunities for growth could be limited.If we are unable to expand our internal sales and marketing capabilities or enter into agreements with third parties with expertise in sales and marketing,we may be unable to generate cash flows from product sales to customers other than the U.S. government.To achieve commercial success for any approved product, we may need to enhance our own sales and marketing capabilities, enter intocollaborations with third parties able to perform these services or outsource these functions to third parties.We currently employ a small, targeted group to support development and business activities related to TPOXX®. We plan to continue to do so andexpect that we will use a similar approach for sales to the U.S. government of any other biodefense product candidates that we may successfully develop. Ifwe are unable to adequately support our development and business activities, we may be unable to expand our sales of TPOXX® or other product candidates,which could have an adverse effect on our growth.We may be required to perform additional clinical trials or change the labeling of TPOXX® if we or others identify side effects after we are on the market,which could harm future sales of such product.If we or others identify side effects of any approved product, or if manufacturing problems occur:•regulatory approval may be withdrawn;•reformulation of our products, additional clinical trials or other testing or changes in labeling of our products may be required;•changes to or re-approvals of manufacturing facilities used by SIGA may be required;•sales of the affected products may drop significantly;•our reputation in the marketplace may suffer; and•lawsuits, including class action suits, may be brought against us.Any of the above occurrences could harm or prevent future sales of the affected product or could increase the costs and expenses of commercializingand marketing these products.18Table of ContentsThe biopharmaceutical market in which we compete and will compete is highly competitive.The biopharmaceutical industry is characterized by rapid and significant technological change. Our success will depend on our ability to developand apply our technologies in the design and development of our product candidates and to establish and maintain a market for our product candidates. Inaddition, there are many companies, both public and private, including major pharmaceutical and chemical companies, specialized biotechnology firms,universities and other research institutions engaged in developing pharmaceutical and biotechnology products. Many of these companies have substantiallygreater financial, technical, research and development resources, and human resources than us. Competitors may develop products or other technologies thatare more effective than any that are being developed by us or may obtain FDA approval for products more rapidly than us. If we commence commercial salesof products, we still must compete in the manufacturing and marketing of such products, areas in which it is very difficult to succeed and in which we havelimited experience and in which we are partially dependent on third parties. Many potential competitors have manufacturing facilities and establishedmarketing capabilities that would enable such companies to market competing products through existing channels of distribution which could provide asubstantial advantage.Product liability lawsuits could cause us to incur liabilities, which could be substantial, and require us to limit commercialization of any products that wemay develop.We face an inherent business risk related to the sale of TPOXX® and any other products that we successfully develop and the testing of our productcandidates in clinical trials.TPOXX® is currently identified as a covered countermeasure under the PREP Act declaration issued in October 2008, as amended, which providesus with substantial immunity with respect to the manufacture, administration or use of TPOXX®. Under our BARDA Contracts, the U.S. government shouldindemnify us against claims by third parties for death, personal injury and other damages related to TPOXX®, including reasonable litigation and settlementcosts, to the extent that the claim or loss results from specified risks not covered by insurance or caused by our grossly negligent or criminal behavior. Thecollection process under the PREP Act can be lengthy and complicated, and there is no guarantee that we will be able to recover these amounts from the U.S.government.If we cannot successfully defend ourselves against future claims that our product or product candidates caused injuries and we are not entitled to orable to obtain indemnity by the U.S. government with respect to such claims, or if the U.S. government does not honor its indemnification obligations, wemay incur liabilities, which could be substantial. Regardless of merit or eventual outcome, product liability claims may result in:•decreased demand for any product candidate or product that we may develop;•injury to our reputation;•withdrawal of a product from the market;•costs and management time and focus to defend the related litigation;•substantial monetary awards to trial participants or patients;•loss of revenue;•harm to our reputation; and•the inability to commercialize any products that we may develop.We currently have product liability insurance with coverage up to a $10 million annual aggregate limit and a $10 million per occurrence limit. Theamount of insurance that we currently hold may not be adequate to cover all liabilities that may occur. Product liability insurance is difficult to obtain andincreasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to maintain or obtain insurancecoverage that will be adequate to satisfy any liability that may arise.Additionally, a successful product liability claim or series of claims brought against us could cause our stock price to fall, could decrease ourfinancial resources and materially exhaust our existing insurance or limit our ability to obtain insurance going forward, all of which would materiallyadversely affect our business.19Table of ContentsIf we seek to sell TPOXX® to non-government customers, healthcare reform and controls on healthcare spending may limit the price we charge for ourproducts and the amounts that we can sell.There have been a number of legislative and regulatory proposals in the United States to change the health care system in ways that could affect ourability to sell our products profitably if we seek to sell TPOXX® to non-government customers. One enacted proposal, the Patient Protection and AffordableCare Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Act”), substantially changed theway healthcare is financed by both governmental and private insurers and could have a substantial effect on the pharmaceutical industry. The HealthcareReform Act contains a number of provisions, including those governing enrollment in federal healthcare programs like Medicare, reimbursement changes andrules protecting against fraud and abuse, that will change existing healthcare programs and will result in the development of new programs, includingMedicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. If we obtain marketingapproval sale of TPOXX® beyond the Strategic Stockpile, it is possible that some of our revenue may be derived from governmental healthcare programs,including Medicare. Furthermore, beginning in 2011, the Healthcare Reform Act imposed a non-deductible excise tax on pharmaceutical manufacturers orimporters who sell “branded prescription drugs,” which includes innovator drugs and biologics (excluding orphan drugs or generics) to U.S. governmentprograms. The Healthcare Reform Act and other healthcare reform measures that may be adopted in the future could have an adverse effect on our industrygenerally and potential future sales and profitability of our current or future products specifically.Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain product candidates outsideof the United States and require us to revise and implement costly compliance programs.If we expand our operations outside of the United States, we must comply with numerous laws and regulations relating to business operations ineach jurisdiction in which we plan to operate. The creation and implementation of international business practices and compliance programs may be costlyand such programs can be difficult to enforce, particularly where reliance on third parties is required.The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering ofanything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreignentity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in theUnited States to comply with certain accounting provisions requiring the Company to maintain books and records that accurately and fairly reflect alltransactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls forinternational operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice. The SEC is involved withenforcement of the books and records provisions of the FCPA.If we expand our operations outside of the U.S., compliance with the FCPA may be expensive and can be difficult, particularly in countries in whichcorruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries,hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals inconnection with clinical studies and other work have been deemed to be improper payments to government officials and have led to FCPA enforcementactions. In addition, biodefense companies like SIGA often sell their products directly to foreign governments.Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expandour presence outside of the United States, it may require us to dedicate additional resources to compliance with these laws, and these laws may preclude usfrom developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential andincrease our development costs.The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarmentfrom government contracting. Violation of the FCPA can result in significant civil and criminal penalties that can be levied on the Company and itsexecutives.Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved.Conviction of a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract orrelationship as a result of our failure to satisfy any of our obligations under laws governing international business practices could have a material negativeimpact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from tradingsecurities on United States exchanges for violations of the FCPA’s accounting provisions.20Table of ContentsOther countries such as the UK have anti-bribery laws similar to or more expansive in scope than the FCPA which may be applicable to ouroperations if we expand outside the U.S.Risks Related to Product DevelopmentGrowth of our business may be impacted significantly by our success in completing development and commercialization of drug candidates, or additionalindications for TPOXX®. If we are unable to commercialize new drug candidates or additional indications, or experience significant delays in doing so,our business may be materially harmed.We have invested a substantial amount of our efforts and financial resources in the development of our drug candidates. Our ability to generate near-term cash flows is primarily dependent on the success of our smallpox antiviral drug TPOXX®, which has only been approved by the FDA in oral form. Thecommercial success of our current and future drug candidates, or additional indications for TPOXX®, will depend on many factors, including:•successful development, formulation and cGMP scale-up of drug manufacturing that meets FDA requirements;•successful development of animal models;•successful completion of non-clinical development, including studies in approved animal models;•our ability to pay the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;•successful completion of clinical trials;•receipt of marketing approvals from FDA for IV TPOXX® and similar foreign regulatory authorities;•establishing arrangements on reasonable terms with suppliers and contract manufacturers;•manufacturing stable commercial supplies of drug candidates, including availability of raw materials;•launching commercial sales of the product, whether alone or in collaboration with others; and•acceptance of the product by potential government customers, public health experts, physicians, patients, healthcare payors and others in themedical community.We may rely on FDA regulations known as the “Animal Rule” to obtain approval for most of our biodefense drug candidates. The Animal Rulepermits the use of animal efficacy studies together with human clinical safety trials to support an application for marketing approval. These regulations arerelied upon only occasionally. It is possible that results from these animal efficacy studies may not be predictive of the actual efficacy of our drug candidatesin humans. If we are not successful in completing the development and commercialization of our drug candidates, whether due to our efforts or due toconcerns raised by our governmental regulators or customers, our business could be materially adversely harmed.We may not be able to fully commercialize the IV formulation of TPOXX®, or other additional indications for TPOXX®, if our clinical trials do notdemonstrate adequate safety or our animal studies do not demonstrate adequate efficacy.Before obtaining regulatory approval for the sale of our drug candidates, extensive development is required. The goal of development is to useclinical studies to demonstrate the safety of our drug candidates and animal trials to demonstrate the efficacy of our drug candidates. Clinical trials andanimal studies, and related work, are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. Successin pre-clinical testing and early clinical trials does not ensure that later clinical trials or animal efficacy studies will be successful, and interim results of aclinical trial or animal efficacy study do not necessarily predict final results.A failure of one or more of our clinical trials or animal efficacy studies can occur at any stage of development. We may experience numerousunforeseen events during, or as a result of, pre-clinical testing and the clinical trial or animal efficacy study process that could delay or prevent our ability toreceive regulatory approval or commercialize our drug candidates, including:21Table of Contents•regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;•we may decide, or regulators may require us, to conduct additional pre-clinical testing or clinical trials, or we may abandon projects that we expectto be promising, if our pre-clinical tests, clinical trials or animal efficacy studies produce negative or inconclusive results;•we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;•regulators or institutional review boards may require that we hold, suspend or terminate clinical development for various reasons, includingnoncompliance with regulatory requirements;•the cost of our clinical trials could escalate and become cost prohibitive;•our governmental regulators may impose requirements on clinical trials, pre-clinical trials or animal efficacy studies that we cannot meet or that mayprohibit or limit our ability to perform or complete the necessary testing in order to obtain regulatory approval;•any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the product notcommercially viable;•we may not be successful in recruiting a sufficient number of qualifying subjects for our clinical trials; or•the effects of our drug candidates may not be the desired effects or may include undesirable side effects or the drug candidates may have otherunexpected characteristics;•the costs, regulations, or challenges associated with animal studies may increase and make our studies more difficult.IV TPOXX® is currently in product development and there can be no assurance of successful commercialization beyond the 2018 BARDA contract.The fact that the FDA has approved the oral formulation of TPOXX® does not guarantee that our approach to drug development will be effective orwill result in the successful commercialization of any other drug, the IV formulation of TPOXX® or any new indication of TPOXX®. We cannot predict withcertainty whether any other drug candidate or expanded indication resulting from our research and development efforts will be approved by the FDA.All of our potential drug candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility thatour drug candidates will not or cannot:•be shown to be safe, non-toxic and effective;•otherwise meet applicable regulatory standards;•receive the necessary regulatory approvals;•develop into commercially viable drugs;•be manufactured or produced economically and on a large scale;•be successfully marketed;•be paid for by governmental procurers or be reimbursed by governmental or private insurers; or•achieve customer acceptance.In addition, third parties may seek to preclude us from marketing our drugs through enforcement of their proprietary or intellectual property rights that we arenot aware of, or third parties may succeed in marketing equivalent or superior drug products that do not infringe our intellectual property. Our failure todevelop safe, commercially viable future drug candidates or obtain approval22Table of Contentsfor expanded indications and formulations of TPOXX® would have a material adverse effect on our ability to grow our business, and impair our financialcondition and operations.Risks Related to Our Dependence on Third PartiesIf third parties on whom we rely for manufacturing and raw materials of TPOXX®, and managing our inventory, do not perform as contractually requiredor as we expect, we may not be able to successfully satisfy our obligations under the 2018 BARDA Contract and our business would suffer.We currently rely on third-party manufacturers and service providers to provide raw materials and manufacture TPOXX®. Under the 2018 BARDAContract, we are responsible for the performance of these third-party contracts, and our contracts with these third parties give us certain supervisory andquality control rights, but we do not exercise day-to-day control over their activities.Additionally, we may rely on a third party provider, or multiple providers, to store a portion of the stockpile of IV TPOXX® under the 2018 BARDAContract, entrusting this vendor with the care and handling of a substantial portion of our inventory of IV TPOXX®. If a third party provider fails to comply with applicable laws and regulations, fails to meet expected deadlines, experiences shortages or delays, orotherwise does not carry out its contractual duties to us, or encounters physical damage or natural disaster at its facilities, our ability to meet our obligationsunder the 2018 BARDA Contract could be significantly impaired. We do not currently have the internal capacity to perform these important functions, andwe may not be able to maintain commercial arrangements for these services on reasonable terms.Our reliance on third parties that we do not control does not relieve us of the responsibilities and requirements imposed by the 2018 BARDAContract. Third parties may not complete activities on schedule, or may not conduct trials in accordance with regulatory requirements or our stated protocols.The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of IV TPOXX® orother drug candidates.Risks Related to Manufacturing and Manufacturing FacilitiesProblems related to large-scale commercial manufacturing could cause us to delay product launches, an increase in costs or shortages of products.Manufacturing API and finished drug products, especially in large quantities, is complex. Our drug candidates require several manufacturing steps atmultiple facilities, and may involve complex techniques to assure quality and sufficient quantity, especially as the manufacturing scale increases. Ourproducts must be made consistently and in compliance with a clearly defined manufacturing process. Accordingly, it is essential to be able to validate andcontrol the manufacturing process to assure that it is reproducible. Slight deviations anywhere in the manufacturing process, including obtaining materials,filling, labeling, packaging, storage, shipping, quality control and testing, some of which all pharmaceutical companies, including SIGA, experience fromtime to time, may result in lot failures, delay in the release of lots, product recalls or spoilage. Success rates can vary dramatically at different stages of themanufacturing process, which can lower yields and increase costs. We may experience deviations in the manufacturing process that may take significant timeand resources to resolve and, if unresolved, may affect manufacturing output and/or cause us to fail to satisfy contractual commitments, lead to delays in ourclinical trials or result in litigation or regulatory action. Such actions would hinder our ability to meet contractual obligations and could cause materialadverse consequences for our business.If third parties do not manufacture our drug candidates or products in sufficient quantities and at an acceptable cost or in compliance with regulatory orcontractual requirements and specifications, the fulfillment of contractual requirements under the 2018 BARDA contract, or any other procurementcontract, or the development of our drug candidates could be delayed, prevented or impaired.We currently rely on third parties to manufacture drug candidates, including TPOXX®. Any significant delay in obtaining adequate supplies of ourdrug candidates could adversely affect our ability to develop drug candidates or perform commercial contracts. If our contract manufacturers are unable togenerate enough materials to meet commercial obligations or satisfy clinical needs, the success of drug products may be jeopardized. Our current andanticipated future dependence upon others for the manufacture of our drug candidates may adversely affect our ability to develop drug candidates andperform on commercial contracts on a timely and competitive basis. If our third party manufacturers’ production processes malfunction or contaminate23Table of Contentsour drug supplies during manufacturing, we may incur significant inventory loss that may not be covered by our contractual provisions or insurance policies.We currently rely on third parties to demonstrate regulatory compliance, for regulatory and science support and for quality assurance with respect tothe drug candidates manufactured for us. We intend to continue to rely on these third parties for these purposes with respect to production of commercialsupplies of drugs that we successfully develop. Manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding stateand foreign agencies or their designees to ensure strict compliance with applicable laws and regulations.We cannot be certain that our present or future manufacturers will be able to comply with these regulations and other FDA regulatory requirementsor similar regulatory requirements outside the U.S. Our contracts and grants call for compliance with all applicable legal and regulatory requirements,however, we do not control third-party manufacturers and their methods for ensuring adherence to regulatory and legal standards. If we or these third partiesfail to comply with applicable regulations, sanctions could be imposed on us which could significantly delay and adversely affect supplies of our drugcandidates.Our activities may involve hazardous materials, use of which may subject us to environmental regulatory liabilities.Our biopharmaceutical research and development sometimes may involve the use of hazardous and radioactive materials and generation ofbiological waste. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of thesematerials and certain waste products. Although we believe that our CMO's safety procedures for handling and disposing of these materials comply withlegally prescribed standards, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of an accident,we could be held liable for damages, and this liability could exceed our resources. We use through third parties, for example, small amounts of radioactiveisotopes commonly used in pharmaceutical research, which are stored, used and disposed of in accordance with Nuclear Regulatory Commission regulations.Our general liability policy provides coverage up to annual aggregate limits of $2 million and coverage of $2 million per occurrence.We believe that we are in compliance in all material respects with applicable environmental laws and regulations and currently do not expect tomake material additional capital expenditures for environmental control facilities in the near term. However, we may have to incur significant costs tocomply with current or future environmental laws and regulations.Risks Related to Our BusinessWe could incur net losses in the future if options are not exercised under the 2018 BARDA Contract. While our current cash position is strong, our ability to continue to fund future operations will be substantially impacted by cash flows from the 2018BARDA Contract, which may not be sufficient if BARDA elects, in its sole discretion, not to exercise some or all of the options under the 2018 BARDAContract. Given the nature of option-based government contracts, we cannot guarantee that we can sustain or enhance our current level of operations. Cashflows could fluctuate significantly and could be delayed from one quarter to another based on several factors. As such, if cash flows from the 2018 BARDAContract are different from expectations, or if operating expenses or other expenses exceed our expectations or cannot be adjusted accordingly, then ourbusiness, results of operations, and financial condition could be materially and adversely affected.Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management, disruptour business, dilute stockholder value and adversely affect our operating results and financial condition.We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our services,enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management andcause us to incur various expenses in identifying, investigating and pursuing businesses. In addition, we may not be able to find and identify desirableacquisition targets or be successful in entering into an agreement with any particular target or consummating any such agreement. Even if we do consummatean agreement, we may not be able to integrate successfully the acquired personnel, operations and technologies, or effectively manage the combined businessfollowing the acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the issuance of debt, which could adversely affect ouroperating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer.24Table of ContentsOur business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cyber-security. Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable todamage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over theInternet, attachments to emails, persons inside our organization or persons with access to systems inside our organization. The risk of a security breach ordisruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generallyincreased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occurand cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial datafrom completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover orreproduce the data. Also, confidential patient and other information may be compromised in a cyber-attack or cyber-intrusion. To the extent that anydisruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietaryinformation, we could incur material legal claims and liability, damage to our reputation, and the further development of our drug candidates could bedelayed.The loss of key personnel or our ability to recruit or retain qualified personnel could adversely affect our results of operations.We rely upon the ability, expertise, judgment, discretion, integrity and good faith of our senior management team. Our success is dependent uponour personnel and our ability to recruit and train high quality employees. We must continue to recruit, retain and motivate management and other employeessufficient to maintain our current business and support our projected growth. The loss of services of any of our key management could have a materialadverse effect on our business.Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualifiedpersonnel. The loss of the services of any key executive might impede the achievement of our research, development and commercial objectives. Replacingkey employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experiences required todevelop, gain regulatory approval of and commercialize our product candidates successfully. We generally do not maintain key person life insurance tocover the loss of any of our employees. Recruiting and retaining qualified scientific personnel, clinical personnel and business development personnel willalso be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, if at all, given the competition among numerouspharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel fromother companies, universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist usin formulating our research and development, regulatory and commercialization strategy. Our consultants and advisors may be employed by employers otherthan us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.We may have difficulty managing our growth.Potential future growth could place a significant strain on our management and operations. Our ability to manage any future growth will dependupon our ability to broaden our management team and our ability to attract, hire and retain skilled employees. Our success will also depend on the ability ofour officers and key employees to continue to implement and improve our operational and other systems and to hire, train and manage our employees.Our ability to use our net operating loss carryforwards may be limited.As of December 31, 2018, we had federal net operating loss carryforwards, or NOLs, of $40.3 million to offset future taxable income. The remainingNOLs expire in 2036, if not utilized. Under the provisions of the Internal Revenue Code, substantial changes in our ownership, in certain circumstances, willlimit the amount of NOLs that can be utilized annually in the future to offset taxable income. In particular, section 382 of the Internal Revenue Code imposesa limitation on a company’s ability to use NOLs if the company experiences a more-than-50% ownership change over a three-year period. If we are limited inour ability to use our NOLs in future years in which we have taxable income, we may be required to pay more taxes than if we were able to utilize our NOLsfully.Risks Related to Our Intellectual PropertyOur ability to compete may decrease if we do not adequately protect our intellectual property rights.25Table of ContentsOur commercial success will depend in part on our ability to obtain and maintain patent protection for our proprietary technologies, drug targets andpotential products and to preserve our trade secrets and trademark rights. Because of the substantial length of time and expense associated with bringingpotential products through the development and regulatory clearance processes to reach the marketplace, the pharmaceutical industry places considerableimportance on obtaining patent and trade secret protection. The patent positions of pharmaceutical and biotechnology companies can be highly uncertainand involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents worldwide hasemerged to date. Accordingly, we cannot predict the type and breadth of claims allowed in patents covering our products.SIGA exclusively owns its key patent portfolios, which relate to its leading drug candidate TPOXX® (also known as ST-246, tecovirimat). As ofFebruary 28, 2019, the TPOXX® patent portfolio has seven patent families consisting of 21 U.S. utility patents, 57 issued foreign patents, five U.S. utilitypatent applications, and 41 foreign patent applications.We also rely on trade secrets, know-how, continuing technological innovation and licensing opportunities. In an effort to maintain theconfidentiality and ownership of trade secrets and proprietary information, we require our employees, consultants and some collaborators to executeconfidentiality and invention assignment agreements upon commencement of a relationship with us. These agreements may not provide meaningfulprotection for our trade secrets, confidential information or inventions in the event of unauthorized use or disclosure of such information, and adequateremedies may not exist in the event of such unauthorized use or disclosure.If our technologies are alleged or found to infringe the patents or proprietary rights of others, we may be sued, we may have to pay damages or be barredfrom pursuing a technology, or we may have to license those rights and pay royalties to or from others on unfavorable terms. If we are sued, even if weprevail, such litigation may be costly.Our commercial success will depend significantly on our ability to operate without infringing the patents or proprietary rights of third parties. Ourtechnologies, or the technologies of third parties on which we may depend, may infringe the patents or proprietary rights of others. If there is an adverseoutcome in any dispute concerning rights to these technologies, then we could be subject to significant liability, required to license disputed rights from orto other parties and/or required to cease using a technology necessary to carry out our research, development and commercialization activities.If our patents are challenged and found to be invalid or unenforceable, the value of our products could be harmed, and we could be subject tocompetition earlier than we anticipated.The costs to establish or defend against claims of infringement or interference with patents or other proprietary rights can be expensive and time-consuming, even if the outcome is favorable. An outcome of any patent or proprietary rights administrative proceeding or litigation that is unfavorable to usmay have a material adverse effect on us. We could incur substantial costs if we are required to defend ourselves in suits brought by third parties or if weinitiate such suits. We may not have sufficient funds or resources in the event of litigation. Additionally, we may not prevail in any such action and suchlitigation often takes years to resolve creating business uncertainty if we are not able to resolve it quickly.Any dispute resulting from claims based on patents and proprietary rights could result in a significant reduction in the coverage of the patents orproprietary rights owned, optioned by or licensed to us and limit our ability to obtain meaningful protection for our rights. If patents are issued to thirdparties that contain competitive or conflicting claims, we may be legally prohibited from researching, developing or commercializing potential products orbe required to obtain licenses to these patents that carry royalty payments or to develop or obtain alternative technology. We may be legally prohibited fromusing technology owned by others, may not be able to obtain any license to the patents or technologies of third parties on acceptable terms, if at all, or maynot be able to obtain or develop alternative technologies.Furthermore, like many biopharmaceutical companies, we may from time to time hire scientific personnel formerly employed by other companiesinvolved in one or more areas similar to the activities conducted by us. It is possible that we and/or these individuals may be subject to allegations of tradesecret misappropriation or other similar claims as a result of their prior affiliations.Risks Related to Our Financial Position and Need for Additional FinancingWe may need additional funding, which may not be available to us, and which may force us to delay, reduce or eliminate any of our product developmentprograms or commercial efforts.While we have raised funds through credit facilities and the issuance of new equity or the exercise of options or warrants in the past, there is noguarantee that we will continue to be successful in raising such funds should we need to seek to do so. If26Table of Contentswe are unable to raise additional funds, we could be forced to discontinue, cease or limit certain operations and equity investors could experience significantor total losses of their investments. Our cash flows may fall short of our projections or be delayed, or our expenses may increase, which could result in ourcapital being consumed significantly faster than anticipated.Although our current cash position is strong, we may require additional financing and we may not be able to raise additional funds. If we are able toobtain additional financing through the sale of equity or convertible debt securities, such sales may contain terms, such as liquidation and other preferencesthat are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may benecessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us. Debt financingarrangements, if available, may require us to pledge certain assets or enter into covenants that would restrict our business activities or our ability to incurfurther indebtedness and may be at interest rates and contain other terms that are not favorable to our stockholders.Indebtedness may make it more difficult to obtain additional financing or reduce our flexibility to act in our best interests, and default on our indebtednesswould have a material adverse effect on our business, financial condition and results of operations.The level of our indebtedness under our $80.0 million loan and security agreement dated September 2, 2016 (as amended from time to time, the"Loan Agreement") with OCM Strategic Credit SIGTEC Holdings, LLC ("Lender), could affect us by: making it more difficult to obtain additional financingfor working capital, capital expenditures, debt service requirements or other purposes; shortening the duration of available revolving credit because lendersmay seek to avoid conflicting maturity dates; constraining our ability to react quickly in an unfavorable economic climate or to changes in our business orthe pharmaceutical industry; or potentially requiring the dedication of substantial amounts to service the repayment of outstanding debt, including periodicinterest payments, thereby reducing the amount of cash available for other purposes. In addition, the Loan Agreement contains customary covenants whichcould impact our ability to obtain additional financing and restrict our flexibility in carrying out our business strategy.Under the Loan Agreement, we are obligated to make periodic interest payments on the outstanding principal amount. Any accrued and unpaidinterest or unpaid principal will be due on the maturity date of the loan (November 16, 2020). If we do not generate sufficient operating cash flows to fundthese payments or obtain additional funding from external sources at acceptable terms, we may not have sufficient funds to satisfy our principal and interestpayment obligations when those obligations are due, which would place us into default under the terms of the Loan Agreement (as further described below).The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants, amongother things, require a minimum cash balance throughout the term of the loan under the Loan Agreement and the achievement of regulatory milestones bycertain dates, and contain certain limitations on the ability of the Company to incur unreimbursed research and development expenditures over a certainthreshold, make capital expenditures over a certain threshold, incur indebtedness, dispose of assets outside of the ordinary course of business and enter intocertain merger or consolidation transactions. These covenants could impact our ability to obtain additional financing and restrict our flexibility in carryingout our business strategy.The Loan Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) the materialinaccuracy of representations or warranties made thereunder, (iii) non-compliance with covenants thereunder, (iv) non-payment of amounts due under, or theacceleration of, other material indebtedness of the Company and (v) bankruptcy or insolvency events. Such default would have a material adverse effect onour business, financial condition and results of operations. Upon the occurrence and during the continuance of an event of default under the Loan Agreement,the interest rate may increase by 2.00% per annum above the rate of interest otherwise in effect, and the Lender would be entitled to accelerate the maturity ofthe Company’s outstanding obligations thereunder. In addition, our indebtedness under the Loan Agreement is secured by a first priority lien on all of ourexisting and after-acquired property, including intellectual property. If we default on our obligations under the Loan Agreement, the Lender could forecloseon our assets.We may issue additional debt or incur other types of indebtedness in the future, subject to compliance with the terms of the Loan Agreement, andsuch additional indebtedness may carry with it similar risks.Risks Related to Our Common StockOur stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit.The volatile price of our stock makes it difficult for investors to predict the value of their investments, to sell shares at a profit at any given time, orto plan purchases and sales in advance. A variety of factors may affect the market price of our common stock. These include, but are not limited to:27Table of Contents•publicity regarding actual or potential clinical or animal test results relating to products under development by our competitors or us;•initiating, completing or analyzing, or a delay or failure in initiating, completing or analyzing, pre-clinical or clinical trials or animal trials or thedesign or results of these trials for products in development;•achievement or rejection of regulatory approvals for products in development by our competitors or us;•announcements of technological innovations or new commercial products by our competitors or us;•developments concerning our collaborations and supply chain;•regulatory developments in the United States and foreign countries;•economic or other crises and other external factors;•period-to-period fluctuations in our revenues and other results of operations;•changes in financial estimates by securities analysts; or•publicity or activity involving possible future acquisitions, strategic investments, partnerships or alliances.Additionally, because the volume of trading in our stock fluctuates significantly at times, any information about us in the media or public domainmay result in significant volatility in our stock price.We will not be able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily beindicative of our future performance.In addition, the stock market in general, and the market for biotechnology companies in particular, has experienced extreme price and volumefluctuations that may have been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factorsmay seriously harm the market price of our common stock, regardless of our operating performance.If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price could decline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. If one or more of the analysts who may cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, ourcommon stock price would likely decline.A future issuance of preferred stock may adversely affect the rights of the holders of our common stock.Our certificate of incorporation allows our Board of Directors to issue up to 20,000,000 shares of preferred stock and to fix the voting powers,designations, preferences, rights and qualifications, limitations or restrictions of these shares without any further vote or action by the stockholders. Therights of the holders of common stock will be subject to, and could be adversely affected by, the rights of the holders of any preferred stock that we may issuein the future. The issuance of preferred stock, while providing desirable flexibility in connection with our future activities, could also have the effect ofmaking it more difficult for a third party to acquire a majority of our outstanding voting stock, thereby delaying, deferring or preventing a change of control.Concentration of ownership of our capital stock could delay or prevent a change of control.Our directors, executive officers and principal stockholders beneficially own a significant percentage of our common stock. As a result, thesestockholders, if acting together, have the ability to influence the outcome of corporate actions requiring stockholder approval. Additionally, thisconcentration of ownership may have the effect of delaying or preventing a change of control of SIGA. As of the most recent available information, directors,executive officers and principal stockholders beneficially owned approximately 33% of our outstanding common stock. In addition to owning commonstock of the Company, directors and certain executive officers have the right to acquire additional stock through the exercise or conversion of certainsecurities.Item 1B. Unresolved Staff Comments None.Item 2. Properties Our headquarters are located in New York, NY and our research and development facilities are located in Corvallis, Oregon. In January 2013, weentered into a sublease for approximately 6,676 square feet with a related party to sublet office space in a New York, NY location to serve as our corporateheadquarters. The sublease commenced in April 2013 and was scheduled to expire in 2020. In July 2017, we terminated this sublease. In May 2017, weentered into a new 10-year lease with a related party to let 3,200 square feet in New York, NY to serve as our new corporate headquarters.In Corvallis, we lease approximately 10,276 square feet. Until its expiration on December 31, 2017, this facility was leased under an amended leaseagreement signed in January 2007, and most recently changed through an addendum in April 2015. On November 3, 2017 we entered into a new lease for thesame space which expires in December 2019. This lease has two successive renewal options; one for two years and the other for three years.Item 3. Legal ProceedingsFrom 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 andproceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, ifany, 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 (see Note 13 to the consolidatedfinancial statements).Item 4. Mine Safety DisclosuresNo disclosure is required pursuant to this item.28Table of ContentsPART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Price Range of Common StockOn March 22, 2018, the Company's common stock commenced trading on The Nasdaq Global Market under the symbol "SIGA". From March 20,2015 through March 21, 2018, the Company's common stock had been traded on the OTC Pink Sheets. The Company's common stock traded under thesymbol “SIGAQ” from March 20, 2015 until April 17, 2016, and since April 18, 2016, it has traded under the Symbol “SIGA.” From September 9, 1997through September 2, 2009, the Company's common stock was traded on the Nasdaq Capital Market and from September 3, 2009 until March 19, 2015 it wastraded on the Nasdaq Global Market under the symbol “SIGA.” Prior to September 9, 1997 there was no public market for our common stock.The following table sets forth, for the periods indicated, the high and low sales prices for our common stock, as reported on The Nasdaq Global Market andOTC Pink Sheets, as applicable:2018High LowFirst Quarter$6.78 $4.21Second Quarter7.54 5.72Third Quarter8.47 5.77Fourth Quarter7.94 4.68 2017High LowFirst Quarter$3.40 $2.80Second Quarter3.88 3.00Third Quarter3.39 2.85Fourth Quarter5.24 3.14As of February 15, 2019, the closing sale price of our common stock was $6.99 per share. There were 35 holders of record as of February 15, 2019.We believe that the number of beneficial owners of our common stock is substantially greater than the number of record holders, because a large portion ofcommon stock is held in broker “street names.”We have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We currently intend to retainany future cash flow in excess of our operating costs to finance the growth and development of our business and to service any debt payments. Dividendpayments are not permitted under the Loan Agreement.29Table of ContentsPerformance Graph The following line graph compares the cumulative total stockholder return through December 31, 2018, assuming reinvestment of dividends, by aninvestor who invested $100 on December 31, 2013 in each of (i) our common stock; (ii) the Nasdaq Composite; and (iii) the Nasdaq Biotech Composite. 2013 2014 2015 2016 2017 2018SIGA Technologies, Inc. $100 $44 $13 $88 $148 $242NASDAQ Composite Index $100 $113 $120 $129 $165 $159NASDAQ Biotech Composite Index $100 $134 $149 $117 $142 $128Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item concerning securities authorized for issuance under equity compensation plans is set forth in Item 12,“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”30Table of ContentsItem 6. Selected Financial Data The selected consolidated financial operating data for the years ended December 31, 2018, 2017 and 2016 and the consolidated balance sheet dataas of December 31, 2018 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form10-K. The selected consolidated financial operating data for the years ended December 31, 2015 and 2014 and the consolidated balance sheet data as ofDecember 31, 2016, 2015 and 2014 have been derived from applicable audited consolidated financial statements not included in this Annual Report onForm 10-K. The following table should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations,” and the consolidated financial statements and related notes to those statements included elsewhere in this Annual Report on Form 10-K. Year Ended December 31, 2018 2017 2016 2015 2014 (in thousands, except share and per share data)Revenues$477,054 $12,269 $14,988 $8,176 $3,140Cost of sales and supportive services95,269 — — — —Selling, general and administrative12,880 12,303 13,714 10,582 12,647Research and development13,016 16,680 19,711 13,131 10,707Patent expenses789 910 909 1,009 988Litigation expense— — — 14,407 188,465Lease termination— 1,225 — — —Interest on PharmAthene liability— — 11,669 — —Income (loss) from operations355,100 (18,849) (31,015) (30,953) (209,667) (Increase) decrease in fair value of common stock warrants(6,923) (4,739) (895) — 313 Interest expense, net(15,478) (14,758) (2,396) (267) (456) Backstop fee— — (1,764) — — Other income, net78,941 17 102 42 1 Reorganization items, net— — (3,717) (7,811) (2,127)Income (loss) before income taxes411,640 (38,329) (39,685) (38,989) (211,936)Benefit from (provision for) income taxes10,168 2,094 (14) (462) (53,528)Net income (loss)$421,808 $(36,235) $(39,699) $(39,451) $(265,464)Basic earnings (loss) per common share$5.28 $(0.46) $(0.69) $(0.73) $(4.97)Diluted earnings (loss) per common share$5.18 $(0.46) $(0.69) $(0.73) $(4.97)Weighted average common shares outstanding: basic79,923,295 78,874,494 57,188,503 53,777,687 53,419,686Weighted average common shares outstanding: diluted82,708,472 78,874,494 57,188,503 53,777,687 53,419,686Cash and cash equivalents and restricted cash$180,397 $37,102 $56,174 $112,711 $99,714Total assets203,444 144,670 160,982 185,733 160,729Long-term obligations76,811 71,891 66,801 332 405Stockholders’ equity (deficiency)102,915 (323,138) (287,418) (284,429) (246,502)Net cash provided by (used in) operating activities$68,871 $(18,387) $(116,813) $11,109 $14,17731Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion should be read in conjunction with our consolidated financial statements and notes to those statements and otherfinancial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion and otherparts of this Annual Report contain forward-looking information that involves risks and uncertainties. Overview We are a commercial-stage pharmaceutical company focused on the health security market. Health security comprises countermeasures forbiological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and health preparedness.Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an 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. Oral TPOXX® is anovel small-molecule drug that has been delivered to the U.S. Strategic National Stockpile (“Strategic Stockpile”) under the Project BioShield Act of 2004(“Project BioShield”). Concurrent with the approval, the FDA granted the Company's request for a Priority Review Voucher (“PRV”). A PRV is a voucher thatmay be used to obtain an accelerated FDA review of a product candidate. On October 31, 2018, the Company sold its PRV for cash consideration of $80.0million.Lead Product-TPOXX® 2018 BARDA ContractOn 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 StrategicStockpile, or store as vendor-managed inventory, up to 212,000 courses of the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, thecontract includes funding from BARDA for advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and supportiveprocurement activities. The contract with BARDA (as amended, modified, or supplemented from time to time, the “2018 BARDA Contract”) currentlycontemplates, as of February 28, 2019, up to approximately $600.1 million of payments, of which approximately $51.7 million of payments are includedwithin the base period of performance of five years, approximately $12.2 million of payments are related to exercised options and up to approximately$536.2 million of payments are currently specified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of theunexercised options. The period of performance for options is up to ten years from the date of entry into the 2018 BARDA Contract and such options couldbe exercised at any time during the contract term, including during the base period of performance. Initially, the 2018 BARDA Contract specified paymentsof up to approximately $628.7 million; on February 21, 2019, a cost-reimbursement plus fixed fee option for post-marketing, and other activities for oralTPOXX® was modified to $12.2 million (from $40.8 million) based on updated planning. As such, total potential payments currently specified under the2018 BARDA Contract are $600.1 million.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 of20,000 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 ("IVBDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments ofapproximately $0.6 million for supportive procurement activities. As of December 31, 2018, the Company has received $3.2 million for the manufacture ofIV BDS; such bulk drug substance is expected to be used for the manufacture of 20,000 courses of IV FDP.Exercised options specify potential payments up to approximately $12.2 million for funding of post-marketing activities for oral TPOXX®.Unexercised options specify potential payments up to approximately $536.2 million in total (if all options are exercised). There are options for thefollowing activities: payments of up to $450.2 million for the delivery of up to approximately 1,452,300 courses of oral TPOXX® to the Strategic Stockpile;payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon themanufacture of IV BDS to be used in the manufacture32Table of Contentsof IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV TPOXX®; and payments of up to approximately $5.6million for supportive procurement activities.The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drugsubstance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDPOptions”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 2018 BARDA Contract includes: three separate IVBDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providingfor 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 FDPOptions, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive paymentsup 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 64,000courses), BARDA has the option to independently purchase IV BDS or IV FDP. 2011 BARDA ContractOn May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses oforal TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract”) includes a base contract, asmodified, (“2011 Base Contract”) as well as options. The 2011 Base Contract specifies approximately $508.7 million of payments (including exercisedoptions), of which, as of December 31, 2018, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses oforal TPOXX® and $43.9 million has been received for certain reimbursements in connection with development and supportive activities. Approximately$5.0 million remains eligible to be received in the future for reimbursements of development and supportive activities.For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are productreplacement obligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the FDA wasdifferent from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the “FDA Approval Replacement Obligation”); (ii) a productreplacement obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a productreplacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July 13, 2018, the FDA approved oral TPOXX® for thetreatment of smallpox and there is no difference between the approved product and courses in the Strategic Stockpile. As such, the possibility of the FDAApproval Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relatingto FDA approval of 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise, the 2011BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all would be exercised by BARDA, wouldresult in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such aswork on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-basemanufacturing. BARDA may choose in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised two optionsrelated to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was minimal.The 2011 BARDA Contract expires in September 2020.LiquidityThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern andcontemplate the realization of assets and the satisfaction of liabilities in the normal course of business. On July 13, 2018, the FDA approved the Company’soral TPOXX® for the treatment of smallpox. There was no difference between the approved product and courses of oral TPOXX® that had been delivered tothe Strategic Stockpile. As such, in July 2018, the Company received $41 million that previously had been held back under the 2011 BARDA Contract.Additionally, since July 2018, the Company has received: a $50 million payment from BARDA in August 2018 as a result of the exercise of an option(through modification of the 2011 BARDA Contract) relating to FDA approval of 84-month expiry for oral TPOXX®; and $8033Table of Contentsmillion of cash proceeds from the sale of its PRV (defined in Note 1 to the consolidated financial statements). Furthermore, the 2018 BARDA Contract,awarded in September 2018, could provide payments of up to $600 million to the Company over the next series of years. Accordingly, management believes,based on currently forecasted operating costs that the Company will continue as a going concern.Critical Accounting Estimates The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in ourconsolidated financial statements, which we discuss under the heading “Results of Operations” following this section of our Management’s Discussion andAnalysis of Financial Condition and Results of Operations. Some of our accounting policies require us to make difficult and subjective judgments, often as aresult of the need to make estimates of matters that are inherently uncertain. Our most critical accounting estimates include revenue recognition, thevaluation of warrants granted or issued by us, and income taxes (including realization of deferred tax assets).Revenue RecognitionAll of our revenue is derived from long-term contracts that can span multiple years. We account for revenue in accordance with ASC Topic 606,Revenue from Contracts with Customers (“ASC 606”). The unit of account in ASC 606 is a performance obligation. A contract’s transaction price is allocatedto each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our performance obligations aresatisfied over time as work progresses or at a point in time.Substantially all of our revenue associated with research and development performance obligations is recognized over time. Because controltransfers over time with these performance obligations, revenue is recognized based on the extent of progress towards completion of the performanceobligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services tobe provided. We generally use the cost-to-cost measure of progress for performance obligations connected with research and development activities becauseit best depicts the transfer of control to the customer, which occurs as we incur costs under our contracts. Under the cost-to-cost measure of progress, theextent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to fully satisfy the performanceobligation. Contract costs include labor, material, overhead and third-party services. Any loss on a research and development performance obligation wouldbe recognized at the point in time that it became probable that a loss was going to be incurred.Revenue under the 2011 BARDA Contract (see Note 3 to the consolidated financial statements) connected with courses of oral TPOXX® that aremanufactured and delivered to the Strategic Stockpile and related services, milestones and advance payments (activities in combination that constitute oneperformance obligation) has been recognized at a point in time. Revenue associated with this performance obligation was recognized when BARDA obtainedcontrol of the asset, which was upon delivery to and acceptance by the customer and at the point in time when the constraint on the consideration wasreasonably resolved. The consideration, which is variable, was constrained until the FDA approved oral TPOXX® for the treatment of smallpox on July 13,2018. Prior to FDA approval, consideration had been constrained because the possibility of the FDA Approval Replacement Obligation (as defined herein)had not been quantified or specified. Following FDA approval, the possibility of having to replace product pursuant to the FDA Approval ReplacementObligation was essentially eliminated and deemed to be remote since there is no difference between the approved product and the courses of oral TPOXX®that had been delivered to the Strategic Stockpile. As a result, the deferred revenue associated with the performance obligation was recorded as product salesand supportive services for the year ended December 31, 2018.Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and costs to satisfythe obligations is complex, subject to many variables and requires significant judgment. The consideration associated with these types of performanceobligations is considered variable. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimatedamounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur and when anyuncertainty associated with variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimatedamounts in the transaction price are based largely on an assessment of our historical and anticipated performance, external factors, trends and all otherinformation (historical, current and forecasted) that is reasonably available to us.Contracts are often modified to account for additional services to be performed. We consider contract modifications to exist when the modificationeither creates new enforceable rights and obligations, or changes existing enforceable rights and obligations. If the effect of a contract modification on thetransaction price changes our measure of progress for the performance34Table of Contentsobligation to which it relates, the impact will be recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulativecatch-up basis.We have a process in which management reviews the progress and execution of our performance obligations. As part of this process, managementreviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule,identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgmentabout the ability and cost to achieve the schedule, technical requirements and other contract requirements. Management must make assumptions andestimates regarding labor productivity, the complexity of the work to be performed, customer behavior and execution by our subcontractors, among othervariables.Based on this analysis, any quarterly adjustments to revenues, research and development expenses and cost of sales and supportive services arerecognized as necessary in the period they become known. Changes in estimates of revenues, research and development expenses and cost of sales andsupportive services are recognized quarterly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes oncurrent and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affectthe profitability of one or more of our performance obligations.Income TaxesOur income tax expense and, deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid. We aresubject to US federal income tax and state income tax in numerous jurisdictions. Significant judgments and estimates are required in the determination of ourincome tax expense.Deferred income taxes arise from temporary differences between the tax basis of assets and their reported amounts in the financial statements, whichwill result in taxable or deductible amounts in the future. Each reporting period, we assess the realizability of our deferred tax assets to determine if thedeductible temporary differences will be utilized on a more-likely-than-not basis. In making this determination, we assess all available positive and negativeevidence to determine if our existing deferred tax assets are realizable on a more-likely-than-not basis. Significant weight is given to positive and negativeevidence that is objectively verifiable. We consider the reversal of existing taxable temporary differences, projected future taxable income, tax planningstrategies and recent financial operating results. The realization of a deferred tax asset is ultimately dependent on our generation of sufficient taxable incomewithin the available net operating loss carryback and/or carryforward periods to utilize the deductible temporary differences. During the year endedDecember 31, 2018, we received FDA approval and recorded revenue related to the delivery of our oral TPOXX® product. We also recorded revenue relatedto the FDA holdback payment and the payment for 84-month expiry for oral TPOXX®. In addition, we entered into a new contract with BARDA for the saleof up to 1.7 million courses of TPOXX®. Based on these factors, we determined that sufficient positive evidence exists to conclude that substantially all ofour deferred tax assets are realizable on a more-likely-than-not basis.The amount of deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the net operatingloss carryforward period change and/or if significant objective negative evidence is no longer present. Such changes could lead to a change in judgmentrelated to the realization of the net deferred tax asset. Future changes in the estimated amount of deferred taxes expected to be realized will be reflected in ourfinancial statements in the period the estimate is changed with a corresponding adjustment to operating results.Income tax benefits are recognized for a tax position when, in management’s judgment, it is more likely than not that the position will be sustainedupon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as thelargest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. As of December 31,2018, we recorded an uncertain tax position attribute reduction related to state net operating loss carryforwards. In the event that we conclude that we aresubject to interest and/or penalties arising from uncertain tax positions, we will present interest and penalties as a component of income taxes.Warrant LiabilityWe account for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments withcertain 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 usinga model-derived valuation. Determining the fair value for warrants includes the expected volatility of our stock. Any changes in the fair value of the warrantsare reported in earnings or loss as long as they are classified as assets or liabilities.Recently Issued Accounting Pronouncements 35Table of ContentsFor discussion regarding the impact of accounting standards that were recently issued but are not yet effective, on our consolidated financialstatements, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements. 36Table of ContentsResults of Operations for the Years ended December 31, 2018, 2017, and 2016 Revenues from product sales and supportive services for the year ended December 31, 2018 were $468.9 million. In 2017 and 2016, there were norecorded revenues from product sales and supportive services. Such revenues in 2018 are primarily associated with revenue recognition of all cashconsideration received in prior periods under the 2011 BARDA Contract that is related to the delivery to the Strategic Stockpile of courses of oral TPOXX®and related services, milestones and advance payments ($375.6 million in total). In prior periods, these receipts had been deferred on the balance sheet sincerevenue recognition had been constrained by the possibility of a product replacement obligation being applicable. Following FDA approval of oral TPOXX®in the third quarter 2018, the possibility of the FDA Approval Replacement Obligation resulting in any future replacements of product within the StrategicStockpile is remote, thus resulting in the recognition of revenues that previously had been deferred. In addition to the above-mentioned amounts, 2018product sales and supportive service revenues also include $91 million received in the third quarter under the 2011 BARDA Contract in connection with a$41 million holdback payment and a $50 million payment for achieving 84-month expiry for oral TPOXX® (see Note 3 to the consolidated financialstatements for further detail on these payments).Revenues from research and development contracts and grants for the years ended December 31, 2018 and 2017, were $8.1 million and $12.3million, respectively. The decrease of $4.1 million, or 33.7%, primarily relates to a decrease in revenues from our federal contracts supporting thedevelopment of oral TPOXX®, partially offset by the increase in revenues from our federal contracts supporting the development of IV TPOXX®. Revenuesfrom federal contracts supporting the development of oral TPOXX® have decreased because active studies involving oral TPOXX® have decreased innumber and scale in comparison to prior year activity, reflecting the filing of a new drug application ("NDA") for oral TPOXX® in December 2017.Revenues from research and development contracts and grants for the years ended December 31, 2017 and 2016, were $12.3 million and $15.0million, respectively. The decrease of $2.7 million, or 18.1%, primarily relates to a decrease in revenues from our federal contracts supporting thedevelopment of oral TPOXX®. Revenues from federal contracts supporting the development of oral TPOXX® decreased because active studies involvingoral TPOXX® decreased in number and scale in comparison to prior year activity.Cost of sales and supportive services for the year ended December 31, 2018, were $95.3 million; in 2017 and 2016, there were no recorded cost ofsales and supportive services. Due to FDA approval of oral TPOXX® on July 13, 2018, all costs incurred in previous periods which had been deferred inconnection with the deferral of related revenues were recognized.Selling, general and administrative expenses (“SG&A”) for the years ended December 31, 2018 and 2017 were $12.9 million and $12.3 million,respectively, reflecting an increase of $0.6 million, or 4.7%. The increase is primarily attributable to a $0.3 million increase in employee compensationexpense and non-recurring costs related to the application for listing our stock on The Nasdaq Global Market, partially offset by a reduction in rent expensestemming from the relocation of corporate headquarters in May 2017.SG&A for the years ended December 31, 2017 and 2016 were $12.3 million and $13.7 million, respectively, reflecting a decrease of $1.4 million, or10.3%. The decrease is primarily attributable to a $1.9 million decrease in professional service fees, partially offset by a $0.9 million increase in employeecompensation expense. The decrease in professional service fees is primarily due to the final resolution of the PharmAthene litigation and related strategicinitiatives, which resulted in a decrease in legal fees. The net increase in employee compensation expense reflects an increase in senior managementheadcount, partially offset by a reduction in annual bonus expense in 2017 (one-time bonuses were paid in 2016 in connection with the satisfaction of thePharmAthene liability).Research and development (“R&D”) expenses were $13.0 million for the year ended December 31, 2018, a decrease of approximately $3.7 million,or 22.0% from the $16.7 million incurred during the year ended December 31, 2017. The decrease is attributable to a $4.2 million net decrease in directvendor-related expenses supporting the development of oral TPOXX® and IV TPOXX®. Direct vendor-related expenses related to oral TPOXX® decreased$6.6 million due to a decrease in the number and scale of active studies, while such expenses related to IV TPOXX® increased $2.4 million. The decrease inR&D expenses is also partially attributable to there being no inventory write-down expenses in 2018 as compared with a net expense of $536,000 in 2017 inconnection with an inventory write-down. These net decreases were partially offset by an increase in employee compensation of approximately $1.4 millionwhich was primarily associated with the vesting in 2018 of restricted stock awards that had been contingent upon the FDA approval of oral TPOXX®. 37Table of ContentsR&D expenses were $16.7 million for the year ended December 31, 2017, a decrease of approximately $3.0 million, or 15.4% from the $19.7 millionincurred during the year ended December 31, 2016. The decrease was primarily attributable to a decrease of $2.9 million in direct vendor-related expensessupporting the development of oral TPOXX® (number and scale of active studies decreased) and a $0.6 million decrease in bonus expense (one-time bonuseswere paid in 2016 in connection with the satisfaction of the PharmAthene liability). These decreases were partially offset by a $536,000 net expense relatedto an inventory write-down. The $536,000 expense related to a $686,000 inventory write-down, partially offset by contractual Contract ManufacturingOrganizations (“CMO”) credits received in connection with the inventory write-down.Patent expenses for the years ended December 31, 2018, 2017 and 2016 were $0.8 million, $0.9 million, and $0.9 million, respectively. Theseexpenses reflect our ongoing efforts to protect our lead drug candidates in varied geographic territories.Lease termination expense for the year ended December 31, 2017 was approximately $1.2 million. This expense relates to the Old HQ SubleaseTermination Agreement. See Note 13 to the consolidated financial statements for additional information. For the year ended December 31, 2016, we recorded approximately $11.7 million of interest expense on thePharmAthene liability. This amount represents interest expense related to the post-judgment interest on the Delaware Court of Chancery Final Order andJudgment. On November 16, 2016, we fully satisfied the PharmAthene liability, and thus there was no interest expense on the PharmAthene liability for theyears ended December 31, 2018 and 2017.Interest expense on the term loan facility under the Loan Agreement (the "Term Loan") for the year ended December 31, 2018 was $15.5 million, anincrease of approximately $0.7 million from the $14.8 million incurred during the year ended December 31, 2017. The $15.5 million of interest for the yearended December 31, 2018 includes: $11.0 million of cash payments from restricted cash and $4.5 million of accretion of unamortized costs and fees relatedto the Term Loan balance. The $14.8 million of interest for the year ended December 31, 2017 includes: $10.3 million of cash payments from restricted cashand $4.5 million of accretion of unamortized costs and fees related to the Term Loan balance.Interest expense on the Term Loan for the year ended December 31, 2017 was $14.8 million, an increase of approximately $12.4 million from the$2.4 million incurred during the year ended December 31, 2016. The increase is primarily attributable to a full 12 months of interest accrued on the TermLoan in 2017; in comparison, less than two months of interest accrued in 2016. The $14.8 million of interest for the year ended December 31, 2017 includes:$10.3 million of cash payments from restricted cash and $4.5 million of accretion of unamortized costs and fees related to the Term Loan balance. The $2.4million of interest for the year ended December 31, 2016 included $1.3 million of cash payments from restricted cash and $1.1 million of accretion ofunamortized costs and fees related to the Term Loan balance.Changes in the fair value of liability classified warrants to acquire common stock were recorded within the income statement. For the years endedDecember 31, 2018, 2017 and 2016, we recorded a loss of approximately $6.9 million, $4.7 million and $0.9 million, respectively, reflecting an increase infair value of liability classified warrants resulting principally from increases in the price of our common stock. For the year-ended December 31, 2016, we incurred a non-cash backstop fee of approximately $1.8 million in connection with a rights offering andpursuant to a backstop agreement with an affiliate of MacAndrews & Forbes Inc. and other backstop parties.Other income, net for the year ended December 31, 2018 was $78.9 million. Other income for 2018 reflects the sale of our PRV for $80.0 million, netof related expenses as well as interest income on cash accounts. See Note 1 to the consolidated financial statements regarding the PRV transaction.Reorganization expenses in connection with the chapter 11 filing for the year ended December 31, 2016 were approximately $3.7 million,respectively. Reorganization expenses for the year-ended December 31, 2016 represents expenses incurred up to the Effective Date of the Plan (as defined in Note 15 to the consolidated financial statements).For the year ended December 31, 2018, we recognized a tax benefit of $10.2 million on pre-tax income of $411.6 million. Our effective tax rate forthe year ended December 31, 2018 was (2.5%). During 2018, we recognized a benefit of approximately $25.8 million primarily related to the Company'sassessment that our deferred tax assets are realizable on a more-likely-than-not basis and the resulting reduction of the related valuation allowance. Oureffective tax rate for the year ended December 31, 2018 differs from the statutory rate primarily as a result of the reduction of the valuation allowance.38Table of ContentsFASB Accounting Standards Codification Topic 740, Income Taxes ("ASC 740") requires that a valuation allowance be established when it is “morelikely than not” that all or a portion of deferred tax assets will not be realized. At each reporting date, we consider new evidence, both positive and negative,that could impact our view with regard to future realization of deferred tax assets. During the year ended December 31, 2018, we received FDA approval andrecorded revenue related to the previous delivery of our oral TPOXX® product. We also recorded revenue related to the FDA holdback payment and thepayment for 84-month expiry of oral TPOXX®. In addition, we entered into a new contract with BARDA for the purchase of up to 1.7 million courses ofTPOXX®. Based on these factors, we determined that sufficient positive evidence existed to conclude that substantially all of our deferred tax assets wererealizable on a more-likely-than-not basis.For the year ended December 31, 2017, we recognized a tax benefit of approximately $2.1 million on a pre-tax loss of $38.3 million. Our effectivetax rate for the year ended December 31, 2017 was 5.5%.On December 22, 2017, the U.S. government enacted comprehensive tax reform commonly referred to as the Tax Cuts and Jobs Act (“TCJA”). UnderASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The TCJA makes broad and complexchanges to the U.S. tax code, including, but not limited to: (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) changing rules related to usesand limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; (3) bonus depreciation that will allow for fullexpensing of qualified property; (4) creating a new limitation on deductible interest expense; (5) eliminating the corporate alternative minimum tax; (6)limitation on the deductibility of executive compensation under Internal Revenue Code §162(m); and (7) new tax rules related to foreign operations.In connection with the initial analysis of the impact of the TCJA as of December 31, 2017, we recorded a provisional decrease in our deferred taxassets and liabilities with a corresponding adjustment to the related valuation allowance. In addition, the Company recorded an income tax benefit of $2.1million primarily related to our Minimum Tax Credit carryforwards as such amounts will be refundable, in cash, under TCJA. As of December 31, 2018, theCompany has approximately $2.7 million of minimum tax credits which are expected to be refunded no later than 2021.In response to the TCJA, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 118 which provides guidance on accounting for the tax effectsof TCJA. The purpose of SAB No. 118 was to address any uncertainty or diversity of view in applying ASC 740 in the reporting period in which the TCJAwas enacted. In addition, SAB No. 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companiesto complete the accounting under ASC 740. For the year ended December 31, 2017, we recorded a provisional decrease in our deferred tax assets andliabilities with a corresponding adjustment to the related valuation allowance. In addition, we recorded an income tax benefit of $2.7 million related to theelimination of the AMT as such amounts will be refundable, in cash, under TCJA. We expect to collect the refund no later than 2021. During the year endedDecember 31, 2018, we finalized the accounting for the tax effects of TCJA with no material changes to the provisional estimate recorded in 2017.For the year ended 2016, we incurred a tax provision of $13,884 on pre-tax net losses of $39.7 million. Our effective tax rate for the year endedDecember 31, 2016 was (0.03%). Our effective tax rate was impacted by recurring items such as current operating losses with no tax benefit, federalalternative minimum tax, state taxes, and the change in the valuation allowance for deferred tax liabilities associated with indefinite-lived intangible assets.Such deferred tax liabilities generally cannot be used as a source of taxable income to realize deferred tax assets with a definitive loss carryforward period.Liquidity and Capital Resources As of December 31, 2018, we had $100.7 million in cash and cash equivalents compared with $19.9 million at December 31, 2017. Additionally, asof December 31, 2018, we had $79.7 million of restricted cash compared with $17.2 million at December 31, 2017. The restricted cash is available to payinterest, fees and principal on the Term Loan. The increase in the restricted cash relates to the sale of our PRV. See Note 7 to the consolidated financialstatements for additional information.Operating ActivitiesWe prepare our consolidated statement of cash flows using the indirect method. Under this method, we reconcile net income (loss) to cash flows fromoperating activities by adjusting net income (loss) for those items that impact net income (loss) but may not result in actual cash receipts or payments duringthe period. These reconciling items include but are not limited to stock-based compensation and changes in the fair value of our warrant liability; gains andlosses from various transactions and changes in the consolidated balance sheet for working capital from the beginning to the end of the period.Net cash provided by (used in) operations for the years ended December 31, 2018 and 2017 was $68.9 million and $(18.4) million, respectively. Forthe year ended December 31, 2018, the primary sources of cash inflows were a $41.0 million holdback39Table of Contentspayment under the 2011 BARDA Contract (see Note 3) and a $50.0 million payment from BARDA in connection with a modification made to the 2011BARDA Contract, in which BARDA exercised an option relating to FDA approval of 84-month expiry for oral TPOXX®. These receipts were partially offsetby net operating costs and $11.0 million of cash interest expense on the Term Loan. For the year ended December 31, 2017, cash usage was primarily due to:$26.7 million of cash operating expenses (net loss adjusted for non-cash items noted in the cash flow statement such as interest expense and change in fairvalue of warrants) and $4.9 million of payments to CMOs for the manufacture and related support of TPOXX®, partially offset by $8.5 million of cashreceived from BARDA for product deliveries of oral TPOXX® as well as reimbursement payments under the BARDA contract of certain vendor costs thatwere paid in the prior year. Net cash (used in) operations for the years ended December 31, 2017 and 2016 was $(18.4) million and $(116.8) million, respectively. For the yearended December 31, 2017, cash usage was primarily due to: $26.7 million of cash operating expenses (net loss adjusted for non-cash items noted in the cashflow statement such as interest expense and change in fair value of warrants) and $4.9 million of payments to CMOs for the manufacture and related supportof TPOXX®, partially offset by $8.5 million of cash received from BARDA for product deliveries of oral TPOXX® as well as reimbursement payments underthe BARDA contract of certain vendor costs that were paid in the prior year. For the year ended December 31, 2016, cash usage was primarily attributable to$170 million of payments made to PharmAthene by the Company, which in combination with a $46.9 million payment made directly to PharmAthene by theLender under the Term Loan, fully satisfied the PharmAthene claim (the $46.9 million payment by the Lender is not part of operating activities within thecash flow statement). Cash usage was also due to: operating expenses; costs attendant to the administration of the chapter 11 case; pre-petition claimpayments (other than the PharmAthene claim); $31.4 million of payments to CMOs for the manufacture and related support of TPOXX®. These amounts werepartially offset by $111.2 million of cash received from BARDA for product deliveries of oral TPOXX® and achieving a milestone under the BARDAcontract. On December 31, 2018 and 2017, our accounts receivable balance was approximately $2.0 million (which includes approximately $0.6 million ofunbilled receivables) and $1.8 million, respectively. Our accounts receivable balances primarily reflect reimbursable work performed during December 31,2018 and 2017, respectively, in connection with TPOXX®. Investing ActivitiesNet cash provided by (used in) investing activities for the years ended December 31, 2018 and 2017 was $78.2 million and $(0.1) million,respectively. In 2018, we received net proceeds of approximately $78.3 million related to the sale of our PRV. In 2017, net cash used related to capitalexpenditures.Net cash (used in) provided by investing activities for the years ended December 31, 2017 and 2016 was $(0.1) million and $1.2 million,respectively. For the year ended December 31, 2017 we purchased approximately $0.1 million of equipment in the ordinary course of business. For the yearended December 31, 2016, we received approximately $1.2 million in connection with the return of collateral supporting a surety bond that had been postedin 2012 in connection with the PharmAthene litigation.Financing ActivitiesNet cash used in financing activities for the years ended December 31, 2018 and 2017 was $3.8 million and $0.6 million, respectively. For the yearended December 31, 2018, cash was used to repurchase $4.1 million of common stock to meet minimum statutory tax withholding requirements for sharesissued to employees in connection with the release of restricted stock units and the exercise of stock appreciation rights and options. Additionally, wereceived approximately $0.3 million in exercise price payments in connection with the exercise of options. For the year ended December 31, 2017, cash wasused to repurchase $0.6 million of common stock to meet minimum statutory tax withholding requirements for shares issued to employees in connection withthe release of restricted stock units and the exercise of stock appreciation rights and options. Additionally, we bought back $84,000 of options at theirintrinsic value, and we received $89,000 in exercise price payments in connection with the exercise of options.Net cash (used in) provided by financing activities for the years ended December 31, 2017 and 2016 was $(0.6) million and $59.1 million, respectively. Forthe year ended December 31, 2017, cash was used to repurchase $0.6 million of common stock to meet minimum statutory tax withholding requirements forshares issued to employees in connection with the release of restricted stock units and the exercise of stock appreciation rights and options. Additionally, webought back $84,000 of options at intrinsic value, and we received $89,000 in connection with the exercise of options. On November 16, 2016, the TermLoan was funded and a rights offering was completed. The rights offering provided net proceeds of approximately $34.6 million through the sale of 23.5million shares of common stock. In connection with the Term Loan, we paid $3.8 million of costs. Separately, during 2016, we repurchased $0.4 million ofcommon stock to meet minimum statutory tax withholding requirements for restricted shares issued to employees. The Term Loan provided $46.9 million($50 million, less fees and expenses of $3.1 million) that was paid directly by the Lender to PharmAthene as part of the full satisfaction of the PharmAtheneclaim. The Term Loan placed an additional $3040Table of Contentsmillion in a reserve account to be utilized primarily to pay interest on the Term Loan (such amount being recorded as restricted cash).41Table of ContentsContractual Obligations, Commercial Commitments and Purchase Obligations Future contractual obligations and commercial commitments as of December 31, 2018 are expected to be as follows: Total Less than 1 year 1 to 3 years 3 to 5 years Greater than 5yearsOperating lease obligations (1)$3,019,928 $541,376 $608,000 $672,774 $1,197,778Term loan obligations at maturity84,000,000 — 84,000,000 — —Interest payment obligations on the Term Loan (2)21,523,631 11,452,078 10,071,553 — —Purchase obligations (3)7,224,223 6,679,261 488,530 56,432 —Payments under Lease Termination Agreement568,057 336,955 231,102 — —Total contractual obligations$116,335,839 $19,009,670 $95,399,185 $729,206 $1,197,778(1)Includes facilities and office space under two operating leases expiring in 2019 and 2027, respectively. These obligations assume non-terminationof agreements and represent expected payments, which are subject to change.(2)Includes amounts to be paid with restricted cash. Assumes cash interest rate of 14.1% (the rate at December 31, 2018) throughout the duration of theTerm Loan.(3)Includes purchase orders for manufacturing and R&D activities.Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our investment portfolio includes cash and cash equivalents. Our main investment objective is the preservation of investment capital. We believethat our investment policy is conservative, both in the duration of our investments and the credit quality of the investments we hold. We do not utilizederivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposureto interest rate changes. As such, we believe that, the securities we hold are subject to market risk, changes in the financial standing of the issuer of suchsecurities and our interest income is sensitive to changes in the general level of U.S. interest rates. Additionally, we are also subject to the risk of risingLIBOR rates; whenever the minimum rates for one-month, two-month, three-month and six-month LIBOR rates (“minimum LIBOR rate”) are above 1%, thenthe interest rate charged on the Term Loan could increase materially depending on the magnitude of any increase in LIBOR rates. For every increase of 0.5%in the minimum LIBOR rate (e.g., an increase from a LIBOR rate of 2.50% to 3.00%), annual interest payments on the Term Loan would increase byapproximately $0.4 million. Furthermore, we are subject to the impact of stock price fluctuations of our common stock in that we have a liability-classifiedwarrant in which 1.7 million shares of SIGA common stock can be purchased at a strike price of $1.50 per share. For every $1 increase in the stock price ofSIGA, the intrinsic value of the liability-classified warrant will increase by approximately $1.7 million.42Table of ContentsItem 8. Financial Statements and Supplementary Data Index to the Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm44 Consolidated Balance Sheets46 Consolidated Statements of Operations and Comprehensive Income (Loss)46 Consolidated Statements of Changes in Stockholders’ Equity/(Deficiency)47 Consolidated Statements of Cash Flows47 Notes to Consolidated Financial Statements4843Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of Directors of SIGA Technologies, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of SIGA Technologies, Inc. (the “Company”) as of December 31, 2018 and 2017, and therelated consolidated statements of operations and comprehensive income (loss), changes in stockholders' equity/(deficiency), and cash flows for each of thethree years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We alsohave audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - IntegratedFramework (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 ofDecember 31, 2018 and December 31, 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31,2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - IntegratedFramework (2013) issued by the COSO.Change in Accounting PrinciplesAs discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenues from contracts withcustomers and the manner in which it accounts for the classification and presentation of restricted cash on the consolidated statements of cash flows in 2018.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, andfor its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over FinancialReporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company'sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable 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 reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol 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 financialstatements, 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 usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch 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 ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and44Table of Contentsdispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detectionof 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPFlorham Park, New JerseyMarch 5, 2019We have served as the Company’s auditor since 1997. 45Table of ContentsSIGA TECHNOLOGIES, INC.CONSOLIDATED BALANCE SHEETSAs of December 31, 2018 December 31, 2017ASSETS Current assets Cash and cash equivalents$100,652,809 $19,857,833Restricted cash, short-term11,452,078 10,701,305Accounts receivable1,959,133 1,802,107Inventory2,908,210 2,983,249Prepaid expenses and other current assets4,317,615 2,019,999 Total current assets121,289,845 37,364,493 Property, plant and equipment, net171,274 138,640Restricted cash, long-term68,292,023 6,542,448Deferred costs— 96,592,334Deferred tax asset, net11,733,385 2,431,963Goodwill898,334 898,334Other assets1,058,880 702,167 Total assets$203,443,741 $144,670,379LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIENCY) Current liabilities Accounts payable$1,688,488 $1,328,867 Accrued expenses and other current liabilities9,648,917 5,481,579 Total current liabilities11,337,405 6,810,446Deferred revenue— 377,641,485Warrant liability12,380,939 11,466,162Other liabilities1,263,113 840,253Long-term debt75,547,597 71,050,324 Total liabilities100,529,054 467,808,670Commitments and contingencies (Note 13) Stockholders' equity/(deficiency) Common stock ($.0001 par value, 600,000,000 shares authorized, 80,763,350 and 79,039,000 issued and outstandingat December 31, 2018, and December 31, 2017, respectively)8,076 7,904Additional paid-in capital218,697,872 214,229,581Accumulated deficit(115,791,261) (537,375,776) Total stockholders' equity/(deficiency)102,914,687 (323,138,291) Total liabilities and stockholders' equity/(deficiency)$203,443,741 $144,670,379The accompanying notes are an integral part of these financial statements.SIGA TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)For the Years Ended December 31 2018 2017 2016Revenues Product sales and supportive services$468,918,468 $— $— Research and development8,135,314 12,268,960 14,987,628 Total revenues477,053,782 12,268,960 14,987,628 Operating expenses Cost of sales and supportive services95,268,974 — — Selling, general and administrative12,879,738 12,303,050 13,713,635 Research and development13,016,183 16,679,712 19,710,673 Patent expenses789,489 909,946 909,376 Lease termination— 1,225,421 — Interest on PharmAthene liability— — 11,668,900 Total operating expenses121,954,384 31,118,129 46,002,584 Operating income (loss)355,099,398 (18,849,169) (31,014,956)Loss from change in fair value of warrant liability(6,922,624) (4,738,753) (894,785)Interest expense(15,478,203) (14,758,140) (2,395,517)Backstop fee— — (1,764,240)Other income, net78,940,985 16,788 102,324Reorganization items, net— — (3,716,902) Income (loss) before income taxes411,639,556 (38,329,274) (39,684,076)Benefit/(provision) for income taxes10,168,272 2,093,790 (13,884) Net and comprehensive income (loss)$421,807,828 $(36,235,484) $(39,697,960) Basic earnings (loss) per share$5.28 $(0.46) $(0.69) Diluted earnings (loss) per share$5.18 $(0.46) $(0.69) Weighted average shares outstanding: basic79,923,295 78,874,494 57,188,503 Weighted average shares outstanding: diluted82,708,472 78,874,494 57,188,503The accompanying notes are an integral part of these financial statements.46Table of ContentsSIGA TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY)For the Years Ended December 31, 2018, 2017 and 2016 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Stockholders’ Shares Amount Capital Deficit Income (Loss) Equity/(Deficiency)Balances, December 31, 201554,114,296 $5,411 $177,008,371 $(461,442,332) $— $(284,428,550)Net loss (39,697,960) (39,697,960)Issuance of common stock upon exercise of RSUs483,335 48 (48) —Stock-based compensation 775,541 775,541Payment of common stock tendered for employeestock-based compensation tax obligations(136,744) (13) (427,996) (428,009)Issuance of common stock associated with rightsoffering23,523,195 2,352 34,594,117 34,596,469Issuance of common stock associated with backstopagreement708,530 71 1,764,169 1,764,240Balances, December 31, 201678,692,612 $7,869 $213,714,154 $(501,140,292) $— $(287,418,269)Net loss (36,235,484) (36,235,484)Issuance of common stock upon exercise of stockoptions33,870 3 89,495 89,498Issuance of common stock upon vesting of RSUs andexercise of stock-settled appreciation rights466,328 47 (47) —Payment of common stock tendered for employeestock-based compensation tax obligations(153,810) (15) (591,052) (591,067)Stock-based compensation— — 1,101,031 1,101,031Buy-back of stock options— — (84,000) (84,000)Balances, December 31, 201779,039,000 $7,904 $214,229,581 $(537,375,776) $— $(323,138,291)Net income 421,807,828 421,807,828Issuance of common stock upon exercise of stockoptions426,366 42 261,837 261,879Issuance of common stock upon vesting of RSUs andexercise of stock-settled appreciation rights1,184,283 118 (118) —Issuance of common stock upon exercise of warrants760,626 77 6,007,770 6,007,847Payment of common stock tendered for employeestock-based compensation tax obligations(646,925) (65) (4,074,375) (4,074,440)Cumulative effect of accounting change (223,313) (223,313) Stock-based compensation 2,273,177 2,273,177Balances, December 31, 201880,763,350 $8,076 $218,697,872 $(115,791,261) $— $102,914,687The accompanying notes are an integral part of these financial statements.SIGA TECHNOLOGIES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended December 31 2018 2017 2016Cash flows from operating activities: Net income (loss)$421,807,828 $(36,235,484) $(39,697,960) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and other amortization69,630 132,189 174,275 Loss on change in fair value of warrant liability6,922,624 4,738,753 894,785 Lease termination— 1,225,421 — Stock-based compensation2,273,177 1,101,031 775,541 Net realization of deferred revenue and costs due to FDA approval(281,950,853) — — Deferred income taxes (benefit)/provision(9,301,422) (2,718,029) 20,423 Write down of inventory, net— 536,000 — Non-cash backstop fee— — 1,764,240 Non-cash interest expense4,497,273 4,497,271 566,779 Gain on sale of priority review voucher(78,338,826) — — Changes in assets and liabilities: Accounts receivable(49,723) 1,352,263 522,360 Inventory39 22,690,715 (13,762,876) Deferred costs— (23,943,057) (19,712,849) Prepaid expenses and other current assets(2,222,616) (1,065,573) (330,443) Other assets(356,713) (60,084) 80,928 Accounts payable, accrued expenses and other current liabilities1,622,331 (1,847,427) (177,342) Liabilities subject to compromise— — (160,072,170) Deferred revenue3,475,714 11,412,898 112,225,534 Other liabilities422,860 (203,654) (84,228) Net cash provided by (used in) operating activities68,871,323 (18,386,767) (116,813,003)Cash flows from investing activities: Capital expenditures(102,264) (100,124) (23,927) Net proceeds from sale of priority review voucher78,338,826 — — Return of collateral for surety bond— — 1,212,591 Net cash provided by (used in) investing activities78,236,562 (100,124) 1,188,664Cash flows from financing activities: Net proceeds from exercise of stock options261,879 89,498 — Net proceeds from equity rights offering - net of offering costs— — 34,596,468 Proceeds from Term Loan escrow release— — 28,694,444 Buy back of stock options— (84,000) — Payment of employee tax obligations for common stock tendered(4,074,440) (591,067) (428,009) Debt issue costs— — (3,775,546) Net cash (used in) provided by financing activities(3,812,561) (585,569) 59,087,357Net increase (decrease) in cash and cash equivalents143,295,324 (19,072,460) (56,536,982)Cash, cash equivalents and restricted cash at the beginning of period37,101,586 56,174,046 112,711,028Cash, cash equivalents and restricted cash at end of period$180,396,910 $37,101,586 $56,174,046 Supplemental disclosure of cash inflows information: Conversion of warrants to common stock$6,007,847 $— $—Issuance of common stock upon cashless exercise$1,681,426 $— $—Portion of Term Loan paid directly to PharmAthene by the Lender in satisfaction of the PharmAthene claim; suchliability is part of the Liabilities Subject to Compromise line item$— $— $46,900,000Cash interest paid on PharmAthene liability$— $— $11,668,900Cash income taxes paid (refund)$251,961 $325,000 $500,975Fair value of warrant, at issuance date, in connection with loan agreement and recorded as warrant liability$— $— $5,832,624The accompanying notes are an integral part of these financial statements47SIGA TECHNOLOGIES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization and Basis of Presentation Description of BusinessSIGA Technologies, Inc. (“SIGA” or the “Company”) is a commercial-stage pharmaceutical company focused on the health security market. Health securitycomprises countermeasures for biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectiousdiseases, and health preparedness. Our lead product is TPOXX®, an orally administered antiviral drug for the treatment of human smallpox disease caused byvariola virus. On July 13, 2018, the United States Food & Drug Administration (“FDA”) approved the Company’s orally-administered drug TPOXX® (“oralTPOXX®”).LiquidityThe accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern andcontemplate the realization of assets and the satisfaction of liabilities in the normal course of business. On July 13, 2018, the FDA approved the Company’soral TPOXX® for the treatment of smallpox. There was no difference between the approved product and courses of oral TPOXX® that had been delivered tothe U.S. Strategic National Stockpile (“Strategic Stockpile”). As such, in July 2018, the Company received $41 million that previously had been held backunder the 2011 U.S. Biomedical Advanced Research and Development Authority (“BARDA”) Contract (see Note 3). Additionally, since July 2018, theCompany has received: a $50 million payment from BARDA in August 2018 as a result of the exercise of an option (through modification of the 2011BARDA Contract (defined in Note 3)) relating to FDA approval of 84-month expiry for oral TPOXX®; and $80 million of cash proceeds from the sale of itsPRV (defined below). Furthermore, the 2018 BARDA Contract (defined in Note 3), awarded in September 2018, could provide payments of up to $600million to the Company over the next series of years. Accordingly, management believes, based on currently forecasted operating costs that the Companywill continue as a going concern.Priority Review VoucherConcurrent with the approval of oral TPOXX®, the FDA granted the Company's request for a Priority Review Voucher (“PRV”). A PRV is a voucher that maybe used to obtain an accelerated FDA review of a product candidate. On October 31, 2018 the Company sold its PRV for cash consideration of $80 million.2. Summary of Significant Accounting Policies Use of EstimatesManagement is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets andliabilities at the date of the financial statements and revenues and expenses during the periods reported. The most significant estimates include the variablesused 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 tobe necessary. Actual results could differ from these estimates. Basis of PresentationThe consolidated financial statements and related disclosures are presented in accordance with generally accepted accounting principles in the United Statesof America (“US GAAP”) and reflect the consolidated financial position, results of operations and cash flows for all periods presented.Cash EquivalentsThe Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.Restricted Cash and Cash EquivalentsOn January 1, 2018, the Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB’s EmergingIssues Task Force. The new standard requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, andamounts generally described as restricted cash or restricted cash equivalents. Entities are required to reconcile such total to amounts on the balance sheet anddisclose the nature of the restrictions. Adoption of this guidance impacts the cash flow disclosure for the years ended December 31, 2017 and 2016; cashflows from operating activities, as disclosed herein, are $10.2 million and $1.2 million, respectively, less than the amounts disclosed in the 2017 Form48Table of Contents10-K. In addition, cash flows from financing activities for the year ended December 31, 2016, as disclosed herein, are $28.7 million more than the amountdisclosed in the 2017 Form 10-K.A portion of the Company’s cash received from the Loan Agreement and net cash proceeds from the PRV sale are restricted and have been placed in reserveaccounts. Cash originally received from the Loan Agreement, and placed in a reserve account, could only be used to pay interest on the Term Loan, asidefrom $5 million that was withdrawn from the reserve account on July 12, 2018 under the provisions of the Term Loan. Cash received from the PRV sale isavailable to pay interest, fees and principal of the Term Loan. See Note 7 for additional information.The following table reconciles cash, cash equivalents and restricted cash per the consolidated statements of cash flows to the consolidated balance sheet foreach respective period: As of December 31, 2018 2017 2016 2015Cash and cash equivalents$100,652,809 $19,857,833 $28,701,824 $112,711,028Restricted cash - short-term11,452,078 10,701,305 10,138,890 —Restricted cash - long-term68,292,023 6,542,448 17,333,332 —Cash, cash equivalents and restricted cash$180,396,910 $37,101,586 $56,174,046 $112,711,028Concentration of Credit RiskThe Company has cash in bank accounts that exceeds the Federal Deposit Insurance Corporation insured limits. The Company has not experienced anylosses on its cash accounts and no allowance has been provided for potential credit losses because management believes that any such losses would beminimal, if any.Accounts ReceivableAccounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2018 and 2017, 100% of accounts receivable representedreceivables from BARDA. An allowance for doubtful accounts is based on specific analysis of the receivables. At December 31, 2018 and 2017, the Companyhad no allowance for doubtful accounts. InventoryInventory is stated at the lower of cost or net realizable value. The Company capitalizes inventory costs associated with the Company’s products when, basedon management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, suchcosts are expensed as research and development. Inventory is evaluated for impairment periodically to identify inventory that may expire prior to expectedsale 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 dueto expiration, the Company records a charge to write down such unmarketable inventory to its net realizable value. As of December 31, 2018, inventory isexpected to have a shelf life in excess of five years and is expected to be available for delivery under any new or existing procurement contracts.Property, Plant and EquipmentProperty, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-line method over the estimateduseful 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 LiabilityThe Company accounts for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments withcertain 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 usingmodel-derived valuations. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts areclassified as assets or liabilities.Revenue RecognitionAll of the Company’s revenue is derived from long-term contracts that span multiple years. The Company accounts for revenue in accordance with ASCTopic 606, Revenue from Contracts with Customers (“ASC 606”).49Table of ContentsAdoption of ASC 606. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts thatwere not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior periodamounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605, Revenue Recognition.The cumulative impact of adopting ASC 606 as of January 1, 2018 was a decrease to deferred revenue of approximately $1.8 million; a decrease to deferredcosts of approximately $2.1 million; an increase to receivables of approximately $0.1 million and a net increase to opening accumulated deficit of $0.2million, net of tax. For the year ended December 31, 2018, the impact to revenues as a result of applying ASC 606 was an increase of approximately $1.0million.Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unitof account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, theperformance obligation is satisfied. As of December 31, 2018, the Company's active performance obligations, for the contracts outlined in Note 3, consist ofthe following: three performance obligations relate to research and development services; two relate to manufacture and delivery of product; and one isassociated 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 contractspecifications or requirements. In most instances, contract modifications are for services that are not distinct, and, therefore, are accounted for as part of theexisting contract.The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Substantially all of the Company’s revenue related toresearch and development performance obligations is recognized over time, because control transfers continuously to our customers. Typically, revenue isrecognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’sperformance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.Contract costs include labor, material, overhead, and third-party services.Revenue connected with the performance obligation to deliver courses of oral TPOXX® to the Strategic Stockpile, which includes related services,milestones and advance payments under the 2011 BARDA Contract, has been recognized at a point in time. Revenue associated with this performanceobligation was recognized when BARDA obtained control of the asset, which was upon delivery to and acceptance by the customer and at the point in timewhen the constraint on the consideration was resolved. The consideration, which is variable consideration, was constrained until the FDA approved oralTPOXX® for the treatment of smallpox on July 13, 2018. Prior to FDA approval, consideration had been constrained because the FDA Approval ReplacementObligation (as defined in Note 3) had not been quantified or specified. Following FDA approval, the possibility of having to replace product pursuant to theFDA Approval Replacement Obligation was essentially eliminated and deemed to be remote since there was no difference between the approved product andthe courses of oral TPOXX® that had been delivered to the Strategic Stockpile.Contract Estimates. Accounting for long-term contracts and grants involves the use of various techniques to estimate total contract revenue andcosts.Contract estimates are based on various assumptions to project the outcome of future events that often span multiple years. These assumptions include laborproductivity; the complexity of the work to be performed; external factors such as customer behavior and potential regulatory outcomes; and the performanceof 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 atcompletion are complex, subject to many variables and require significant judgment. The consideration associated with research and development services isvariable as the total amount of services to be performed has not been finalized. The Company estimates variable consideration as the most likely amount towhich it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal ofcumulative revenue recognized will not occur and when any uncertainty associated with variable consideration is resolved. The Company’s estimates ofvariable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our historicaland 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 updatesits contract-related estimates regularly. The Company recognizes adjustments in estimated revenues, research and development expenses and cost of salesand supportive services under the cumulative catch-up method. Under this50Table of Contentsmethod, the impact of the adjustment on revenues, research and development expenses and cost of sales and supportive services recorded to date on acontract 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 workprogresses in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones. Undertypical payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For theCompany’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.Remaining Performance Obligations. Remaining performance obligations represent the transaction price for which work has not been performedand excludes unexercised contract options. As of December 31, 2018 the aggregate amount of transaction price allocated to remaining performanceobligations for the 2011 BARDA Contract, 2018 BARDA Contract and the IV Formulation R&D Contract was $58.1 million. The Company expects torecognize this amount as revenue over the next five years as the specific timing for satisfying the performance obligations is subjective and outside theCompany’s control. Deferred RevenueWhen the Company receives consideration, or such consideration is unconditionally due, prior to transferring goods or services to the customer under theterms of a sales contract, the Company records deferred revenue, which represents a contract liability. The Company recognizes deferred revenue as netrevenues once control of goods and/or services has been transferred to the customer and all revenue recognition criteria have been met and any constraintshave been resolved.Historically, the Company deferred revenue in connection with the manufacture and delivery of oral TPOXX® under the 2011 BARDA Contract. Revenuerecognition as of December 31, 2017 was constrained by the unquantifiable possibility of product replacement pursuant to the FDA Approval ReplacementObligation. On July 13, 2018, the FDA approved oral TPOXX® for the treatment of smallpox. As a result of FDA approval, the possibility of having toreplace product pursuant to the FDA Approval Replacement Obligation was essentially eliminated and deemed to be remote since there was no differencebetween the approved product and the courses of oral TPOXX® that had already been delivered to the Strategic Stockpile. As such, deferred revenue as ofDecember 31, 2017 associated with the 2011 BARDA Contract was recorded as product sales and supportive services during the year ended December 31,2018.The following table presents changes in the Company's deferred revenue: For the year ended December 31,2018Balance at December 31, 2017$378,896,803Cumulative effect of accounting change(1,780,050)Billings in advance of revenue recognized3,399,630Revenue recognized(376,356,437)Balance at December 31, 2018, included in Accrued expenses and other current liabilities$4,159,946As of December 31, 2017 approximately $1.3 million of deferred revenue was included in accrued expenses and other current liabilities on the consolidatedbalance sheet. Billings in advance of revenue recognized include $3.2 million for the manufacture of IV BDS (see Note 3).Research and DevelopmentResearch and development expenses include costs directly and indirectly attributable to the conduct of research and development programs, and performancepursuant to the BARDA contracts, including employee related costs, materials, supplies, depreciation on and maintenance of research equipment, the cost ofservices provided by outside contractors, including services related to the Company’s clinical trials and facility costs, such as rent, utilities, and generalsupport services. All costs associated with research and development are expensed as incurred. Costs related to the acquisition of technology rights, for whichdevelopment work is still in process, and that have no alternative future uses, are expensed as incurred. 51Table of ContentsGoodwillThe Company evaluates goodwill for impairment at least annually or as circumstances warrant. The impairment review process compares the fair value of thereporting unit in which goodwill resides to its carrying value. The Company operates as one business and one reporting unit. Therefore, the goodwillimpairment 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 CompensationStock-based compensation expense for all share-based payment awards made to employees and directors is determined on the grant date; for options awards,fair value was estimated using the Black-Scholes model and for stock-settled stock appreciation rights (“SSARs”), fair value was estimated using the MonteCarlo method. These compensation costs are recognized net of an estimated forfeiture rate over the requisite service periods of the awards. Forfeitures areestimated on the date of the respective grant and revised if actual or expected forfeiture activity differs from original estimates. Income TaxesThe Company recognizes income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes arerecorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities at enacted tax rates expected to bein 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 entiredeferred tax asset will not be realized. The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgmentsabout the Company’s future profitability which are inherently uncertain.Earnings (Loss) per ShareBasic 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, SSARs, RSUs, warrants and other incentives had been issued and any proceeds receivedin respect thereof were used to repurchase common stock at the average market price during the period. The assumed proceeds used to repurchase commonstock is the sum of the amount to be paid to the Company upon exercise of options and the amount of compensation cost attributed to future services not yetrecognized.Fair Value of Financial InstrumentsThe carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and othercurrent liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilitiesare 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 obtainedfrom 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 arecurring basis and classify such liability-classified warrants in Level 3. As described in Note 8, the fair value of the liability-classified warrant was $12.4million at December 31, 2018.At December 31, 2018, the fair value of the debt was $91.1 million and the carrying value of the debt was $75.5 million. The Company used a discountedcash flow model to estimate the fair value of the debt by applying a discount rate to future payments expected to be made as set forth in the Loan Agreement. The fair value of the loan was measured using Level 3 inputs. The discount rate was determined using market participant assumptions. There were no transfers between levels of the fair value hierarchy during 2018. In addition, there were no Level 1 or Level 2 financial instruments as ofDecember 31, 2018 and 2017.52Table of ContentsThe following table presents changes in the liability-classified warrant measured at fair value using Level 3 inputs: Fair Value Measurements of Level 3 liability classifiedwarrantWarrant liability at December 31, 2017$11,466,162Increase in fair value of warrant liability6,922,624Exercise of warrants(6,007,847)Warrant liability at December 31, 2018$12,380,939Loss ContingenciesThe Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to theextent 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 amountwithin 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, thelowest amount in the range is accrued. The Company expenses legal costs associated with loss contingencies as incurred. We record anticipated recoveriesunder existing insurance contracts when recovery is assured.Segment InformationThe Company is managed and operated as one business. The entire business is managed by a single management team that reports to the chief executiveofficer, who is the Chief Operating Decision Maker. The Company does not operate separate lines of business or separate business entities with respect to anyof its product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product areas or by location andhas only one reportable segment.Recent Accounting PronouncementsOn January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Theguidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be theamount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairmentguidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitativeimpairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carryingamounts. The revised guidance will be applied prospectively, and is effective for fiscal years beginning after December 15, 2019. The Company believes theadoption of ASU No. 2017-04 will not have a significant impact on its consolidated financial statements.On February 25, 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which relates to the accounting for leasing transactions. This standard requiresa lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. Inaddition, this standard requires both lessees and lessors to disclose certain key information about lease transactions. The Company has elected to adopt thestandard using the modified retrospective transition approach with a January 1, 2019 effective date of initial application. Under the modified retrospectivetransition method, the Company will recognize a cumulative effect adjustment to retained earnings as of the effective date in the period of adoption.Consequently, comparative financial information and disclosures provided for dates and periods before January 1, 2019 will not be updated in theCompany’s future filings. While the Company is continuing to evaluate the impact that ASU No. 2016-02 will have on its consolidated financial statements,the Company expects that a right-of-use asset and a corresponding amount of lease liability in the range of $3.0 - $4.0 million will be recorded on theconsolidated balance sheet.3. Procurement Contract and Research Agreements 2018 BARDA ContractOn September 10, 2018, the Company entered into a contract with BARDA pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oralTPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 coursesof the intravenous (IV) formulation of TPOXX® ("IV TPOXX®"). Additionally, the contract includes funding from BARDA for advanced development of IVTPOXX®, post-marketing activities for oral and IV TPOXX®, and supportive procurement activities. The contract with BARDA (as amended, modified, orsupplemented from time to time, the “2018 BARDA Contract”) currently contemplates, as of February 28, 2019, up to approximately $600.1 million ofpayments, of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately $12.2 millionof payments are related to exercised options and up to approximately $536.2 million53Table of Contentsof payments are currently specified as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercisedoptions. The period of performance for options is up to ten years from the date of entry into the 2018 BARDA Contract and such options could be exercisedat any time during the contract term, including during the base period of performance. Initially, the 2018 BARDA Contract specified payments of up toapproximately $628.7 million; on February 21, 2019, a cost-reimbursement plus fixed fee option for post-marketing, and other activities for oral TPOXX®was modified to $12.2 million (from $40.8 million) based on updated planning. As such, total potential payments currently specified under the 2018 BARDAContract are $600.1 million.The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of 20,000courses 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 ofapproximately $0.6 million for supportive procurement activities. As of December 31, 2018, the Company has received $3.2 million for the manufacture ofIV BDS; such bulk drug substance is expected to be used for the manufacture of 20,000 courses of IV FDP.Exercised options specify potential payments up to approximately $12.2 million for funding of post-marketing activities for oral TPOXX®.Unexercised options specify potential payments up to approximately $536.2 million in total (if all options are exercised). There are options for the followingactivities: payments of up to $450.2 million for the delivery of up to approximately 1,452,300 courses of oral TPOXX® to the Strategic Stockpile; paymentsof up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon the manufactureof 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®; andpayments of up to approximately $5.6 million for supportive procurement activities.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 2018 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 64,000courses 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 make independent exercise decisions. 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 64,000courses), BARDA has the option to independently purchase IV BDS or IV FDP.2011 BARDA ContractOn May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oralTPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract") includes a base contract, as modified,("2011 Base Contract") as well as options. The 2011 Base Contract specifies approximately $508.7 million of payments (including exercised options), ofwhich, as of December 31, 2018, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million of oral TPOXX® and$43.9 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $5.0 million remainseligible to be received in the future for reimbursements of development and supportive activities.For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product replacementobligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the FDA was different from anycourses of oral TPOXX® that had been delivered to the Strategic Stockpile (the “FDA Approval Replacement Obligation”); (ii) a product replacementobligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a product replacementobligation in the event that oral TPOXX® does not meet any specified label claims. On July 13, 2018, the FDA approved oral TPOXX® for the treatment ofsmallpox and there is no difference between the approved product and courses in the Strategic Stockpile. As such,54Table of Contentsthe possibility of the FDA Approval Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relating to FDAapproval of the aforementioned 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise,the 2011 BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all were exercised by BARDA,would result in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activitiessuch as work on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related towarm-base manufacturing. BARDA may choose, in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised twooptions related to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was immaterial.The 2011 BARDA Contract expires in September 2020.As described in Note 2, cash inflows related to delivery of courses under the 2011 BARDA Contract had been recorded as deferred revenue prior to FDAapproval of oral TPOXX®, which occurred in the third quarter 2018. The deferral was due to a constraint on the consideration received. During the thirdquarter 2018, the constraint was satisfied with FDA approval of oral TPOXX®. As such, $375.6 million associated with cash consideration received in priorperiods under the 2011 BARDA Contract was recognized as revenue for the year ended December 31, 2018. Separately, as discussed above, $90.9 million ofrevenues were recognized in the third quarter of 2018 in connection with a $40.9 million holdback payment (under the 2011 BARDA Contract) and a $50.0million payment for achieving 84-month expiry for oral TPOXX® (under the 2011 BARDA Contract). Direct costs incurred by the Company to manufactureand fulfill the delivery of courses had also been deferred. As of December 31, 2017, deferred direct costs under the 2011 BARDA Contract wereapproximately $96.5 million. In connection with the FDA approval of oral TPOXX®, all related deferred costs were recognized in the consolidated statementof operations during the third quarter of 2018.Research Agreements and GrantsThe Company has an R&D program for IV TPOXX®. This program is funded by the 2018 BARDA Contract and a development contract with BARDA ("IVFormulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As of December 31,2018, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $15.1 million.Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts andgrants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at anytime. As such, we may not be eligible to receive all available funds.4. InventoryDue to the deferral of revenue under the 2011BARDA Contract (see Note 3 for additional information), amounts that would be otherwise recorded as cost ofsales and supportive services for delivered courses were recorded as deferred costs on the consolidated balance sheet as of December 31, 2017. In the thirdquarter of 2018, such deferred costs were recognized in the statement of operations. Inventory includes costs related to the manufacture of TPOXX®.Inventory consisted of the following: As of December 31, 2018 December 31, 2017Work in-process$1,950,445 $2,025,445Finished goods957,765 957,804Inventory$2,908,210 $2,983,249For the year ended December 31, 2017, research and development expenses include net inventory-related losses of approximately $536,000 related to a$686,000 inventory write-down, partially offset by credits received from contract manufacturing organizations (“CMO”) in connection with the inventorywrite-down. No such losses were incurred in 2018.55Table of Contents5. Property, Plant and Equipment Property, plant and equipment consisted of the following: As of December 31, 2018 December 31, 2017Leasehold improvements$2,420,028 $2,420,028Computer equipment618,248 701,762Furniture and fixtures377,859 363,588 3,416,135 3,485,378Less-accumulated depreciation(3,244,861) (3,346,738)Property, plant and equipment, net$171,274 $138,640Depreciation and amortization expense on property, plant, and equipment was $69,630, $132,189, and $174,275 for the years ended December 31, 2018,2017, and 2016, respectively. In connection with the lease termination discussed in Note 14, the Company wrote off $129,000 of leasehold improvementsand furniture and fixtures during the year ended December 31, 2017.6. Accrued Expenses Accrued expenses and other current liabilities consisted of the following: As of December 31, 2018 December 31, 2017Bonus$2,600,839 $2,538,340Deferred revenue4,159,946 1,255,318Research and development vendor costs1,446,410 183,856Professional fees242,043 381,980Vacation294,794 328,588Other904,885 793,497Accrued expenses and other current liabilities$9,648,917 $5,481,5797. DebtOn September 2, 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Loan Agreement”) with OCM StrategicCredit SIGTEC Holdings, LLC (“Lender”), pursuant to which the Company received $80.0 million (less fees and other items) on November 16, 2016 havingsatisfied certain pre-conditions. Such $80.0 million had been placed in an escrow account on September 30, 2016 (the “Escrow Funding Date”). Prior to theEscrow Release Date (November 16, 2016), the Company did not have access to, or any ownership interest in, the escrow account. Until the Escrow ReleaseDate occurred, the Company did not have an obligation to make any payments under the Loan Agreement, no security was granted under the LoanAgreement and no affirmative or negative covenants or events of default were effective under the Loan Agreement. Amounts were held in the escrow accountuntil the satisfaction of certain conditions including the closing of the Rights Offering (see Note 10) on November 16, 2016. As part of the satisfaction of alitigation claim, funds were released from the escrow account (the date on which such transfer occurred, the “Escrow Release Date”).The Loan Agreement provides for a first-priority senior secured term loan facility in the aggregate principal amount of $80.0 million (the “Term Loan”), ofwhich (i) $25.0 million was placed in a reserve account (the “Reserve Account”) only to be utilized to pay interest on the Term Loan as it becomes due; (ii)an additional $5.0 million was also placed in the Reserve Account and up to the full amount of such $5.0 million was eligible to be withdrawn after June 30,2018 upon the satisfaction of certain conditions, provided that any of such amount is required to fund any interest to the extent any interest in excess of theaforementioned $25.0 million is due and owing and any of such $5.0 million remains in the Reserve Account; and (iii) $50.0 million (net of fees andexpenses then due and owing to the Lender) was paid as part of the final payment to satisfy a litigation claim. Interest on the Term Loan is at a per annum rateequal to the Adjusted LIBOR rate plus 11.5%, subject to adjustments as set forth in the Loan Agreement. At December 31, 2018, the effective interest rate onthe Term Loan, which includes interest payments and accretion of unamortized costs and fees, was 19.4%. The Company incurred approximately $15.5million of interest expense during the year-ended December56Table of Contents31, 2018, of which $11.0 million was paid from restricted cash and the remaining $4.5 million accreted to the Term Loan balance. For the year endedDecember 31, 2017, the Company incurred approximately $14.8 million of interest expense, of which $10.3 million was paid from restricted cash and theremaining $4.5 million accreted to the Term Loan balance. On July 12, 2018, upon confirmation that there had been no events of default, $5 million waswithdrawn by the Company from the Reserve Account and was placed in the Company's cash operating account. On October 31, 2018, the Loan Agreementwas amended to expand the definition of permitted dispositions to include a sale of the PRV. In connection with the amendment, net cash proceeds from thesale of the PRV ($78.3 million) were placed in a restricted cash account; such restricted account is to be used only for interest, fees and principal payments(other than those in connection with an event of default) on the Term Loan.The Term Loan matures on the earliest to occur of (i) the four-year anniversary of the Escrow Release Date, and (ii) the acceleration of certain obligationspursuant to the Loan Agreement. At maturity, $80.0 million of principal will be repaid, and an additional $4.0 million will be paid (see below). Prior tomaturity, there are no scheduled principal payments.Through the three and one-half year anniversary of the Escrow Release Date, any prepayment of the Term Loan is subject to a make-whole provision in whichinterest payments related to the prepaid amount are due (subject to a discount of treasury rate plus 0.50%).In connection with the Term Loan, the Company has granted the Lender a lien on and security interest in all of the Company’s right, title and interest insubstantially all of the Company’s tangible and intangible assets, including all intellectual property.The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants, among otherthings, require a minimum cash balance throughout the term of the Term Loan and the achievement of regulatory milestones by certain dates, and containcertain limitations on the ability of the Company to incur unreimbursed research and development expenditures over a certain threshold, make capitalexpenditures over a certain threshold, incur indebtedness, dispose of assets outside of the ordinary course of business, make cash distributions and enter intocertain merger or consolidation transactions. The minimum cash requirement was $5.0 million until August 27, 2018 (45 days after FDA approval of oralTPOXX®), at which point the minimum cash requirement became $20.0 million.The Loan Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) the material inaccuracyof representations or warranties made thereunder, (iii) non-compliance with covenants thereunder, (iv) non-payment of amounts due under, or the accelerationof, other material indebtedness of the Company and (v) bankruptcy or insolvency events. Upon the occurrence and during the continuance of an event ofdefault under the Loan Agreement, the interest rate may increase by 2.00% per annum above the rate of interest otherwise in effect, and the Lenders would beentitled to accelerate the maturity of the Company’s outstanding obligations thereunder.As of December 31, 2018, the Company is in compliance with the Loan Agreement covenants.In connection with the Loan Agreement, the Company incurred $8.2 million of costs (including interest on amounts held in the escrow account betweenSeptember 30, 2016 and November 15, 2016). Furthermore, an additional $4.0 million will become payable when principal of the Term Loan is repaid. Aspart of the Company's entry into the Loan Agreement, the Company issued the Warrant (see Note 9) with a fair market value of $5.8 million. The fair value ofthe Warrant, as well as costs related to the Term Loan issuance, were recorded as deductions to the Term Loan balance on the Balance Sheet. These amountsare being amortized on a straight-line basis over the life of the related Term Loan. The Company compared the amortization under the effective interestmethod with the straight-line basis and determined the results were not materially different. The $4.0 million that will be paid when principal is repaid isbeing accreted to the Term Loan balance. As of December 31, 2018, the Term Loan balance is $75.5 million.8. Per Share DataThe 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 ofbasic EPS is to measure the performance of an entity over the reporting period by dividing income (loss) by the weighted average shares outstanding. Theobjective of diluted EPS is consistent with that of basic EPS, except that it also gives effect to all potentially dilutive common shares outstanding during theperiod.The following is a reconciliation of the basic and diluted earnings (loss) per share computation:57Table of Contents Year Ended December 31, 2018 2017 2016Net income (loss) for basic earnings per share$421,807,828 $(36,235,484) $(39,697,960)Less: Change in fair value of warrants(6,922,624) — —Net income (loss), adjusted for change in fair value of warrants fordiluted earnings per share$428,730,452 $(36,235,484) $(39,697,960)Weighted-average shares79,923,295 78,874,494 57,188,503Effect of potential common shares2,785,177 — —Weighted-average shares: diluted82,708,472 78,874,494 57,188,503Earnings (loss) per share: basic$5.28 $(0.46) $(0.69)Earnings (loss) per share: diluted$5.18 $(0.46) $(0.69)For the year ended December 31, 2018, the diluted earnings per share calculation reflects the effect of the assumed exercise of outstanding warrants and anycorresponding elimination of the impact included in operating results from the change in fair value of the warrants. Weighted-average diluted shares includethe dilutive effect of in-the-money options and warrants, unvested restricted stock and unreleased restricted stock units. The dilutive effect of warrants andoptions is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount theemployee or director must pay for exercising stock options, the average amount of compensation cost for future service that the Company has not yetrecognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are collectively assumedto be used to repurchase shares.The Company incurred losses for the twelve months ended December 31, 2017 and 2016 and as a result, for such years the equity instruments listed below areexcluded from the calculation of diluted earnings (loss) per share as the effect of the exercise, conversion or vesting of such instruments would be anti-dilutive. The weighted average number of equity instruments excluded consisted of: Year Ended December 31, 2017 2016Stock Options 1,386,176 1,789,751Stock-Settled Stock Appreciation Rights 333,252 360,031Restricted Stock Units 1,396,730 705,850Warrants 2,690,950 877,303As discussed in Note 11, the appreciation of each stock-settled stock appreciation right was capped at a determined maximum value. As a result, the weightedaverage number shown in the table above for stock-settled stock appreciation rights reflects the weighted average maximum number of shares that could beissued.9. Financial Instruments2016 WarrantOn 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 shareand (ii) the subscription price paid in connection with the Rights Offering (as defined in Note 10). The subscription price paid was $1.50 in connection withthe 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.Subsequent to partial exercises of the Warrant in 2018, there are approximately 1.75 million shares underlying the Warrant as of December 31, 2018. TheWarrant 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 instrumentswith 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. Anychanges in the fair value of the derivative instruments are reported in earnings58Table of Contentsor loss as long as the derivative contracts are classified as assets or liabilities. Accordingly, the Company classified the Warrant as a liability and reports itschange 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 MonteCarlo Simulation-model to calculate the fair value of the Warrant using the following assumptions: risk free interest rate of 1.60%; no dividend yield; anexpected life of 10 years; and a volatility factor of 80%. The Company compared the Monte Carlo simulation model calculation to a Black-Scholes modelcalculation as of December 31, 2016. These models generated substantially equivalent fair values for the Warrant. As such, the Company utilized a Black-Scholes model for December 31, 2018 and 2017 to determine the fair value of the Warrant.As of December 31, 2018, the fair value of the Warrant was $12.4 million. A Black Scholes model was applied to calculate the fair value of the Warrant usingthe following assumptions: risk free interest rate of 2.6%; no dividend yield; an expected life of 7.7 years; and a volatility factor of 70%.As of December 31, 2017, the fair value of the Warrant was $11.5 million. A Black Scholes model was applied to calculate the fair value of the Warrant usingthe following assumptions: risk free interest rate of 2.38%; no dividend yield; an expected life of 8.67 years; and a volatility factor of 75%.For the years ended December 31, 2018, 2017, and 2016 the Company recorded a loss of $6.9 million, $4.7 million, and $0.9 million, respectively as a resultof increases in fair value of the liability-classified Warrant. During the year ended December 31, 2018 approximately $6.0 million of warrants were exercisedresulting in the net issuance of approximately 760,000 shares of common stock. As of December 31, 2018 there are approximately 1.75 million sharesunderlying the outstanding Warrants.At December 31, 2018, pursuant to the Warrant agreement, there were no conditions under which current assets would have been required to satisfy theWarrant obligation. 10. Stockholders’ Equity On December 31, 2018, the Company’s authorized share capital consisted of 620,000,000 shares, of which 600,000,000 are designated common shares and20,000,000 are designated preferred shares. The Company’s Board of Directors is authorized to issue preferred shares in series with rights, privileges andqualifications of each series determined by the Board. As of December 31, 2018 and 2017, no preferred shares were outstanding or issued.Rights OfferingOn November 16, 2016, the Company completed a rights offering (the “Rights Offering”), pursuant to which it raised approximately $35.3 million in grossproceeds through the sale of 23,523,195 shares of its common stock. The Rights Offering was made pursuant to a registration statement on Form S-1 anddeclared effective by the SEC on October 21, 2016. As part of the Rights Offering, each stockholder of the Company received a subscription right for eachshare of common stock owned as of the record date of October 12, 2016. Each subscription right entitled its holder to invest $0.65 towards the purchase ofshares of the Company's common stock at a subscription price equal to the lower of $1.50 or 85% of the volume weighted average price of Company sharesduring market hours on the expiration date of the Rights Offering. The Rights Offering expired on November 8, 2016. Through basic subscriptions andoversubscriptions, the Rights Offering was fully subscribed. The subscription price was set at $1.50. The Company used the net proceeds of the RightsOffering, together with proceeds from the Term Loan and cash on hand, to fully satisfy PharmAthene's claim related to litigation (see Note 13).Rights Offering-Backstop AgreementOn October 13, 2016, in connection with the Rights Offering as discussed above, the Company entered into an investment agreement or “backstopagreement”, with an affiliate of MacAndrews & Forbes Incorporated (“M&F”) (see Note 14), and certain other backstop parties (the “Backstop Parties”).Under the terms of the backstop agreement, the Backstop Parties agreed to purchase, pursuant to a separate private placement, a number of shares of commonstock equal to the numbers of shares that were not subscribed for in the Rights Offering. Because the Rights Offering was fully subscribed, the BackstopParties were not required to draw on such commitment. The Company issued 708,530 shares to Backstop Parties, of which approximately 565,000 shares werereceived by M&F, in payment of the five percent backstop fee ($1,764,240) payable to the Backstop Parties in connection with the backstop agreement. Thefair value of the shares issued in satisfaction of the backstop fee was expensed in the income statement in the fourth quarter of 2016. There are no remainingpayment obligations to the Backstop Parties under the backstop agreement.59Table of Contents11. 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 andoutside directors of the Company. On May 17, 2011, the 2010 Plan was amended to provide for the issuance of restricted stock units (“RSUs”) and onFebruary 2, 2012, the 2010 Plan was amended to provide for the issuance of SSARs. Effective April 25, 2012 and May 23, 2017, the 2010 Plan was amendedto 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 CompensationCommittee also determines the expiration date of each equity award, however, stock options and SSARs may not be exercisable more than ten years after thedate of grant as the maximum term of equity awards issued under the 2010 Plan is ten years.For the years ended December 31, 2018, 2017 and 2016, the Company recorded stock-based compensation expense, including stock options, SSARs, RSUsand certain warrant amortization, of approximately $2.3 million, $1.1 million and $0.8 million, respectively. Stock OptionsStock option awards provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee and must have anexercise 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 ofthe Company's common stock and the historical volatility of a group of comparable companies’ common stock, both using historical periods equivalent tothe options’ expected lives. The expected dividend yield assumption is based on the Company’s intent not to issue a dividend in the foreseeable future. Therisk-free interest rate assumption is based upon observed interest rates for securities with maturities approximating the options’ expected lives. The expectedlife was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms ofthe award.A summary of the Company’s stock option activity is as follows: Number ofOptions WeightedAverage ExercisePrice WeightedAverageRemaining Life(in years) AggregateIntrinsic Value(in thousands)Outstanding at January 1, 20181,062,467 $5.42 Granted— — Exercised(635,067) 3.06 Canceled/Expired(25,000) 7.13 Outstanding at December 31, 2018402,400 $9.03 2.04 $421,250Vested at December 31, 2018402,400 $9.03 2.04 $421,050Exercisable at December 31, 2018402,400 $9.03 2.04 $421,050As of December 31, 2018, there is no remaining unrecognized stock-based compensation cost related to stock options expected to be recognized. The totalfair value of stock options which vested during the year ended December 31, 2017 was approximately $73,000. For the years ended December 31, 2018 and2016 there were no stock options that vested.The total intrinsic value of stock options exercised was approximately $2,900,000, $65,000 and $0 for the years ended December 31, 2018, 2017 and 2016,respectively. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option. As of December 31, 2017, 100,000 of the Company’s outstanding options were subject to specific performance conditions consisting of regulatory approvalof our lead drug candidate. The performance conditions were met in 2018.Stock Appreciation Rights60Table of ContentsSSARs provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee and must have an exercise priceequal to or in excess of the fair market value of the Company’s common stock at the date of grant. Upon exercise, the gain, or intrinsic value, is settled by thedelivery of SIGA stock to the employee.There were no SSARs granted during the years ended December 31, 2018 or 2017. During the year ended December 31, 2012, the Company granted 1.4million shares of SSARs at a weighted average grant-date fair value of $0.68 per share. The exercise price of a SSAR is equal to the closing market price onthe date of grant. The granted SSARs vested in equal annual installments over a period of three years and expire no later than seven years from the date ofgrant. Moreover, the appreciation of each SSAR was capped at a determined maximum value. At December 31, 2018 and 2017, due to the cap on value, themaximum number of shares that could be issued in the future was 23,157 and 162,393, respectively.The fair value of granted SSARs was estimated utilizing a Monte Carlo method. The Monte Carlo method is a statistical simulation technique used to providethe grant-date fair value of an award. As the issued SSARs were capped at maximum values, such attribute was considered in the simulation.The Company calculated the expected volatility using a combination of historical volatility of SIGA's common stock and the volatility of a group ofcomparable companies' common stock. The expected life from grant date was estimated based on the expectation of exercise behavior in consideration of themaximum value and contractual term of the SSARs. The dividend yield assumption was based on the Company’s intent not to issue a dividend in theforeseeable future. The risk-free interest rate assumption was based upon observed interest rates appropriate for the expected life of the SSARs.A summary of the Company’s SSAR activity is as follows: Number ofSSARs WeightedAverageExercisePrice WeightedAverageRemaining Life(in years) AggregateIntrinsic Value(in thousands)Outstanding at January 1, 2018266,150 $3.53 Granted— — Exercised(232,050) 3.53 Canceled/Expired— — Outstanding at December 31, 201834,100 3.53 0.09 149,017Vested at December 31, 201834,100 $3.53 0.09 $149,017Exercisable at December 31, 201834,100 $3.53 0.09 $149,017The total intrinsic value of SSARs exercised was approximately $0.7 million and $0.9 million and for the years ended December 31, 2018 and 2017,respectively. For the years ended December 31, 2016 there were no SSARs exercised.Restricted Stock Awards/Restricted Stock UnitsRSUs awarded to employees vest in equal annual installments over a three-year period and RSUs awarded to directors of the Company vest over a one-yearperiod. A summary of the Company’s RSU activity is as follows: Number ofRSUs WeightedAverageGrant-DateFair ValueOutstanding at January 1, 20181,472,000 $2.61Granted105,000 6.53Vested and released(1,077,884) 2.69Canceled/Expired— —Outstanding at December 31, 2018499,116 $3.26As of December 31, 2018, $1.1 million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over theweighted-average remaining requisite service period of 0.79 years. The weighted average fair value at the date of grant for restricted stock awards grantedduring the years ended December 31, 2018, 2017 and 2016 was $6.53, $3.51 and $2.24 per share, respectively. Based on the grant date, the total fair value ofrestricted stock and restricted stock units vested61Table of Contentsand released during the years ended December 31, 2018, 2017 and 2016 was approximately $2.9 million, $0.6 million and $1.4 million, respectively.12. Income TaxesOn December 22, 2017, the U.S. government enacted comprehensive tax reform referred to as the Tax Cuts and Jobs Act (“TCJA”). Under FASB AccountingStandards Codification Topic 740, Income Taxes (“ASC 740”), the effects of changes in tax rates and laws are recognized in the period in which the newlegislation is enacted. The TCJA makes broad and complex changes to the U.S. tax code, including, but not limited to: (1) reducing the U.S. federal corporatetax rate from 35% to 21%; (2) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning afterDecember 31, 2018; (3) bonus depreciation that will allow for full expensing of qualified property; (4) creating a new limitation on deductible interestexpense; (5) eliminating the corporate alternative minimum tax ("AMT"); (6) limitation on the deductibility of executive compensation under InternalRevenue Code §162(m); and (7) new tax rules related to foreign operations.In response to the TCJA, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance on accounting for the tax effects of theTCJA. The purpose of SAB No. 118 was to address any uncertainty or diversity of view in applying ASC 740 in the reporting period in which the TCJA wasenacted. In addition, SAB No. 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies tocomplete the accounting under ASC 740. For the year ended December 31, 2017, the Company recorded a provisional decrease in its deferred tax asset andliabilities with a corresponding adjustment to the related valuation allowance. In addition, the Company recorded an income tax benefit of $2.7 millionrelated to the elimination of the AMT as such amounts will be refundable, in cash, under the TCJA. The Company expects to collect the refund no later than2021. During the year ended December 31, 2018, the Company finalized the accounting for the tax effects of the TCJA with no material changes to theprovisional estimate recorded in 2017.The Company's (benefit) provision for income taxes comprises the following: For the year ended December 31, 2018 2017 2016Current: Federal$(1,326,022) $623,060 $(5,093)State and local459,172 1,179 (1,446)Total current provision (benefit)(866,850) 624,239 (6,539)Deferred: Federal(9,256,661) (2,724,371) 21,252State and local(44,761) 6,342 (829)Total deferred (benefit) provision(9,301,422) (2,718,029) 20,423Total (benefit) provision$(10,168,272) $(2,093,790) $13,88462Table of ContentsThe Company’s deferred tax assets and liabilities comprise the following: As of December 31, 2018 2017Deferred income tax assets: Net operating losses9,798,319 $38,087,782Deferred research and development costs60,535 205,527Amortization of intangible assets171,044 282,213Share-based compensation508,089 1,001,662Fixed assets371,804 417,085Deferred revenue— 84,130,212Alternative minimum tax credits1,326,228 2,652,250Other1,028,083 1,024,082Deferred income tax assets13,264,102 127,800,813Less: valuation allowance(1,051,307) (102,556,657)Deferred income tax assets, net of valuation allowance$12,212,795$25,244,156Deferred income tax liabilities: Amortization of goodwill(192,146) (193,458)Capitalized contract costs— (21,518,646)Other(287,264) (1,100,089)Deferred income tax asset (liability), net$11,733,385 $2,431,963The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitabilitywhich is inherently uncertain. The Company assesses all available positive and negative evidence to determine if its existing deferred tax assets are realizableon a more-likely-than-not basis. In making such assessment, the Company considered the reversal of existing taxable temporary differences, projected futuretaxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on theCompany's generation of sufficient taxable income within the available net operating loss carryback and/or carryforward periods to utilize the deductibletemporary differences.During the year ended December 31, 2018, the Company received FDA approval and recorded revenue related to the delivery of our oral TPOXX® product.The Company also received payments for the FDA holdback, the expiry option under the 2011 Base Contract, and for the sale of its PRV. In addition, theCompany entered into a new contract with BARDA for the sale of up to 1.7 million courses of (oral and IV) TPOXX®. Based on these factors, managementdetermined that sufficient positive evidence exists to conclude that substantially all of our deferred tax assets are realizable on a more-likely-than-not basisand reversed our valuation allowance. During 2018, the valuation allowance decreased by $101.5 million which relates to the reversal of substantially all ofthe Company's valuation allowance against its deferred tax assets with the exception of those related to certain state net operating losses.As of December 31, 2018, the Company had $40.3 million of federal net operating loss carryforwards, which expire in 2036, to offset future taxable income.63Table of ContentsThe Company’s effective tax rate differs from the U.S. federal statutory income tax rate as follows: As of December 31, 2018 2017 2016Statutory federal income tax rate21.0 % (35.0)% (35.0)%State tax benefit0.8 % (3.9)% 0.6 %Increase in fair value of common stock warrants0.4 % 4.3 % 0.8 %Reorganization costs— % — % 3.3 %Other— % (1.8)% 0.2 %U.S. federal tax law change— % (5.1)% — %Valuation allowance on deferred tax assets(24.7)% 36.0 % 30.1 %Effective tax rate(2.5)% (5.5)% — %For the year ended December 31, 2018, the Company’s effective tax rate differs from the statutory rate of 21% primarily due to the reversal of the Company'svaluation allowance as substantially all of the Company's deferred tax assets became realizable on a more-likely-than-not basis. For the year endedDecember 31, 2017, the Company's effective tax rate differs from the statutory rate of 35% principally due to the operating losses for which no tax benefit wasprovided, coupled with the impact of the TCJA.A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows: For the year ended December 31, 2018Balance at beginning of year$—Tax positions related to the current and prior years: Additions5,738,964 Reductions— Settlements—Lapses in applicable statutes of limitation—Balance at the end of the year$5,738,964As of December 31, 2017, the Company did not have any unrecognized tax benefits. Included in the balance of unrecognized tax benefits as of December 31,2018, are potential benefits of $5.7 million that, if recognized, would affect the effective tax rate. There are no uncertain tax positions for which it isreasonably possible that the total amounts of unrecognized benefits will significantly increase or decrease within twelve months from December 31, 2018.The Company files federal income tax returns and income tax returns in various state and local tax jurisdictions. The open tax years for U.S. federal, state andlocal tax returns are 2014-2018; open tax years relating to any of the Company’s net operating losses begin in 2001. In the event that the Companyconcludes that it is subject to interest and/or penalties arising from uncertain tax positions, the Company will present interest and penalties as a component ofincome taxes. No amounts of interest or penalties were recognized in the Company’s consolidated financial statements for any of the years in the three-yearperiod ended December 31, 2018.13. Commitments and Contingencies Operating lease commitmentsThe Company leases its Corvallis, Oregon, facilities and office space under an operating lease which was signed on November 3, 2017 and commenced onJanuary 1, 2018. This lease expires December 31, 2019. The Company had a lease for the same location prior to this lease. On May 26, 2017 the Companyand M&F Incorporated entered into a ten-year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square feetat 31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its new corporate headquarters. Rentalexpense, including charges for maintenance, utilities, real estate taxes and other operating expenses, totaled $0.7 million, $1.0 million and $1.2 million forthe years ended December 31, 2018, 2017 and 2016, respectively.64Table of ContentsFuture minimum cash rental commitments under non-cancelable operating leases as of December 31, 2018 are expected to be as follows:2019$541,3762020304,0002021304,0002022320,7742023352,000Thereafter1,197,778Total$3,019,928Legal ProceedingsAfter several years of proceedings in litigation initiated by PharmAthene in 2006, the Delaware Court of Chancery on August 8, 2014 issued an opinion andorder in which it determined, among other things, that PharmAthene was entitled to a lump sum damages award for its lost profits including interest and fees,based on U.S. government purchases of the Company's smallpox drug allegedly anticipated as of December 2006. On September 16, 2014, as a consequenceof SIGA’s chapter 11 filing, the legal proceedings with PharmAthene were stayed, except that the parties agreed by stipulation approved by the Court onOctober 8, 2014 that the litigation could proceed. On January 15, 2015, the Delaware Court of Chancery entered its Final Order and Judgment (the “FinalOrder and Judgment”) awarding PharmAthene approximately $195.0 million, including pre-judgment interest up to January 15, 2015 (the “Judgment”). OnDecember 23, 2015 the Delaware Supreme Court affirmed the Judgment. Pursuant to the Final Order and Judgment, SIGA also was liable to PharmAthene for$30,663.89 per day in post-judgment interest. On a series of dates up to and including a final payment on November 16, 2016, the Company paidPharmAthene an aggregate of $217.0 million to fully satisfy the Judgment, including post-judgment interest, in accordance with the bankruptcy plan ofreorganization.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 andproceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, ifany, 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.65Table of Contents14. Related Party TransactionsBoard of Directors and Outside CounselA member of the Company’s Board of Directors is a member of the Company’s outside counsel. During the years ended December 31, 2018, 2017 and 2016,the Company incurred expenses of $450,000, $400,000 and $1.5 million, respectively, related to services provided by the outside counsel. On December 31,2018 the Company’s outstanding payables and accrued expenses included a $37,000 liability to the outside counsel.Board of Directors-Consulting AgreementOn October 13, 2018, the Company, entered into a consulting agreement with a member of the Company’s Board of Directors. Under the agreement, theconsulting services will include assisting the Company on expanded indications for TPOXX® and other business development opportunities as requested bythe Company. The term of the agreement is for two years, with compensation for such services at an annual rate of $200,000. During the year ended December31, 2018, the Company incurred $42,935 related to services under this agreement. As of December 31, 2018, the Company’s outstanding payables andaccrued expenses included a $42,935 liability associated with this agreement.Rights Offering-Backstop AgreementOn October 13, 2016, in connection with the Rights Offering as discussed above, the Company entered into the Backstop Agreement with an affiliate of M&F(M&F is a principal stockholder of the Company) and the other Backstop Parties. Under the terms of the Backstop Agreement, the Backstop Parties agreed topurchase, pursuant to a separate private placement, a number of shares of common stock equal to the numbers of shares that would have not been subscribedfor in the Rights Offering. The Backstop Agreement provided that the subscription price for the Backstop Parties would be equal to the subscription priceapplicable to all shareholders under the Rights Offering. Because the Rights Offering was fully subscribed, the Backstop Parties were not required to draw onsuch commitment. The Company issued 708,530 shares to Backstop Parties, of which approximately 565,000 shares were received by M&F, in payment ofthe five percent backstop fee ($1,764,240) payable to the Backstop Parties in connection with the backstop agreement. When shares were issued to theBackstop Parties in payment of the backstop fee, the stock price of SIGA common stock was $2.49 per share (the closing price of the Company’s commonstock on November 16, 2016). The fair value of the shares issued in satisfaction of the backstop fee was expensed to the income statement in 2016. There areno remaining payment obligations to the Backstop Parties under the Backstop Agreement.Real Estate LeasesOn May 26, 2017 the Company and M&F Incorporated entered into the New HQ Lease, pursuant to which the Company agreed to lease 3,200 square feet at31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its new corporate headquarters. TheCompany'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 firstsix 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 rentalobligations 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 landlordmaking available certain ancillary services, commencing on the first anniversary of entry into the lease. The facility fee will be $3,333 per month for thesecond year of the term and increase by five percent each year thereafter, to $4,925 per month in the final year of the term.On July 31, 2017, the Company and M&F, entered into a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”), pursuant towhich the Company and M&F agreed to terminate the sublease dated January 9, 2013 for 6,676 square feet of rental square footage located at 660 MadisonAvenue, Suite 1700, New York, New York (such sublease being the “Old HQ Sublease” and the location being the “Old HQ”).Effectiveness of the Old HQ Sublease Termination Agreement was conditioned upon the commencement of a sublease for the Old HQ between M&F and anew subtenant (the “Replacement M&F Sublease”), which occurred on August 2, 2017. The Old HQ Sublease Termination Agreement obligates the Companyto pay, on a monthly basis, an amount equal to the discrepancy (the “Rent Discrepancy”) between the sum of fixed rent and Additional Rent (as definedbelow) under the Old HQ Overlease (as defined below) and the sum of fixed rent and Additional Rent under the Replacement M&F Sublease. Under the OldHQ Sublease Termination Agreement, the Company and M&F release each other from any liability under the Old HQ Sublease.Under the Old HQ Sublease, the Company was obligated to pay fixed rent of approximately $60,000 per month until August 2018 and approximately$63,400 per month thereafter until the Old HQ Sublease expiration date of August 31, 2020. Additionally, the Company was obligated to pay certainoperating expenses and taxes (“Additional Rent”), such Additional Rent being specified in the overlease between M&F and the landlord at 660 MadisonAvenue (the “Old HQ Overlease”).66Table of ContentsUnder the Replacement M&F Sublease, the subtenant’s rental obligations were excused for the first two (2) months of the lease term (“Rent ConcessionPeriod”). Thereafter, the subtenant was obligated to pay fixed rent of $36,996 per month for the first twelve (12) months, and is obligated to pay $37,831 permonth for the next 12 months, and $38,665 per month until the scheduled expiration of the Replacement M&F Sublease on August 24, 2020. In addition tofixed rent, the subtenant is also obligated to pay, pursuant to the Replacement M&F Sublease, a portion of the Additional Rent specified in the Old HQOverlease.For the time period between August 2, 2017 and August 31, 2020 (the expiration date of the Old HQ Sublease), the Company estimates that it will pay a totalof approximately $0.9 million combined in fixed rent and additional amounts payable under the New HQ Lease and a total of approximately $1.1 million inRent Discrepancy under the Old HQ Sublease Termination Agreement, for a cumulative total of $2.0 million. In contrast, fixed rent and estimated AdditionalRent under the Old HQ Sublease, for the aforementioned time period, would have been a total of approximately $2.4 million if each of the New HQ Lease,Replacement M&F Sublease and Old HQ Sublease Termination Agreement had not been entered into by each of the parties thereto. Because amounts such asoperating expenses and taxes may vary, the foregoing totals can only be estimated at this time and are subject to change.As a result of the above-mentioned transactions, the Company has discontinued usage of Old HQ in the third quarter of 2017. As such, for the year endedDecember 31, 2017 the Company recorded a loss of approximately $1.1 million in accordance with ASC 420, Exit or Disposal Obligations. This lossprimarily represented the discounted value of estimated Rent Discrepancy payments to occur in the future, and included costs related to the termination ofthe old HQ Sublease. The Company also wrote-off approximately $0.1 million of leasehold improvements and furniture and fixtures related to the Old HQ.The following table summarizes activity relating to the liability that was recorded as a result of the lease termination: For the years ended December 31, 2018 2017Beginning Balance$814,622 $—Charges35,861 1,096,648Cash Payments(340,546) (282,026)Lease Termination Liability$509,937 $814,622For the years ended December 31, 2018 and 2017, approximately $0.2 million and $0.5 million of the lease termination liability is included in Otherliabilities on the consolidated balance sheet with the remainder in accrued expenses.Pre-Clinical Development ProgramOn May 17, 2018, the Company and vTv Therapeutics LLC ("vTv") entered into an asset purchase agreement, pursuant to which the Company acquired datarelated to certain pre-clinical development activities. Such data contains information that could be used to potentially develop clinical drug candidates. A deminimis amount ($10) was paid by the Company to vTv in order to execute the asset purchase agreement. vTv, which is majority owned by affiliates of M&F,will receive a royalty of 1-4% of sales in the event that SIGA is able to (i) successfully develop a drug from the acquired data and (ii) there are drug sales.Additionally, vTv will receive up to 10% of development revenues in the event that SIGA receives revenues in connection with any development activities.15. Reorganization Items, net:On April 12, 2016, the Company emerged from chapter 11 of the Bankruptcy Code when the Company's plan of reorganization (the “Plan”) became effective,and on December 22, 2016 the Company's chapter 11 case was closed by the Bankruptcy Court. Under the Plan, the Company fully paid all of its claims. TheCompany did not apply the provisions of fresh start accounting as ownership of existing shares of the Company's common stock remained unaltered by thePlan.Prior to April, 12 2016, the effective date of the Plan, the Company was operating its business as a “debtor-in-possession.” The Company had filed onSeptember 16, 2014, a voluntary petition for relief under chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United StatesBankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) chapter 11 Case Number 14-12623 (SHL). The chapter 11 case preservedthe Company's ability to satisfy its commitments under the 2011 BARDA Contract (as defined in Note 3) and preserved its operations, which likely wouldhave been jeopardized by the enforcement of a judgment stemming from the Company's litigation with PharmAthene, Inc. While operating as a debtor-in-67Table of Contentspossession under chapter 11, the Company pursued an appeal of the Delaware Court of Chancery Final Order and Judgment, without having to post a bond.Reorganization items represent expenses in connection with the chapter 11 case. For the year ended December 31, 2016,reorganization items consisted of the following:Legal fees$1,951,381Professional fees1,732,521Trustee fees33,000Total$3,716,902Subsequent to the Effective Date of the Plan, expenses directly attributable to the implementation of the Plan are reported in selling, general andadministrative expenses. During the year ended December 31, 2016, the Company paid approximately $4.6 million for reorganization items.16. Financial Information By Quarter (Unaudited) Three Months Ended 2018March 31 June 30 September 30 December 31 (in thousands, except for per share data) Revenues$1,748 $2,661 $471,075 $1,569 Cost of sales and supportive services— — 95,166 103 Selling, general & administrative3,057 2,880 3,115 3,828 Research and development3,008 3,312 3,723 2,973 Patent preparation fees218 178 186 207 Operating income (loss)(4,535) (3,710) 368,885 (5,541) Net income (loss)(11,582) (7,051) 388,050 52,391ANet loss per share: basic$(0.15) $(0.09) $4.85 $0.65 Net loss per share: diluted$(0.15) $(0.09) $4.71 $0.65 A- Includes sale of PRV in October 2018. See Note 1 for additional information. Three Months Ended2017March 31 June 30 September 30 December 31 (in thousands, except for per share data)Revenues$5,202 $4,265 $1,390 $1,412Selling, general and administrative2,870 3,058 3,094 3,281Research and development6,360 5,068 2,471 2,781Patent expenses241 197 251 221Lease termination— — 1,225 —Operating loss(4,269) (4,059) (5,651) (4,871)Net loss(8,615) (7,501) (9,816) (10,303)Loss per common share: basic and diluted$(0.11) $(0.10) $(0.12) $(0.13)68Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2018 in accordance with the framework on Internal Control-Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Management recognizes that any disclosure controls and procedures no matter how well designed andoperated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Office and Chief Financial Officer have concluded that our disclosure controls and procedures wereeffective as of December 31, 2018 at a reasonable level of assurance.Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2018 that materially affected, orare reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: a.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets;b.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations ofmanagement and the directors of the Company; andc.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets thatcould 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 anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018 using theframework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based onthis evaluation using the COSO criteria, management concluded that the Company’s internal control over financial reporting was effective as ofDecember 31, 2018. The effectiveness of our internal control over financial reporting as of December 31, 2018 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in its report which appears herein. Item 9B. Other Information None.69Table of ContentsPART III Item 10. Directors, Executive Officers, and Corporate Governance Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders.Item 11. Executive Compensation Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders. Equity Compensation Plan InformationThe following table sets forth certain compensation plan information with respect to compensation plans as of December 31, 2018:Plan CategoryNumber of Securities to beIssued Upon Exercise ofOutstanding Options, Warrantsand Restricted Stock Units (1) Weighted-averageExercise Price ofOutstanding Options,Warrants and Restricted StockUnits Number of SecuritiesAvailable for FutureIssuance under EquityCompensation Plans (2)Equity compensation plans approved bysecurity holders924,674 $5.78 4,862,804Equity compensation plans not approved bysecurity holders— — —Total924,674 $5.78 4,862,804(1)Consists of the 1996 Incentive and Non-Qualified Stock Option Plan and the 2010 Stock Incentive Plan.(2)Consists of the 2010 Stock Incentive Plan.Item 13. Certain Relationships and Related Transactions, and Director Independence Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders. Item 14. Principal Accounting Fees and Services Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2019 Annual Meeting of Stockholders.70Table of ContentsPART IV Item 15. Exhibits and Financial Statement Schedules (a) (1) and (2). Financial Statements. See Index to Financial Statements under Item 8 in Part II hereof where these documents are listed. All schedules for which provision is made in the applicableaccounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, havebeen omitted. (a) (3). Exhibits.The following is a list of exhibits:ExhibitNo. Description2(c) Asset Purchase Agreement, dated October 31, 2018, by and between Eli Lilly and Company and SIGA Technologies, Inc.(incorporated by referenced to the Current Report on Form 8-K of the Company filed on November 1, 2018). 3(a) Amended and Restated Certificate of Incorporation of SIGA Technologies, Inc. (incorporated by reference to the CurrentReport on Form 8-K of the Company filed on April 14, 2016). 3(b) Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to the Current Report on Form 8-K ofthe Company filed on April 14, 2016). 3(c) Amendment to Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to the Current Report onForm 8-K of the Company filed on December 13, 2016). 4(a) Form of Common Stock Certificate (incorporated by reference to the Form SB-2 Registration Statement of the Company datedMarch 10, 1997 (No. 333-23037)). 10(a) Contract dated as of May 13, 2011, between SIGA and the Biomedical Advanced Research and Development Authority of theUnited States Department of Health and Human Services (portions of this exhibit have been omitted and separately filed withthe Securities and Exchange Commission with a request for confidential treatment) (incorporated by reference to the CurrentReport on Form 8-K of the Company filed on May 17, 2011). 10(b) Amendment of Solicitation/Modification of Contract dated as of June 24, 2011, to Agreement dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Current Report on Form 8-K of theCompany filed on June 28, 2011). 10(c) Director Compensation Program, effective January 1, 2012 (incorporated by reference to the Definitive Proxy Statement onForm DEF 14A of the Company filed on April 27, 2012). 10(d) Amendment of Solicitation/Modification of Contract dated as of September 28, 2011, to Agreement dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of theCompany filed on May 7, 2012). 7110(e) Amendment of Solicitation/Modification of Contract dated as of October 7, 2011, to Agreement dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of theCompany filed on May 7, 2012). 10(f) Amendment of Solicitation/Modification of Contract dated as of January 25, 2012 to Agreement, dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of theCompany filed on May 7, 2012). 10(g) Amendment of Solicitation/Modification of Contract dated as of February 7, 2012, to Agreement, dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 7, 2012). 10(h) Amendment of Solicitation/Modification of Contract dated as of December 19, 2012, to Agreement, dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Annual Report on Form 10-K of theCompany filed on March 6, 2013). 10(i) Amendment of Solicitation/Modification of Contract dated as of February 28, 2013, to Agreement, dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 10, 2014). 10(j) Amendment of Solicitation/Modification of Contract dated as of April 9, 2013, to Agreement, dated as of May 13, 2011,between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 10, 2014). 10(k) Amendment of Solicitation/Modification of Contract 0009, dated April 29, 2015, to Agreement, dated May 13, 2011 by andbetween SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of theCompany filed on May 6, 2015). 10(l) Amendment of Solicitation/Modification of Contract 0010, dated July 1, 2015, to Agreement, dated May 13, 2011 by andbetween SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Healthand Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Annual Report on Form 10-K of theCompany filed on March 4, 2016). 10(m) Amendment of Solicitation/Modification of Contract 0011, dated December 9, 2015, to Agreement, dated May 13, 2011 byand between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department ofHealth and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment)(incorporated by reference to the Annual Report on Form 10-K of theCompany filed on March 4, 2016). 10(n) Amended and Restated Employment Agreement, dated April 12, 2016, between SIGA Technologies, Inc. and Daniel J.Luckshire (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 14, 2016). 7210(o) Amended and Restated Employment Agreement, dated April 12, 2016, between SIGA Technologies, Inc. and Dennis E. Hruby(incorporated by reference to the Current Report on Form 8-K of the Company filed on April 14, 2016). 10(p) Amendment of Solicitation/Modification of Contract 0013, dated June 28, 2016, to Agreement, dated May 13, 2011, betweenthe Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA (portions of this exhibit have been omitted and separately filed with the Securities and ExchangeCommission with a request for confidential treatment) (incorporated by reference to the Current Report on Form 8-K of theCompany filed on July 5, 2016). 10(q) Loan and Security Agreement, dated as of September 2, 2016, by and among SIGA Technologies, Inc., OCM Strategic CreditSIGTEC Holdings, LLC, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateral agent,OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger, and each of the other persons who are or thereafter becomeparties to the Loan Agreement as guarantors (incorporated by reference to the Current Report on Form 8-K of the Company filedon September 7, 2016). 10(r) Warrant, dated as of September 2, 2016, by the Company in favor of OCM Strategic Credit SIGTEC Holdings, LLC or itsregistered assigns (incorporated by reference to the Current Report on Form 8-K of the Company filed on September 7, 2016). 10(s) Employment Agreement, dated as of October 13, 2016, between SIGA and Phillip Louis Gomez, III (incorporated by reference tothe Current Report on Form 8-K of the Company filed on October 13, 2016). 10(t) Investment Agreement, dated October 13, 2016, by and among SIGA Technologies, Inc., ST Holdings One LLC, BlackwellPartners LLC-Series A, Nantahala Capital Partners Limited Partnership, Nantahala Capital Partners II Limited Partnership, SilverCreek CS SAV, L.L.C. and Nantahala Capital Partners SI, LP (incorporated by reference to the Current Report on Form 8-K of theCompany filed on October 19, 2016). 10(u) Amendment of Solicitation/Modification of Contract 0012, dated April 22, 2016, to Agreement, dated May 13, 2011, betweenthe Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Servicesand SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 4, 2017). 10(v) Amendment of Solicitation/Modification of Contract 0014, dated September 21, 2016, to Agreement, dated May 13, 2011,between the Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 4, 2017). 10(w) Office Lease, dated as of May 26, 2017, by and between SIGA Technologies, Inc. and MacAndrews & Forbes Incorporated(portions of this exhibit have been omitted and separately filed with the Securities and Exchange Commission with a request forconfidential treatment) (incorporated by reference to the Current Report on Form 8-K of the Company filed on May 30, 2017). 10(x) Termination of Sublease, dated as of July 31, 2017 (incorporated by reference to the Quarterly Report on Form 10-Q of theCompany filed on August 3, 2017). 10(y) Amendment, dated August 29, 2017, to that certain Loan and Security Agreement, dated as of September 2, 2016, by and amongSIGA Technologies, Inc., OCM Strategic Credit SIGTEC Holdings, LLC, Cortland Capital Market Services LLC, in its capacityas administrative agent and collateral agent, OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger, and each ofthe other persons who are or thereafter become parties to the Loan Agreement as guarantors (incorporated by reference to theQuarterly Report on Form 10-Q of the Company filed on November 7, 2017). 10(z) Commercial Lease Agreement for Corvallis, Oregon dated November 3, 2017 (incorporated by reference to the Quarterly Reporton Form 10-Q of the Company filed on November 7, 2017). 73 10(aa) Second Amendment to Loan and Security Agreement, dated June 25, 2018, by and among the Company, OCM Strategic CreditSIGTEC Holdings, LLC, as lender, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateralagent, and OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger (incorporated by reference to the QuarterlyReport on Form 10-Q of the Company filed on August 7, 2018). 10(bb) Amendment of Solicitation/Modification of Contract 0015, dated July 30, 2018, to Agreement, dated May 13, 2011, betweenthe Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Servicesand SIGA (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 1, 2018). 10(cc) Second Amended and Restated Employment Agreement, dated August 1, 2018, between SIGA Technologies, Inc. and Robin E.Abrams (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 3, 2018). 10(dd) Addendum, dated August 10, 2018, to Seconded Amended and Restated Employment Agreement, dated April 12, 2016,between SIGA Technologies, Inc. and Dennis E. Hruby (incorporated by reference to the Current Report on Form 8-K of theCompany filed on August 10, 2018). 10(ee) Contract, dated as of September 10, 2018, between SIGA Technologies, Inc. and the Biomedical Advanced Research andDevelopment Authority of the United States Department of Health and Human Services (portions of this exhibit have beenomitted and separately filed with the Securities and Exchange Commission with a request for confidential treatment)(incorporated by reference to the Current Report on Form 8-K of the Company filed on September 11, 2018). 10(ff) Amendment of Solicitation/Modification of Contract 0016, dated September 21, 2018, to Agreement, dated May 13, 2011,between the Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,2018). 10(gg) Amendment of Solicitation/Modification of Contract 0017, dated September 28, 2018, to Agreement, dated May 13, 2011,between the Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,2018). 10(hh) Amendment of Solicitation/Modification of Contract 0018, dated September 28, 2018 to Agreement, dated June 1, 2011,between the Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,2018). 10(ii) Consulting Agreement and Release, dated October 13, 2018, between SIGA Technologies, Inc. and Dr. Eric A. Rose(incorporated by reference to the Current Report on Form 8-K of the Company filed on October 18, 2018). 10(jj) Third Amendment to Loan and Security Agreement, dated October 31, 2018, by and among the Company, OCM Strategic CreditSIGTEC Holdings, LLC, as lender, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateralagent, and OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger (incorporated by reference to the Current Reporton Form 8-K of the Company filed on November 1, 2018). 10(kk) Commercial Manufacturing Agreement, dated October 1, 2018, by and between Albemarle Corporation and SIGA (portions ofthis exhibit have been omitted and separately filed with the Securities and Exchange Commission with a request for confidentialtreatment). 10(ll) Amendment of Solicitation/Modification of Contract 0001, dated February 21, 2019, to Agreement, dated September 10, 2018,between the Biomedical Advanced Research and Development Authority of the United States Department of Health and HumanServices and SIGA. 23.1Consent of PRICEWATERHOUSECOOPERS LLP, Independent Registered Public Accounting Firm. 31.1Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002-Chief Executive Officer. 7431.2Certification pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002-Chief Financial Officer. 32.1Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-Chief ExecutiveOfficer. 32.2Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-Chief FinancialOfficer.101.INSXBRL Instance Document 101.SCH Taxonomy Extension Schema Document 101.CAL Taxonomy Extension Calculation Linkbase Document 101.DEF Taxonomy Extension Definition Linkbase Document 101.LAB Taxonomy Extension Labels Linkbase Document 101.PRE Taxonomy Extension Presentation Linkbase Document75Table of ContentsItem 16. Form 10-K SummaryNone76SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. SIGA TECHNOLOGIES, INC. (Registrant) Date:March 5, 2019By:/s/ Phillip L. Gomez Phillip L. Gomez Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.Signature Title of Capacities Date/s/ Phillip L. Gomez March 5, 2019Phillip L. Gomez Chief Executive Officer and Director /s/ Daniel J. Luckshire Daniel J. Luckshire Executive Vice President and March 5, 2019 Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /s/ Eric A. Rose Eric A. Rose, M.D. Chairman March 5, 2019 /s/ James J. Antal James J. Antal Director March 5, 2019 /s/ Michael J. Bayer Michael J. Bayer Director March 5, 2019 /s/ Thomas E. Constance Thomas E. Constance Director March 5, 2019 /s/ Jeffrey Kindler Jeffrey Kindler Director March 5, 2019 /s/ Joseph Marshall Joseph Marshall Director March 5, 2019 /s/ Michael Plansky Michael Plansky Director March 5, 2019 /s/ Paul G. Savas Paul G. Savas Director March 5, 201977 1. CONTRACT ID CODEPAGE OF PAGESAMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 122. AMENDMENT/MODIFICATION NO. 00013. EFFECTIVE DATE See Block 16C4. REQUISITION/PURCHASE REQ. NO. OS2354155. PROJECT NO. (If applicable)6. ISSUED BYCODEHHS/OS/ASPR/BARDA7. ADMINISTERED BY (If other than Item 6)CODEASPR-BARDAO1US DEPT OF HEALTH & HUMAN SERVICES ASST SEC OF PREPAREDNESS & RESPONSE ACQ MANAGEMENT, CONTRACTS, & GRANTS O’NEILL HOUSE OFFICE BUILDING Washington DC 20515ASPR-BARDA 330 Independence Ave, SW, Rm G644 Washington DC 202018. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State, and Zip Code)(x)9A. AMENDMENT OF SOLICITATION NO.SIGA TECHNOLOGIES, INC. 1385150 SIGA TECHNOLGIES, INC. 31 East 62nd Street NEW YORK, NY 100658446 9B. DATED (SEE ITEM 11) x10A. MODIFICATION OF CONTRACT/ORDER NO. HHSO100201800019C 10B. DATED (SEE ITEM 13)CODE 1385150FACILITY CODE 09/10/201811. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers is extended, is not extended. Offers must acknowledge receipt of this amendmentprior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning _____ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter ortelegram which includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THERECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer alreadysubmitted, such change may be made by telegram or letter, provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour anddate specified.12. ACCOUNTING AND APPROPRIATION DATA (If required) Net Increase: $12,186,975.002019.1990051.2550513. THIS ITEM ONLY APPLIES TO MODIFICATION OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.CHECK ONEA. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. INITEM 10A. B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation date,etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).XC. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: FAR 43.103(a) Bilateral Modification; FAR 17.207(c) (1) Exercise of Options with Avaliable Funds D. OTHER (Specify type of modification and authorityE. IMPORTANT: Contractor is not, is required to sign this document and return 1 copies to the issuing office.14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)Tax ID Number: 13-3864870 DUNS Number: 932651516 Procurement and Late-Stage Development of Smallpox Antiviral Drug(s) The purpose of this modification is to exercise Option CLIN0007 in the amount of $12,186,975.00 and change the COR information listed in Article G.2 asfollows. Delivery: 12/31/2023 Delivery Location Code: HHS/OS/ASPR HHS/OS/ASPR200 C St SWWASHINGTON DC 20201 US Continued ... Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.15A. NAME AND TITLE OF SIGNER (Type or print) Dennis E Hurby, CSO16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)Brooke Bernold 15B. CONTRACTOR/OFFEROR /s/ Dennis E Hurby, CSO15C. DATE SIGNED 19 Feb 201916b. united states of america16c. date signedBY/s/ Brooke T. Bernold21 Feb 2019(Signature of person authorized to sign) (Signature of Contracting Officer) NSN 7540-01-152-8070Previous Edition Unusable30-105STANDARD FORM 30 (Rev. 10-83)Prescribed by GSAFAR (48 CFR) 53.243 The purpose of this modification is to exercise Option CLIN0007 in the amount of $12,186,975.00 and change the COR informationlisted in Article G.2 as follows.Article B.3. Option PricesCLINPeriod ofPerformanceSupplies/ ServicesTotal Est. CostFixed FeeTotal Cost Plus Fixed Fee ($)0007 (Option -Exercised)01/01/19 –12/31/2023Phase IV post marketing commitments(nonparenteral (oral) formulation)including relabeling of approved drug inthe SNS (this is an option that may ormay not be exercised as required by theFDA)$11,497,147$689,828$12,186,975Article G.2. Contracting Officer’s Representative (COR)The following Contracting Officer’s Representative (COR) will represent the Government for the purpose of this contract:David SimonContracting Officer’s RepresentativeBiomedical Advanced Research and Development Authority (BARDA)Office of the Assistant Secretary for Preparedness and ResponseDepartment of Health and Human ServicesDavid.Simon@hhs.gov(202) 260-1101COMMERCIAL MANUFACTURING AGREEMENTThis COMMERCIAL MANUFACTURING AGREEMENT (this “Agreement”) is entered into effective as of October 1, 2018(the “Effective Date”), by and between SIGA Technologies, Inc., a Delaware corporation (“Customer”), having a place of businessat 31 East 62nd Street, New York, NY, 10065, and Albemarle Corporation, a Virginia corporation (“Albemarle”), having a place ofbusiness at 4350 Congress Street, Suite 700, Charlotte, North Carolina 28209. Each of Customer and Albemarle is sometimesreferred to herein as a “Party” and collectively as the “Parties”.RECITALSA. Customer is in the business of developing and commercializing pharmaceutical products.B. Albemarle is in the business of performing contract manufacturing and supply of pharmaceutical products.C. Customer is actively engaged in various efforts to sell courses of tecovirimat (primarily known as TPOXX®), includingbut not limited to seeking a contract from the United States Government (the “USG”) under the Project BioShield Act of 2004 (the“Act”) pursuant to RFP-BARDA-18-100-SOL-00011 (the “RFP”), including contract HHSO100201800019C to supply, among otherthings, up to 1.7 million courses of FDP (as defined below) to the Strategic National Stockpile. Any contract to be entered into bythe Customer with the USG in response to the RFP shall be known as the “BARDA Contract”.D. Customer and Albemarle entered into a Mutual Confidential Disclosure Agreement dated January 23, 2006, asamended December 28, 2006, December 8, 2008 and January 12, 2010 (collectively, the “Prior CDA”).E. Customer and Albemarle entered into a Mutual Confidential Disclosure Agreement dated April 27, 2018 (the “CDA”).F. Customer and Albemarle entered into an agreement dated January 23, 2006 pursuant to which Albemarle hasmanufactured, tested and supplied the API (as defined below) for oral FDP, for use in the manufacture of registration batches andpursuant to which Albemarle continues to conduct stability studies with respect to such batches (the “Prior ManufacturingAgreement”).G. Customer and Albemarle entered in an agreement dated August 24, 2009 to manufacture, test, and supply ST-246®Monohydrate (Form-I) to Customer for use as the API for FDP in quantities that are scaled up for the Customer’s validationbatches (the “Validation Supply Agreement”).H. Customer and Albemarle entered in a commercial manufacturing agreement dated as of August 25, 2011, as amendedon December 21, 2012 by that certain Addendum to Commercial Manufacturing Agreement (the “First Addendum”); as amendedon July 1, 2013 by that certain Addendum 2 to Commercial Manufacturing Agreement (the “Second Addendum”); as amended onJuly 2, 2014 by that certain Addendum 3 to Commercial Manufacturing Agreement (the “Third Addendum”); as amended on April29, 2015 by that certain 2015 Amendment to the Commercial Manufacturing Agreement (the “2015 Amendment”, collectively, the"Prior Commercial Manufacturing Agreement’).I. Customer desires to contract with Albemarle to manufacture, test and supply the Product (as defined below) toCustomer as set forth herein..1* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants set forth below,the Parties hereby agree as follows:1.DEFINITIONSFor purposes of this Agreement, the terms defined in this Section 1 shall have the respective meanings set forth below:“API” shall mean active pharmaceutical ingredient.“Applicable Law” means all laws, ordinances, rules and regulations of the United States or any other jurisdiction applicableto any aspect of the obligations of Albemarle or Customer, as the context requires, under this Agreement, as amended from time totime, including (A) all applicable federal, state and local laws and regulations of the United States, (B) the U.S. Federal Food, Drugand Cosmetic Act, as amended (the “FFDCA”), (C) all applicable laws and regulations in any other relevant jurisdiction whereProduct is being manufactured or supplied, and (D) cGMP, or their respective equivalents in any other relevant jurisdiction whereProduct is being manufactured.“BARDA” means the U.S. Biomedical Advanced Research and Development Authority. “BARDA Contract” shall have the meaning set forth in paragraph C of the Recitals.“Batch Documentation” shall mean complete and accurate copies of all of the following, as applicable: Albemarle auditedproduction batch records, deviation reports, investigation reports, a COA, Product release chromatographs and correspondingcalculations for all batches, management of Change (MOCs), cGMP certificate of compliance, and stability data, when available(including one chromatograph utilizing one condition for each pull interval from one batch). For the sake of clarity, originals of theBatch Documentation will be retained by Albemarle and made available for inspection for all batches produced, including abortedbatches, and a complete copy of Batch Documentation shall be furnished to Customer in accordance with Section 3.2.“cGMP” shall mean Good Manufacturing Practices as (a) prescribed from time to time by the FDA, including within themeaning of 21 C.F.R. Parts 210 and 211, as amended, (b) their respective equivalents in any other relevant jurisdiction whereProduct is being manufactured, and (c) the ICH Q7 guidelines.“CMC” means Chemistry, Manufacturing and Controls.“COA” shall mean a certificate of analysis prepared in accordance with the Quality Agreement that shall include the resultsof the tests set forth in the Specifications in Exhibit C, as may be amended in accordance with this Agreement.“Facility” shall mean the Albemarle cGMP FDA-approved manufacturing facility at which the manufacturing and testingservices will be performed. This facility is located at 1421 Kalamazoo Street, South Haven, Michigan 49090.“FDP” shall mean the final drug product utilizing the Product as its API.“FDA” shall mean the United States Food and Drug Administration or the successor thereto.“Government Contract” shall mean any contract currently existing or hereafter entered into by a Government Entity andCustomer for the supply of the FDP, including any BARDA Contract.“Government Entity” shall mean any government entity of any country of the world, including the USG.“include(ing)” shall mean “include(ing) without limitation”.2* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.“Lead Time” shall mean (a) with respect to the First Renewal Order (as defined below) of Product, [redacted]*, and (b) withrespect to each Firm Order (as defined below) of Product, [redacted]*.“Product” shall mean the unmicronized form of the active pharmaceutical ingredient known as, or containing, tecovirimat(Form-I, also known as Form B), the structure of which is attached as Exhibit A hereto, which meets the Specifications set forth inExhibit C.“Regulatory Authority” shall mean, with respect to a country, any governmental authority (whether federal, state, provincial,municipal or others) regulating the exportation, importation, use, manufacture, distribution, marketing and/or sale ofpharmaceuticals, which, in the United States, shall include the FDA.“Specifications” shall mean the specifications for the manufacture of the Product set forth in Exhibit C, as may be amendedin accordance with this Agreement.2.MANUFACTURE OF PRODUCT2.1 Manufacturing Services. Albemarle shall manufacture, sell and deliver to Customer or its designee all Productordered by Customer in conformance with terms and conditions of this Agreement. In addition, Albemarle shall perform an analysisof samples of the micronized form of the Product as set forth in Section 2.12 and Exhibit B, and shall perform the stability studiesas set forth in Section 2.11 and Exhibit D. Albemarle will dedicate sufficient manufacturing capacity to fill Customer’s orders withinthe applicable Lead Time; provided, however, that Customer’s orders do not exceed [redacted]* batches, or approximately[redacted]* of Product. If Customer’s demand exceeds [redacted]*, or approximately [redacted]*, Customer and Albemarle willmutually agree on the amount of Product to be manufacturered, sold and delivered by Albemarle. Unless otherwise agreedbetween Albemarle and Customer, all Product will be manufactured under cGMP conditions at the Facility. Subject to theprovisions of this Agreement related to subcontracting, Albemarle shall not transfer or perform any of the work required by thisAgreement outside of the United States without specific written consent by Customer, which shall be subject to the restrictions onforeign manufacturing contained in Customer’s Government Contracts, the contents of which, to the extent necessary, shall bemade known to Albemarle by Customer and which contents shall be deemed to be Confidential Information of Customer.2.2 First Renewal Order. Albemarle and Customer shall cooperate fully and negotiate in good faith in estimatingand scheduling the first order of commercial quantities of Product (“First Renewal Order”) to be placed by Customer, with themutual goal of the Parties that the First Renewal Order be scheduled for completion and delivery to Customer or its designee notlater than six (6) months after the date the First Renewal Order is placed by Customer, except in cases where the First RenwalOrder requires the purchase of raw materials with lead times more than six (6) months. In such case, Albemarle and Customershall cooperate fully and negotiate in good faith in estimating and scheduling any such orders.2.3 Forecasts and Firm Orders.2.3.1 Starting after the placement of the First Renewal Order, on or before the first day of each calendarmonth, Customer shall give Albemarle Customer’s good faith written estimate of Customer’s projected requirements of the Productfor delivery during the upcoming twelve (12) months. Such forecasts constitute non-binding, good faith estimates provided solely toassist Albemarle in raw material procurement, production planning and manufacturing of the Product. Albemarle shall use theseforecasts to procure long leadtime raw materials.3* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.2.3.2 Customer acknowledges that, since Product is a product made exclusively for Customer, and in orderto accommodate Albemarle’s planning, manufacturing, analytical testing and release of the Product, Customer agrees to place abinding non-cancelable written purchase order for the delivery of any Product required in the first three (3) month period of the initialor any updated forecast (a “Firm Order”). Customer further agrees to place Firm Orders in one-batch increments, each batch toconsist of approximately 1,450 kg. Albemarle shall, upon receipt of any Firm Order after the First Renewal Order, deliver orderedbatches of Product within the Lead Time applicable to such Firm Order, which period shall be shortened, as much as possible,taking into account the availability of raw materials.2.3.3 In the event that Customer does not place binding orders for Product consistent with the forecastedquantities, then in order to compensate Albemarle for the actual and full costs of procuring long lead time raw materials, Customershall pay Albemarle the documented direct costs associated with any unused quantity of such raw materials purchased byAlbemarle specifically for the manufacture of the Product, provided that Albemarle has made good faith efforts to return such rawmaterials to their manufacturers for credit. Any such raw materials, for which Customer pays Albemarle the documented directcosts, shall be deemed to be the property of Customer, and Albemarle shall promptly assign all right, title and interest in and tosuch raw materials to Customer. Albemarle shall store such unused raw materials at the Customer’s request at no charge for up toone (1) year, and thereafter shall, at Albemarle’s option, continue to store such raw materials at the Customer’s expense andAlbemarle shall, upon notice to Customer, deliver them to Customer or its designee. Albemarle shall otherwise, at Customer’sexpense, properly dispose of any unused raw materials, any rejected Product and any waste in accordance with Applicable Law.2.4 Purchase Orders. Customer shall issue written purchase orders to Albemarle for the First Renewal Order andeach Firm Order. Purchase orders shall be placed at least the applicable Lead Time before the desired delivery date and shall bedeemed accepted if placed in accordance with the terms and conditions of this Agreement. Purchase orders shall specify thequantity of the Product ordered, the requested delivery date, and the means of shipment (provided, however, that the means ofshipment complies with all Applicable Law and any requirement of any applicable Government Contract). Purchase orders issuedby Customer and accepted (or deemed accepted) by Albemarle shall constitute the binding obligation of Albemarle to manufacture,sell and deliver to Customer the specified quantity of the Product by the specified delivery date (and perform the post-micronizationtesting services set forth in Section 2.12 and Exhibit B for such Product and the stability studies set forth in Section 2.11 andExhibit D for such Product) and the binding obligation of Customer to purchase the specified quantity of the Product thereindelivered in conformance with this Agreement. Purchase orders issued by Customer shall be effective solely with respect tospecifying the quantity, requested delivery date and means of shipment of the Product being ordered. All other terms andconditions printed or included on such purchase orders which contradict or would serve to alter the provisions of this Agreementshall be of no effect or force.2.5 Purchase Commitments.2.5.1 Customer agrees (i) to order one hundred percent (100%) of Customer’s internal and externalrequirements of the Product from Albemarle for the first three (3) years of this Agreement except in cases whereby the potentialdemand opportunity requires local or alternative manufacturing location (as required by a customer as part of a procurementaward) which would exclude Albemarle as the site of manufacture, and (ii) in the event that production over three (3) years is lessthan twelve (12) metric tons of API, then Albemarle shall continue to4* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.manufacture 100% of Customer’s internal and external requirements of the Product until Albemarle has cumulatively manufacturedtwelve (12) metric tons since the Effective Date. Additionally, if SIGA does not provide firm orders for the manufacture of at leasttwelve (12) metric tons of API within the first three (3) years of this Agreement, then the minimum supply percentage for Albemarlein year 4 will be 50% and in year 5 it will be 30%. For years 4 and 5 of this Agreement, provided that twelve (12) metric tons of APIhas been manufactured by Albemarle within the first three (3) years of this Agreement, Albemarle will manufacture at least 70% ofCustomer’s internal and external requirements of the Product. Beginning in year 4, provided that that Customer has placed firmorders for twelve (12) metric tons of API with Albemarle during the first three (3) years, SIGA may bring a valid comparable offer tosell Product, by a responsible supplier, of a like quantity of Product of a quality equal to the Albemarle Product andappropriately qualified by SIGA for the same application as the Albemarle Product, at a price that is lower than isprovided pursuant to this Agreement. SIGA must submit written evidence satisfactory to Albemarle of such lowerpriceand, if Albemarle is unable to meet the comparable price within 30 days, SIGA may accept such competitive offer byproviding written notice to Albemarle within five business days, provided, however, that Albemarle will continue tomanufacture at least 30% of Customer’s internal and external requirements of the Product in years 4 and 5. SIGA can bring a validcomparable price to Albemarle once per year. If Albemarle is able to meet the comparable price the parites will discuss the optionto extend the term and the percentage of Customer’s internal and external product requirements to be manufactured by Albemarle.2.5.2 Customer’s purchase commitments under Section 2.5.1 of this Agreement are subject to thefollowing:(a) In the event that a proposed contract to be entered into by Customer for the sale of FDP in anintravenous formulation requires that the Product used as the API for such FDP be manufactured to specifications other than theSpecifications, and the Parties are not able to reach agreement on the necessary changes to the Specifications for suchintravenous formulation or to pricing therefore, the amounts of Product contemplated by such proposed Customer contract shallnot be counted or considered when calculating Customer’s internal and external requirements or the amount to be ordered byCustomer or the amount to be delivered by Albemarle.(b) If either (i) the shipment of any Customer order of Product or any portion thereof, or the provisionof any analytical data for released Product to be provided to Customer hereunder is late by more than twenty (20) days on morethan one occasion, (ii) Product produced and released by Albemarle is defective or does not conform to the Specifications orApplicable Law on more than one occasion, or (iii) Albemarle otherwise fails to perform any of its obligations under this Agreementand does not cure such failure within thirty (30) days of written notice from Customer (said notice specifying the nature of thefailure), Customer shall have, in addition to any other rights under this Agreement or in law, the right to reduce or terminate itspurchase commitment obligation under Section 2.5.1 hereof.2.6 Subcontractors.2.6.1 Subject to approval by the applicable Government Entity if required by a Government Contract, (a)Customer consents that Albemarle may engage, for the duration of the Term, [redacted]*, as subcontractor to provide [redacted]*,(b) Customer also consents that Albemarle may engage, for the duration of the Term, [redacted]*, as subcontractor to provide[redacted]*, and (c) Customer also consents that Albemarle may engage, for the duration of the Term, [redacted]*, as asubcontractor to provide [redacted]*, as long as such subcontractors may5* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.perform their respective subcontracts in accordance with all applicable legal requirements and the requirements of this Agreement.Albemarle may not engage any other subcontractors to perform Albemarle’s obligations under this Agreement, except uponexpress prior written consent by Customer, which consent shall not be unreasonably withheld but which will be subject to and takeinto account whether the approval of the applicable Government Entity as necessary.2.6.2 The Parties agree and acknowledge that, if, in order to meet Customer’s requirements, it is necessarythat a portion of Customer’s Product requirements be manufactured outside the United States, Albemarle shall be afforded areasonable opportunity to subcontract such portion of the manufacture and testing of the Product to a third party that fulfills therequirements of Customer, provided that (i) Customer shall have the right to prior approval of the proposed subcontractor, and thenon-commercial terms of such subcontract, which approval will not be withheld without cause; (ii) any such subcontract will grantCustomer the right to oversee and monitor the performance of any such subcontractor in the manner to be agreed by the Parties ingood faith, but in no event with less oversight than Customer would have had if the Product had been manufactured by Albemarleunder this Agreement; (iii) any such subcontract will contain all of the terms and conditions to which Albemarle is obligated underthis Agreement, including any “flow-down” requirements under any Government Contract for which such Product will be used, and(iv) any such subcontract will be subject to the approval of the applicable Government Entity as necessary.2.6.3 Any such permitted appointment of subcontractors pursuant to Sections 2.6.1 and 2.6.2 hereof shallnot affect or diminish Albemarle’s responsibilities and obligations set forth herein and Albemarle shall remain responsible toCustomer for the performance of its subcontractors. Albemarle will cause its subcontractors to grant Customer the right to performannual and “for cause” audits of Albemarle’s subcontractors to evaluate their quality systems and for compliance with cGMP,Applicable Law, Specifications, applicable product and establishment standards, and security requirements. Albemarle representsand warrants that the approved subcontractors are aware of and have agreed to any requirements imposed by Applicable Law onCustomer and its contractors and subcontractors, and such subcontractors shall also comply with all relevant obligations imposedon Albemarle under this Agreement, including Customer’s right to place, at Customer’s option, a person in subcontractor’s facilityto observe the activities of the subcontractor.2.7 Albemarle’s Responsibilities; Quality Agreement.2.7.1 Albemarle shall manufacture the Product and perform the other activities in accordance with thisAgreement, the Specifications and all Applicable Law. Albemarle shall bear the full cost of manufacturing the Product and shall beresponsible to manufacture and/or supply, without limitation, all raw materials, starting materials, source materials, intermediates,labor, facilities, utilities, and the equipment necessary for the manufacture of the Product, setting up of the manufacturing process,and assembling and packaging of the Product, all in accordance with the Specifications. Any materials, including raw materials,purchased by Albemarle in excess of the volume required for manufacture of Product under this Agreement shall remain theproperty of Albemarle, subject to Section 2.3.3. In addition, Albemarle shall perform the analysis of the micronized form of theProduct as set forth in Section 2.12 and Exhibit B, and shall perform the stability studies as set forth in Section 2.11 and Exhibit D.2.7.2 Albemarle shall abide by the terms and conditions of the Quality Agreement attached hereto as ExhibitE (“Quality Agreement”), the provisions of which are integral to its performance of its obligations under this Agreement. In the eventof an inconsistency between the terms of the Quality Agreement and the terms of the body of this Agreement, the terms of this6* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.Agreement shall control. The Quality Agreement may only be amended upon written agreement of the Parties, provided that, theQuality Agreement shall be deemed to be amended to the extent necessary to conform with the provisions of any GovernmentContract, or a quality agreement with any Government Entity required to be entered into pursuant to any such GovernmentContract. Customer shall provide Albemarle a written notice of any such amendment, and to the extent any such amendmentwould require Albemarle to incur more expense or commercial effort for adherence to the revised Quality Agreement as reasonablydetermined by Albemarle in good faith, the Parties agree to negotiate in good faith revised pricing for the sale of the Producthereunder.2.8 Specifications and Vendors.2.8.1 The Specifications for Product may only be revised upon written agreement of both Parties, exceptthat Albemarle shall provide its prompt written agreement if the FDA or any other Government Entity requires Customer to revisethe Specifications, whether pursuant to Customer’s Government Contracts, cGMP requirements, or otherwise (a “MandatedSpecification Change”). If any such Mandated Specification Change or a mutually agreed upon change to the Specificationsrequires any material change to the manufacturing process or raw materials, the Parties shall negotiate in good faith a reasonableadjustment to the Unit Price to be paid by Customer hereunder and the applicable Lead Time. Albemarle and Customer agree thata Mandated Specification Change or mutual agreement to change the Specifications shall not change, effect, modify or alter anyother provision of this Agreement with the exception of the Unit Price and possibly the Lead Time. Both Parties understand andagree that material changes in Specifications may affect Unit Price and Lead Time and agree to negotiate in good faith in suchcases to arrive at a revised Unit Price and Lead Time mutually agreed in writing by both Parties for all subsequent work affected bysuch changes in Specifications, provided however, that any Mandated Specification Change that imposes a more stringentSpecification, but which Specification is within the demonstrated process capability for the manufacture of the Product, based onrelevant available data from all commercial size batches of Product manufactured prior to the date of such change, shall not beconsidered a material change in the Specifications.2.8.2 Albemarle has qualified the raw material vendors set forth in Exhibit H. In the event that Albemarlewants to add an alternate raw material vendor, or wants to supply any raw material itself, it must qualify such vendor (includingAlbemarle) in the manner provided in its standard operating procedures, and provide the results of such qualifying tests toCustomer for its approval, which approval will not be withheld without cause.2.9 Compliance. Albemarle shall maintain the Facility, and shall manufacture the Product, in compliance with thisAgreement, the Specifications and all Applicable Law. Albemarle shall allow Customer, at Customer’s option, to place a person inthe Facility to observe the commercial manufacturing process.2.10 Recalls. In the event of a Product or FDP defect or recall caused by Albemarle’s failure to manufacture theProduct in accordance with the Specifications and Applicable Law, or its failure to analyze appropriately the micronized form of theProduct, Albemarle shall reimburse Customer for the costs related to curing the defect and accomplishing the recall, to the extentsuch costs result from Albemarle’s failure, provided, that in no event will Albemarle’s liability pursuant to this Section 2.10 exceedthe liability limitation set forth in Section 7.2 hereof, except as provided in Section 6.1.2 with regard to any claim by a third party. Inall other instances, the costs related to a recall shall be borne by Customer.2.11 Stability Studies. Albemarle will conduct [redacted]* month stability studies in accordance with Exhibit D.7* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.2.12 Micronized Product Analysis. Samples for analysis by FP14.SG, only, will be provided by Customer throughits drug product service provider and data will be provided to Customer in the form of a COA within fourteen (14) days from thereceipt of test samples by the drug product service provider.2.13 Security When requested by the Customer, Albemarle shall maintain security at levels, and of quality, as hasbeen provided under the Prior Commercial Manufacturing Agreement. Additionally, Albemarle agrees to implement securitychanges, when practicable, if such changes or enhancements are required under any government contract or by Applicable Law.The Parties agree that in the event such additional security corrective actions are necessary, they will negotiate in good faith toreach agreement on a reimbursement amount for each such additional security corrective action. Costs related to securityrequested by the Customer shall be agreed upon between Albemarle and Customer and shall be paid for by the Customer. Prior tothe initial manufacturing under this Agreement the Parties have participated in a pre-award security audit of the Facility conductedby BARDA representatives. If such security audit resulted in BARDA imposing a requirement that certain security correctiveactions be implemented by Albemarle as a condition to commencement of Product manufacturing for the BARDA Contract, if it isawarded to the Customer. The Parties agree that in the event such additional security corrective actions are necessary, they willnegotiate in good faith to reach agreement on a reimbursement amount for each such additional security corrective action.3. SUPPLY OF PRODUCT3.1 Shipment. Albemarle shall ship the released Product FCA Facility, Freight Collect, (per Incoterms 2010) tosuch location as designated in writing by Customer. The purchase order shall set forth the transport means and company selectedby Customer for shipping the Product, provided that in the event a designated carrier is unable to ship Product on schedule,Albemarle will obtain an alternate carrier designation from Customer. Title and risk of loss and damages to the Product ordered byCustomer hereunder shall pass to Customer upon delivery of the Product to the transporting carrier.3.2 Product Release. Subject to the provisions of Sections 3.2.1 and 3.2.2, batch review and release of Product forshipment to Customer’s shipping point will be the responsibility of Albemarle’s Quality Assurance department, who will act inaccordance with Albemarle’s standard operating procedures. For each batch of Product released by Albemarle for shipment,Albemarle will deliver to Customer, at the same time it ships such batch, (i) a certificate of compliance that will include a statementthat the batch has been manufactured in accordance with cGMP, Applicable Law and the Specifications, and (ii) a copy of theBatch Documentation and COA.3.2.1 For each of the first four (4) batches of Product ordered by the Customer only, the following additionalbatch release procedure shall be followed. Upon completion of each such batch and the review of all Batch Documentation byAlbemarle’s Quality Assurance department, Albemarle shall forward to Customer, electronically or by overnight mail, the applicablecompleted Batch Documentation for each Batch. Customer shall use reasonable efforts to complete its review of the BatchDocumentation within seven (7) working days of receiving it from Albemarle (the “Customer Review Period”). Subject to the resultsof its review, Customer will disposition the Product for release and upon receipt of Customer’s disposition Albemarle shall deliver toCustomer the final COA, and release and ship the Product to the Customer’s designated shipping point by the shipping methoddesignated by the Customer.8* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.3.2.2 Any problem discovered by either Party during its quality assurance reviews will be communicated tothe other Party directly along with any supporting documentation of the problem. The communication shall occur within three (3)business days after the discovery of the problem. The Product will be immediately placed in quarantine until Albemarle and theCustomer have met and determined the final disposition of the Product. The resolution of any such problem shall be accomplishedin accordance with the Quality Agreement.3.3 Packaging and Labeling. Albemarle shall package the Product in accordance with the Specifications, and incompliance with the applicable labeling requirements of FDA and all other Applicable Law regarding the labeling, materials andcontainers applicable to the Product. Albemarle shall label the Product with such labels, trade names, and trademarks as directedby Customer.3.4 Freight and Insurance. Customer shall pay all freight, insurance charges, taxes, import and export duties,inspection fees and other charges applicable to the transport and delivery of the Product.3.5 Rejection and Cure. Customer shall notify Albemarle within one hundred twenty (120) days of Albemarle’sdelivery of any batch of Product if it believes that the batch, or any portion thereof, was damaged, defective or did not conform tothe Specifications or Applicable Law. In addition to any remedy available to Customer under Sections 2.5.2(b), 2.10 or 6.1.2,Customer’s sole remedy under this Section 3.5 against Albemarle for any failure to supply a batch of conforming Product isexpressly limited to one of the following (as may be elected by Customer at its sole option):(i)Albemarle will promptly provide a replacement batch of conforming Product to Customer at no additional costand on a schedule mutually agreed upon by Albemarle and Customer based upon lead timerequirements for raw materials and reimburse Customer for the shipping and micronization costs, ifany, incurred by Customer for the non-conforming batch, or(ii)refund within 10 business days to the Customer the full aggregate Price for such batch of Product containingnon-conforming Product, plus shipping and micronization costs, if any, incurred by the Customer withrespect to such non-conforming batch of Product.If Albemarle disputes the above referenced notice of rejection with respect to any batch containing non-conforming Product, theParties will each retest the rejected Product within thirty (30) days of Albemarle’s notice of dispute. If the Parties, after retesting therejected Product continue to have conflicting test results, the matter shall be referred to a laboratory selected by Customer from thelist included on Exhibit G (or other mutually agreed upon laboratory) to perform tests on representative samples from the rejectedportion of the shipment. The results of such tests will be binding upon Customer and Albemarle. If the laboratory determines thatthe batch contained Product that was non-conforming, Albemarle will pay for all laboratory charges; if the laboratory determinesthat Customer rejected the batch containing non-conforming Product in error, then Customer will pay for all laboratory charges.Rejected Product will be returned to Albemarle or disposed of at Albemarle’s expense in accordance with Albemarle’s instructions,in which case Customer will deliver to Albemarle an appropriate certificate of destruction. If Albemarle requests, Customer willmake its personnel available on a reasonable basis to work with Albemarle in order to assist Albemarle in determining the reasonfor the non-conformity and in developing remedial measures.9* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.3.6 Force Majeure. Neither Party shall be liable to the other for any delay or failure of performance resulting fromany circumstance (other than the payment of money owed) beyond the reasonable control of such Party (a “Force MajeureEvent”), which may include: fire, storm, flood, act of God, war, earthquake, explosion, sabotage, epidemic, quarantine restrictions,embargo, expropriation, strikes, failure of all available means of production or of transportation, or shortage of labor, raw materials,or shortage of utilities, fuel and/or energy. Subject to Section 3.7, Albemarle shall make every effort to make up any deficienciesduring the course of the force majeure event, unless such oblligations are modified by written mutual agreement. In the eventAlbemarle experiences a Force Majeure Event that continues for more than ninety (90) days, Customer may, in addition to anyother rights or remedies it may have under this Agreement or in law, terminate this Agreement without cost or penalty, except topay Albemarle for all work performed and reimburse for all costs incurred up to the termination date, not to exceed the applicablePrice.3.7 Apportionment. In the case of a shortage or anticipated shortage of labor, raw materials, utilities, fuel or energy,Albemarle will allocate equitably the available labor, raw materials, utilities, fuel and energy to manufacture and use in the Product,to Albemarle's own internal use, to the use of its affiliates and to the use in other products.4.PAYMENT TERMS4.1 Unit Price; Adjustments. The price to be charged by Albemarle for Product manufactured and delivered underthis Agreement shall [redacted]* per kilogram of Product actually delivered in each batch (“Unit Price”). Pricing listed and paymentof the invoiced costs is contingent upon Albemarle and Customer written agreement on security measures required for theproduction facility prior to start of production of Product and the reimbursement plan for said security measures. If necessary,Albemarle will perform a recrystallization upon Customer’s request. For each such recrystallization (including multiplerecrystalizations for the same batch), Customer will pay Albemarle [redacted]*.4.2 Unit Price Adjustments. The Unit Price set forth in Section 4.1 shall be adjusted in accordance with Sections4.2.2 and 4.2.3 below.4.2.1 “Base Raw Material Cost” means the average invoiced cost of raw materials used to produce allorders of Product placed by the Customer, such average being the average invoiced cost of raw materials for the twelve monthsprior to each anniversary date used in section 4.2.2 calculations..4.2.2 Albemarle may raise or lower the Unit Price set forth in Section 4.1 due to increases or decreases inraw material costs over the Base Raw Material Cost on the twelve (12) month anniversary of the Effective Date, and upon eachsubsequent twelve month anniversary date thereafter, upon written notice to Customer provided no less than thirty (30) days priorto the applicable anniversary date (a “Raw Material Price Adjustment Notice”). Such revised Unit Price shall be applicable for allbatches of Product ordered after the twelve (12) month anniversary of the Effective Date hereof, or any subsequent anniversarydate set forth above. At the request of the Customer Albemarle shall furnish Customer with documentation demonstrating the rawmaterial cost changes from the Base Raw Material Cost. If, after receipt of such documentation, Customer is not in agreement withsuch adjustment, then Customer shall notify Albemarle in writing, and the Parties shall agree to an independent, qualified, thirdparty audit company whose services shall be retained to determine whether or not such Unit Price increases or decreases meetthe terms of this Agreement. In the event the proposed Unit Price adjustment shall be deemed to have been warranted by the thirdparty auditor, Customer shall pay for all costs related to such audit services.10* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.In the event the proposed price adjustment shall be deemed to not have been warranted by the third party auditor, Albemarle shallpay for all costs related to such audit.4.2.3 Upon no less than thirty (30) days’ notice prior to the third annual anniversary of the Effective Date,and each annual anniversary date thereafter, Albemarle shall also be entitled, but not obligated, to raise the Unit Price set forthherein to reflect increases in non raw material costs incurred in the manufacture of Product. This increase will be limited to thepercentage increase, if any, in the final U.S. Department of Labor, Bureau of Labor Statistics, Producer Price Index forCommodities, Drugs and Pharmaceuticals (ID: WPU 063) (Base Period 1982=100), as published by the Bureau of Labor Statistics,U.S. Department of Labor, in the PPI Detailed Report for the month of July of the year in which the calculation is being made, oversuch index for the preceding July. All increases in Unit Price shall be applicable for all batches of Product ordered hereunder afterthe thirty sixth (36th) month anniversary of the effective date hereof and each twelve month anniversary thereafter, as applicable.4.2.4 Prior to the third annual anniversary of the Effective Date, any unit price adjustments related to thecost of the raw material shall not exceed [redacted]* per kilogram over any twelve (12) month period. After the third annualanniversary of the Effective Date, any unit price adjustments related to the cost of the raw material and non raw material costsincurred in the manufacture of Product shall not exceed [redacted]* per kilogram over any twelve (12) month period. Anyadjustment to the unit price cannot occur until at least [redacted]* kilograms of Product has been manufactured under thisagreement.4.3 Stability Study Fee. Albemarle shall charge a fee of [redacted]* for each [redacted]* unmicronized stabilitystudy and [redacted]* for each [redacted]* micronized stability study described in Section 2.11 that is requested by the Customer.Such fee will be invoiced by Albemarle quarterly in arrears during the first year of such study.4.4 Invoicing. Albemarle shall provide to Customer an invoice with each delivery of the Product. Each invoice shallreference the purchase order to which the invoice relates and the quantity of the Product actually shipped. Payments shall be sentto the “Remit to” address set forth on the invoice. Should Customer dispute any portion of an invoice, it shall so notify Albemarle inwriting and the Parties shall attempt in good faith to resolve said dispute. Any terms on any invoice or other purchasedocumentation issued by Albemarle which are inconsistent with this Agreement shall be of no effect or force.4.5 Payment. Customer shall pay all amounts due in U.S. dollars, payable within forty-five (45) days of the date ofthe corresponding invoice. If Customer fails to make payment within forty-five(45) days of the invoice date, Albemarle shall beentitled to collect from the Customer interest on past due payments at a rate of interest of one percent (1.0%) per month or thehighest rate permitted by law, whichever is less, as well as any costs incurred by Albemarle in collecting such past due payments,including but not limited to, reasonable attorneys’ fees, court costs and the reasonable value of Albemarle’s time and expensesspent in connection with such collection action, computed at Albemarle’s prevailing fee schedule and expense policies.4.6 Taxes. Except as expressly provided elsewhere in the Agreement, Customer will pay any tax (other than onincome), duty or other governmental charge now or hereafter imposed on any Product or imposed on Albemarle by reason of themanufacture, sale, use or transportation of such products or raw material.5.CONFIDENTIALITY5.1 Confidential Information. The Parties agree and acknowledge that all disclosures of information between theParties, whether under this Agreement, the Prior CDA, the11* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.Validation Supply Agreement, the Prior Manufacturing Agreement, or the Prior Commercial Manufacturing Agreement, shall betreated as “Proprietary Information” under the CDA and shall be subject to the terms of the CDA. The Parties hereby amend theCDA as necessary to protect the relevant disclosures under this Agreement, including by extending the term of disclosureprotected under the CDA through the Term, and the Parties shall sign a written document memorializing such amendment.5.1 Confidential Agreement. Neither Party shall disclose any of the terms and conditions of this Agreement to anyperson or entity outside such Party whatsoever (other than to such Party’s affiliates and actual or potential investors, lenders andacquirers (provided, that such recipients are bound to maintain the confidentiality of this Agreement to the same extent as if theywere parties hereto) and subject to Section 8.5 below to any Government Entity that is a purchaser or potential purchaser of FDPand such Party’s legal counsel without the prior written consent of the other Party, except as such disclosure may be required foraccounting or tax reporting purposes, for purpose of complying with the rules of any stock exchange on which the shares of aParty trades, or as otherwise may be required by law.5.2 Ownership of Confidential and Proprietary Information. Except as otherwise agreed upon in writing or requiredpursuant to Section 11 (Flow down provisions) below, each Party shall remain the sole owner of the patent rights (and any otherintellectual property rights) which have been or are being developed by said Party before entering into this Agreement or during thisAgreement but independent of any activities to be carried out under this Agreement. Notwithstanding the foregoing and for theavoidance of doubt, Customer is the sole owner of any improvements (including process improvements), derivations, inventions,innovations, developments, works of authorship, know-how or processes related to the Product developed during the performanceof activities under this Agreement or under the Validation Supply Agreement or the Prior Manufacturing Agreement, the PriorCommercial Manufacturing Agreement, and all intellectual property rights therein, (collectively the “Process Improvements”), andAlbemarle and its Affiliates and subcontractors hereby assigns to Customer all right, title and interest in and to all such ProcessImprovements. Albemarle shall promptly disclose to Customer all Process Improvements upon their creation, and shall provideCustomer with such other information about Process Improvements as Customer may reasonably request. Albemarle and itsAffiliates and subcontractors shall cooperate with Customer, at Customer’s sole expense, by furnishing supporting data andsigning documents needed for the prosecution and maintenance of patent applications and patents covering the ProcessImprovements. Albemarle shall not use any technology or intellectual property proprietary to Albemarle or any Affiliate or third partyto manufacture the Product unless Albemarle first notifies Customer of such intended use and obtains Customer’s prior writtenconsent, and grants to Customer a license reasonably acceptable to Customer thereunder.6. INDEMNITY; INSURANCE6.1Indemnity.6.1.1 By Customer. Customer shall defend, indemnify and hold Albemarle harmless from and against alllosses, liabilities, damages, costs and expenses (including reasonable attorneys’ fees and costs) (“Losses”) resulting from allclaims, demands, actions and other proceedings by any third party to the extent arising from (a) the breach of any representation,warranty or covenant of Customer under this Agreement, (b) any bodily injury to person (including12* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.death) or damage to real or tangible personal property caused by the Product or the use thereof (except if subject to Albemarle’sindemnification obligations under Section 6.1.2(a) or 6.1.2(b)), (c) the gross negligence or willful misconduct of Customer in theperformance of its obligations under this Agreement, or (d) infringement of any patents or trademarks or other third party intellectualproperty rights which result from Customer's particular use of the Product or from Albemarle's compliance with Customer'sdesigns, specifications or instructions.6.1.2 By Albemarle. Albemarle shall defend, indemnify and hold Customer and its affiliates, and its and theirofficers, directors, employees and agents, harmless from and against all Losses resulting from all claims, demands, actions andother proceedings by any third party (including any subcontractor of Albemarle) to the extent arising from (a) the breach of anyrepresentation, warranty or covenant of Albemarle under this Agreement, including any such breach arising as a result of the actionor omission of any Albemarle subcontractor, or (b) the gross negligence or willful misconduct of Albemarle or any subcontractor inthe performance of Albemarle’s obligations under this Agreement.6.1.3 Indemnity Procedure. A Party (the “Indemnitee”) that intends to claim indemnification under thisSection 6 shall promptly notify the other Party (the “Indemnitor”) of any claim, demand, action or other proceeding for which theIndemnitee intends to claim such indemnification. The Indemnitor shall have the right to assume and control the defense thereofwith counsel selected by the Indemnitor; provided, however, that the Indemnitee shall have the right to retain its own counsel toparticipate in the defense at Indemnitee’s own expense, subject to Indemnitor’s right to control the defense. The indemnityobligations under this Section 6 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding ifsuch settlement is effected without the prior express written consent of the Indemnitor, which consent shall not be unreasonablywithheld or delayed. The failure to deliver notice to the Indemnitor within a reasonable time after notice of any such claim ordemand, or the commencement of any such action or other proceeding shall not relieve such Indemnitor of all liability to theIndemnitee under this Section 6 with respect thereto, but if such failure is prejudicial to the Indemnitor’s ability to defend such claim,demand, action or other proceeding, and if such prejudice results in liabilities that may have been avoided or reduced if timelynotice had been given, then the Indemnitor shall be relieved of said part of the liabilities. The Indemnitor may not settle or otherwiseconsent to an adverse judgment in any such claim, demand, action or other proceeding, that diminishes the rights or interests ofthe Indemnitee without the prior express written consent of the Indemnitee, which consent shall not be unreasonably withheld ordelayed. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnitor and its legal representatives inthe investigation of any claim, demand, action or other proceeding covered by this Section 6.6.2 Insurance. Each Party shall maintain, at all times during the Term, adequate and appropriate insurancecoverage from one or more reputable insurance companies, each rated A- or better by AM Best and licensed to do business in theUnited States. Such insurance shall include products/completed operations coverage with limits of liability of no less than[redacted]* per occurrence/claim and in the aggregate. Each Party shall, at the other Party’s request, furnish to the other Party acertificate of insurance.6.3 Attorneys’ Fees. If suit is filed to enforce any right granted in this Agreement, the substantially prevailing Partyshall be entitled to recover its costs, disbursements and reasonable attorneys’ fees from the other Party. The Party who is awardeda net recovery against the other shall be deemed the substantially prevailing Party unless such other Party has previously13* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.made a bona fide offer of payment in settlement and the amount of recovery is the same or less than the amount offered insettlement. Reasonable attorneys’ fees may be recovered regardless of the forum in which the dispute is heard, including anappeal.6.LIABILITY AND LIMITATIONS7.1 Actual Damages. EXCEPT WITH RESPECT TO A BREACH OF SECTION 5 OR A PARTY’S GROSSNEGLIGENCE OR WILLFUL MISCONDUCT, IN NO EVENT OR INSTANCE SHALL EITHER PARTY BE LIABLE TO THEOTHER PARTY FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR OTHERINDIRECT DAMAGES, INCLUDING, LOSS OF PROFIT OR LOSS OF BUSINESS GOODWILL, ARISING FROM ORRELATING TO THIS AGREEMENT, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, NEGLIGENCE, STRICTLIABILITY OR OTHERWISE, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 7.1 ISINTENDED TO LIMIT OR RESTRICT THE OBLIGATION TO PAY INDEMNIFICATION CLAIMS OF EITHER PARTY UNDERTHIS AGREEMENT RELATED TO AMOUNTS DUE THIRD PARTIES7.2 Limitations. IN RECOGNITION OF THE RELATIVE RISKS AND BENEFITS ASSOCIATED WITH THESERVICES TO BE PROVIDED HEREUNDER, THE RISKS HAVE BEEN ALLOCATED BETWEEN THE PARTIES SUCH THATCUSTOMER AGREES, TO THE FULLEST EXTENT PERMITTED BY LAW, TO LIMIT THE LIABILITY OF ALBEMARLE TOCUSTOMER FOR ANY AND ALL CLAIMS, LOSSES, COSTS, OR DAMAGES OF ANY NATURE WHATSOEVER, ARISINGFROM ANY CAUSE OR CAUSES WHATSOEVER, OTHER THAN ALBEMARLE’S BREACH OF SECTION 5 ANDALBEMARLE’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 6 TO PAY THIRD PARTY CLAIMS, SO THAT THETOTAL AGGREGATE LIABILITY OF ALBEMARLE HEREUNDER SHALL NOT EXCEED THE PRICE PAID TO ALBEMARLEFOR THE SPECIFIC SUBJECT BATCH OR BATCHES BASED ON THE PER KILOGRAM PRICE AND VOLUME OF THESUBJECT BATCH OR BATCHES OF PRODUCT. SUCH CLAIMS AND CAUSES INCLUDE NEGLIGENCE, PROFESSIONALERRORS OR OMISSIONS, STRICT LIABILITY, BREACH OF CONTRACT OR WARRANTY.8.TERM AND TERMINATION8.1 Term. Subject to earlier termination as provided herein, the term of this Agreement (“Term”) shall commenceon the Effective Date and continue for an initial term that is the longer of the period ending on (i) the fifth anniversary of the EffectiveDate or (ii) the date Customer has fulfilled its delivery obligations under the BARDA Contract, if the BARDA Contract is awarded tothe Customer prior to the fifth anniversary of the Effective Date. Thereafter this Agreement shall renew for successive one (1) yearrenewal terms until either Party provides the other Party with advance written notice of non-renewal at least ninety (90) days priorto the expiration of the then-current term.8.2 Applicability of FAR Clauses. Notwithstanding any other terms of this Agreement, for orders placed under thisAgreement that relate to a Government Contract, the following clauses of the Federal Acquisition Regulation ("FAR"), as modifiedto identify the Parties to this Agreement and carry out the purpose of those clauses, shall govern the rights and obligations of theParties: 52.242-15 Stop-Work Order, 52.249-2 Termination for Convenience of the Government (Fixed-Price), 52.249-8 Default(Fixed-Price Supply and Service).8.3 Termination for Default. Subject to the provisions of Section 8.2, a Party may terminate this Agreement bywritten notice to the other Party after the breach of any provision of this Agreement by the other Party, if the other Party has notcured such breach within sixty (60)14* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.days after written notice thereof from the non-breaching Party; provided that, if Customer receives a notice of default from aGovernment Entity pursuant to a Government Contract, and such default was caused by Albemarle or its subcontractors,Customer may terminate this Agreement if Albemarle does not cure the default within the period required by the GovernmentContract. Customer shall provide satisfactory evidence to Albemarle of any such notice of default (promptly when received byCustomer), all information evidencing that any such default was caused by Albemarle or its subcontractor, and satisfactoryevidence of any applicable time periods within which a cure must be completed.8.4 Termination for Insolvency. This Agreement may be terminated by a Party upon written notice to the otherParty if (a) the other Party shall make an assignment for the benefit of its creditors, file a petition in bankruptcy, petition or apply toany tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets, or shall commence anyproceeding under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction,whether now or hereafter in effect; or (b) if there shall have been filed against the other Party any such bona fide petition orapplication, or any such proceeding shall have been commenced against it, in which an order for relief is entered or that remainsundismissed or unstayed for a period of ninety (90) days or more; or (c) if the other Party consents to, approves of oracquiescences in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver ortrustee for it or any substantial part of its assets, or shall suffer any such custodianship, receivership or trusteeship to continueundischarged or unstayed for a period of ninety (90) days or more; or (d) anything analogous to any of the foregoing occurs in anyapplicable jurisdiction. Termination shall be effective upon the date specified in such notice.8.5 BARDA Approval of Subcontracts; Suspension or Termination by Action of Government Entity. Under theBARDA Contract, BARDA has the right to approve any subcontract entered into by Customer for goods or services to be suppliedfor the BARDA Contract, including this Agreement. Customer shall supply a copy of this Agreement to BARDA and endeavor toobtain BARDA’s approval of this Agreement as a subcontract to the BARDA Contract. In the event that BARDA does not approvethis Agreement, Customer shall so notify Albemarle in writing, specifying the reasons for BARDA’s rejection of this Agreement. Albemarle shall then have ninety (90) days from the receipt of said notice to remedy the section(s) of this Agreement that were thesubject of BARDA’s disapproval. In such an event, Customer agrees to use good faith efforts to modify and/or amend thisAgreement with Albemarle for the purpose of meeting BARDA’s approval. In the event Albemarle fails to remedy the section(s) ofthis Agreement that were the subject of BARDA’s disapproval within said ninety (90) days of its receipt of written notification fromCustomer, Customer shall have the right to terminate this Agreement. In addition, subject to the provisions of Section 8.2, if anyapplicable Government Entity issues a stop work order or otherwise suspends, modifies or terminates Customer’s GovernmentContract, and such action affects the scope of work under this Agreement, Customer may require Albemarle to immediately stopall, or any part, of the work called for by this Agreement as required by the Government Entity’s stop work order, modification,suspension or termination, written evidence of which shall be provided to Albemarle promptly upon receipt of same by Customer.Albemarle shall immediately comply with the terms of such order as specified by Customer and take all reasonable steps tominimize the incurrence of costs allocable to the work covered by the stop work order or termination. Where work has beensuspended, but not terminated, Albemarle shall not resume work unless specifically directed to do so by Customer. Albemarleshall be paid for work and reimbursed for all reasonable costs incurred by Albemarle up to the termination of the Agreement, not toexceed the aggregate Price for the most recent order of Product not yet delivered. Where the Government Entity orders atermination for convenience,15* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.that work may be terminated for convenience by Customer upon submission to Albemarle of written evidence of any suchtermination for convenience. If any suspension hereunder continues for one hundred eighty (180) days, Albemarle shall have theright to terminate this Agreement and to be paid for all work performed and reimbursed for all costs incurred up to the terminationdate. In the event of a termination pursuant to this Section 8.5, Customer will reimburse Albemarle for all costs reasonably relatedto decommissioning of the Facility, or its subcontractor’s facility, together with all costs for waste disposal, cleaning and mothballingincurred by Albemarle or its subcontractor as a result of said termination.8.6 Effect of Termination. All rights and obligations under this Agreement shall terminate immediately upon anytermination or expiration of this Agreement, except however, the rights and obligations set forth in the following Sections shallsurvive any termination of this Agreement3.5 (with respect to Product shipped during the Term), 5 (“Confidentiality”), 6.1.1-6.1.3(“Indemnity”), 7 (“Liability and Limitations”), 8.2 (“Applicability of FAR Clauses”), 8.5 (“Suspension or Termination by Action ofGovernment Entity”), 8.6 (“Effect of Termination”), 9 (“Warranty”), 10 (“Regulatory”), 11 (“Flow Down Provisions”) (to the extentrequired by Applicable Law) and 12 (“General Provisions”). In addition, upon termination, Albemarle will immediately deliver toCustomer copies of all records, equipment, and other items or information in its possession that are the property of Customer, aswell as, upon providing Albemarle with written evidence of the applicable Government Entity’s requirement, all necessarydocumentation relating to Albemarle’s work that Customer may require to perform its Government Contract. Similarly, upontermination, Customer will immediately deliver to Albemarle copies of all records, equipment, and other items or information in itspossession that are property of Albemarle. Upon termination or expiration Upon termination or expiration of this AgreementCustomer may request of Albemarle to transfer to Customer, any of its Affiliates, the documentation exclusively related to theProduct used by Albemarle in the provision of the services for the Product (“Technology Transfer”) which Albemarle has notpreviously shared with Customer. Such Technology Transfer shall include transfer of all the documentation required tomanufacture the Product in accordance with the Specifications and the Quality Agreement, but shall exclude only AlbemarleConfidential Information related to Albemarle’s equipment or process technology. Specifically, batch records are not to be copiedfor the purposes other than for Customer’s regulatory, compliance and government oversight purposes only. Customer shall payAlbemarle for such Technology Transfer (at Albemarle’s then-standard rates) and reimburse Albemarle for reasonable out-of-pocket expenses incurred in providing such Technology Transfer).9.WARRANTYAlbemarle represents and warrants that (a) the Product sold hereunder shall at the time of completion of the manufacture of theProduct, as well as immediately prior to shipping to Customer’s micronizing subcontractor, conform to the Specifications and bemanufactured in accordance with Applicable Law and shall not be adulterated, misbranded or mislabeled within the meaning ofApplicable Law; (b) any services performed by Albemarle hereunder shall be performed in accordance with Applicable Law and ina professional and workmanlike manner in accordance with industry standards; (c) neither Albemarle nor any of its Affiliates orsubcontractors or their respective employees, consultants or other personnel have been debarred, is subject to debarment,suspension, proposed for debarment, or voluntarily excluded from participation in transactions by the Federal government nor willuse in any capacity, in connection with the performance of its obligations or the exercise of its rights under this Agreement, anyindividual or entity who has been debarred, suspended or proposed for debarment by the Federal government or pursuant toSection16* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.306 of the FFDCA or who is the subject of a conviction described in such section; (d) Customer shall receive good title to theProduct, free and clear of liens or other encumbrances; and (e) Albemarle shall manufacture Product exclusively for Customer.However, except as provided in this Section 9 and Section 2.6, Albemarle makes no other warranty of any kind, whether expressor implied, including no warranty of merchantability or fitness for any particular purpose. Further, to the extent that the Productconforms to its applicable Specifications, Customer assumes all risk and liability for results obtained by the use of the Productcovered by this Agreement, whether used singly or in combination with other products, except as provided in Section 6.1.2 withrespect to third party claims.10.REGULATORY10.1 Upon a request by any properly authorized officer or employee of the FDA or any equivalent state regulatorybody or any Regulatory Authority, Albemarle shall permit such officer or employee, at reasonable times, to have access to, copyand verify any records and reports in Albemarle’s possession or under Albemarle’s custody or control relating to the Product, andshall submit such records or reports (or copies thereof) upon FDA or any other regulatory request, to the FDA or such RegulatoryAuthority. Albemarle shall provide the Customer with prompt notice of any such request. Albemarle shall maintain all recordsrelated to its activities under this Agreement in accordance with Applicable Law or any record keeping obligation as set forth in aGovernment Contract of which Customer informs Albemarle in writing.10.2 Each Party shall promptly advise the other of any safety or toxicity problem of which either Party becomesaware regarding the Product. Customer shall have the sole right to initiate a recall or take any other action with respect to Productonce delivered by Albemarle to Customer or its designee.10.3 Albemarle shall not file, support or maintain a DMF or any foreign equivalent for the Product except withCustomer’s prior written consent.10.4 Albemarle shall, upon Customer’s reasonable request, promptly assist Customer with any regulatory mattersrelated to the Product or this Agreement, which may include responding to Customer’s reasonable requests, providing all CMCinformation, assisting Customer by providing any information reasonably available to Albemarle, and granting Customer a right ofreference or use to relevant data.6.FLOW DOWN PROVISIONSWith regard to any Firm Order under this Agreement that relates to a Government Contract, Customer and Albemarle agreethat the FAR clauses and other provisions contained in Exhibit F, as well as any other clauses required by law or regulation, shallbe binding on Albemarle and shall be enforceable against Albemarle by Customer, either directly or acting on behalf of theapplicable Government Entity. Clauses incorporated by reference shall have the same force and effect as if they were given in fulltext. The provisions of this Section 11 and such flowdown clauses shall take precedence over any conflicting provision of thisAgreement. In addition, Albemarle agrees that it will use reasonable effort to supply Customer with information or support fromAlbemarle required in order for Customer to comply with its obligations under the relevant Government Contract. Together with anysuch request for information submitted to Albemarle, Customer will provide Albemarle with a copy of the documentation pursuant towhich it believes it requires Albemarle’s assistance in meeting its obligations under the relevant Government Contract.17* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.7.GENERAL PROVISIONS7.1 Notices. Any consent, notice or report required or permitted to be given or made under this Agreement by oneof the Parties to the other shall be in writing and addressed to such other Party at its address indicated below, or to such otheraddress as the addressee shall have last furnished in writing to the addressor, and shall be effective upon receipt by theaddressee.If to SIGA: If to Albemarle:SIGA Technologies, Inc. Albemarle Corporation4575 SW Research Way, Suite 110 4350 Congress Street, Suite 700Corvallis, Oregon 97333 Charlotte, North Carolina 28209Attention: Contracts Attention: VP Fine ChemicalsWith a copy to: With a copy to:SIGA Technologies, Inc. Albemarle Corporation27 East 62nd Street 451 Florida StreetNew York, NY 10065 Baton Rouge, Louisiana 70801Attention: General Counsel Attention: General Counsel7.2 Assignment. Neither Party may assign or otherwise transfer this Agreement or any right or obligation hereunder(whether voluntarily, by operation of law or otherwise), without the prior express written consent of the other Party, which consentshall not be unreasonably withheld or delayed. Any instance of a Party selling all or substantially all of its assets (including, withoutlimitation, Customer selling all or substantially all of its rights to the marketing or production of the Product or the FDP), or all orsubstantially all of the assets of all divisions and departments providing or receiving Product or services (as applicable) hereunder,shall not be construed as an assignment of this Agreement. Additionally, the sale by a Party’s shareholders of a controlling interestin the outstanding stock of such Party shall similarly not be considered an assignment of this Agreement, and in either instance,this Agreement shall remain in full force and effect and shall be binding upon, and inure to the benefit of, the successor or assigneeof such Party, provided that, any permitted successor or assignee shall assume all obligations of its assignor under this Agreementand prior to any such sale of assets or of ownership interest, such proposed successor or assignee confirms in writing to the non-assigning Party that it can meet the obligations of the assigning Party under this Agreement). Any purported assignment or transferin violation of this Section 12.2 shall be void.7.3 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Stateof Delaware, without regard to the conflicts of law principles thereof.7.4 Construction. This Agreement will be fairly interpreted in accordance with its terms and without any strictconstruction in favor of or against any Party.7.5 Severability. Whenever possible, each provision of this Agreement, shall be interpreted in such manner as tobe effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid underapplicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating theremainder of such provisions or the remaining provisions of this Agreement.7.6 Counterparts; Facsimile. This Agreement may be executed in counterparts, all of which together shallconstitute one and the same instrument. Signing and delivery of this18* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.Agreement may be evidenced by a facsimile/telecopy/PDF transmission of the signed signature page to the other Party.7.7 Headings. The captions to the sections hereof are not a part of this Agreement, but are merely guides or labelsto assist in locating and reading the sections hereof.7.8 Independent Contractors. Each Party hereby acknowledges that the Parties shall be independent contractorsand that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have theauthority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on theother Party, without the prior consent of the other Party to do so.7.9 Waiver. The waiver by a Party of any right hereunder, or of any failure to perform or breach by the other Partyhereunder, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by the other Party hereunderwhether of a similar nature or otherwise.7.10 Entire Agreement. This Agreement (which includes its Exhibits and the Quality Agreement) contain the entireunderstanding of the Parties with respect to the subject matter hereof. All other express or implied representations, understandingsand agreements with respect to the subject matter hereof, either oral or written, heretofore made, including without limitation thePrior CDA, are expressly superseded by this Agreement; provided, however, that the CDA (amended as provided herein),the PriorCommercial Manufacturing Agreement shall expressly survive. This Agreement may be amended, or any term hereof modified,only by a written instrument duly executed by both Parties.7.11 Dispute Resolution. In the event there is a dispute between the Parties with respect to this Agreement, theParties, prior to instituting any court action, shall, if requested by either Party in writing, mediate their dispute before one mutuallyagreed upon impartial mediator in a mutually agreed upon location, within thirty (30) days after such request. Mediation fees, if any,shall be divided equally between the Parties. If the dispute is not resolved within thirty (30) days of initiation of mediation, eitherParty may bring suit in any court of competent jurisdiction. [Remainder of Page Intentionally Left Blank]19* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. SIGA TECHNOLOGIES, INC.By: /s/ Daniel J. Luckshire______ _________Name: Daniel J. Luckshire_ _______ ______Title: CFO____ __________ ___________Date: 10/5/2018 _______________________ALBEMARLE CORPORATIONBy: /s/ Scott Martin_____________________Name: Scott Martin____ _______________Title: President, FCS________ __________Date: 10/12/2018 ______________________20* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT APRODUCT CHEMICAL STRUCTUREName: Tecovirimat MonohydrateChemical Name: [redacted]*Chemical Structure: [redacted]*21* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT BMicronized Product TestingSamples for analysis by FP14.SG, only, will be provided by Customer through its drug product service provider and data will beprovided to Customer in the form of a COA.Table 1: Micronized Product AnaylsisTestMethodAcceptance Criteria[redacted]*Albemarle will perform stability testing on micronized Product.Samples of micronized Product will be provided to Albemarle where they will be staged according to established protocols andanalyzed based on the specifications outlined in Table 2. The results will be provided on a quarterly basis.Table 2: Micronized Product Specification for StabilityTestMethodAcceptance Criteria[redacted]*22* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.[redacted]*23* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT CSpecificationsST-246 Drug Substance Specification for Commercial ProductionPRODUCT SPECIFICATIONSTable 1: Un-MicronizedTestMethodAcceptance Criteria[redacted]*24* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.[redacted]*25* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.Table 2: Un-Micronized Product Specification for StabilityTestMethodAcceptance Criteria[redacted]*26* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT DStability StudyStability Program Per ICH Guidelines for 84 months1)The [redacted]* Stability Testing activities as per established protocols would be undertaken for the micronized Productfrom [redacted]* batch of the micronized Product produced each calendar year. Customer has responsibility to provideAlbemarle with micronized Product. The responsibilities of Albemarle would include:a.Protocol writing, with corresponding Customer approval in accordance with the Quality Agreement;b.Sample preparation/staging in stability chamber ovens, with corresponding Customer approval in accordance withthe Quality Agreement;c.Analysis per the stability protocols within time period in accordance with the Albemarle SOPs and the QualityAgreement;d.Report writing using format mutually agreed upon with the Customer.2)The [redacted]* Stability Testing activities as per established protocols would be undertaken for the unmicronized Productfrom [redacted]* batch of the unmicronized Product produced each calendar year. The responsibilities of Albemarle wouldinclude:a.Protocol writing, with corresponding Customer approval in accordance with the Quality Agreement;b.Sample preparation/staging in stability chamber ovens, with corresponding Customer approval in accordance withthe Quality Agreement;c.Analysis per the stability protocols within time period in accordance with the Albemarle SOPs and the QualityAgreement;d.Report writing using format mutually agreed upon with the Customer.27* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT EQUALITY AGREEMENT[Quality Agreement will be referenced here]28* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT FFlow-down ProvisionsThe following Federal Acquisitions Regulation (FAR) clauses are incorporated by reference as if in full text. By acceptance of thisAgreement, Albemarle certifies that it is supplying only Commercial Items as that term is defined in FAR 2.101 and understandsthat Customer has relied on that certification. The effective version of each provision shall be the same version as that whichappears in Customer’s prime contract, or higher-tier subcontract under which this is a subcontract. In all clauses listed herein, theterms “Government,” “Contracting Officer” and “Contractor” shall be revised to suitably identify the contracting parties herein andaffect the proper intent of the provision. “Subcontractor”, however, shall mean “Albemarle’s Subcontractor” under this subcontract.Notwithstanding the foregoing, in the clauses whose subject matter is intellectual property including, but not limited to patents andrights in data, and “Security Requirements,” the terms “Government,” “Contracting Officer” and equivalent phrases shall retain themeans as set forth in FAR.52.203-13, Contractor Code of Business Ethics and Conduct52.203-16 Preventing Personal Conflicts of Interest52.219-8, Utilization of Small Business Concerns52.222-21 Prohibition of Segregated Facilities52.222-26, Equal Opportunity52.222-35, Equal Opportunity for Veterans52.222-36, Affirmative Action for Workers with Disabilities52.222-37 Employment Reports on Veterans52.222-40, Notification of Employee Rights Under the National Labor Relations Act52.222-50, Combating Trafficking in Persons52.227-2 Notice and Assistance Regarding Patent and Copyright Infringement52.232-40 Providing Accelerated Payments to Small Business Subcontractors52.244-6 Subcontracts for Commercial Items B. HHS Clauses: HHSAR 352.203-70 Anti LobbyingHHSAR 352.222-70 Contractor Cooperation in Equal Employment OpportunityInvestigationsHHSAR 352.223-70 Safety and HealthPROHIBITION ON CONTRACTOR INVOLVEMENT WITH TERRORIST ACTIVITIESAlbemarle acknowledges that U.S. Executive Orders and Laws, including but not limited to E.O. 13224 and Pub. L. 107-56, prohibittransactions with, and the provision of resources and support to, individuals and organizations associated with terrorism. It is thelegal responsibility of the Albemarle to ensure compliance with these Executive Orders and Laws. This clause must be included inall subcontracts issued under this Agreement. 29* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT GList of Approved Laboratories per Section 2.6[redacted]*30* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.EXHIBIT HList of Qualified Raw Material Vendors per Section 2.8Approved Raw Material Vendors for tecovirimat monohydrate Drug SubstanceRaw MaterialApproved Vendor[redacted]*31* Certain material has been omitted pursuant to a request for confidential treatment. Such omitted material has been filedseparately with the Securities and Exchange Commission.CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-218507, 333-183101, 333-167329, 333-112935,333-56216, and 333-35992) of SIGA Technologies, Inc. of our report dated March 5, 2019 relating to the financial statements and the effectiveness ofinternal control over financial reporting, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLPFlorham Park, New Jersey March 5, 2019Exhibit 31.1Certification by Chief Executive Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002I, Phillip L. Gomez, certify that:1.I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 5, 2019 /s/ Phillip L. GomezPhillip L. GomezChairman and Chief Executive OfficerExhibit 31.2Certification by Chief Executive Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002I, Daniel J. Luckshire, certify that:1.I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 5, 2019 /s/ Daniel J. LuckshireDaniel J. LuckshireExecutive Vice President andChief Financial OfficerExhibit 31.2Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip L. Gomez, Chief Executive Officer of the Company, certify,pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company andfurnished to the Securities and Exchange Commission or its staff upon request./s/ Phillip L. GomezPhillip L. GomezChairman and Chief Executive OfficerMarch 5, 2019Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2018 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel J. Luckshire, Executive Vice President and Chief Financial Officerof the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of myknowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company andfurnished to the Securities and Exchange Commission or its staff upon request./s/ Daniel J. LuckshireDaniel J. LuckshireExecutive Vice President and Chief Financial OfficerMarch 5, 2019

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