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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 For the fiscal year ended December 31, 2006

      Or

|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 For the transition period from ______________ to
      ______________

Commission File No. 0-23047

                             SIGA Technologies, Inc.
             (Exact name of registrant as specified in its charter)

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

    420 Lexington Avenue, Suite 408
              New York, NY                                  10170
(Address of principal executive offices)                  (zip code)

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

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

      Title of each class              Name of each exchange on which registered
      -------------------              -----------------------------------------
common stock, $.0001 par value                   Nasdaq Capital Market

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

                                      None

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act Yes |_| 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 |_| 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 those Sections.

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

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's  knowledge,  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. |_|.

<PAGE>

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (check
one): Large Accelerated Filer |_| Accelerated  Filer |_|  Non-Accelerated  Filer
|X|

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

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 March 8, 2007 as  reported  on the Nasdaq  SmallCap  Market was
approximately $140,000,000.

As of March 8, 2007 the registrant had outstanding  32,674,394  shares of common
stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

The following document is incorporated herein by reference:

                  Document                         Parts Into Which Incorporated
                  --------                         -----------------------------
Proxy Statement for the Company's 2007 Annual                Part III
           Meeting of Stockholders

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                             SIGA Technologies, Inc.

                                    Form 10-K

                                Table of Contents

                                                                        Page No.
PART I

Item 1.   Business.............................................................2

Item 1A.  Risk Factors........................................................11

Item 1B.  Unresolved Staff Comments...........................................19

Item 2.   Properties..........................................................20

Item 3.   Legal Proceedings...................................................20

Item 4.   Submission of Matters to a Vote of Security Holders.................20

PART II

Item 5.   Market For Registrant's Common Equity, Related Stockholder
          Matters and Issuer Purchases of Equity Securities...................21

Item 6.   Selected Financial Data.............................................22

Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...........................................23

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk..........33

Item 8.   Financial Statements and Supplementary Data.........................34

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure............................................56

Item 9A.  Controls and Procedures.............................................56

Item 9B.  Other Information...................................................56

PART III

Item 10.  Directors, Executive Officers and Corporate Governance..............57

Item 11.  Executive Compensation..............................................57

Item 12.  Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters.....................................57

Item 13.  Certain Relationships and Related Transactions, and
          Director Independence...............................................58

Item 14.  Principal Accountant Fees and Services..............................58

PART IV

Item 15.  Exhibits, Financial Statements and Schedules........................59

SIGNATURES....................................................................63

<PAGE>

Item 1. Business

      Certain  statements in this Annual Report on Form 10-K,  including certain
statements contained in "Business" and "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operations,"  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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
various known and unknown risks and uncertainties and SIGA cautions you that any
forward-looking  information provided by or on behalf of SIGA is not a guarantee
of future performance.  SIGA's actual results could differ materially from those
anticipated by such forward-looking  statements due to a number of factors, some
of which are  beyond  SIGA's  control,  including  (i) the risk  that  potential
products that appear promising to SIGA or its  collaborators  cannot be shown to
be efficacious or safe in subsequent  pre-clinical or clinical trials,  (ii) the
risk that SIGA or its  collaborators  will not obtain  appropriate  or necessary
governmental  approvals to market these or other potential  products,  (iii) the
risk that SIGA may not be able to obtain anticipated funding for its development
projects  or other  needed  funding,  (iv) the risk that SIGA may not be able to
secure funding from anticipated  government  contracts and grants,  (v) the risk
that  SIGA may not be able to  secure  or  enforce  adequate  legal  protection,
including  patent  protection  for its products,  (vi) the risk that  regulatory
approval for SIGA's products may require further or additional testing that will
delay or prevent  approval,  (vii) the  volatile and  competitive  nature of the
biotechnology  industry,  (viii)  changes in domestic  and foreign  economic and
market conditions,  and (ix) the effect of federal, state and foreign regulation
on SIGA's businesses. All such forward-looking statements are current only as of
the date on which  such  statements  were  made.  SIGA  does not  undertake  any
obligation to publicly update any forward-looking statement to reflect events or
circumstances  after the date on which any such  statement is made or to reflect
the occurrence of unanticipated events.

Introduction

      SIGA  Technologies,  Inc. is referred to throughout this report as "SIGA,"
"the Company," "we" or "us."

      SIGA is a biotechnology  corporation  incorporated in Delaware on December
28, 1995. We aim to discover,  develop and commercialize novel  anti-infectives,
antibiotics and vaccines for serious infectious diseases. The major focus of our
developmental and commercialization activities is on products for use in defense
against biological warfare agents such as Smallpox and Arenaviruses (hemorrhagic
fevers). Our lead product,  SIGA-246, is an orally administered  anti-viral drug
that  targets  the  smallpox   virus.   In  December  2005  the  Food  and  Drug
Administration (FDA) accepted our Investigational New Drug (IND) application for
SIGA-246 and granted the program  "Fast-Track"  status. In December 2006 the FDA
granted Orphan Drug  designation to SIGA-246 for the prevention and treatment of
smallpox.  Our  anti-viral  programs  are  designed  to  prevent  or  limit  the
replication of the viral pathogen. Our anti-infectives programs are aimed at the
increasingly  serious  problem  of drug  resistance.  We are also  developing  a
technology for the mucosal delivery of our vaccines which may allow the vaccines
to activate  the immune  system at the mucus  lined  surfaces of the body -- the
mouth, the nose, the lungs and the gastrointestinal and urogenital tracts -- the
sites of entry for most  infectious  agents.  As a result of the  success of our
efforts to develop  products for use against  agents of biological  warfare,  we
have  not  spent  significant  resources  to  further  the  development  of  our
anti-infective and vaccine technologies.

Product Candidates and Market Potential

      SIGA Biological Warfare Defense Product Portfolio

Anti-Smallpox  Drug:  Smallpox  virus is classified as a Category A agent by the
Center for Disease  Control and  Prevention  (CDC) and is considered  one of the
most  significant  threats  for  use as a  biowarfare  agent.  While  deliberate
introduction of any pathogenic  agent would be  devastating,  we believe the one
that holds the greatest  potential  for harming the general U.S.  population  is
Smallpox.  At present there is no effective  drug with which to treat or prevent
Smallpox  infections.  To  address  this  serious  risk,  SIGA  scientists  have
identified a lead drug candidate,  SIGA-246,  which inhibits  vaccinia,  cowpox,
ectromelia  (mousepox),  monkeypox,  camelpox,  and variola  replication in cell
culture but not other  unrelated  viruses.  Given the safety  concerns  with the
current smallpox


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vaccine,  there should be several uses for an effective smallpox antiviral drug:
prophylactically,  to  protect  the  non-immune  who are at  risk  to  exposure;
therapeutically,  to prevent disease or death in those exposed to smallpox;  and
lastly,  as an adjunct treatment to the  immunocompromised.  SIGA scientists are
also  working  on several  other  smallpox  drug  targets,  including  the viral
proteinases,  to  develop  additional  drug  candidates  for use in  combination
therapy if necessary. In December 2005, the FDA approved our IND application for
SIGA-246. In June 2006 we successfully completed the first human clinical safety
study of  SIGA-246.  The trial showed the drug to be  well-tolerated  in healthy
human volunteers at all tested orally administered doses. In addition, data from
blood level  exposure was  sufficient to support once a day dosing.  The Phase I
clinical  trial was performed at Advanced  Biomedical  Research,  Inc.  Clinical
Research  Center in Hackensack,  NJ. The study was a  double-blind,  randomized,
placebo  controlled,  and ascending  single dose study. We started an additional
Phase I clinical trial in February 2007, to assess the safety, tolerability, and
pharmacokenitics  of SIGA-246  administered  as a single  daily oral dose for 21
days in healthy human volunteers. This Phase I human trial is being performed at
the Orlando  Clinical  Research Center in Orlando,  Florida.  In 2006,  SIGA-246
became the first drug ever to demonstrate 100% protection against human smallpox
virus in a primate trial  conducted at the federal  Centers for Disease  Control
and Prevention  (CDC).  Later in 2006, in two non-human  primate trials the drug
demonstrated  100%  protection to animals  injected with high doses of monkeypox
virus.  One study  was  sponsored  by the  National  Institute  of  Allergy  and
Infectious  Diseases (NIAID) at the National  Institutes (NIH). The second study
was conducted by the U.S. Army Medical Research Institute of Infectious Diseases
(USAMRIID)  and was  funded by the  Department  of  Defense's  Threat  Reduction
Agency.  In late 2006,  SIGA-246  received Orphan Drug  designation for both the
treatment and prevention of smallpox. During 2006, SIGA received grants from the
NIH totaling  approximately  $21 million for the  continued  development  of the
drug.

      Anti-Arenavirus Drug: Arenaviruses are hemorrhagic fever viruses that have
been  classified as Category A agents by the CDC due to the great risk that they
pose to  public  health  and  national  safety.  Among  the  Category  A viruses
recognized by the CDC, there are four  hemorrhagic  fever  arenaviruses  (Junin,
Machupo,  Guanarito  and  Sabia  viruses)  for which  there are no FDA  approved
treatments  available.  In order  to meet  this  threat,  SIGA  scientists  have
identified a lead drug candidate,  ST-294,  which has  demonstrated  significant
antiviral activity in cell culture assays against arenavirus pathogens.  We have
also  demonstrated  the therapeutic  efficacy of ST-294 in a preliminary  animal
challenge study.  SIGA also has programs against other hemorrhagic fever viruses
including Lassa virus,  Lymphocytic  choriomeningitis virus (LCMV), and Ebola in
development.  We  believe  that the  availability  of  hemorrhagic  fever  virus
antiviral  drugs will address  national and global security needs by acting as a
significant  deterrent and defense against the use of arenaviruses as weapons of
bioterrorism. In 2006, SIGA received a three year grant of $6.0 million from the
NIH to support the development of antiviral drugs for Lassa fever virus.

      Bacterial  Commensal  Vectors:  Our scientists have developed methods that
allow  essentially  any gene  sequence to be expressed in Generally  Regarded As
Safe (GRAS) gram-positive  bacteria, with the foreign protein being displayed on
the  surface  of the live  recombinant  organisms.  Since  these  organisms  are
inexpensive to grow and are very stable, this technology affords the possibility
of rapidly producing live recombinant vaccines against any variety of biological
agents  that might be  encountered,  such as  Bacillus  anthracis  (anthrax)  or
Smallpox.  SIGA  scientists are working to develop an  alternative  vaccine with
improved  safety  for use in  preventing  human  disease  caused  by  pathogenic
orthopoxviruses  such as variola virus. To accomplish this goal we are utilizing
our  newly-developed BCV (bacterial  commensal vector) technology.  BCV utilizes
gram-positive  commensal bacteria, such as Streptococcus gordonii, (S. Gordonii)
to  express  heterologous  antigens  of  interest,  either in  secreted  form or
attached to its external  surface.  Phase I human clinical  trials indicate that
this S.  gordonii  strain  is safe and  well-tolerated  in  humans.  In  several
different animal model systems S. gordonii has been shown to efficiently express
various antigens and elicit protective immune responses  (cellular,  humoral and
mucosal).  We believe that the delivery of selected  vaccinia virus antigens via
this live bacterial  vector system will provide an effective and safe method for
prevention of smallpox in humans.

      Surface  Protein  Expression   (SPEX/PLEX)  System:  Our  scientists  have
harnessed the protein expression  pathways of gram-positive  bacteria and turned
them into  protein  production  factories.  Using our  proprietary  SPEX or PLEX
systems,  we can produce  foreign  proteins at high levels in the laboratory for
use  in  subunit  vaccine   formulations  or  other  therapeutic   applications.
Furthermore,  we can envision engineering these bacteria to colonize the mucosal
surfaces of soldiers and/or civilians and secrete  therapeutic  molecules - e.g.
anti-toxins that protect against aerosolized botulism toxin.


                                       3
<PAGE>

      Antibiotics:  To combat the problems  associated with emerging  antibiotic
resistance, our scientists are developing drugs designed to address a new target
- the  bacterial  adhesion  organelles.  Specifically,  by using  novel  enzymes
required for the transport  and/or  assembly of the proteins and structures that
bacteria require for adhesion or colonization,  we are developing new classes of
broad  spectrum  antibiotics.  This may prove  invaluable  in  providing  prompt
treatment to individuals  encountering an unknown bacterial  pathogen in the air
or food supply.

      Market for Biological Defense Programs

      From 2001 through 2007,  the Federal  Government  has  allocated  over $16
billion in State and local terrorism preparedness funding from the Department of
Homeland Security, Health and Human Services and Justice. In 2006, approximately
$5.0 billion was allocated for emergency,  preparedness and response funding.  A
similar amount was enacted for 2007 with a slight  increase  projected for 2008.
The Federal budget for defending against  catastrophic  threats funding includes
not only stockpiling  countermeasures that are currently available,  but funding
to develop new  countermeasures  for agents that  currently  have none, and next
generation  countermeasures  that are safer and more  effective  than those that
presently exist. Current BioShield  legislation allows the Federal Government to
buy  critically  needed  vaccines and  medications as soon as experts agree that
they are safe  and  effective  enough  to be  added  to the  Strategic  National
Stockpile (http://www.whitehouse.gov/omb/budget/  fy2008/pdf/). One of the major
concerns  in the field of  biological  warfare  agents is  Smallpox  -  although
declared  extinct in 1980 by the World  Health  Organization  (WHO),  there is a
threat that a rogue nation or a terrorist group may have an illegal inventory of
the virus that causes Smallpox. The only legal inventories of the virus are held
under  extremely  tight  security  at  the  CDC  in  Atlanta,  Georgia  and at a
laboratory  in  Russia.  As a result of this  threat,  the U.S.  government  has
announced  its  intent  to make  significant  expenditures  on  finding a way to
counteract  the virus if turned loose by  terrorists  or on a  battlefield.  The
Congressional  Budget  Office (the "CBO")  reported  that the DHS  projects  the
acquisition  of 60  million  doses of new  Smallpox  vaccines  over a three year
period,  commencing in 2005.  Further the CBO reports that the DHS will spend an
additional  $1  billion  to  replace  expired  stocks in  2007-2013.  The market
opportunity for our biological  warfare defense products has not been quantified
as yet beyond the  potential to obtain a share of the  approximately  $9 billion
the federal government is committing to support research in the coming year.

      The FDA amended its regulations,  effective June 30, 2002, so that certain
new drug and  biological  products  used to reduce or prevent  the  toxicity  of
chemical,  biological,  radiological,  or nuclear substances may be approved for
use in humans based on evidence of  effectiveness  derived only from appropriate
animal studies and any additional  supporting  data. We believe that this change
could  make it  possible  for us to have our  products  which  have been  proven
effective in animal  studies to be approved  for sale within a relatively  short
time.

      SIGA Antivirals Product Portfolio

      SIGA currently has the following  antiviral  programs which are in various
stages of  development  ranging from initial  research and  screening to Phase I
human clinical trials: Smallpox antiviral,  New World Arenavirus antiviral,  Old
World Arenavirus antiviral, Filovirus (Ebola & Marburg) antivirals, Dengue Fever
virus  antiviral,  and Bunyavirus  antivirals.  Currently  there are no approved
antivirals available against any of these viruses.

      SIGA Antibiotics Product Portfolio

      Our anti-infectives  program is targeted principally toward drug-resistant
bacteria and hospital-acquired infections.  According to estimates from the CDC,
approximately  two million  hospital-acquired  infections occur each year in the
United  States.  Our  anti-infectives  approaches  aim to block the  ability  of
bacteria to attach to and colonize human tissue,  thereby blocking  infection at
the first stage in the infection process. By comparison,  antibiotics  available
today act by  interfering  with  either the  structure  or the  metabolism  of a
bacterial cell, affecting its ability to survive and to reproduce.  No currently
available antibiotics target the attachment of a bacterium to its target tissue.
We believe  that,  by  preventing  attachment,  the  bacteria  should be readily
cleared by the body's immune system.  SIGA has Gram-positive,  Gram-negative and
broad spectrum antibiotic technologies.


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<PAGE>

      Market for Anti-infective Programs

      There are currently  approximately  83 million  prescriptions  written for
antibiotics annually in the U.S  (www.iatrogenic.org/library/antibioticlib.html)
and it is  estimated  that  the  worldwide  market  for  antibiotics  was  worth
approximately  23.7 billion in 2004  (www.pharmaprojectsplus.com).  Although our
products are too early in development  to make accurate  assessments of how well
they might  compete,  if  successfully  developed  and  marketed  against  other
products  currently  existing or in  development  at this time,  the  successful
capture of even a  relatively  small  global  market share could lead to a large
dollar volume of sales.  Some of the antivirals  that SIGA is developing are for
biowarfare  agents and the market for that area is currently  unknown,  however,
there is funding  available to purchase these drugs in Project Bioshield as well
as through the Department of Defense.  Markets for the other antiviral  programs
at SIGA vary widely  depending on the virus and where they are endemic.  Each of
these programs will be assessed on an individual  basis as they approach the New
Drug Application stage.

Technology

      Antiviral Technology: Two Approaches

      SIGA has two approaches to the discovery and  development of new antiviral
compounds:  rational  drug  design  and  high-throughput  screening  (HTS).  For
rational  drug design SIGA applies  advanced  receptor  structure-based  Virtual
Ligand Screening technology for ligand/inhibitor  discovery. The analysis of the
structure reveals potentially  "drugable"  pockets.  The technology allows us to
utilize the  three-dimensional  structure of the target receptor to screen large
virtual  compound  collections  as well as databases of  commercially  available
compounds and prioritize them for subsequent experimental  validation.  Rational
drug design is also used to develop  structure  activity  relationships and lead
optimization.

      For HTS SIGA uses whole cell virus  inhibition  assays,  pseudotype  virus
inhibition  assays,  as  well  as  validated  target  biochemical  assays.  SIGA
currently  has a  200,000  small  molecule  compound  library  in-house  that is
utilized for screening in these various  assays.  This strategy  allows for both
target  specific  and  target  neutral  screening  and  identification  of novel
antiviral  compounds.  Compounds  are also screened for toxicity in various cell
lines to develop a therapeutic  index (TI) which is the  concentration  that the
compound is toxic to 50% of the cells  (CC50)  divided by the  concentration  of
compound required to inhibit 50% of the virus (EC50) (TI= CC50/EC50).  Once hits
are identified with an acceptable TI they are selected for chemical optimization
and proceed in to the antiviral drug development pipeline.

      Vaccine Technologies: Mucosal Immunity and Vaccine Delivery

      Using  proprietary   technology   licensed  from  Rockefeller   University
(Rockefeller),  SIGA has done work toward developing specific commensal bacteria
("commensals") as a means to deliver mucosal  vaccines.  Commensals are harmless
bacteria that naturally  occupy the body's  surfaces with  different  commensals
inhabiting different surfaces,  particularly the mucosal surfaces. By activating
a local mucosal immune response,  our vaccine candidates are designed to prevent
infection  and  disease  at the  earliest  possible  stage,  as  opposed to most
conventional  vaccines  which are  designed to act after  infection  has already
occurred.

      We believe that mucosal vaccines developed using our proprietary commensal
delivery technology could provide a number of advantages, including:

      o     More complete protection than conventional vaccines:

      o     Safety advantage over other live vectors:  Commensals,  by virtue of
            their  substantially  harmless  nature,  may offer a safer  delivery
            vehicle  without fear of genetic  reversion to the infectious  state
            inherent in attenuated pathogens.

      o     Non-injection   administration:   Oral,  nasal,  rectal  or  vaginal
            administration  of the  vaccine  eliminates  the  need  for  painful
            injections with their potential adverse reactions.


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<PAGE>

      o     Potential for combined  vaccine  delivery:  The  Children's  Vaccine
            Initiative,  a worldwide  effort to improve  vaccination of children
            sponsored  by the WHO,  has called for the  development  of combined
            vaccines,  specifically  to reduce the  number of needle  sticks per
            child,  by combining  several  vaccines into one injection,  thereby
            increasing compliance and decreasing disease.

      o     Eliminating  need  for  refrigeration:   A  critical  consideration,
            especially for the delivery of vaccines in developing countries.

      o     Low cost  production:  By using a live bacterial  vector,  extensive
            downstream  processing is eliminated,  leading to considerable  cost
            savings in the production of the vaccine.

      Surface Protein Expression Systems ("SPEX" & "PLEX")

      The ability to overproduce many bacterial and human proteins has been made
possible  through the use of recombinant DNA technology.  SIGA has added to this
field by taking  advantage of our knowledge of Gram-positive  bacterial  protein
expression  and  anchoring  pathways.  This  pathway  has  evolved to handle the
transport of surface proteins that vary widely in size,  structure and function.
Modifying the approach used to create bacterial  commensal mucosal vaccines,  we
have developed  methods which,  instead of anchoring the foreign  protein to the
surface of the recombinant  Gram-positive bacteria,  result in it being secreted
into the  surrounding  medium in a manner  which is readily  amenable  to simple
batch purification.  We believe the advantages of this approach include the ease
and lower cost of Gram-positive  bacterial growth,  the likelihood that secreted
recombinant  proteins  will be  folded  properly,  and  the  ability  to  purify
recombinant  proteins  from the  culture  medium  without  having to disrupt the
bacterial cells and liberating cellular contaminants. Gram-positive bacteria may
be grown  simply in scales from those  required  for  laboratory  research up to
commercial mass  production.  Recent  developments in the  construction of these
recombinant bacteria have resulted in a plasmid-based  expression system (PLEX),
in which  engineered  genetic  elements  (plasmids)  are cloned  into  commensal
bacteria  for  protein  production.   This  system  allows  for  higher  protein
production levels than the original SPEX constructs.  In addition,  the PLEX and
SPEX systems may be used in concert,  enabling  greater  flexibility  in protein
secretion for purification or for surface expression of multiple proteins - e.g.
for multi-component  combination  vaccines. We believe this technology overcomes
many of the issues encountered in more traditional  bacterial expression systems
- e.g. Escherichia coli - in which proteins may sometimes prove insoluble or run
the  risk  of  toxic   contamination   from  natural  bacterial  products  (e.g.
endotoxin).

Collaborative Research and Licenses

      We have  entered  into the  following  license  agreements,  collaborative
research arrangements and contracts:

      National Institutes of Health. In October and August 2006, the NIH awarded
us a $16.5 million,  3 year contract and a $4.8 million,  3 year, Small Business
Innovation Research (SBIR) grant, respectively,  both to advance the development
of our lead drug  candidate,  SIGA-246.  In September 2006, the NIH awarded us a
$6.0  million,  3 year SBIR  grant for the  continued  development  of our arena
viruses drug  candidates.  In August  2004,  we were awarded two Phase I and two
Phase II SBIR grants totaling approximately $11.1 million to support our work on
Smallpox and  Arenaviruses.  The grants were acquired as part of our acquisition
of certain assets from  ViroPharma  Incorporated  ("Viropharma").  For the years
ending December 31, 2006,  2005, and 2004, we have  recognized  revenue from the
SBIR grants of $3,723,000, $6,596,000, and $1,415,000, respectively. In 2006, we
recognized $171,000 in revenue from our October 2006 contract with the NIH.

      Prior to 2003, we received grants amounting to approximately  $1.1 million
to support our antibiotic and vaccine development  programs including a Phase II
SBIR grant for  approximately  $865,000  that began in 2002 and was completed in
May 2004.

      SIGA  receives  cash  payments  from the NIH  under  its SBIR  grants on a
semi-monthly  basis,  and under its contract on a monthly basis,  as the work is
performed and the related revenue is recognized.  SIGA's current NIH SBIR grants
and contract do not include milestone payments.  The agreements can be cancelled
for  non-performance  and if cancelled,  the Company will not receive additional
funds under the agreements.


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<PAGE>

      As part of our operational strategy we routinely submit grants to the NIH.
However, there is no assurance that we will receive additional grants.

      United  States Army Medical  Research and Material  Command.  In September
2005, we entered into a $3.2  million,  one year contract with the United States
Army Medical Research and Material  Command  (USAMRMC).  The agreement,  for the
rapid identification and treatment of anti-viral diseases, is funded through the
United States Air Force (USAF).  It is anticipated that our efforts will aid the
USAF Special  Operations  Command in its use of computational  biology to design
and develop specific  countermeasures  against biological threat agents Smallpox
and  Adenovirus.  As of December 31, 2006,  SIGA  received cash payments of $3.2
million under this contract and recognized total revenue of  approximately  $3.1
million.  SIGA completed its work under the contract under-budget and will repay
the USAF  approximately  $92,000  which was not  recognized  as  revenue  by the
Company.

      United States Air Force. In November 2006, we received a $1.4 million, one
year  contract  with  the Air  Force  Medical  Service  for the  development  of
counter-measures against Dengue viruses and other water-related viral agents. In
November  2006 we also  received a one-year,  $900,000  contract to aid the USAF
Special Operations  Command (USAFSOC) in its development of specific  anti-viral
agents. For the year ended December 31, 2006 we recognized  revenues of $247,000
from these  contracts.  SIGA  receives  cash payments from the USAF on a monthly
basis,  as the work is performed and the related  revenue is recognized.  SIGA's
current  contracts  with  the  USAF  do  not  include  milestone  payments.  The
agreements can be cancelled for  non-performance  and if cancelled,  the Company
will not receive additional funds under the agreements.

      United  States Army Medical  Research  Acquisition  Activity.  In December
2002, we entered into a four year  contract with the U.S. Army Medical  Research
Acquisition Activity (USAMRAA) to develop a drug to treat Smallpox. The contract
start date was  January  1, 2003 for the total  amount of $1.6  million.  Annual
payments  over the term of the agreement  were  approximately  $400,000.  In the
years ended December 31, 2006, 2005, and 2004 we recognized revenue of $412,000,
$427,000, and $425,000,  respectively.  SIGA received cash payments from USAMRAA
under this contract on a monthly basis, as the work is performed and the related
revenue was  recognized.  The agreement  with USAMRAA did not include  milestone
payments.  As of December 31, 2006,  SIGA completed its  obligations  under this
agreement and expects to receive all of the related funding.

      Saint Louis University. On September 1, 2005, we entered into an agreement
with Saint Louis University for the continued development of one of our Smallpox
drugs.  The  agreement  is funded  through the NIH.  Under the  agreement,  SIGA
received $1.0 million during the term of September 1, 2005 to February 28, 2006.
Revenues  were  recognized  as services  were  performed.  In 2006 and 2005,  we
recognized revenues of $225,000 and $775,000 from the agreement.

      Oregon State University.  Oregon State University (OSU) is also a party to
our  license  agreement  with  Rockefeller  (discussed  below),  whereby we have
obtained the right and license to make,  use and sell  products for the therapy,
prevention  and  diagnosis of diseases  caused by  streptococcus.  Pursuant to a
separate  research support agreement with OSU, we provided funding for sponsored
research  through  December  31,  1999,  with  exclusive  license  rights to all
inventions  and  discoveries  resulting  from this  research.  At this time,  no
additional funding is contemplated under this agreement,  however, we retain the
exclusive licensing rights to the inventions and discoveries that may arise from
this collaboration. The term of the agreement is for the duration of the patents
licensed. As we do not currently know when any patents pending or future patents
will expire,  we cannot at this time determine the term of this  agreement.  The
agreement can be terminated earlier if we are in breach of the provisions of the
agreement  and do not  cure  the  breach  in the  allowed  cure  period.  We are
compliant in all our obligations under the agreement.

      Regents of the University of California. In December 2000, we entered into
an exclusive  license  agreement  and a sponsored  research  agreement  with the
Regents of the University of California ("Regents"). Under the license agreement
we obtained  rights for the exclusive  commercial  development,  use and sale of
products related to certain inventions in exchange for a non-refundable  license
issuance fee of $15,000 and an annual maintenance fee of $10,000. As of December
31, 2006 we have made payments of approximately  $111,000 under the license.  In
the event that we sub-license our rights, we must pay Regents 15% of all royalty
payments made to SIGA. We have


                                       7
<PAGE>

currently met all our  obligations  under this  agreement.  SIGA does not expect
receipt or  disbursement  of funds under the  agreement  with the Regents of the
University of California for the next three to five years.

      Rockefeller University.  In accordance with an exclusive worldwide license
agreement with Rockefeller,  we have obtained the right and license to make, use
and sell mucosal vaccines based on gram-positive  organisms and products for the
therapy,   prevention  and  diagnosis  of  diseases  caused  by   streptococcus,
staphylococcus and other organisms. The license covers eight issued U.S. patents
and  three  issued  European  patents,  as  well  as  one  pending  U.S.  patent
application  and one pending  European  application.  The issued  United  States
patents  expire  in 2008,  2014  (4),  2015 (2),  and  2016,  respectively.  The
agreement  generally requires us to pay royalties on sales of products developed
from the licensed technologies,  and fees on revenues from sub-licensees,  where
applicable,  and we are  responsible  for the  costs of filing  and  prosecuting
patent  applications.  Under the agreement,  we paid  Rockefeller  approximately
$850,000 to support research at Rockefeller.  The agreement to fund research has
ended and no  payments  have been made to the  university  since the year  ended
December 31, 1999.  Under the  agreement we are  obligated to pay  Rockefeller a
royalty on net sales by SIGA at rates  between  2.5% and 5% depending on product
and amount of sales.  On sales by any  sub-licensee,  we will pay  Rockefeller a
royalty of 15% of  anything  we receive.  The term of the  agreement  is for the
duration of the patents  licensed.  As we do not currently know when any patents
pending or future patents will expire, we cannot at this time determine the term
of this agreement.  At the end of that term of the agreement,  we have the right
to continue to practice the then existing technical information as a fully paid,
perpetual  license.  The agreement can be terminated earlier if we are in breach
of the  provisions  of the  agreement  and do not cure the breach in the allowed
cure period. We are compliant in all our obligations  under the agreement.  SIGA
does not expect  receipt  or  disbursement  of funds  under the  agreement  with
Rockefeller University for the next three to five years.

      TransTech  Pharma,  Inc. In October 2002, we entered into a drug discovery
collaboration agreement with TransTech Pharma, Inc., a related party ("TransTech
Pharma").  Under the  agreement,  SIGA and TransTech  Pharma  collaborate on the
discovery, optimization and development of lead compounds to certain therapeutic
agents.  The costs of development  are shared.  SIGA and TransTech  Pharma would
share  revenues  generated  from  licensing and profits from any  commercialized
product sales.  The agreement will be in effect until  terminated by the parties
or upon  cessation  of research  or sales of all  products  developed  under the
agreement.  If the  agreement  is  terminated,  relinquished  or expires for any
reason certain rights and benefits will survive the termination. Obligations not
expressly  indicated to survive the agreement will terminate with the agreement.
No revenues were  recognized in 2006,  2005,  and 2004 from this  collaboration.
SIGA does not expect receipt or  disbursement  of funds under the agreement with
TransTech Pharma for the next three to five years.

Intellectual Property and Proprietary Rights

      Our commercial  success will depend in part on our and our  collaborators'
ability  to  obtain  and  maintain   patent   protection  for  our   proprietary
technologies,  drug targets and potential  products and to effectively  preserve
our  trade  secrets.  Because  of the  substantial  length  of time and  expense
associated  with  bringing   potential  products  through  the  development  and
regulatory  clearance  processes to reach the  marketplace,  the  pharmaceutical
industry  places  considerable  importance on obtaining  patent and trade secret
protection.  The patent positions of pharmaceutical and biotechnology  companies
can be highly  uncertain  and involve  complex legal and factual  questions.  No
consistent  policy  regarding  the  breadth of claims  allowed in  biotechnology
patents has emerged to date. Accordingly, we cannot predict the type and breadth
of claims allowed in these patents.

      We have licensed the rights to eight issued U.S.  patents and three issued
European  patents.  These patents have varying lives and they are related to the
technology  licensed from Rockefeller for the strep and Gram-positive  products.
We have one additional  patent  application  in the U.S. and one  application in
Europe  relating  to  this  technology.  We  are  joint  owner  with  Washington
University of seven issued  patents in the U.S. and one in Europe.  In addition,
there are four  co-owned  U.S.  patent  applications.  These patents are for the
technology  used  for  the  Gram-negative  product  opportunities.  We are  also
exclusive owner of two U.S. patent and two U.S. utility patent applications. One
of these U.S. utility applications relates to our DegP product opportunities. We
are also exclusive owner of three U.S. provisional patent applications.


                                       8
<PAGE>

The following are our patent positions as of December 31, 2006.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                            Number         Number        Number
                          Exclusively  Co-Exclusively  Exclusively     Number
                           Licensed       Licensed      Licensed     Exclusively      Number
       PATENTS               from           with       from Oregon    Licensed       Owned by       Patent Expiration Dates
                          Rockefeller    Washington       State       from UCLA        SIGA
                             Univ.          Univ.      University
--------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>            <C>           <C>           <C>       <C>
                                                                                                    2008, 2013(2), 2014 (6),
         U.S.                  8             7              1                           2           2015 (2), 2016 (2), 2017,
                                                                                                         2019, 2020 (2)
--------------------------------------------------------------------------------------------------------------------------------
      Australia                5             2              1                                     2009, 2013, 2014 (2), 2015,
                                                                                                        2016, 2019,2020
--------------------------------------------------------------------------------------------------------------------------------
        Canada                 2                                                                           2010, 2019
--------------------------------------------------------------------------------------------------------------------------------
        Europe                 3             1              1                                       2009, 2010, 2013, 2019,
                                                                                                              2020
--------------------------------------------------------------------------------------------------------------------------------
       Hungary                 1                                                                              2013
--------------------------------------------------------------------------------------------------------------------------------
        Japan                  2                                                                           2010, 2012
--------------------------------------------------------------------------------------------------------------------------------
        Mexico                 1                                                                              2016
--------------------------------------------------------------------------------------------------------------------------------
     New Zealand               1                                                                              2016
--------------------------------------------------------------------------------------------------------------------------------
        China                  1                                                                              2016
--------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
-----------------------------------------------------------------------------------------------
                            Number         Number        Number
                          Exclusively  Co-Exclusively  Exclusively      Number
                           Licensed       Licensed      Licensed      Exclusively     Number
     APPLICATIONS            from           with       from Oregon     Licensed      Owned by
                          Rockefeller    Washington       State        from UCLA        SIGA
                             Univ.          Univ.       University
-----------------------------------------------------------------------------------------------
<S>                            <C>           <C>            <C>           <C>           <C>
  U.S. applications            1             4                            2             2
-----------------------------------------------------------------------------------------------
  U.S. provisionals                                                                     3
-----------------------------------------------------------------------------------------------
         PCT                                                                            3
-----------------------------------------------------------------------------------------------
      Australia                                             1             1             2
-----------------------------------------------------------------------------------------------
        Canada                 3             2              2             1             2
-----------------------------------------------------------------------------------------------
        Europe                 1             1              1             1             3
-----------------------------------------------------------------------------------------------
       Finland                 1
-----------------------------------------------------------------------------------------------
        Japan                  3             2              1             1             3
-----------------------------------------------------------------------------------------------
       Hungary                 1
-----------------------------------------------------------------------------------------------
</TABLE>

      We also  rely  upon  trade  secret  protection  for our  confidential  and
proprietary information. No assurance can be given that other companies will not
independently  develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain  access  to our  trade  secrets  or  that we can
meaningfully protect our trade secrets.

Government Regulation

      Regulation  by  governmental  authorities  in the United  States and other
countries  will be a significant  factor in the  production and marketing of any
biopharmaceutical  products  that we may  develop.  The nature and the extent to
which such  regulations may apply to us will vary depending on the nature of any
such products.  Virtually all of our potential  biopharmaceutical  products will
require regulatory approval by governmental agencies prior to commercialization.
In particular,  human therapeutic products are subject to rigorous  pre-clinical
and clinical testing and other approval procedures by the FDA and similar health
authorities in foreign countries. Various federal


                                       9
<PAGE>

statutes and  regulations  also govern or influence the  manufacturing,  safety,
labeling, storage, record keeping and marketing of such products. The process of
obtaining these approvals and the subsequent compliance with appropriate federal
and foreign  statutes and  regulations  requires the  expenditure of substantial
resources.

      In order to test clinically, produce and market products for diagnostic or
therapeutic  use, a company  must comply with  mandatory  procedures  and safety
standards  established by the FDA and comparable  agencies in foreign countries.
Before  beginning  human clinical  testing of a potential new drug in the United
States,  a company  must file an IND and receive  clearance  from the FDA.  This
application  is a summary of the  pre-clinical  studies  that were  conducted to
characterize  the drug,  including  toxicity and safety  studies,  as well as an
in-depth discussion of the human clinical studies that are being proposed.

      The  pre-marketing  program required for approval by the FDA of a new drug
typically involves a time-consuming and costly three-phase  process. In Phase I,
trials are  conducted  with a small number of healthy  patients to determine the
early safety profile, the pattern of drug distribution and metabolism.  In Phase
II, trials are conducted  with small groups of patients  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
are conducted with patients  afflicted with a target disease in order to provide
enough data for statistical proof of efficacy and safety required by the FDA and
others.

      The FDA amended its regulations,  effective June 30, 2002, so that certain
new drug and  biological  products  used to reduce or prevent  the  toxicity  of
chemical,  biological,  radiological,  or nuclear substances may be approved for
use in humans based on evidence of  effectiveness  derived only from appropriate
animal studies and any additional supporting data.

      The FDA  closely  monitors  the  progress  of each of the three  phases of
clinical  testing  and may, in its  discretion,  reevaluate,  alter,  suspend or
terminate the testing based on the data that have been accumulated to that point
and its assessment of the  risk/benefit  ratio to the patient.  Estimates of the
total time required for carrying out such clinical  testing vary between two and
ten years. Upon completion of such clinical testing, a company typically submits
a New Drug Application ("NDA") or Product License Application ("PLA") to the FDA
that  summarizes  the results and  observations  of the drug during the clinical
testing.  Based on its review of the NDA or PLA, the FDA will decide  whether to
approve the drug. This review process can be quite lengthy, and approval for the
production and marketing of a new pharmaceutical product can require a number of
years and substantial funding; there can be no assurance that any approvals will
be granted on a timely basis, if at all.

      Once the  product  is  approved  for  sale,  FDA  regulations  govern  the
production process and marketing  activities,  and a post-marketing  testing and
surveillance  program may be required to monitor  continuously a product's usage
and  its  effects.  Product  approvals  may  be  withdrawn  if  compliance  with
regulatory  standards is not  maintained.  Other countries in which any products
developed by us may be marketed could impose a similar regulatory process.

Competition

      The  biotechnology  and  pharmaceutical  industries are  characterized  by
rapidly evolving  technology and intense  competition.  Our competitors  include
most of the major pharmaceutical companies, which have financial,  technical and
marketing  resources  significantly  greater than ours.  Biotechnology and other
pharmaceutical  competitors include Acambis,  Achillion  Pharmaceuticals,  Arrow
Therapeutics,  Avant  Immuno-therapeutics,  Inc.,  Bavarian  Nordic AS, Chimerix
Inc.,  Bioport,  Pharmathene  and Vaxgen.  Academic  institutions,  governmental
agencies and other public and private research organizations are also conducting
research activities and seeking patent protection and may commercialize products
on  their  own or  through  joint  venture.  There  is a  possibility  that  our
competitors will succeed in developing  products that are more effective or less
costly  than any which are  being  developed  by us or which  would  render  our
technology and future products obsolete and noncompetitive.

Human Resources and Facilities

      As of March 8, 2007 we had 44 full time  employees.  None of our employees
are covered by a collective  bargaining  agreement  and we consider our employee
relations to be good.


                                       10
<PAGE>

Availability of Reports and Other Information

      We file annual,  quarterly,  and current reports,  proxy  statements,  and
other  documents with the Securities and Exchange  Commission  ("SEC") under the
Securities  Exchange Act of 1934 (the "Exchange  Act").  The public may read and
copy any materials that we file with the SEC at the SEC's Public  Reference Room
at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information
on  the  operation  of  the  Public   Reference  Room  by  calling  the  SEC  at
1-800-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 documents that we file with the SEC at http://www.sec.gov.

      In  addition,  our  company  website  can  be  found  on the  Internet  at
www.siga.com.  The website  contains  information  about us and our  operations.
Copies of each of our filings with the SEC on Form 10-K, Form 10-KSB, Form 10-Q,
Form 10-QSB and Form 8-K, and all amendments to those reports, can be viewed and
downloaded  free of charge as soon as reasonably  practicable  after the reports
and  amendments are  electronically  filed with or furnished to the SEC. To view
the reports, access www.siga.com/investor.html and click on "SEC Filing".

      The following corporate governance related documents are also available on
our website:

      o     Code of Ethics and Business Conduct

      o     Amended and Restated Audit Committee Charter

      o     Compensation Committee Charter

      o     Nominating and Corporate Governance Committee Charter

      o     Procedure for Sending Communications to the Board of Directors

      o     Procedures   for   Security   Holder    Submission   of   Nominating
            Recommendations

      o     2004 Policy on Confidentiality of Information and Securities Trading

To  review  these  documents,  access  www.siga.com/investor.html  and  click on
"Corporate Governance."

Any of the above documents can also be obtained in print by any shareholder upon
request to the Secretary,  SIGA Technologies,  Inc., 420 Lexington Avenue, Suite
408, New York, New York 10170.

Item 1A. Risk Factors

      This report  contains  forward-looking  statements  and other  prospective
information  relating to future  events.  These  forward-looking  statements and
other  information are subject to risks and  uncertainties  that could cause our
actual results to differ  materially  from our  historical  results or currently
anticipated results including the following:

We have  incurred  operating  losses since our inception and expect to incur net
losses and negative cash flow for the foreseeable future.

      We incurred net losses of approximately  $9.9 million,  $2.3 million,  and
$9.4  million  for  the  years  ended   December  31,  2006,   2005,  and  2004,
respectively.  As of December 31, 2006, 2005, and 2004, our accumulated  deficit
was approximately $56.4 million, $46.5 million, and $44.2 million, respectively.
We expect to continue to incur significant operating expenditures.  We will need
to generate significant revenues to achieve and maintain profitability.

      We  cannot  guarantee  that  we  will  achieve  sufficient   revenues  for
profitability.  Even if we do achieve profitability, we cannot guarantee that we
can sustain or increase  profitability  on a  quarterly  or annual  basis in the
future.  If revenues grow slower than we  anticipate,  or if operating  expenses
exceed our  expectations or cannot be adjusted  accordingly,  then our business,
results of operations, financial condition and cash flows will be materially and
adversely  affected.  Because our strategy might include  acquisitions  of other
businesses,  acquisition  expenses and any cash used to make these  acquisitions
will reduce our available cash.


                                       11
<PAGE>

Our business will suffer if we are unable to raise additional equity funding.

      We  continue to be  dependent  on our ability to raise money in the equity
markets. There is no guarantee that we will continue to be successful in raising
such funds. If we are unable to raise additional  equity funds, we may be forced
to  discontinue  or cease  certain  operations.  We  currently  have  sufficient
operating capital to finance our operations  beyond the next twelve months.  Our
annual  operating  needs  vary from year to year  depending  upon the  amount of
revenue  generated  through  grants,  contracts  and  licenses and the amount of
projects  we  undertake,  as well as the  amount  of  resources  we  expend,  in
connection  with  acquisitions  all of which may materially  differ from year to
year and may adversely affect our business.

Our 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  investment,  to sell shares at a profit at any given
time, or to 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:

o     publicity  regarding  actual or  potential  clinical  results  relating to
      products under development by our competitors or us;

o     delay or failure in initiating,  completing or analyzing  pre-clinical  or
      clinical trials or the unsatisfactory design or results of these trials;

o     achievement or rejection of regulatory approvals by our competitors or us;

o     announcements of technological  innovations or new commercial  products by
      our competitors or us;

o     developments concerning proprietary rights, including patents;

o     developments concerning our collaborations;

o     regulatory developments in the United States and foreign countries;

o     economic or other crises and other external factors;

o     period-to-period  fluctuations  in  our  revenues  and  other  results  of
      operations;

o     changes in financial estimates by securities analysts; and

o     sales and short selling activity of our common stock.

      Additionally,  because there is not a high volume of trading in our stock,
any information about SIGA in the media may 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 be
indicative of our future performance.

      In addition, the stock market in general, and the market for biotechnology
companies in particular,  has experienced  extreme price and volume fluctuations
that may have been unrelated or disproportionate to the operating performance of
individual companies. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our operating performance.

We are in various stages of product development and there can be no assurance of
successful commercialization.

      In general, our research and development programs are at an early stage of
development.  To obtain FDA approval for our biological warfare defense products
we will be required to perform at least two animal models and provide animal and
human safety data. Our other products will be subject to the approval guidelines
under FDA regulatory requirements which include a number of phases of testing in
humans.


                                       12
<PAGE>

      The FDA has not approved any of our biopharmaceutical  product candidates.
Any drug candidates developed by us will require significant additional research
and development efforts,  including extensive  pre-clinical and clinical testing
and  regulatory  approval,  prior to  commercial  sale.  We  cannot  be sure our
approach to drug discovery  will be effective or will result in the  development
of any drug.  We cannot  expect that any drugs  resulting  from our research and
development efforts will be commercially available for many years, if at all.

      We have limited experience in conducting pre-clinical testing and clinical
trials. Even if we receive initially positive  pre-clinical or clinical results,
such  results do not mean that  similar  results  will be  obtained in the later
stages of drug  development,  such as additional  pre-clinical  testing or human
clinical trials.  All of our potential drug candidates are prone to the risks of
failure  inherent  in   pharmaceutical   product   development,   including  the
possibility that none of our drug candidates will or can:

      o     be safe, non-toxic and effective;

      o     otherwise meet applicable regulatory standards;

      o     receive the necessary regulatory approvals;

      o     develop into commercially viable drugs;

      o     be manufactured or produced economically and on a large scale;

      o     be successfully marketed;

      o     be reimbursed by government and private insurers; and

      o     achieve customer acceptance.

      In  addition,  third  parties  may  preclude us from  marketing  our drugs
through  enforcement  of their  proprietary  rights that we are not aware of, or
third parties may succeed in marketing equivalent or superior drug products. Our
failure to develop safe, commercially viable drugs would have a material adverse
effect on our business, financial condition and results of operations.

Most of our immediately  foreseeable  future revenues are contingent upon grants
and contracts from the United States  government and  collaborative  and license
agreements and we may not achieve  sufficient  revenues from these agreements to
attain profitability.

      Until and unless we successfully  make a product,  our ability to generate
revenues will largely  depend on our ability to enter into  additional  research
grants,  collaborative  agreements,  strategic alliances,  contracts and license
agreements  with third parties and maintain the  agreements we currently have in
place.  Substantially all of our revenues for the years ended December 31, 2006,
2005,  and 2004,  respectively,  were derived from  revenues  related to grants,
contracts and license  agreements.  Our current revenue is derived from contract
work being performed for the NIH under two major grants and a contract which are
scheduled  to expire in  September  2009 and  contracts  with the U.S. Air force
which expire in October and November  2007.  These  agreements  are for specific
work to be  performed  under the  agreements  and could only be  canceled by the
other party thereto for non-performance.  We may not earn significant  milestone
payments under our existing  collaborative  agreements  until our  collaborators
have  advanced  products  into  clinical  testing,  which may not occur for many
years, if at all.

      We have material agreements with the following collaborators:

      o     National Institutes of Health. In October 2006 we received a 3 year,
            $16.5 million  contract from the NIH to advance the  development  of
            our lead drug  SIGA-246.  In  September  2006,  we  received  a $6.0
            million,  3 year SBIR grant from the NIH to develop  antiviral drugs
            for the Lassa fever virus.  In August  2006,  the NIH awarded us a 3
            year SBIR grant for $4.8 million to continue the  development of our
            smallpox drug  candidate,  SIGA-246.  In 2004, we have received SBIR
            Grants totaling


                                       13
<PAGE>

            approximately  $11.1 million  which  expired in 2006.  SIGA receives
            cash payments from the NIH on a monthly or  semi-monthly  basis,  as
            the work is performed and the related revenue is recognized.  SIGA's
            current  NIH  contract  and SBIR  grants  do not  include  milestone
            payments.  As of December 31, 2006,  SIGA  recognized  approximately
            $11.0  million  from  these  grants for work it had  performed.  The
            agreements  can be cancelled for  non-performance  and if cancelled,
            the Company will not receive  additional funds under the agreements.
            SIGA also has an  agreement  whereby  the NIH is required to conduct
            and pay for the clinical trials of our strep vaccine product through
            phase II human  trials.  The NIH can  terminate  the agreement on 60
            days written notice.  If terminated,  we receive copies of all data,
            reports and other information  related to the trials. If terminated,
            we would have to find another source of funds to continue to conduct
            the trials.  As of December 31,  2006,  SIGA has not  performed  any
            clinical  trials  related to its strep vaccine  program and does not
            expect to perform any during the next three to five years.

      o     United  States Air  Force.  In  November  2006,  we  received a $1.4
            million,  one year contract  with the Air Force Medical  Service for
            the development of counter-measures against Dengue viruses and other
            water-related  viral  agents.  In November  2006 we also  received a
            one-year,  $900,000  contract  to aid the  USAF  Special  Operations
            Command (USAFSOC) in its development of specific  anti-viral agents.
            For the year ended  December  31,  2006 we  recognized  revenues  of
            $247,000 from these contracts.  SIGA receives cash payments from the
            USAF on a monthly  basis,  as the work is performed  and the related
            revenue is recognized. SIGA's current contracts with the USAF do not
            include  milestone  payments.  The  agreements  can be cancelled for
            non-performance  and if  cancelled,  the  Company  will not  receive
            additional funds under the agreements.

      o     United  States  Army  Medical  Research  and  Material  Command.  In
            September  2005 we entered into a $3.2  million,  one year  contract
            with the USAMRMC.  The agreement,  for the rapid  identification and
            treatment of anti-viral diseases,  is funded through the USAF. It is
            anticipated  that our efforts will aid the USAF  Special  Operations
            Command in its use of  computational  biology to design and  develop
            specific  countermeasures  against biological threat agents Smallpox
            and Adenovirus. As of December 31, 2006, SIGA received cash payments
            of $3.2 million under this contract and recognized  total revenue of
            approximately  $3.1  million.  SIGA  completed  its work  under  the
            contract  under-budget and will repay the USAF approximately $92,000
            which was not recognized as revenue by the Company.

      o     Saint Louis  University.  On September  1, 2005,  we entered into an
            agreement with Saint Louis University for the continued  development
            of one of our Smallpox  drugs.  The agreement is funded  through the
            NIH. Under the agreement,  SIGA received  approximately $1.0 million
            during the term of  September  1, 2005 to February 28, 2006 for work
            performed under the agreement.

      o     United  States  Army  Medical  Research  Acquisition   Activity.  In
            December  2002, we entered into a four year contract with USAMRAA to
            develop a drug to treat  Smallpox.  SIGA received cash payments from
            USAMRAA  under this  contract  on a monthly  basis,  as the work was
            performed and the related revenue was recognized. The agreement with
            USAMRAA did not include milestone payments. As of December 31, 2006,
            SIGA completed its obligations under this agreement.

      o     Rockefeller  University.  The term of our agreement with Rockefeller
            is for the duration of the patents and a number of pending  patents.
            As we do not  currently  know  when any  patents  pending  or future
            patents will expire, we cannot at this time  definitively  determine
            the term of this agreement.  The agreement can be terminated earlier
            if we are in breach of the  provisions  of the  agreement and do not
            cure the breach in the allowed  cure  period.  We are current in all
            obligations  under the  contract.  SIGA does not  expect  receipt or
            disbursement  of funds under the agreement with  Rockefeller for the
            next three to five years.

      o     Oregon State  University.  OSU is a signatory of our agreement  with
            Rockefeller.  The term of this  agreement is for the duration of the
            patents and a number of pending patents. As we do not currently know
            when any patents pending or future patents will expire, we cannot at
            this time  definitively  determine the term of this  agreement.  The
            agreement can be terminated earlier if we are in breach of


                                       14
<PAGE>

            the  provisions  of the  agreement and do not cure the breach in the
            allowed cure  period.  We are current in all  obligations  under the
            contract.  SIGA does not  expect  receipt or  disbursement  of funds
            under the agreement with OSU for the next three to five years.

      o     Washington  University.  We have licensed  certain  technology  from
            Washington under a non-exclusive license agreement.  The term of our
            agreement  with  Washington is for the duration of the patents and a
            number of  pending  patents.  As we do not  currently  know when any
            patents  pending or future  patents will  expire,  we cannot at this
            time  definitively  determine  the  term  of  this  agreement.   The
            agreement  cannot be  terminated  unless we fail to pay our share of
            the joint patent costs for the  technology  licensed.  SIGA does not
            expect  receipt or  disbursement  of funds under the agreement  with
            Washington University for the next three to five years.

      o     Regents of the  University of California.  We have licensed  certain
            technology from Regents under an exclusive license agreement. We are
            required to pay minimum  royalties under this  agreement.  SIGA does
            not expect receipt or disbursement of funds under the agreement with
            the Regents of the  University of  California  for the next three to
            five years.

      o     TransTech  Pharma,  Inc.  Under  our  collaborative  agreement  with
            TransTech Pharma, a related party, TransTech Pharma is collaborating
            with  us on the  discovery,  optimization  and  development  of lead
            compounds to certain  therapeutic  agents.  We and TransTech  Pharma
            have agreed to share the costs of development and revenues generated
            from licensing and profits from any  commercialized  products sales.
            The agreement  will be in effect until  terminated by the parties or
            upon cessation of research or sales of all products  developed under
            the agreement. SIGA does not expect receipt or disbursement of funds
            under the agreement with TransTech Pharma for the next three to five
            years.

The  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 develop and
apply our  technologies in the design and development of our product  candidates
and to establish  and maintain a market for our product  candidates.  There also
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  substantially  greater  financial,
technical,  research and development,  and human resources than us.  Competitors
may develop products or other technologies that are 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 sales of products,  we still must compete in
the  manufacturing  and  marketing of such  products,  areas in which we have no
experience.  Many of these  companies  also have  manufacturing  facilities  and
established  marketing  capabilities  that would enable such companies to market
competing products through existing channels of distribution. Two companies with
similar profiles are VaxGen, Inc., which is developing vaccines against anthrax,
Smallpox and HIV/AIDS;  and Avant  Immunotherapeutics,  Inc.,  which has vaccine
programs for agents of biological warfare.

Because we must obtain  regulatory  clearance to test and market our products in
the United  States,  we cannot  predict  whether or when we will be permitted to
commercialize our products.

      A  pharmaceutical  product  cannot be  marketed  in the U.S.  until it has
completed  rigorous  pre-clinical  testing and clinical  trials and an extensive
regulatory  clearance process  implemented by the FDA.  Pharmaceutical  products
typically  take many years to satisfy  regulatory  requirements  and require the
expenditure  of  substantial  resources  depending on the type,  complexity  and
novelty of the product.

      Before  commencing  clinical trials in humans,  we must submit and receive
clearance  from  the FDA by means of an IND  application.  Institutional  review
boards and the FDA oversee clinical trials and such trials:

      o     must be  conducted  in  conformance  with the FDA's good  laboratory
            practice regulations;

      o     must meet requirements for institutional review board oversight;


                                       15
<PAGE>

      o     must meet requirements for informed consent;

      o     must  meet   requirements   for  good  clinical  and   manufacturing
            practices;

      o     are subject to continuing FDA oversight;

      o     may require large numbers of test subjects; and

      o     may be suspended by us or the FDA at any time if it is believed that
            the  subjects  participating  in these  trials are being  exposed to
            unacceptable health risks or if the FDA finds deficiencies in any of
            the Company's IND applications or the conduct of these trials.

      Before  receiving FDA clearance to market a product,  we must  demonstrate
that the product is safe and  effective on the patient  population  that will be
treated. Data we obtain from preclinical and clinical activities are susceptible
to  varying  interpretations  that  could  delay,  limit or  prevent  regulatory
clearances.  Additionally, we have limited experience in conducting and managing
the clinical trials and manufacturing  processes  necessary to obtain regulatory
clearance.

      If regulatory  clearance of a product is granted,  this  clearance will be
limited  only  to  those  states  and   conditions  for  which  the  product  is
demonstrated  through  clinical  trials  to be safe and  efficacious.  We cannot
ensure that any compound developed by us, alone or with others, will prove to be
safe and  efficacious  in  clinical  trials and will meet all of the  applicable
regulatory requirements needed to receive marketing clearance.

If our  technologies  or  those of our  collaborators  are  alleged  or found to
infringe the patents or proprietary  rights of others, we may be sued or have to
license those rights from others on unfavorable terms.

      Our commercial success will depend significantly on our ability to operate
without  infringing the patents and  proprietary  rights of third  parties.  Our
technologies, along with our licensors' and our collaborators' technologies, may
infringe  the patents or  proprietary  rights of others.  If there is an adverse
outcome  in  litigation  or an  interference  to  determine  priority  or  other
proceeding  in a court or  patent  office,  then we,  or our  collaborators  and
licensors,  could be subjected to significant  liabilities,  required to license
disputed  rights  from or to other  parties  and/or  required  to cease  using a
technology necessary to carry out research,  development and  commercialization.
At present we are unaware of any or potential  infringement  claims  against our
patent portfolio.

      The costs to establish the validity of patents,  to defend  against patent
infringement  claims of others and to assert  infringement claims against others
can be  expensive  and time  consuming,  even if the  outcome is  favorable.  An
outcome of any patent prosecution or litigation that is unfavorable to us or one
of our licensors or  collaborators  may have a material adverse effect on us. We
could incur  substantial  costs if we are required to defend ourselves in patent
suits  brought by third  parties,  if we  participate  in patent  suits  brought
against or initiated by our  licensors or  collaborators  or if we initiate such
suits. We may not have sufficient funds or resources in the event of litigation.
Additionally, we may not prevail in any such action.

      Any conflicts  resulting from third-party patent  applications and patents
could  significantly  reduce the coverage of the patents  owned,  optioned by or
licensed  to us or our  collaborators  and  limit  our  ability  or  that of our
collaborators to obtain meaningful patent  protection.  If patents are issued to
third parties that contain  competitive or conflicting claims, we, our licensors
or our collaborators may be legally  prohibited from researching,  developing or
commercializing of potential products or be required to obtain licenses to these
patents or to develop or obtain alternative technology. We, our licensors and/or
our collaborators may be legally prohibited from using patented technology,  may
not be able to obtain  any  license to the  patents  and  technologies  of third
parties on acceptable  terms, if at all, or may not be able to obtain or develop
alternative technologies.

      In addition,  like many biopharmaceutical  companies,  we may from time to
time hire scientific  personnel formerly employed by other companies involved in
one or more areas  similar to the  activities  conducted  by us. We and/or these
individuals  may be subject to allegations of trade secret  misappropriation  or
other similar claims as a result of their prior affiliations.


                                       16
<PAGE>

Our  ability  to  compete  may  decrease  if we do not  adequately  protect  our
intellectual property rights.

      Our commercial  success will depend in part on our and our  collaborators'
ability  to  obtain  and  maintain   patent   protection  for  our   proprietary
technologies,  drug targets and potential  products and to effectively  preserve
our  trade  secrets.  Because  of the  substantial  length  of time and  expense
associated  with  bringing   potential  products  through  the  development  and
regulatory  clearance  processes to reach the  marketplace,  the  pharmaceutical
industry  places  considerable  importance on obtaining  patent and trade secret
protection.  The patent positions of pharmaceutical and biotechnology  companies
can be highly  uncertain  and involve  complex legal and factual  questions.  No
consistent  policy  regarding  the  breadth of claims  allowed in  biotechnology
patents has emerged to date. Accordingly, we cannot predict the type and breadth
of claims allowed in these patents.

      We have licensed the rights to eight issued U.S.  patents and three issued
European  patents.  These patents have varying lives and they are related to the
technology licensed from Rockefeller  University for the Strep and Gram-positive
products.  We  have  one  additional  patent  application  in the  U.S.  and one
application  in Europe  relating  to this  technology.  We are joint  owner with
Washington  University of seven issued patents in the U.S. and one in Europe. In
addition,  there are four co-owned U.S. patent  applications.  These patents are
for the technology used for the Gram-negative product opportunities. We are also
exclusive owner of one U.S. patent and three U.S.  patent  applications.  One of
these U.S. patent applications relates to our DegP product opportunities.

      We included a summary of our patent  positions  as of December 31, 2006 in
Part I, Item 1 of this document.

      We also rely on copyright protection, trade secrets, know-how,  continuing
technological innovation and licensing  opportunities.  In an effort to maintain
the confidentiality and ownership of trade secrets and proprietary  information,
we  require  our  employees,  consultants  and  some  collaborators  to  execute
confidentiality  and invention  assignment  agreements  upon  commencement  of a
relationship with us. These agreements may not provide meaningful protection for
our  trade  secrets,  confidential  information  or  inventions  in the event of
unauthorized use or disclosure of such  information,  and adequate  remedies may
not exist in the event of such unauthorized use or disclosure.

We may have difficulty managing our growth.

      We expect to  experience  growth in the  number of our  employees  and the
scope of our operations.  This future growth could place a significant strain on
our  management  and  operations.  Our ability to manage this growth will depend
upon 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 of our
officers and key employees to continue to implement and improve our  operational
and other systems and to hire, train and manage our employees.

Our activities  involve hazardous  materials and may subject us to environmental
regulatory liabilities.

      Our biopharmaceutical research and development involves the controlled use
of hazardous and radioactive  materials and biological  waste. We are subject to
federal,  state and local laws and regulations  governing the use,  manufacture,
storage,  handling and disposal of these  materials and certain waste  products.
Although we believe that our safety  procedures  for  handling and  disposing of
these materials comply with legally 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. The research and development activities of
our  company do not  produce any  unusual  hazardous  products.  We do use small
amounts of 32P, 35S and 3H, which are stored, used and disposed of in accordance
with Nuclear Regulatory  Commission ("NRC")  regulations.  We maintain liability
insurance in the amount of  approximately  $3,000,000 and we believe this should
be sufficient to cover any contingent losses.

      We  believe  that  we are in  compliance  in all  material  respects  with
applicable  environmental  laws and  regulations  and currently do not expect to
make  material  additional  capital   expenditures  for  environmental   control
facilities in the near term.  However, we may have to incur significant costs to
comply with current or future environmental laws and regulations.


                                       17
<PAGE>

Our potential products may not be acceptable in the market or eligible for third
party  reimbursement  resulting  in a negative  impact on our  future  financial
results.

      Any products  successfully  developed by us or our collaborative  partners
may  not  achieve  market  acceptance.  The  antibiotic  products  which  we are
attempting to develop will compete with a number of well-established traditional
antibiotic drugs  manufactured and marketed by major  pharmaceutical  companies.
The degree of market  acceptance  of any of our products will depend on a number
of factors, including:

      o     the  establishment and demonstration in the medical community of the
            clinical efficacy and safety of such products,

      o     the potential  advantage of such  products  over existing  treatment
            methods, and

      o     reimbursement policies of government and third-party payors.

      Physicians, patients or the medical community in general may not accept or
utilize any products  that we or our  collaborative  partners  may develop.  Our
ability to receive revenues and income with respect to drugs, if any,  developed
through the use of our technology will depend, in part, upon the extent to which
reimbursement  for the cost of such drugs  will be  available  from  third-party
payors,  such as government health  administration  authorities,  private health
care insurers,  health maintenance  organizations,  pharmacy benefits management
companies and other organizations. Third-party payors are increasingly disputing
the prices charged for pharmaceutical products. If third-party reimbursement was
not available or sufficient  to allow  profitable  price levels to be maintained
for drugs  developed by us or our  collaborative  partners,  it could  adversely
affect our business.

If our products harm people, we may experience product liability claims that may
not be covered by insurance.

      We  face an  inherent  business  risk of  exposure  to  potential  product
liability claims in the event that drugs we develop are alleged to cause adverse
effects  on  patients.  Such risk  exists  for  products  being  tested in human
clinical  trials,  as well as products  that  receive  regulatory  approval  for
commercial sale. We may seek to obtain product liability  insurance with respect
to drugs we and/or our collaborative  partners develop.  However,  we may not be
able to obtain such insurance.  Even if such insurance is obtainable, it may not
be  available  at a  reasonable  cost or in a  sufficient  amount to  protect us
against liability.

We may be required to perform additional  clinical trials or change the labeling
of our products if we or others  identify side effects after our products are on
the market, which could harm sales of the affected products.

      If we or others identify side effects after any of our products are on the
market, or if manufacturing problems occur:

      o     regulatory approval may be withdrawn;

      o     reformulation of our products,  additional clinical trials,  changes
            in labeling of our products may be required;

      o     changes to or  re-approvals of our  manufacturing  facilities may be
            required;

      o     sales of the affected products may drop significantly;

      o     our reputation in the marketplace may suffer; and

      o     lawsuits, including class action suits, may be brought against us.

      Any of the above  occurrences  could harm or prevent sales of the affected
products  or could  increase  the  costs and  expenses  of  commercializing  and
marketing these products.


                                       18
<PAGE>

The manufacture of biotechnology  products can be a  time-consuming  and complex
process which may delay or prevent  commercialization  of our  products,  or may
prevent  our  ability  to  produce  an  adequate   volume  for  the   successful
commercialization of our products.

      Our  management  believes  that we have the  ability to acquire or produce
quantities of products  sufficient to support our present needs for research and
our  projected  needs  for  our  initial  clinical  development  programs.   The
manufacture of all of our products will be subject to current Good Manufacturing
Practices (GMP) requirements prescribed by the FDA or other standards prescribed
by the  appropriate  regulatory  agency in the  country of use.  There can be no
assurance  that  we  will be able  to  manufacture  products,  or have  products
manufactured for us, in a timely fashion at acceptable quality and prices,  that
we or third party  manufacturers  can comply with GMP, or that we or third party
manufacturers will be able to manufacture an adequate supply of product.

Healthcare  reform and  controls on  healthcare  spending may limit the price we
charge for any products and the amounts thereof that we can sell.

      The U.S.  federal  government and private insurers have considered ways to
change, and have changed,  the manner in which healthcare  services are provided
in the U.S. Potential approaches and changes in recent years include controls on
healthcare  spending and the creation of large purchasing groups. In the future,
the U.S.  government may institute  further  controls and limits on Medicare and
Medicaid spending.  These controls and limits might affect the payments we could
collect from sales of any products.  Uncertainties  regarding future  healthcare
reform and private market  practices could adversely  affect our ability to sell
any products profitably in the U.S. At present, we do not foresee any changes in
FDA regulatory policies that would adversely affect our development programs.

The 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  10,000,000  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.  The rights 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  issue  in the  future.  The  issuance  of  preferred  stock,  while
providing  desirable  flexibility in connection with possible  acquisitions  and
other corporate purposes,  could have the effect of making it more difficult for
a third party to acquire a majority of our  outstanding  voting  stock,  thereby
delaying, deferring or preventing a change in control.

Concentration of ownership of our capital stock could delay or prevent change of
control.

      Our directors,  executive officers and principal stockholders beneficially
own a significant  percentage of our common stock.  They also have,  through the
exercise or conversion of certain  securities,  the right to acquire  additional
common stock. As a result,  these  stockholders,  if acting  together,  have the
ability to significantly  influence the outcome of corporate  actions  requiring
shareholder approval. Additionally, this concentration of ownership may have the
effect of delaying or  preventing  a change in control of SIGA.  At December 31,
2006,  Directors,   Officers  and  principal  stockholders   beneficially  owned
approximately 41.5% of our stock.

Item 1B. Unresolved Staff Comments

      Not applicable.


                                       19
<PAGE>

Item 2. Properties

      Our  headquarters  are  located  in New  York  City and our  research  and
development  facilities are located in Corvallis,  Oregon. In New York, we lease
approximately  3,000 square feet under a lease that expires in November 2007. In
Corvallis,  we lease  approximately  18,100  square feet under an amended  lease
agreement  signed in January 2007,  which expires in December 2011. Our facility
in Oregon has been improved to meet the special  requirements  necessary for the
operation  of our  research and  development  activities.  In the opinion of the
management,  these facilities are sufficient to meet the current and anticipated
future requirements of SIGA.

Item 3. Legal Proceedings

      On December 20, 2006,  PharmAthene,  Inc.  ("PharmAthene") filed an action
against  us in the  Court  of  Chancery  in the  State  of  Delaware,  captioned
PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its Complaint,
PharmAthene  asks the  Court to  order  the  Company  to  enter  into a  license
agreement  with  PharmAthene  with  respect  to  SIGA-246,  as well  as  issue a
declaration that we are obliged to execute such a license  agreement,  and award
damages resulting from our supposed breach of that obligation.  PharmAthene also
alleges that we breached an obligation to negotiate such a license  agreement in
good  faith,  as well as  seeks  damages  for  promissory  estoppel  and  unjust
enrichment   based  on  supposed   information,   capital  and  assistance  that
PharmAthene  allegedly provided to us during the negotiation process. On January
9, 2007,  we filed a motion to dismiss the Complaint in its entirety for failure
to state a claim  upon which  relief  can be  granted.  The Court  approved  the
parties' briefing schedule, with all briefing to be completed by April 13, 2007.
SIGA  believes  that the claims  are  without  merit and plans to defend  itself
vigorously.

Item 4. Submission of Matters to a Vote of Security Holders

      At our Annual  Meeting of  Stockholders  held on December  19,  2006,  our
stockholders  elected our Board of  Directors  and  ratified  our  selection  of
independent registered public accounting firm:

      The  following  nominees  were elected to our Board of Directors  upon the
following votes:

      Director                           Votes For                 Withheld
      --------                           ---------                 --------
      Donald G. Drapkin                  26,158,641                 804,656
      Thomas E. Constance                26,907,435                  55,862
      Adnan M. Mjalli, Ph.D.             26,904,336                  58,961
      Mehmet C. Oz, M.D.                 26,164,681                 798,616
      Eric A. Rose, M.D.                 26,176,331                 786,966
      Paul G. Savas                      26,899,776                  63,521
      Michael A. Weiner, M.D.            26,266,481                 696,816
      Judy S. Slotkin                    26,896,786                  66,511
      James J. Antal                     26,910,076                  53,221
      Scott M. Hammer, M.D.              26,197,261                 766,036

      Our stockholders ratified the selection of  PricewaterhouseCoopers  LLP as
our  independent  registered  public  accounting firm for the fiscal year ending
December 31, 2006 by casting 26,340,016 votes in favor of this proposal, 617,171
votes against the proposal and 6,110 abstained.


                                       20
<PAGE>

                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
        Issuer Purchases of Equity Securities

Price Range of Common Stock

      Our  common  stock has been  traded on the  Nasdaq  Capital  Market  since
September 9, 1997 and trades under the symbol  "SIGA."  Prior to that time there
was no public market for our common stock.  The following table sets forth,  for
the  periods  indicated,  the high and low closing  sales  prices for the common
stock, as reported on the Nasdaq Capital Market.

                                   Price Range

2005                                                         High          Low
First Quarter ......................................       $  1.69       $  1.28
Second Quarter .....................................       $  1.44       $  0.99
Third Quarter ......................................       $  1.10       $  0.70
Fourth Quarter .....................................       $  1.35       $  0.87

2006                                                         High          Low
First Quarter ......................................       $  1.56       $  0.90
Second Quarter .....................................       $  1.65       $  1.22
Third Quarter ......................................       $  1.63       $  1.01
Fourth Quarter .....................................       $  4.95       $  1.49

      The following line graph compares the cumulative total stockholder  return
through December 31, 2006,  assuming  reinvestment of dividends,  by an investor
who invested $100 on December 31, 2001 in each of (i) the Common Stock, (ii) the
NASDAQ National Market-US; and (iii) the NASDAQ Pharmaceutical Index.

                              [LINE CHART OMITTED]

                                       21
<PAGE>

<TABLE>
<CAPTION>
Value of Initial Investment           12/31/01    12/31/02    12/31/03    12/31/04    12/31/05    12/31/06
--------------------------------     ----------  ----------  ----------  ----------  ----------  ----------
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>
SIGA Technologies, Inc.               $ 100.00    $  49.31    $  78.97    $  57.24    $  32.76    $ 129.31
NASDAQ Composite Index                $ 100.00    $  68.47    $ 102.72    $ 111.54    $ 113.07    $ 123.84
NASDAQ Biotech Composite Index        $ 100.00    $  54.67    $  79.68    $  84.57    $  86.96    $  87.85
</TABLE>

As of March 8, 2007,  the  closing  bid price of our common  stock was $4.28 per
share.  There were 75 holders of record as of March 8, 2007. 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 of common stock is held in
broker "street names."

      We have paid no  dividends on our common stock and we do not expect to pay
cash dividends in the foreseeable future. We are not under any restriction as to
our present or future  ability to pay dividends.  We currently  intend to retain
any future earnings to finance the growth and development of our business.

Item 6. Selected Financial Data (in thousands, except share and per share data)

The following table sets forth selected financial  information  derived from our
audited consolidated financial statements as of and for the years ended December
31, 2006, 2005, 2004, 2003, and 2002.

<TABLE>
<CAPTION>
  The year                                                                                    In-process
   ended                           Selling, general     Research and        Patent           research and        Impairment of
December 31,         Revenues      & administrative     development     preparation fees      development      intangible assets
------------     ---------------  ------------------  ---------------  ------------------  ----------------   -------------------
<S>                <C>               <C>                <C>               <C>                <C>                 <C>
2006               $     7,258       $     4,624        $     9,149       $       295        $        --         $        --
2005               $     8,477       $     2,481        $     8,295       $       232        $        --         $        --
2004               $     1,839       $     4,042        $     4,166       $       393        $       568         $     2,118
2003               $       732       $     2,646        $     2,943       $       300        $        --         $       137
2002               $       344       $     1,838        $     1,766       $       105        $        --         $        --

<CAPTION>
                                                                            Weighted average
The year ended                                       Net loss per share:   shares outstanding:
 December 31,     Operating loss       Net loss       basic & diluted       basic and diluted
                 ----------------   --------------  --------------------  ---------------------
<S>                <C>               <C>                <C>                   <C>
2006               $    (6,810)      $    (9,899)       $     (0.35)          28,200,130
2005               $    (2,532)      $    (2,288)       $     (0.09)          24,824,824
2004               $    (9,448)      $    (9,373)       $     (0.40)          23,724,026
2003               $    (5,296)      $    (5,277)       $     (0.34)          15,717,138
2002               $    (3,365)      $    (3,331)       $     (0.32)          10,450,529

<CAPTION>
As of and for
the year ended                       Cash & cash        Long term      Total stockholders'      Net cash used in
 December 31,      Total assets      equivalents       obligations           equity           operating activities
                  --------------   ---------------   ---------------  ---------------------  ----------------------
<S>                <C>               <C>               <C>                 <C>                   <C>
2006               $    14,028       $    10,640       $     4,696         $     7,282           $    (4,438)
2005               $     6,132       $     1,772       $       642         $     3,231           $    (1,392)
2004               $     6,111       $     2,021                           $     4,559           $    (4,890)
2003               $     6,100       $     1,441                           $     5,551           $    (5,332)
2002               $     2,830       $     2,069                           $     2,173           $    (2,648)
</TABLE>


                                       22
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

      The  following   discussion   should  be  read  in  conjunction  with  our
consolidated  financial  statements  and  notes to those  statements  and  other
financial  information appearing elsewhere in this Annual Report. In addition to
historical information,  the following discussion and other parts of this Annual
Report   contain   forward-looking   information   that   involves   risks   and
uncertainties.

Overview

      Since our  inception in December  1995,  SIGA has pursued the research and
development  of novel  products  for the  prevention  and  treatment  of serious
infectious  diseases,   including  products  for  use  in  the  defense  against
biological  warfare agents such as Smallpox and  Arenaviruses.  During the third
quarter of 2006 we were awarded a 3 year,  $16.5  million  contract from the NIH
and an additional 3 year, $4.8 million SBIR Phase II continuation grant from the
NIH.  Both awards  support  the  continuing  development  of our  smallpox  drug
candidate,  SIGA-246.  Our efforts to develop  SIGA-246  were also  supported by
previous  SBIR  grants  from  the NIH  totaling  $5.8  million,  a $1.0  million
agreement with Saint Louis University, and a $1.6 million contract with the U.S.
Army. Our initiative to advance SIGA's  Arenavirus  programs is supported by a 3
year,  $6.0  million  SBIR grant from the NIH,  received in  September  2006 and
previous SBIR grants from the NIH totaling $6.3 million.

      Our anti-viral  programs are designed to prevent or limit the  replication
of  the  viral  pathogen.   Our  anti-infectives   programs  are  aimed  at  the
increasingly serious problem of drug resistance.  These programs are designed to
block the ability of bacteria to attach to human  tissue,  the first step in the
infection process.  We are also developing a technology for the mucosal delivery
of our vaccines  which may allow the  vaccines to activate the immune  system at
the mucus lined  surfaces of the body -- the mouth,  the nose, the lungs and the
gastrointestinal and urogenital tracts -- the sites of entry for most infectious
agents.

      We do not have  commercial  biomedical  products,  and we do not expect to
have such  products for one to three  years,  if at all. We believe that we will
need additional  funds to complete the  development of our biomedical  products.
Our plans with regard to these  matters  include  continued  development  of our
products as well as seeking  additional  research  support  funds and  financial
arrangements.  Although we continue to pursue these plans, there is no assurance
that we will be successful in obtaining  future financing on terms acceptable to
us.  Management  believes it has  sufficient  funds and projected  cash flows to
support operations beyond the next twelve months.

      Our  biotechnology  operations  are  based  in our  research  facility  in
Corvallis,  Oregon.  We continue to seek to fund a major  portion of our ongoing
antiviral,  antibiotic and vaccine  programs through a combination of government
grants,  contracts  and  strategic  alliances.  While  we have  had  success  in
obtaining strategic alliances,  contracts and grants, there is no assurance that
we will continue to be successful in obtaining  funds from these sources.  Until
additional  relationships  are  established,  we  expect  to  continue  to incur
significant  research  and  development  costs  and  costs  associated  with the
manufacturing of product for use in clinical trials and pre-clinical testing. It
is  expected  that  general  and  administrative  costs,  including  patent  and
regulatory  costs,  necessary  to  support  clinical  trials  and  research  and
development will continue to be significant in the future.

      To date, we have not marketed,  or generated  revenues from the commercial
sale of any products. Our biopharmaceutical  product candidates are not expected
to be  commercially  available for several  years,  if at all.  Accordingly,  we
expect to incur  operating  losses for the foreseeable  future.  There can be no
assurance that we will ever achieve profitable operations.

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 our consolidated
financial statements, which we discuss under the heading "Results of Operations"
following this section of our Management's  Discussion and Analysis. Some of our
accounting policies require us to make difficult and subjective judgments, often
as a result  of the  need to make  estimates  of  matters  that  are  inherently
uncertain.  Our most critical  accounting  estimates  include the  assessment of
recoverability of goodwill,


                                       23
<PAGE>

which could impact goodwill  impairments;  the assessment of  recoverability  of
long-lived  assets,  which  primarily  impacts  operating  income if  impairment
exists.  Below, we discuss these policies further,  as well as the estimates and
judgments   involved.   Other  key  accounting   policies,   including   revenue
recognition, are less subjective and involve a far lower degree of estimates and
judgment.

Significant Accounting Policies

      The  following is a brief  discussion of the more  significant  accounting
policies and methods used by us in the preparation of our consolidated financial
statements.  Note  2 of  the  Notes  to the  Consolidated  Financial  Statements
includes a summary of all of the significant accounting policies.

      Share-based Compensation

      On January 1, 2006, the Company adopted Statement of Financial  Accounting
Standards No. 123 (revised 2004),  "Share-Based Payment" ("SFAS 123(R)"),  which
requires  the  measurement  and  recognition  of  compensation  expense  for all
share-based  payment awards made to employees and directors  including  employee
stock  options  and  employee  stock  purchases  related to the  Employee  Stock
Purchase Plan ("employee stock purchases") based on estimated fair values.  SFAS
123(R) supersedes the Company's previous accounting under Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB 25") for
periods  beginning  on January  1, 2006.  In March  2005,  the SEC issued  Staff
Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company has
applied the provisions of SAB 107 in its adoption of SFAS 123(R).

      The Company adopted SFAS 123(R) using the modified prospective  transition
method,  which requires the application of the accounting standard as of January
1,  2006,  the  first day of the  Company's  fiscal  year  2006.  The  Company's
Consolidated Financial Statements as of and for the year ended December 31, 2006
reflect the impact of SFAS 123(R).  In accordance with the modified  prospective
transition method, the Company's Financial Statements for prior periods have not
been  restated  to  reflect,  and do not  include,  the  impact of SFAS  123(R).
Share-based  compensation related to stock options expense recognized under SFAS
123(R)  for the year  ended  December  31,  2006 was  $470,892.  No  share-based
compensation expense related to employee stock options was recognized during the
year ended December 31, 2005.

      SFAS 123(R)  requires  companies to estimate the fair value of share-based
payment awards on the grant-date using an option-pricing model. The value of the
portion  of the award  that is  ultimately  expected  to vest is  recognized  as
expense  over the  requisite  service  periods in the  Company's  Statements  of
Operations.  Prior to the adoption of SFAS  123(R),  the Company  accounted  for
share-based  awards to employees and directors  using the intrinsic value method
in  accordance  with APB 25 as allowed under  Statement of Financial  Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Under
the intrinsic value method, no share-based compensation expense related to stock
options had been  recognized in the Company's  Statements of Operations when the
exercise price of the Company's stock options granted to employees and directors
equaled the fair market value of the underlying stock at the grant-date.

      Share-based  compensation  expense recognized during the current period is
based  on the  value  of the  portion  of  share-based  payment  awards  that is
ultimately expected to vest. SFAS 123(R) requires forfeitures to be estimated at
the time of grant in order to  estimate  the amount of  share-based  awards that
will  ultimately  vest.  The  forfeiture  rate is  based  on  historical  rates.
Share-based  compensation  expense  recognized  in the  Company's  Statements of
Operations  for the year ended  December  31,  2006  includes  (i)  compensation
expense for  share-based  payment awards granted prior to, but not yet vested as
of December 31, 2005, based on the grant-date fair value estimated in accordance
with the pro forma provisions of SFAS 123 and (ii) compensation  expense for the
share-based payment awards granted subsequent to December 31, 2005, based on the
grant-date  fair value  estimated  in  accordance  with the  provisions  of SFAS
123(R).  The Company  utilizes the  Black-Scholes  options pricing model for the
valuation of share-based  awards.  Determining the fair value of these awards at
the grant date requires judgment.  It is reasonably likely that forfeiture rates
will change in the future and impact  future  compensation  expense.  It is also
reasonably  likely that the variables  used in the Black Scholes  option pricing
model will  change in the future and impact the fair value of future  options at
the grant date and future compensation expense.


                                       24
<PAGE>

      Fair value of financial instruments

      The  carrying  value of cash and cash  equivalents,  accounts  payable and
accrued expenses approximates fair value due to the relatively short maturity of
these  instruments.  Common stock rights and warrants  which are  classified  as
assets or  liabilities  under the provisions of EITF 00-19 are recorded at their
fair  market  value  as of  each  reporting  period.  The  Company  applies  the
Black-Scholes  pricing model to calculate the fair values of common stock rights
and  warrants  using  the  contracted  term  of  the  instruments  and  expected
volatility  that is  calculated as a  combination  of the  Company's  historical
volatility and the volatility of a group of comparable companies.

      Revenue Recognition

      The Company  recognizes revenue from contract research and development and
research progress payments in accordance with SEC Staff Accounting  Bulletin No.
104,  Revenue  Recognition,  ("SAB 104"). In accordance with SAB 104, revenue is
recognized  when  persuasive  evidence of an  arrangement  exists,  delivery has
occurred,  the fee is  fixed  and  determinable,  collectibility  is  reasonably
assured,  contractual obligations have been satisfied and title and risk of loss
have been  transferred  to the  customer.  The Company  recognizes  revenue from
non-refundable  up-front payments,  not tied to achieving a specific performance
milestone, over the period which the Company is obligated to perform services or
based on the percentage of costs incurred to date,  estimated  costs to complete
and total expected  contract  revenue.  Payments for development  activities are
recognized as revenue is earned, over the period of effort.  Substantive at-risk
milestone  payments,  which  are  based  on  achieving  a  specific  performance
milestone,  are  recognized  as revenue  when the  milestone is achieved and the
related  payment  is  due,  providing  there  is no  future  service  obligation
associated with that milestone. In situations where the Company receives payment
in advance of the  performance  of  services,  such  amounts  are  deferred  and
recognized as revenue as the related services are performed.

      Goodwill

      Goodwill  is  recorded  when the  purchase  price paid for an  acquisition
exceeds the estimated fair value of the net  identified  tangible and intangible
assets acquired.

      The Company  evaluates  goodwill for  impairment  annually,  in the fourth
quarter  of each  year.  In  addition,  the  Company  would  test  goodwill  for
recoverability   between  annual  evaluations  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amounts  may  not be  recoverable.
Examples of such events  could  include a  significant  adverse  change in legal
matters,  liquidity or in the business climate,  an adverse action or assessment
by a  regulator  or  government  organization,  loss  of key  personnel,  or new
circumstances  that would cause an  expectation  that it is more likely than not
that we would sell or otherwise dispose of a reporting unit. Goodwill impairment
is  determined  using a  two-step  approach  in  accordance  with  Statement  of
Financial  Accounting  Standards No. 142 "Goodwill and Other Intangible  Assets"
("SFAS  142").  The  impairment  review  process  compares the fair value of the
reporting unit in which  goodwill  resides to its carrying  value.  In 2006, the
Company operated as one business and one reporting unit. Therefore, the goodwill
impairment  analysis was  performed on the basis of the Company as a whole using
the market  capitalization  of the Company as an estimate of its fair value.  In
the past,  our market  capitalization  has been  significantly  in excess of the
Company's  carrying  value.  It is  reasonably  likely  that the  future  market
capitalization  of  SIGA  may  exceed  or  fall  short  of  our  current  market
capitalization,  in which case a different amount for potential impairment would
result.  The use of the  discounted  expected  future cash flows to evaluate the
fair value of the Company as a whole is reasonably  likely to produce  different
results than the Company's market capitalization.

      Intangible Assets

      Acquisition-related  intangibles  include  acquired  technology,  customer
contracts,  grants and covenants not to compete, and are amortized on a straight
line basis over periods ranging from 2-4 years.

      In accordance  with  Statement of Financial  Accounting  Standards No. 144
"Accounting  for the Impairment or Disposal of Long-Lived  Assets" ("SFAS 144"),
the Company performs a review of its identified  intangible  assets to determine
if facts and circumstances  exist which indicate that the useful life is shorter
than  originally  estimated  or that the  carrying  amount of assets  may not be
recoverable.  If such facts and circumstances do exist, the Company assesses the
recoverability  of  identified  intangible  assets by  comparing  the  projected
undiscounted net cash flows associated with the related asset or group of assets
over  their  remaining  lives  against  their   respective   carrying   amounts.
Impairment,  if any, is based on the excess of the carrying amount over the fair
value of those assets. Our


                                       25
<PAGE>

estimates  of projected  cash flows are  dependent  on many  factors,  including
general  economic  trends,   technological  developments  and  projected  future
contracts and government  grants. It is reasonably likely that future cash flows
associated  with our  intangible  assets may exceed or fall short of our current
projections,  in which case a different amount for impairment  would result.  If
our actual cash flows exceed our estimates of future cash flows,  any impairment
charge would be greater than needed.  If our actual cash flows are less than our
estimated cash flows, we may need to recognize additional  impairment charges in
future periods,  which would be limited to the carrying amount of the intangible
assets.

      Recent accounting pronouncements

      In July 2006, the Financial  Accounting  Standards  Board ("FASB")  issued
Interpretation   No.  48,   "Accounting  for  Uncertainty  in  Income  Taxes--an
interpretation  of FASB  Statement  No. 109" ("FIN  48"),  which  clarifies  the
accounting for  uncertainty in tax positions.  This  Interpretation  requires an
entity to recognize the impact of a tax position in its financial  statements if
that  position  is more likely  than not to be  sustained  on audit based on the
technical  merits of the position.  The provisions of FIN 48 are effective as of
the beginning of fiscal year 2007,  with the cumulative  effect of the change in
accounting  principle  recorded as an adjustment to opening  retained  earnings.
Early application of FIN 48 is encouraged.  The Company is evaluating the timing
of its  adoption  of FIN 48 and  the  potential  effects  of  implementing  this
Interpretation on its financial condition and results of operations.

      In  September  2006,  the FASB issued SFAS No. 157.  SFAS No. 157 provides
guidance  for using fair value to measure  assets and  liabilities  and requires
expanded  information  about the extent to which  companies  measure  assets and
liabilities at fair value,  the information  used to measure fair value, and the
effect of fair value  measurements on earnings.  The standard  applies  whenever
other standards require (or permit) assets or liabilities to be measured at fair
value.  The  standard  does  not  expand  the  use of  fair  value  in  any  new
circumstances.  SFAS No. 157 is  effective  for  fiscal  years  beginning  after
November 15, 2007. We are in the process of evaluating  the adoption of SFAS No.
157.

Results of Operations

The following table sets forth certain consolidated statements of income data as
a percentage of net revenue for the periods indicated:

<TABLE>
<CAPTION>
                                                    2006          2005          2004
                                                 ----------    ----------    ----------
<S>                                                     <C>           <C>           <C>
         Revenue                                        100%          100%          100%
                                                 ----------    ----------    ----------
         Selling, general and administrative             64%           29%          220%
         Research and development                       126%           98%          227%
         Patent preparation fees                          4%            3%           21%
         In-process research and development              0%            0%           31%
         Impairment of intangible assets                  0%            0%          115%
                                                 ----------    ----------    ----------
         Operating loss                                  94%           30%          514%
</TABLE>

Years ended December 31, 2006, 2005, and 2004

      Revenues from research and development  contracts and grants for the years
ended   December  31,  2006  and  2005  were  $7.3  million  and  $8.5  million,
respectively.  Revenues  recorded for the year ended  December 31, 2006 declined
$1.2 million or 14% from the prior year. For the year ended December 31, 2006 we
recorded  $3.7  million from an NIH  contract,  NIH SBIR grants and an agreement
with Saint Louis University,  supporting two of our lead programs. Revenues from
NIH SBIR grants  supporting  these  programs  during the year ended December 31,
2005 were $7.2 million.  The decline of $3.5 million was  partially  offset by a
$1.8 million  increase in revenues  recognized  from our $3.2 million,  one year
contract with USAMRMC for the rapid  identification  and treatment of anti-viral
diseases.  The agreement was signed in September 2005 and was funded through the
USAF.  Revenue  recognized  in connection  with this  agreement  increased  from
$653,000 in 2005 to $2.5 million in 2006. The decline in revenues supporting our
two lead  programs  was also offset by $409,000  recorded in  connection  with a
$500,000, one year,


                                       26
<PAGE>

Phase I SBIR grant  from the NIH to support  the  development  of our  Bacterial
Commensal  Vector  technology  for the delivery of smallpox  vaccine,  ending on
February  28,  2007.  In November  2006,  we received a $1.4  million,  one year
contract  with  the  Air  Force   Medical   Service  for  the   development   of
counter-measures against Dengue viruses and other water-related viral agents. In
November  2006 we also  received a one-year,  $900,000  contract to aid the USAF
Special Operations  Command (USAFSOC) in its development of specific  anti-viral
agents. For the year ended December 31, 2006 we recognized  revenues of $247,000
from these contracts.

      In August 2006, we received a three year,  $6.0 million award from the NIH
to support the development of our antiviral  drugs for Lassa fever virus,  and a
three  year,  $4.8  million  SBIR  Phase II  continuation  grant from the NIH to
support the development of our smallpox drug candidate,  SIGA-246.  In September
2006,  we entered into a three year,  $16.5  million  contract with the National
Institute of Allergy and Infectious  Diseases of the NIH, to further advance the
development of our smallpox drug  candidate.  Revenues from these new grants and
contracts are recognized as services are performed.

      Revenues for the years ended  December 31, 2005 and 2004 were $8.5 million
and $1.8  million,  respectively.  The increase of $6.6 million or 361% from the
year ended  December  31, 2004 related to the award of two Phase I and two Phase
II SBIR grants by the NIH during the third  quarter of 2004,  an agreement  with
Saint Louis  University  entered into in September  2005,  and an agreement with
USAMRMC entered into in September 2005. The grants awarded by the NIH during the
third  quarter  of 2004 for a total  amount  of  $11.1  million,  supported  our
Smallpox and Arenaviruses programs and expired in the third quarter of 2006. For
the years ended December 31, 2005 and 2004 we recorded  revenues of $6.4 million
and $1.0  million,  respectively,  from  these  grants,  mainly  reflecting  the
continued  development  of our Smallpox  oral  antiviral  drug. In 2004, we also
received a one year SBIR grant from the NIH for  $252,000  to support  our Strep
vaccine  program.  In 2005 and 2004 we recorded revenue of $156,000 and $86,000,
respectively,  from this grant.  In September 2005, we entered into an agreement
with Saint Louis University for the continued development of one of our Smallpox
drugs.  The  agreement was funded  through the NIH.  Under the  agreement,  SIGA
received  approximately  $1.0  million  during the term of  September 1, 2005 to
February 28, 2006. Revenues were recognized as services were performed. In 2005,
we recognized  revenues of $775,000 from the  agreement.  In September  2005, we
also entered into a $3.2  million,  one year  contract  with USAMRMC and for the
year  ended  December  31,  2005,  recognized  revenues  of  $653,000  from this
agreement.

      For the years ended  December  31, 2005 and 2004 revenue from our contract
with the U.S. Army was $427,000 and $425,000.  In 2004 we recognized  revenue of
$255,000 from an SBIR grant for our DegP anti infective that we completed in the
second quarter of 2004.

      Selling,  general and administrative expenses ("SG&A") for the years ended
December 31, 2006 and 2005 were $4.6 million and $2.5 million, respectively. The
increase  of  $2.1  million  or 84% is  mainly  attributed  to $1.2  million  of
professional   fees  and  $530,000  of  non-cash  share  base  compensation  and
consulting  charges  recorded for the year ended December 31, 2006, and a credit
of $303,000 in legal expenses  recorded in 2005.  During the year ended December
31, 2006 we recorded  legal,  accounting  and  consulting  expenses of $861,000,
$183,000  and  $132,000,  respectively,  for due  diligence  services,  fairness
opinion and legal advice related to our proposed merger with  PharmAthene,  Inc.
("PHTN"), which was terminated in October 2006. In 2006, we recorded $156,000 of
non-cash  consulting charge reflecting the fair market value of 400,000 warrants
issued under a February 2003 consulting  agreement.  For the year ended December
31,  2006,  we  also  recorded  a  $376,000  non-cash  charge  for  share  based
compensation following the adoption of FAS 123(R) on January 1, 2006.

      SG&A were $2.5 million and $4.0  million for the years ended  December 31,
2005 and 2004.  SG&A  declined $1.6 million or 39% primarily due to $1.0 million
decline in legal fees and $401,000 decline in consulting fees. In 2005, upon the
re-negotiation  of certain legal invoices,  we received and recorded  credits of
$303,000 in legal expenses.  In addition to the credits  received by SIGA, legal
fees declined by  approximately  $711,000 from the year ended  December 31, 2004
reflecting  higher legal fees during the 2004 period due to the  acquisition  of
certain  assets  from  ViroPharma,  the review and  amendment  of our  corporate
governance  policies and procedures to ensure compliance with Sarbanes Oxley Act
of 2002 and NASDAQ  requirements.  Legal  expenses in 2004 were also incurred in
connection with the sale of certain  non-core  vaccine assets and a legal action
that the Company initiated against a former founder. In 2004, we incurred higher
consulting  expenses in connection with our efforts to secure certain government
contracts.  Our agreement  with the  consulting  group was terminated in October
2004.


                                       27
<PAGE>

      Research and  Development  (R&D) expenses for the years ended December 31,
2006 and 2005 were $9.1  million  and $8.3  million,  respectively.  On April 1,
2006,  we completed  the  renovation  of a new  laboratory  space in  Corvallis,
Oregon. Depreciation expense, lab supplies expenditures and rent expense for the
year ended  December 31, 2006,  increased by $637,000,  $354,000,  and $381,000,
respectively,  from the same period in 2005.  During the year ended December 31,
2006, we expanded our R&D work force from 35 full time employees to 41 full time
employees. R&D payroll and related expenses increased by $743,000 as a result of
this expansion and bonuses paid in 2006 to our R&D employees.  In addition,  R&D
expenditures  related to our contract  with USAMRMC and two  contracts  with the
U.S. Air Force  received in 2006  increased  $646,000  from  $249,000 in 2005 to
$895,000 in 2006.  These  increases were  partially  offset by a decline of $1.9
million in R&D expenditures related to two of our lead programs.

      During the years ended  December 31, 2006,  and 2005 we spent $2.3 million
and $3.9 million,  respectively,  on the development of our lead drug candidate,
SIGA-246,  an orally  administered  anti-viral  drug that  targets the  smallpox
virus. For the year ended December 31, 2006, we spent $716,000 on internal human
resources  and $1.6  million  mainly on  clinical  testing.  For the year  ended
December  31,  2005,  we spent  $708,000 on internal  human  resources  and $3.2
million on  pre-clinical  testing of  SIGA-246.  From  inception of the SIGA-246
development  program to-date, we expended a total of $6.5 million related to the
program,  of which $1.6 million and $4.9  million  were spent on internal  human
resources,  and clinical and pre-clinical  work,  respectively.  These resources
reflect  SIGA's  research  and  development  expenses  directly  related  to the
program.  They exclude  additional  expenditures such as the cost to acquire the
program,  patent costs,  allocation of indirect expenses, and the value of other
services received from the NIH and the DoD.

      R&D  expenses  of $1.0  million  and $1.6  million  during  the year ended
December 31, 2006 and 2005,  respectively,  were used to support the development
of  ST-294,  a drug  candidate  which  has  demonstrated  significant  antiviral
activity in cell culture assays against arenavirus  pathogens,  as well as other
drug candidates for hemorrhagic fevers. For the year ended December 31, 2006, we
spent $536,000 on internal human  resources and $484,000  mainly on pre-clinical
testing.  For the year ended  December 31, 2005,  we spent  $777,000 on internal
human resources and $787,000 on pre-clinical  testing of ST-294.  From inception
of our  program to develop  ST-294 and other  drug  candidates  for  hemorrhagic
fevers,  to-date,  we spent a total of $3.1 million  related to the program,  of
which $1.5 million and $1.3 million were  expended on internal  human  resources
and pre-clinical work, respectively. These resources reflect SIGA's research and
development  expenses directly related to the program.  They exclude  additional
expenditures such as the cost to acquire the program,  patent costs,  allocation
of indirect expenses,  and the value of other services received from the NIH and
the DoD.

      R&D expenses related to our USAF Agreements were $548,000 and $895,000 for
internal  human  resources and external R&D services,  respectively,  during the
year ended December 31, 2006.  During the same period in 2005, we spent $132,000
and  $249,000  on  internal   human   resources   and  external  R&D   services,
respectively.  Costs related to our work on the USAF Agreements, during the term
of the agreements to-date were $2.0 million, of which we spent $825,000 and $1.1
million on internal  human  resources and external R&D  services,  respectively.
These  resources  reflect  SIGA's  research and  development  expenses  directly
related to this agreement.  They exclude additional  expenditures such as patent
costs and allocation of indirect expenses.

      Research and  development  (R&D) expenses for the years ended December 31,
2005 and 2004 were $8.3  million and 4.2  million,  respectively.  R&D  expenses
increased $4.1 million or 99% primarily due to preclinical  development  work in
connection  with our two lead product  programs,  work  performed to support our
recent  agreements  with Saint Louis  University and the USAF, the hiring of new
employees  and the  increase  in  amortization  expense.  In 2005,  we  incurred
approximately $3.0 million to support preclinical development work in connection
with our Smallpox and Arenaviruses  programs.  Our research staff increased from
23  scientists  at December  31, 2004 to 33  scientists  at December  31,  2005,
resulting  in  an  increase  of  $705,000  in  payroll  and  related   expenses.
Amortization  of intangible  assets in the amount of $1,097,000 and $636,000 for
the  years  ended  December  31,  2005  and  2004,   respectively,   represented
approximately 11% of the increase.

      During the years ended December 31, 2005 and 2004, we spent  approximately
$3.9 million and $363,000,  respectively,  on the  development  of our lead drug
candidate,  SIGA-246,  an orally  administered  anti-viral drug that targets the
smallpox  virus.  For the year ended  December 31, 2005, we spent  approximately
$708,000 on internal


                                       28
<PAGE>

human  resources and $3.2 million mainly on pre-clinical  testing.  For the year
ended  December  31, 2004,  we spent  approximately  $136,000 on internal  human
resources and $227,000 on pre-clinical testing of SIGA-246.

      R&D expenses of $1.6 million and $431,000  during the years ended December
31, 2005 and 2004, respectively, were used to support the development of ST-294,
a drug candidate which has demonstrated  significant  antiviral activity in cell
culture assays against  arenavirus  pathogens,  as well as other drug candidates
for  hemorrhagic  fevers.  For the  year  ended  December  31,  2005,  we  spent
approximately  $777,000 on  internal  human  resources  and  $787,000  mainly on
pre-clinical   testing.   For  the  year  ended  December  31,  2004,  we  spent
approximately  $258,000 on internal human resources and $173,000 on pre-clinical
testing of ST-294.  We incurred no costs related to this program during the year
ended December 31, 2003.

      R&D expenses related to our USAF Agreement were approximately $132,000 and
$249,000 for internal human  resources and external R&D services,  respectively,
during the year ended  December 31, 2005.  We incurred no costs  related to this
program during the years ended December 31, 2004 and 2003.

      Our product programs are in the early stage of development.  At this stage
of development,  we cannot make  reasonable  estimates of the potential cost for
most of our  programs to be  completed  or the time it will take to complete the
project. Our lead product,  SIGA-246, is an orally administered  anti-viral drug
that  targets the  smallpox  virus.  In December  2005 the FDA  accepted our IND
application for SIGA-246 and granted it Fast-Track status. In December 2006, the
FDA  granted  Orphan  Drug  designation  to  SIGA-246,  for the  prevention  and
treatment  of  smallpox.  We expect  that costs to  complete  the  program  will
approximate $15 million to $20 million,  and that the project could be completed
in 24  months  to 36  months.  There  is a high  risk of  non-completion  of any
program,  including SIGA-246, because of the lead time to program completion and
uncertainty of the costs. Net cash inflows from any products  developed from our
programs  is at least  one to  three  years  away.  However,  we  could  receive
additional  grants,  contracts or  technology  licenses in the  short-term.  The
potential  cash and  timing is not known and we cannot be  certain  if they will
ever occur.

      The risk of failure to complete any program is high,  as each,  other than
our  smallpox  program  which began phase I clinical  trials in 2006,  is in the
relatively  early stage of  development.  Products  for the  biological  warfare
defense  market,  such  as the  SIGA-246  Smallpox  anti-viral,  could  generate
revenues in one to three  years.  We believe the products  directed  toward this
market are on schedule.  We expect the future research and  development  cost of
our biological  warfare defense  programs to increase as the potential  products
enter animal studies and safety testing,  including  human safety trials.  Funds
for future  development  will be partially  paid for by NIH  contracts  and SBIR
grants,  additional  government  funding  and from future  financing.  If we are
unable to obtain  additional  federal  grants  and  contracts  or funding in the
required  amounts,  the  development  timeline for these  products would slow or
possibly be suspended.  Delay or suspension of any of our programs could have an
adverse  impact  on our  ability  to  raise  funds  in the  future,  enter  into
collaborations with corporate partners or obtain additional federal funding from
contracts or grants.

      Patent  preparation  expenses  for the year ended  December  31, 2006 were
$295,000 compared to $232,000 for the year ended December 31, 2005. The increase
of 63,000 or 27% is mainly due to a refund of $83,000  received in 2005 from our
patent legal counsel.

      Patent preparation expenses for the years ended December 31, 2005 and 2004
were $232,000 and $393,000, respectively. The decline of $161,000 or 41% relates
to the termination of our relations with Plexus and Pecos Labs Inc. (Pecos), and
the  reduction  in the number of patents  supported  by SIGA,  in  addition to a
refund of $83,000 received in 2005 from our patent legal counsel.

      For the year ended  December 31, 2004, as a result of the  acquisition  of
certain government grants and two early stage antiviral  programs,  Smallpox and
Arenavirus,  targeting  certain agents of biological  warfare,  from ViroPharma,
$568,329  was  immediately   expensed  as  purchased   in-process  research  and
development  ("IPRD").  The amount expensed as IPRD was attributed to technology
that has not reached technological  feasibility and has no alternate future use.
The value  allocated  to IPRD was  determined  using the  income  approach  that
included an excess earnings analysis reflecting the appropriate costs of capital
for the  purchase.  Estimates of future cash flows related to the IPRD were made
for both the Smallpox and Arenavirus  programs.  The aggregate  discount rate of
approximately  55% utilized to discount the  programs'  cash flows were based on
consideration of the Company's


                                       29
<PAGE>

weighted average cost of capital, as well as other factors,  including the stage
of completion and the uncertainty of technology advances for these programs.  If
the programs are not successful or completed in a timely  manner,  the Company's
product  pricing and growth  rates may not be  achieved  and the Company may not
realize the financial benefits expected from the programs.

      For the year ended  December  31, 2004 we recorded a  $2,118,200  non-cash
loss  on  impairment  of  assets.  In  December  2004,  upon  completion  of the
ViroPharma  transaction,  integration of the related acquired  programs into the
Company's operations,  and the demonstrated  antiviral activity of the Company's
lead smallpox  compound  against  several mouse models of poxvirus  disease,  we
commenced an application process for additional government grants to support our
continued  efforts  under the Smallpox and  Arenavirus  antiviral  programs.  We
determined  that  significant   efforts  and  resources  will  be  necessary  to
successfully  continue the development  efforts under these programs and decided
to allocate  the  necessary  resources to support its  commitment.  As a result,
limited   resources  were  available  for  the  development  of  future  product
candidates that utilize the technology  acquired from Plexus in May 2003.  These
factors  resulted in a significant  reduction in forecasted  revenues related to
that  technology  and a  reduction  in the future  remaining  useful  life,  and
triggered  the related  intangible  asset  impairment.  The amount of impairment
recorded  by us in  December  2004 was  determined  using the  two-step  process
impairment  review as required by SFAS 144. In the first step,  we compared  the
projected  undiscounted net cash flows  associated with the technology  acquired
from Plexus over its remaining life against its carrying  amount.  We determined
that the carrying  amount of the  technology  acquired from Plexus  exceeded its
projected  undiscounted  cash flows.  In the second step,  we estimated the fair
value of the technology using the income method of valuation, which included the
use of estimated  discounted cash flows. Based on our assessment,  we recorded a
non-cash impairment charge of approximately $1.5 million in December 2004, which
was included as a component of our operating  loss. In May 2004, we performed an
impairment  review  of our  intangible  assets  in  accordance  with SFAS 144 in
connection  with the sale of certain  intangible  assets from our  immunological
bioinformatics   technology  and  certain  non-core  vaccine  development  to  a
privately-held  company,  Pecos. We recorded an impairment charge of $307,000 to
the grants transferred to Pecos and $303,000 to the covenant not to compete with
our President who was terminated during the current year period.

      Total operating loss for the year ended December 31, 2006 was $6.8 million
compared  with $2.5 million for 2005.  The increase of $4.2 million in operating
loss relates mainly to $1.2 million of professional  fees incurred in connection
with our merger  agreement  with PHTN,  which was  terminated in October 2006, a
decline of $1.2  million in  revenues  generated  in 2006,  and an  increase  of
$870,000  in non-cash  expenses  recorded  for  depreciation,  amortization  and
non-cash compensation.

      Total  operating  loss for the years ended  December 31, 2005 and 2004 was
$2,532,000  and  $9,448,000,  respectively.  Operating  loss in 2004,  excluding
non-cash  charges  recorded  for the  impairment  of assets and  recognition  of
in-process R&D was $6,763,000.  The decline in total operating loss is primarily
related to the increase in revenues generated during 2005 and the decline in our
SG&A  expenses  which was  partially  off-set by the increase in R&D expenses to
support our programs.

      A loss of $3.1  million  from the  increase in fair market value of common
stock rights and common stock warrants was recorded in connection  with the sale
of common  stock and  warrants in October  2006,  and the sale of common  stock,
warrants and rights in November 2005. The warrants and rights to purchase common
stock of SIGA were recorded at fair market value and  classified as  liabilities
at the time of the  transaction.  In 2006 we recorded losses for the increase in
the fair value of the  warrants  sold in October  2006,  during the period  from
October 19, 2006 to December 31, 2006. We also recorded  losses  reflecting  the
increase in the fair value of warrants and rights sold in November 2005,  during
the period of January 1, 2006 to December 31, 2006.

      A gain from the decrease in common stock rights and common stock  warrants
was recorded in connection with the sale and issuance of common stock,  warrants
and rights in 2005. The warrants and rights to purchase  additional common stock
of SIGA were recorded at fair market value and  classified as liabilities at the
time of the transaction.  A gain of $253,000 was recorded by us,  reflecting the
decline in the fair value of the warrants  and the rights to acquire  additional
shares of our common  stock,  from the time of the  transaction  to December 31,
2005.

      Other income for the years ended  December 31,  2006,  2005,  and 2004 was
$1,600, $9,000, and $75,000, respectively.  Other income in 2004 was higher than
2006 and 2005 mainly due to net interest income received on


                                       30
<PAGE>

higher cash balances  during that year. In 2004 we also received other income of
$15,000 as the result of the settlement of a legal action with a former founder.
For the year ended December 31, 2006, we recorded  interest  charges of $114,000
relating to loans payable in the amount of $3.0 million which we paid in full in
October 2006. The charges were offset by interest  income of $147,000  generated
from  higher cash  balance  subsequent  to the October  2006 sale of SIGA common
stock and warrants.

Liquidity and Capital Resources

      On December 31, 2006, we had $10.6  million in cash and cash  equivalents.
On October 18, 2006,  we entered into a Securities  Purchase  Agreement  for the
issuance and sale of 2,000,000 shares of the Company's common stock at $4.54 per
share and warrants to purchase  1,000,000  shares of the Company's common stock.
The  warrants  are  exercisable  at $4.99 per share at any time and from time to
time through and including  the seventh  anniversary  of the closing date.  With
respect to the  transaction,  we also  entered into a Finder's  Agreements.  The
finders fee under the agreement  includes cash  compensation  of 3% of the gross
amount financed and warrants to acquire  136,200 shares of the Company's  common
stock at terms equal to the  investors'  warrants.  Also in connection  with the
transaction,  pursuant to our existing Exclusive Finder's  Agreement,  we paid a
finder's fee consisting of cash  compensation  of 4% of the amount  financed and
warrants to acquire  136,200  shares of our common stock,  at terms equal to the
investors'  warrants.  We  received  net  proceeds  of  $8.4  million  from  the
transaction.

      During the forth quarter of 2006, we received net proceeds of $4.3 million
from  exercises  of warrants  and options to  purchase  shares of the  Company's
Common stock.

      In November  2006, we received a $1.4 million,  one year contract with the
Air Force Medical Service for the development of counter-measures against Dengue
viruses and other  water-related viral agents. In November 2006 we also received
a  one-year,  $900,000  contract  to aid the  USAF  Special  Operations  Command
(USAFSOC) in its development of specific anti-viral agents.

      On August 30, 2006, we received a three year,  $6.0 million award from the
NIH to support the  development of our antiviral drugs for Lassa fever virus. On
August  1,  2006,  we  received  a  three  year,  $4.8  million  SBIR  Phase  II
continuation  grant from the NIH to support the development of our smallpox drug
candidate,  SIGA-246. On September 26, 2006, we entered into a three year, $16.5
million contract with the National Institute of Allergy and Infectious  Diseases
of the NIH, to further  advance the  development of our smallpox drug candidate.
Revenues from these new grants and contracts  will be recognized as services are
performed.

      On October 4, 2006,  SIGA  exercised its right,  pursuant to its Agreement
and Plan of Merger, dated June 8, 2006, with PHTN (the "Merger  Agreement"),  to
terminate  the  transaction  pursuant to which a subsidiary of SIGA was going to
merge with PHTN.  Pursuant to Section 12.1(a) of the Merger Agreement,  SIGA had
an  obligation  to  exclusively  negotiate  with  PHTN the  terms  of a  license
agreement  relating to  SIGA-246.  On December  20,  2006,  PharmAthene  filed a
complaint against us with respect to, among other matters,  this provision.  See
"Legal Proceedings".

      On March 20, 2006, in connection with the  transaction,  we entered into a
Bridge Note Purchase  Agreement  ("Notes Purchase  Agreement") with PHTN for the
sale of three 8% Notes by SIGA, for $1,000,000 each. The first, second and third
Notes  were  issued  on March  20,  2006,  April 19,  2006,  and June 19,  2006,
respectively.  The  proceeds  of the  Notes  were  used by the  Company  for (i)
expenses  directly related to the development of SIGA's lead product,  SIGA-246,
(ii)  expenses  related  to the  Company's  planned  merger  with PHTN and (iii)
corporate overhead.  Pursuant to a Security Agreement between SIGA and PHTN also
entered  into on March 20,  2006,  the Notes were  secured  by a first  priority
security  interest in the  Company's  assets  (other than assets  subject to the
security interest granted to General Electric Capital  Corporation).  On October
23,  2006,  we paid PHTN  $3,114,400  in full  repayment  of the three notes and
interest accrued thereon.

      We believe that our existing cash combined  with  anticipated  cash flows,
including receipt of future funding from government contracts and grants will be
sufficient to support our  operations  beyond the next twelve  months,  and that
sufficient cash flows will be available to meet our business  objectives  during
that period.


                                       31
<PAGE>

      Operating activities

      Net cash used in  operations  during the year ended  December 31, 2006 was
$4.4 million  compared to $1.4  million used during the year ended  December 31,
2005. The increase in cash used in operations is mainly due to professional fees
of $1.2 million  incurred in connection  with the  terminated  merger with PHTN,
development  expenses of $660,000  incurred in  connection  with human  clinical
trials  of  SIGA-246,  bonuses  paid to  management  and  employees  in 2006 and
supplies and materials purchased for our laboratory in Oregon.

      Investing activities

      Capital  expenditures  during the years ended  December  31, 2006 and 2005
were $884,000 and $861,000, respectively, and mainly supported the renovation of
our research facility in Oregon.

      Financing activities

      Cash provided by financing  activities  was $14.2 million and $2.0 million
during the years ended December 31, 2006 and 2005, respectively. During the year
ended  December  31,  2006 we  received  $8.4 from the sale of common  stock and
warrants to acquire common stock,  $4.3 million from the exercise of options and
warrants to purchase shares of common stock,  and $1.5 million from exercises of
rights to  purchase  1,500,000  shares of our common  stock for $1.10 per share.
During the year ended  December  31, 2005 we received  $276,000,  net,  from the
issuance of a promissory note payable to General  Electric  Capital  Corporation
(GE). The note is payable in 36 monthly  installments  of principal and interest
of 10.31% per annum.  During the years ended  December 31, 2006 and 2005 we made
payments of $108,000 and $35,000 to GE.

      Other

      As of  December  31,  2006,  we do not  expect  receipt  of  up-front  and
milestone payments from any of our current collaborative and other agreements.

      We have  incurred  cumulative  net losses  and expect to incur  additional
losses to perform further  research and development  activities.  We do not have
commercial products and have limited capital resources. Our plans with regard to
these matters include  continued  development of our products as well as seeking
additional  working capital through a combination of  collaborative  agreements,
strategic  alliances,  research grants,  equity and debt financing.  Although we
continue to pursue these plans, there is no assurance that we will be successful
in obtaining future financing on commercially reasonable terms.

      Our working  capital and capital  requirements  will depend upon  numerous
factors,   including   pharmaceutical   research   and   development   programs;
pre-clinical  and  clinical  testing;  timing and cost of  obtaining  regulatory
approvals;   levels  of  resources   that  we  devote  to  the   development  of
manufacturing  and marketing  capabilities;  technological  advances;  status of
competitors;  and our ability to establish collaborative arrangements with other
organizations.

Contractual Obligations, Commercial Commitments and Purchase Obligations

      As of December 31, 2006,  our purchase  obligations  are not material.  We
lease certain facilities and office space under operating leases. Minimum future
rental commitments under operating leases having  non-cancelable  lease terms in
excess of one year, are as follows:

<TABLE>
<CAPTION>
                                                       Loans and related
     Year ended December 31,      Lease obligations    interest payable      Total commitments
<S>                                 <C>                  <C>                   <C>
                  2007              $    576,948         $    107,521          $    684,469
                  2008                   576,948               22,809               599,757
                  2009                   579,648                   --               579,648
                  2010                   466,448                   --               466,448
                  2011                   443,748                   --               443,748
                                    ------------         ------------          ------------
     Total                          $  2,643,740         $    130,330          $  2,774,070
                                    ============         ============          ============
</TABLE>


                                       32
<PAGE>

Off-Balance Sheet Arrangements

      SIGA does not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      None.


                                       33
<PAGE>

Item 8. Financial Statements and Supplementary Data

                 Index to the Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm.......................35

Consolidated Balance Sheets as of December 31, 2006 and 2005..................36

Consolidated Statements of Operations for the years ended December 31,
2006, 2005 and 2004...........................................................37

Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 2006, 2005 and 2004..................................38

Consolidated Statements of Cash Flows for the years ended December 31,
2006, 2005 and 2004...........................................................40

Notes to Consolidated Financial Statements....................................41


                                       34
<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of SIGA Technologies, Inc.:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material  respects,  the financial position of
SIGA  Technologies,  Inc. and its  subsidiary at December 31, 2006 and 2005, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2006 in conformity with  accounting  principles
generally accepted in the United States of America. These consolidated financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the  consolidated  financial  statements,  the Company
changed the manner in which it accounts for share-based compensation in 2006.

/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
March 8, 2007


                                       35
<PAGE>

                             SIGA TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                        As of December 31, 2006 and 2005

<TABLE>
<CAPTION>
                                                                                      December 31,     December 31,
                                                                                          2006             2005
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents .....................................................    $ 10,639,530     $  1,772,489
   Accounts receivable ...........................................................         617,032          883,054
   Prepaid expenses ..............................................................         141,032          160,144
                                                                                      ------------     ------------
     Total current assets ........................................................      11,397,594        2,815,687

   Property, plant and equipment, net ............................................       1,320,315        1,224,147
   Goodwill ......................................................................         898,334          898,334
   Intangible assets, net ........................................................         165,243          932,735
   Other assets ..................................................................         246,201          234,126
                                                                                      ------------     ------------
     Total assets ................................................................    $ 14,027,687     $  6,105,029
                                                                                      ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities
   Accounts payable ..............................................................    $  1,357,906     $  1,251,854
   Accrued expenses and other ....................................................         382,679          452,082
   Accrued bonuses ...............................................................         201,825               --
   Deferred revenue ..............................................................              --          347,319
   Common stock rights ...........................................................              --           73,400
   Notes payable .................................................................         107,520          107,520
                                                                                      ------------     ------------
     Total current liabilities ...................................................       2,049,930        2,232,175

Non-current portion of notes payable .............................................          22,809          106,705
Common stock warrants ............................................................       4,673,098          535,119
                                                                                      ------------     ------------
     Total liabilities ...........................................................       6,745,837        2,873,999

Commitments and contingencies ....................................................              --               --

Stockholders' equity
   Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
     authorized, none and 68,038 issued and outstanding at December
     31, 2006 and December 31, 2005, respectively) ...............................              --           58,672
   Common stock ($.0001 par value, 50,000,000 shares authorized,
     32,452,210 and 26,500,648 issued and outstanding at December 31, 2006
     and December 31, 2005, respectively) ........................................           3,245            2,650
   Additional paid-in capital ....................................................      63,646,224       49,638,619
   Accumulated deficit ...........................................................     (56,367,619)     (46,468,911)
                                                                                      ------------     ------------
     Total stockholders' equity ..................................................       7,281,850        3,231,030
                                                                                      ------------     ------------
     Total liabilities and stockholders' equity ..................................    $ 14,027,687     $  6,105,029
                                                                                      ============     ============
</TABLE>

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


                                       36
<PAGE>

                             SIGA TECHNOLOGIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              For the Years Ended December 31, 2006, 2005 and 2004

<TABLE>
<CAPTION>
                                                                             2006             2005             2004
                                                                         ------------     ------------     ------------
<S>                                                                      <C>              <C>              <C>
Revenues
  Research and development ..........................................    $  7,257,532     $  8,476,741     $  1,839,182
                                                                         ------------     ------------     ------------

Operating expenses
  Selling, general and administrative (include $376,295
         of non-cash share based compensation for the
         year ended December 31, 2006) ..............................       4,623,577        2,481,489        4,041,973
  Research and development (include $94,597
         of non-cash share based compensation for the
         year ended December 31, 2006) ..............................       9,149,327        8,295,262        4,165,849
  Patent preparation fees ...........................................         295,006          232,329          393,100
  In-process research and development ...............................              --               --          568,329
  Impairment of intangible assets ...................................              --               --        2,118,219
                                                                         ------------     ------------     ------------
    Total operating expenses ........................................      14,067,910       11,009,080       11,287,470
                                                                         ------------     ------------     ------------

    Operating loss ..................................................      (6,810,378)      (2,532,339)      (9,448,288)

Decrease (increase) in fair market value of common stock rights
  and common stock warrants .........................................      (3,089,997)         235,730               --
Other income (expense), net .........................................           1,667            9,059           74,969
                                                                         ------------     ------------     ------------
    Net loss ........................................................    $ (9,898,708)    $ (2,287,550)    $ (9,373,319)
                                                                         ============     ============     ============

Weighted average shares outstanding: basic and diluted ..............      28,200,130       24,824,824       23,724,026
                                                                         ============     ============     ============
Net loss per share: basic and diluted ...............................    $      (0.35)    $      (0.09)    $      (0.40)
                                                                         ============     ============     ============
</TABLE>

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


                                       37
<PAGE>

                             SIGA TECHNOLOGIES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 2006, 2005 and 2004

<TABLE>
<CAPTION>
                                                                       Series A Convertible
                                                                         Preferred Stock                  Common Stock
                                                                   ---------------------------     --------------------------
                                                                      Shares          Amount          Shares         Amount
<S>                                                                    <C>         <C>              <C>           <C>

      Balance at January 1, 2004                                        81,366     $    72,666      18,676,851    $     1,868

Net proceeds from issuance of common stock
      ($1.44 per share)                                                                              4,750,413            475
Issuance of common stock upon exercise of stock
      options and warrants                                                                              70,994              7
Conversion of preferred stock for common stock                         (13,328)        (13,994)         13,328              1
Stock issued in acquisition of intangible assets                                                     1,000,000            100
Common stock retired upon settlement agreement
      with former founder                                                                              (40,938)            (4)
Stock issued for services                                                                               30,000              3
Net loss
                                                                   -----------     -----------     -----------    -----------
      Balance at December 31, 2004                                      68,038     $    58,672      24,500,648    $     2,450
                                                                   -----------     -----------     -----------    -----------

Net proceeds allocated to the issuance of common
      stock ($1.00 per share)                                                                        2,000,000    $       200
Stock options issued to members of the Board
      of Directors
Net loss
                                                                   -----------     -----------     -----------    -----------
      Balance at December 31, 2005                                      68,038     $    58,672      26,500,648    $     2,650
                                                                   -----------     -----------     -----------    -----------

Net proceeds allocated to the issuance of common
      stock ($4.54 per share)                                                                        2,000,000    $       200
Conversion of preferred stock for common stock                         (68,038)        (58,672)         68,038              7
Stock based compensation
Stock issued for services
Issuance of common stock upon exercise of stock
      options and warrants                                                                           2,383,524            238
Issuance of common stock upon exercise of common
      stock rights                                                                                   1,500,000            150
Fair value of exercised common stock rights and warrants
Net loss
                                                                   -----------     -----------     -----------    -----------
      Balance at December 31, 2006                                          --     $        --      32,452,210    $     3,245
                                                                   ===========     ===========     ===========    ===========
</TABLE>

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

                                   (Continued)


                                       38
<PAGE>

                             SIGA TECHNOLOGIES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 2006, 2005 and 2004

<TABLE>
<CAPTION>
                                                                                                         Total
                                                                    Additional       Accumulated      Stockholders'
                                                                  Paid-in Capital      Deficit           Equity
                                                                  ---------------   -------------     -------------
<S>                                                                <C>              <C>               <C>
      Balance at January 1, 2004                                   $  40,284,856    $ (34,808,042)    $   5,551,348

Net proceeds from issuance of common stock
      ($1.44 per share)                                                6,784,131                          6,784,606
Issuance of common stock upon exercise of stock
      options and warrants                                                69,369                             69,376
Conversion of preferred stock for common stock                            13,993                                 --
Stock issued in acquisition of intangible assets                       1,479,900                          1,480,000
Common stock retired upon settlement agreement
      with former founder                                                      4                                 --
Stock issued for services                                                 47,397                             47,400
Net loss                                                                               (9,373,319)       (9,373,319)
                                                                   -------------    -------------     -------------
      Balance at December 31, 2004                                 $  48,679,650    $ (44,181,361)    $   4,559,411
                                                                   -------------    -------------     -------------

Net proceeds allocated to the issuance of common
      stock ($1.00 per share)                                      $     947,269                            947,469
Stock options issued to members of the Board
      of Directors                                                        11,700                             11,700
Net loss                                                                               (2,287,550)       (2,287,550)
                                                                   -------------    -------------     -------------
      Balance at December 31, 2005                                 $  49,638,619    $ (46,468,911)    $   3,231,030
                                                                   -------------    -------------     -------------

Net proceeds allocated to the issuance of common
      stock ($4.54 per share)                                      $   5,948,328                          5,948,528
Conversion of preferred stock for common stock                            58,665                                 --
Stock based compensation                                                 470,892                            470,892
Stock issued for services                                                156,470                            156,470
Issuance of common stock upon exercise of stock
      options and warrants                                             4,337,604                          4,337,842
Issuance of common stock upon exercise of common
      stock rights                                                     1,534,350                          1,534,500
Fair value of exercised common stock rights and warrants               1,501,296                          1,501,296
Net loss                                                                               (9,898,708)       (9,898,708)
                                                                   -------------    -------------     -------------
      Balance at December 31, 2006                                 $  63,646,224    $ (56,367,619)    $   7,281,850
                                                                   =============    =============     =============
</TABLE>

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


                                       39
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2006, 2005 and 2004

<TABLE>
<CAPTION>
                                                                                 2006             2005             2004
                                                                             ------------     ------------     ------------
<S>                                                                          <C>              <C>              <C>
Cash flows from operating activities:
Net loss ................................................................    $ (9,898,708)    $ (2,287,550)    $ (9,373,319)
Adjustments to reconcile net loss to net
cash used in operating activities:
   Purchase of in-process research & development ........................              --               --          568,329
   Loss on impairment of intangible assets ..............................              --               --        2,118,219
   Depreciation .........................................................         788,014          145,809          221,719
   Amortization of intangible assets ....................................         767,492        1,181,562          832,534
   Decrease (increase) in fair market value of rights and warrants ......       3,089,997         (235,730)              --
   Stock based compensation .............................................         470,892           11,700           47,400
   Non-cash stock based consulting expense ..............................         156,470               --               --
   Loss on impairment of investments ....................................              --           15,000               --
   Loss on write-off of prepaid investments .............................              --          116,243               --
   Changes in assets and liabilities:
      Accounts receivable ...............................................         266,022         (774,150)         (70,118)
      Prepaid expenses ..................................................          19,112            2,160         (231,210)
      Other assets ......................................................         (12,075)         (67,401)          (6,729)
      Deferred revenue ..................................................        (347,319)         347,319               --
      Accounts payable and accrued expenses .............................         262,098          152,587        1,003,117
                                                                             ------------     ------------     ------------
      Net cash used in operating activities .............................      (4,438,005)      (1,392,451)      (4,890,058)
                                                                             ------------     ------------     ------------
Cash flows from investing activities:
   Acquisition of intangible assets .....................................              --               --       (1,033,022)
   Capital expenditures .................................................        (884,182)        (861,941)        (350,688)
                                                                             ------------     ------------     ------------
      Net cash used in investing activities .............................        (884,182)        (861,941)      (1,383,710)
                                                                             ------------     ------------     ------------
Cash flows from financing activities:
   Net proceeds from issuance of common stock and derivatives ...........       8,424,406        1,791,718        6,784,606
   Proceeds from issuance of notes payable ..............................       3,000,000          276,434               --
   Net proceeds from exercise of common stock rights ....................       1,534,500               --               --
   Net proceeds from exercise of warrants and options ...................       4,337,842               --           69,376
   Repayment of notes payable ...........................................      (3,107,520)         (62,209)              --
                                                                             ------------     ------------     ------------
      Net cash provided by financing activities .........................      14,189,228        2,005,943        6,853,982
                                                                             ------------     ------------     ------------
Net increase (decrease) in cash and cash equivalents ....................       8,867,041         (248,449)         580,214
Cash and cash equivalents at beginning of period ........................       1,772,489        2,020,938        1,440,724
                                                                             ------------     ------------     ------------
Cash and cash equivalents at end of period ..............................    $ 10,639,530     $  1,772,489     $  2,020,938
                                                                             ============     ============     ============

Cash paid for interest on notes payable .................................    $    135,055           11,105     $         --
Non-cash supplemental information:
   Conversion of preferred stock to common stock ........................    $     58,672               --     $     13,994
   Transfer of intangible assets for investment in Pecos Labs, Inc. .....    $         --               --     $     15,000
   Shares issued for acquisition of assets from ViroPharma Inc. .........    $         --               --     $  1,480,000
</TABLE>

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


                                       40
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization

SIGA  Technologies,  Inc.  ("SIGA" or the  "Company") is a  bio-defense  company
engaged in the discovery,  development and commercialization of products for use
in defense against  biological warfare agents such as Smallpox and Arenaviruses.
The Company is also  engaged in the  discovery  and  development  of other novel
anti-infectives,  vaccines,  and antibiotics for the prevention and treatment of
serious infectious  diseases.  The Company's anti-viral programs are designed to
prevent or limit the  replication  of viral  pathogens.  SIGA's  anti-infectives
programs target the increasingly  serious problem of drug resistant bacteria and
emerging pathogens.

Basis of presentation

The accompanying consolidated financial statements have been prepared on a basis
which  assumes  that the  Company  will  continue  as a going  concern and which
contemplates  the realization of assets and the  satisfaction of liabilities and
commitments  in  the  normal  course  of  business.  The  Company  has  incurred
cumulative net losses and expects to incur additional  losses to perform further
research  and  development  activities.  The  Company  does not have  commercial
products and has limited capital  resources.  Management's  plans with regard to
these matters include  continued  development of its products as well as seeking
additional  research support funds and future financial  arrangements.  Although
management  will continue to pursue these plans,  there is no assurance that the
Company  will  be  successful  in  obtaining   sufficient  future  financing  on
commercially reasonable terms or that the Company will be able to secure funding
from  anticipated  government  contracts  and grants.  Management  believes that
existing cash balances  combined with  anticipated cash flows will be sufficient
to support  its  operations  beyond the next  twelve  months,  and will fund the
Company's business objectives during that period.

2. Summary of Significant Accounting Policies

Use of Estimates

The consolidated  financial  statements and related  disclosures are prepared in
conformity with accounting principles generally accepted in the United States of
America.  Management is required to make estimates and  assumptions  that affect
the reported  amounts of assets and  liabilities,  the  disclosure of contingent
assets and  liabilities at the date of the financial  statements and revenue and
expenses during the period reported.  These estimates include the realization of
deferred tax assets,  useful  lives and  impairment  of tangible and  intangible
assets,  and the value of options and warrants granted or issued by the Company.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the financial  statements in the period they are  determined to
be necessary. Actual results could differ from these estimates.

Cash and cash equivalents

Cash and cash equivalents consist of short term, highly liquid investments, with
original  maturities of less than three months when  purchased and are stated at
cost. Interest is accrued as earned.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated  depreciation.
Depreciation is provided on the  straight-line  method over the estimated useful
lives of the various asset classes.  Estimated  lives are 5 years for laboratory
equipment;  3 years for computer equipment;  7 years for furniture and fixtures;
and the life of the lease for leasehold improvements.  Maintenance,  repairs and
minor  replacements  are  charged to expense as  incurred.  Upon  retirement  or
disposal of assets,  the cost and related  accumulated  depreciation are removed
from the Balance  Sheet and any gain or loss is  reflected  in the  Statement of
Operations.

Revenue Recognition

The Company  recognizes  revenue  from  contract  research and  development  and
research  payments in  accordance  with SEC Staff  Accounting  Bulletin No. 104,
Revenue  Recognition,  ("SAB  104").  In  accordance  with SAB 104,  revenue  is
recognized  when  persuasive  evidence of an  arrangement  exists,  delivery has
occurred, the fee is fixed or


                                       41
<PAGE>

determinable, collectibility is reasonably assured, contractual obligations have
been satisfied and title and risk of loss have been transferred to the customer.
The Company recognizes revenue from non-refundable  up-front payments,  not tied
to achieving a specific performance milestone, over the period which the Company
is obligated to perform services or based on the percentage of costs incurred to
date, estimated costs to complete and total expected contract revenue.  Payments
for development  activities are recognized as revenue as earned, over the period
of effort.  Substantive at-risk milestone payments, which are based on achieving
a specific performance  milestone,  are recognized as revenue when the milestone
is achieved and the related payment is due, providing there is no future service
obligation  associated  with that  milestone.  In  situations  where the Company
receives  payment in advance of the  performance  of services,  such amounts are
deferred and recognized as revenue as the related services are performed.

For the years ended December 31, 2006,  2005,  and 2004,  revenues from National
Institutes of Health ("NIH")  contracts and Small Business  Innovation  Research
("SBIR")  grants  was  53%,  87%,  and  77%,  respectively,  of  total  revenues
recognized by the Company.

Accounts Receivable

Accounts  receivable  are recorded net of provisions for doubtful  accounts.  An
allowance  for  doubtful   accounts  is  based  on  specific   analysis  of  the
receivables.  At December 31, 2006, 2005, and 2004, the Company had no allowance
for doubtful accounts.

Research and development

Research and  development  expenses  include costs directly  attributable to the
conduct of research and development programs,  including employee related costs,
materials, supplies,  depreciation on and maintenance of research equipment, the
cost of services  provided by outside  contractors,  and facility costs, such as
rent,  utilities,  and  general  support  services.  All costs  associated  with
research  and  development  are  expensed  as  incurred.  Costs  related  to the
acquisition  of  technology  rights,  for  which  development  work is  still in
process, and that have no alternative future uses, are expensed as incurred.

Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the
estimated  fair  value of the net  identified  tangible  and  intangible  assets
acquired.

The Company evaluates goodwill for impairment annually, in the fourth quarter of
each year.  In addition,  the Company  would test  goodwill  for  recoverability
between annual evaluations whenever events or changes in circumstances  indicate
that the carrying amounts may not be recoverable.  Examples of such events could
include a  significant  adverse  change in legal  matters,  liquidity  or in the
business  climate,  an adverse action or assessment by a regulator or government
organization,  loss of key personnel,  or new circumstances  that would cause an
expectation  that it is more  likely  than not that we would  sell or  otherwise
dispose of a reporting unit.  Goodwill impairment is determined using a two-step
approach in accordance with Statement of Financial  Accounting Standards No. 142
"Goodwill and Other  Intangible  Assets"  ("SFAS 142").  The  impairment  review
process  compares the fair value of the reporting unit in which goodwill resides
to its carrying  value.  In 2006,  the Company  operated as one business and one
reporting unit. Therefore, the goodwill impairment analysis was performed on the
basis of the Company as a whole using the market  capitalization  of the Company
as an estimate of its fair value.

Identified Intangible Assets

Acquisition-related intangibles include acquired technology, customer contracts,
grants and covenants not to compete,  and are amortized on a straight line basis
over periods ranging from 2-4 years.

In  accordance  with  Statement  of  Financial   Accounting  Standards  No.  144
"Accounting  for the Impairment or Disposal of Long-Lived  Assets" ("SFAS 144"),
the Company performs a review of its identified  intangible  assets to determine
if facts and circumstances  exist which indicate that the useful life is shorter
than  originally  estimated  or that the  carrying  amount of assets  may not be
recoverable.  If such facts and circumstances do exist, the Company assesses the
recoverability  of  identified  intangible  assets by  comparing  the  projected
undiscounted net cash flows associated with the related asset or group of assets
over  their  remaining  lives  against  their   respective   carrying   amounts.
Impairment,  if any, is based on the excess of the carrying amount over the fair
value of those assets.  Our  estimates of projected  cash flows are dependent on
many factors, including general economic trends, technological


                                       42
<PAGE>

developments  and  projected  future  contracts  and  government  grants.  It is
reasonably  likely that future cash flows associated with our intangible  assets
may exceed or fall short of our current  projections,  in which case a different
amount for impairment would result.

Income taxes

Income taxes are accounted for under the asset and liability  method  prescribed
by Statement of Financial  Accounting  Standards No. 109, "Accounting for Income
Taxes."  Deferred  income taxes are recorded for temporary  differences  between
financial   statement   carrying  amounts  and  the  tax  basis  of  assets  and
liabilities.  Deferred tax assets and liabilities reflect the tax rates expected
to be in effect for the years in which the  differences are expected to reverse.
A valuation allowance is provided if it is more likely than not that some or the
entire deferred tax asset will not be realized.

Net loss per common share

The Company  computes,  presents and discloses  earnings per share in accordance
with SFAS 128 "Earnings  Per Share"  ("EPS")  which  specifies the  computation,
presentation and disclosure requirements for earnings per share of entities with
publicly held common stock or potential common stock. The statement  defines two
earnings per share calculations,  basic and diluted.  The objective of basic EPS
is to measure the performance of an entity over the reporting period by dividing
income  (loss) by the weighted  average  shares  outstanding.  The  objective of
diluted  EPS is  consistent  with  that of basic  EPS,  that is to  measure  the
performance of an entity over the reporting  period,  while giving effect to all
dilutive  potential common shares that were outstanding  during the period.  The
calculation  of diluted  EPS is similar to basic EPS except the  denominator  is
increased for the conversion of potential common shares.

The Company  incurred  losses for the years ended  December 31, 2006,  2005, and
2004,  and as a  result,  certain  equity  instruments  are  excluded  from  the
calculation  of diluted loss per share.  At December 31, 2005,  68,038 shares of
the Company's  Series A convertible  preferred stock have been excluded from the
computation of diluted loss per share as they were  anti-dilutive.  These shares
were  converted  into shares of the Company's  common stock in 2006. At December
31, 2006, 2005, and 2004, outstanding options to purchase 7,736,145,  9,399,561,
and 9,762,061, shares, respectively, of the Company's common stock with exercise
prices  ranging from $0.94 to $5.50 have been excluded from the  computation  of
diluted loss per share as they are  anti-dilutive.  At December 31, 2006,  2005,
and 2004, outstanding warrants to purchase 9,441,915,  9,378,794, and 8,469,594,
shares,  respectively,  of the  Company's  common stock,  with  exercise  prices
ranging from $1.18 to $4.99 have been excluded from the  computation  of diluted
loss per share as they are anti-dilutive.

Fair value of financial instruments

The carrying value of cash and cash  equivalents,  accounts  payable and accrued
expenses  approximates  fair value due to the relatively short maturity of these
instruments.  Common stock rights and warrants which are classified as assets or
liabilities  under the  provisions  of EITF  00-19,  are  recorded at their fair
market value as of each reporting period.

Concentration of credit risk

The Company has cash in bank accounts that exceed the Federal Deposit  Insurance
Corporation  insured  limits.  The Company has not experienced any losses on its
cash  accounts.  No allowance  has been  provided for  potential  credit  losses
because management believes that any such losses would be minimal.

Share-based Compensation

On January 1, 2006,  the  Company  adopted  Statement  of  Financial  Accounting
Standards No. 123 (revised 2004),  "Share-Based Payment" ("SFAS 123(R)"),  which
requires  the  measurement  and  recognition  of  compensation  expense  for all
share-based  payment awards made to employees and directors  including  employee
stock  options  and  employee  stock  purchases  related to the  Employee  Stock
Purchase Plan ("employee stock purchases") based on estimated fair values.  SFAS
123(R) supersedes the Company's previous accounting under Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB 25") for
periods  beginning  on January  1, 2006.  In March  2005,  the SEC issued  Staff
Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company has
applied the provisions of SAB 107 in its adoption of SFAS 123(R).


                                       43
<PAGE>

The  Company  adopted  SFAS 123(R)  using the  modified  prospective  transition
method,  which requires the application of the accounting standard as of January
1,  2006,  the  first day of the  Company's  fiscal  year  2006.  The  Company's
Consolidated Financial Statements as of and for the year ended December 31, 2006
reflect the impact of SFAS 123(R).  In accordance with the modified  prospective
transition method, the Company's Financial Statements for prior periods have not
been  restated  to  reflect,  and do not  include,  the  impact of SFAS  123(R).
Share-based  compensation related to stock options expense recognized under SFAS
123(R)  for the year  ended  December  31,  2006 was  $470,892.  No  share-based
compensation expense related to employee stock options was recognized during the
year ended December 31, 2005.

SFAS 123(R) requires companies to estimate the fair value of share-based payment
awards on the grant-date using an option-pricing model. The value of the portion
of the award that is  ultimately  expected to vest is recognized as expense over
the requisite service periods in the Company's  Statements of Operations.  Prior
to the adoption of SFAS 123(R),  the Company accounted for share-based awards to
employees and directors  using the intrinsic value method in accordance with APB
25 as allowed  under  Statement  of  Financial  Accounting  Standards  No.  123,
"Accounting  for  Stock-Based  Compensation"  ("SFAS 123").  Under the intrinsic
value method, no share-based  compensation  expense related to stock options had
been  recognized  in the Company's  Statements  of Operations  when the exercise
price of the Company's stock options granted to employees and directors  equaled
the fair market value of the underlying stock at the grant-date.

Share-based  compensation  expense recognized during the current period is based
on the value of the portion of  share-based  payment  awards that is  ultimately
expected to vest. SFAS 123(R)  requires  forfeitures to be estimated at the time
of grant in order to  estimate  the  amount  of  share-based  awards  that  will
ultimately vest. The forfeiture rate is based on historical  rates.  Share-based
compensation  expense  recognized in the Company's  Statements of Operations for
the  year  ended  December  31,  2006  includes  (i)  compensation  expense  for
share-based  payment  awards granted prior to, but not yet vested as of December
31, 2005,  based on the grant-date  fair value  estimated in accordance with the
pro  forma  provisions  of  SFAS  123  and  (ii)  compensation  expense  for the
share-based payment awards granted subsequent to December 31, 2005, based on the
grant-date  fair value  estimated  in  accordance  with the  provisions  of SFAS
123(R).  The Company  utilizes the  Black-Scholes  options pricing model for the
valuation of share-based  awards.  Determining the fair value of these awards at
the grant date requires judgment.

Share-based compensation expense reduced the Company's results of operations for
the year ended  December  31, 2006 by $470,893,  or $0.02 per share,  and had no
impact on the Company's cash flow.

The following table illustrates the effect on net loss and net loss per share as
if the Company had applied  the fair value  recognition  provisions  of SFAS No.
123, as amended by SFAS No. 148,  "Accounting  for  Stock-Based  Compensation  -
Transition  and  Disclosures"  ("SFAS 148") during the years ended  December 31,
2005 and 2004.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                        2005               2004
                                                                   --------------     --------------
<S>                                                                <C>                <C>
Net loss available to common stockholders, as reported ........       ($2,287,550)       ($9,373,319)
                                                                   ==============     ==============
Add: Stock-based employee compensation expense included
  in reported net loss ........................................            11,700                 --

Deduct: Total stock based compensation expense determined
  under the fair value based method ...........................          (709,285)        (1,105,330)
                                                                   --------------     --------------
Net loss available to common stockholders, pro forma ..........       ($2,985,135)      ($10,478,649)
                                                                   ==============     ==============
Loss per common share - basic and diluted:
  As reported .................................................    $        (0.09)    $        (0.40)

  Pro forma ...................................................    $        (0.12)    $        (0.44)
</TABLE>


                                       44
<PAGE>

Segment information

The Company is managed  and  operated as one  business.  The entire  business is
managed by a single management team that reports to the chief executive officer.
The Company  does not operate  separate  lines of business or separate  business
entities with respect to any of its product candidates. Accordingly, the Company
does not prepare discrete financial information with respect to separate product
areas or by location and only has one reportable  segment as defined by SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information".

Recent accounting pronouncements

In  July  2006,  the  Financial   Accounting  Standards  Board  ("FASB")  issued
Interpretation   No.  48,   "Accounting  for  Uncertainty  in  Income  Taxes--an
interpretation  of FASB  Statement  No. 109" ("FIN  48"),  which  clarifies  the
accounting for  uncertainty in tax positions.  This  Interpretation  requires an
entity to recognize the impact of a tax position in its financial  statements if
that  position  is more likely  than not to be  sustained  on audit based on the
technical  merits of the position.  The provisions of FIN 48 are effective as of
the beginning of fiscal year 2007,  with the cumulative  effect of the change in
accounting  principle  recorded as an adjustment to opening  retained  earnings.
Early application of FIN 48 is encouraged.  The Company is evaluating the timing
of its  adoption  of FIN 48 and  the  potential  effects  of  implementing  this
Interpretation on its financial condition and results of operations.

In September 2006, the FASB issued SFAS No. 157. SFAS No. 157 provides  guidance
for using fair value to measure  assets and  liabilities  and requires  expanded
information  about the extent to which companies  measure assets and liabilities
at fair value,  the  information  used to measure fair value,  and the effect of
fair value  measurements  on  earnings.  The  standard  applies  whenever  other
standards  require  (or  permit)  assets or  liabilities  to be measured at fair
value.  The  standard  does  not  expand  the  use of  fair  value  in  any  new
circumstances.  SFAS No. 157 is  effective  for  fiscal  years  beginning  after
November 15, 2007. We are in the process of evaluating  the adoption of SFAS No.
157.

3. Research Agreements

On August 30, 2006, the Company  received a three-year,  $6.0 million award from
the NIH to support the  development  of its antiviral  drugs for the Lassa fever
virus. Revenues will be recognized as services are performed.

On August 1,  2006,  SIGA  received a  three-year,  $4.8  million  SBIR Phase II
continuation  grant from the NIH to support  the  Company's  development  of its
smallpox drug candidate,  SIGA-246.  Revenues will be recognized as services are
performed.

On September  26, 2006,  the Company  entered into a  three-year,  $16.5 million
contract with the National  Institute of Allergy and Infectious  Diseases of the
NIH, to further advance the development of SIGA-246, the Company's smallpox drug
candidate. Revenues will be recognized as services are performed.

In November 2006,  SIGA received a $1.4 million,  one year contract with the Air
Force Medical  Service for the  development of  counter-measures  against Dengue
viruses  and  other  water-related  viral  agents.  In  November  2006 SIGA also
received  a  one-year,  $900,000  contract  to aid the USAF  Special  Operations
Command  (USAFSOC) in its development of specific  anti-viral  agents.  Revenues
from these contracts will be recognized as services are performed.

4. Business Acquisitions and Other Transactions

Purchase of Intangible Assets

In August 2004, the Company  acquired  certain  government  grants and two early
stage antiviral programs,  Smallpox and Arenavirus,  targeting certain agenda of
biological  warfare for a purchase  price of  $1,000,000  in cash and  1,000,000
shares of the Company's common stock from ViroPharma Incorporated ("ViroPharma")
(the "ViroPharma  Transaction").  The shares issued to ViroPharma were valued at
the closing date price.

The total  purchase  price of  approximately  $2.5 million was  allocated to the
acquired  government grants ($1.9 million) and to purchased  in-process research
and development ($464,000 allocated to the Smallpox program and


                                       45
<PAGE>

approximately  $104,000 to the  Arenavirus  program)  ("IPRD").  The grants were
amortized over 2 years,  the  contractual  life of each. The amount  expensed as
IPRD was attributed to technology that has not reached technological feasibility
and has no  alternate  future use. The value  allocated  to IPRD was  determined
using the income approach that included an excess earnings  analysis  reflecting
the  appropriate  costs of capital for the  purchase.  Estimates  of future cash
flows  related  to the IPRD  were  made for both  the  Smallpox  and  Arenavirus
programs.  The aggregate discount rate of approximately 55% utilized to discount
the programs' cash flows were based on consideration  of the Company's  weighted
average  cost of  capital  as well as  other  factors,  including  the  stage of
completion and the uncertainty of technology advances for these programs. If the
programs  are not  successful  or completed in a timely  manner,  the  Company's
product  pricing and growth  rates may not be  achieved  and the Company may not
realize the financial benefits expected from the programs.

5. Intangible Assets

The following table presents the components of the Company's acquired intangible
assets with finite lives:

<TABLE>
<CAPTION>
                                              December 31, 2006                               December 31, 2005
                               ---------------------------------------------   ---------------------------------------------
                               Gross Carrying   Accumulated                    Gross Carrying   Accumulated
                                   Amount       Amortization         Net           Amount       Amortization         Net
                               --------------   ------------    ------------   --------------   ------------    ------------
<S>                             <C>             <C>             <C>             <C>             <C>             <C>
Acquired Grants                 $  1,962,693    $  1,962,693    $         --    $  1,962,693    $  1,308,465    $    654,228
Customer contract and grants          83,571          83,571              --          83,571          52,927          30,644
Covenants not to compete             202,000         202,000              --         202,000         202,000              --
Acquired technology                  330,483         165,240         165,243         330,483          82,620         247,863
                                ------------    ------------    ------------    ------------    ------------    ------------
                                $  2,578,747    $  2,413,504    $    165,243    $  2,578,747    $  1,646,012    $    932,735
                                ------------    ------------    ------------    ------------    ------------    ------------
</TABLE>

Amortization expense for intangible assets and costs included the following:

                                                      Year Ended December 31,
                                                       2006             2005
                                                   ------------     ------------
Amortization of acquired grants                    $    654,228     $    981,347
Amortization of customer contract and grants             30,644           33,428
Amortization of covenants not to compete                     --           84,167
Amortization of acquired technology                      82,620           82,620
                                                   ------------     ------------
                                                   $    767,492     $  1,181,562
                                                   ------------     ------------

The Company anticipates  amortization expense to approximate $82,600 for each of
the years ending December 31, 2007, and 2008.

Impairment of Intangible Assets

In December 2004, upon completion of the ViroPharma Transaction,  integration of
the  related  acquired   programs  into  the  Company's   operations,   and  the
demonstrated  antiviral activity of the Company's lead smallpox compound against
several mouse models of poxvirus  disease;  management  commenced an application
process for additional  government grants to support its continued efforts under
the Smallpox and  Arenavirus  antiviral  programs.  Management  determined  that
significant efforts and resources will be necessary to successfully continue the
development  efforts under these  programs and decided to allocate the necessary
resources to support its  commitment.  As a result,  limited  resources  will be
available for the  development  of future  product  candidates  that utilize the
technology  acquired  from  Plexus  in May 2003.  These  factors  resulted  in a
significant  reduction in forecasted  revenues  related to that technology and a
reduction  in the future  remaining  useful  life,  and  triggered  the  related
intangible asset impairment.  The amount of impairment recorded by management in
December 2004 was determined  using the two-step  process  impairment  review as
required by SFAS 144.  In the first  step,  management  compared  the  projected
undiscounted net cash flows associated with the technology  acquired from Plexus
over its


                                       46
<PAGE>

remaining  life  against its carrying  amount.  Management  determined  that the
carrying  amount of the technology  acquired from Plexus  exceeded its projected
undiscounted cash flows. In the second step, management estimated the fair value
of the technology  using the income method of valuation,  which included the use
of  estimated  discounted  cash flows using a discount  rate of 28.5%.  Based on
management's  assessment,  the Company recorded a non-cash  impairment charge of
approximately  $1.5 million in December 2004,  which was included as a component
of the Company's operating loss.

Transfer of Intangible Assets to Pecos Labs, Inc.

In  May  2004,  the  Company  sold  intangible  assets  from  its  immunological
bioinformatics  technology and certain non-core vaccine  development assets to a
privately-held  company,  Pecos Labs,  Inc.  ("Pecos")  in exchange  for 150,000
shares of Pecos common stock.  In addition,  concurrent with the asset transfer,
the Company  terminated  its  employment  agreement  with the  President  of the
Company.  The Company paid approximately  $270,000 in severance to the President
as well as accelerated vesting on 100,000 stock options that were due to vest in
May 2004.  No  compensation  charge was  recorded as the  exercise  price of the
options was above the fair value  market  price on the date of  termination.  In
addition,  the Company reduced the covenant not to compete with the President to
one year from the date of termination.

As a result of the Pecos  transaction in the second quarter of 2004, the Company
performed an impairment  review of the intangible assets in accordance with SFAS
144. The impairment of intangible  assets consists of $322,063 of impairments to
unamortized  intangible  assets  related to the grants  transferred to Pecos and
$303,000 of  impairment  to the  unamortized  covenant  not to compete  with the
President  of the Company due to the  reduction of the covenant to one year from
the date of termination.

During the year ended December 31, 2005, Pecos  terminated its operations.  As a
result,  the Company  recorded a loss of $15,000 to write-off its  investment in
Pecos.

6. Stockholders' Equity

At December  31, 2006,  the  Company's  authorized  share  capital  consisted of
60,000,000  shares,  of  which  50,000,000  are  designated  common  shares  and
10,000,000 are designated  preferred shares. The Company's Board of Directors is
authorized  to issue  preferred  shares in series with  rights,  privileges  and
qualifications of each series determined by the Board.

2006 Placement

On October 19, 2006, the Company  entered into a Securities  Purchase  Agreement
for the issuance and sale of 2,000,000  shares of the Company's  common stock at
$4.54 per share and  warrants  to  purchase  1,000,000  shares of the  Company's
common stock.  The warrants are  exercisable  at $4.99 per share at any time and
from time to time through and including the seventh  anniversary  of the closing
date. With respect to the  transaction,  the Company also entered into a Finders
Agreement.  The  Company  paid  finders'  fee of 3% of the amount  financed,  or
$272,400,  and issued the  finders  warrants  to acquire  136,200  shares of the
Company's  common  stock at  terms  equal to the  investors'  warrants.  Also in
connection with the transaction,  pursuant to the Company's  existing  Exclusive
Finders Agreement, the Company paid finders fee consisting of cash consideration
of 4% of the amount financed, or $363,200, and issued warrants acquiring 136,200
shares of the Company's common stock at terms equal to the investors'  warrants.
The Company received net proceeds of $8.4 million from the transaction.

The Company  accounted for the  transaction  under the  provisions of EITF 00-19
which requires that free standing derivative financial  instruments that require
net cash  settlement be classified as assets or  liabilities  at the time of the
transaction,  and recorded at their fair value. On October 19, 2006, the Company
recorded the warrants to acquire common stock as  liabilities  with an estimated
fair value of $2.5  million.  EITF 00-19 also  requires  that any changes in the
fair value of the derivative instruments be reported in earnings or loss as long
as the derivative contracts are classified as assets or liabilities. At December
31, 2006, the fair market value of the warrants to acquire common stock was $2.4
million.  The Company  applied the  Black-Scholes  model to  calculate  the fair
values of the respective derivative instruments using the contracted term of the
warrants.  Management  estimates the expected  volatility using a combination of
the Company's historical  volatility and the volatility of a group of comparable
companies.  SIGA recorded a gain of $100,000 for the decline in the instruments'
fair value from the date of the transaction to December 31, 2006.


                                       47
<PAGE>

2005 Placement

In November 2005, the Company entered into a Securities  Purchase  Agreement for
the issuance and sale of 2,000,000 shares of the Company's common stock at $1.00
per share and  warrants to purchase  1,000,000  shares of the  Company's  common
stock.  The warrants are initially  exercisable  at 110% of the closing price on
the closing date of the transaction  ($1.18 per share) at any time and from time
to time through and including the seventh  anniversary  of the closing date. The
investors  are also  entitled to  purchase  additional  shares of the  Company's
common stock for a gross amount of $2.0 million at an initial price of $1.10 per
share  for  a  period  of 90  trading  days  following  the  effectiveness  of a
registration statement. An initial registration statement relating to the common
stock sold and the stock underlying the warrants became effective on December 2,
2005.  With respect to the  transaction,  the Company  entered into an Exclusive
Finder's Agreement.  Finder's fees under the agreement include cash compensation
of 7% of the gross amount financed and a warrant to acquire 60,000 shares of the
Company's  common stock at terms equal to the investors'  warrants.  The Company
received  gross  proceeds of $2.0  million from the  transaction  on November 3,
2005. Net proceeds from were $1.8 million.

The Company accounted for the transaction under the provisions of EITF 00-19. On
November 2, 2005, the Company  recorded the warrants to acquire common stock and
the option to acquire common stock as  liabilities  with estimated fair value of
$631,000 and $213,000, respectively. At December 31, 2005, the fair market value
of the  warrants to acquire  common  stock and the option to acquire  additional
shares of common stock was $535,000 and $73,000,  respectively.  SIGA recorded a
gain of $236,000 for the decline in the instruments' fair value from the date of
the transaction to December 31, 2005. In 2006,  holders of 275,000  warrants and
1,500,000 rights to acquire shares of the Company's common stock exercised their
warrants and rights.  Net proceeds  from the exercise of the warrants and rights
were $324,000 and $1,534,500,  respectively.  On August 25, 2006, 500,000 rights
to acquire  common stock  expired  unexercised.  At December 31, 2006,  the fair
market value of the  outstanding  725,000  warrants to acquire  common stock was
$2.4  million.  In 2006,  management  recognized  non-cash  loss of $3.2 million
related to changes in the instruments'  fair market value from December 31, 2005
to December 31, 2006.

2004 Placements

In August 2003, the Company  entered into a securities  purchase  agreement with
MacAndrews  & Forbes  Holdings  Inc.  ("MacAndrews  & Forbes").  Pursuant to the
agreement,  the Company raised gross proceeds of $1.0 million from  MacAndrews &
Forbes and  certain of its  employees,  in exchange  for  694,444  shares of the
Company's  common  stock at a price of $1.44 per share and  warrants to purchase
347,222  shares of the Company's  common stock at an exercise price of $2.00 per
share.  In  addition,  MacAndrews  & Forbes and  certain of its  employees  were
granted an option,  exercisable  through  October 13,  2003,  to invest up to an
additional $9.0 million in the Company on the same terms.

In October  2003,  MacAndrews & Forbes,  certain of its  employees and TransTech
Pharma,  Inc., a related  party to the Company and an affiliate of  MacAndrews &
Forbes  ("TransTech  Pharma"),  exercised their option to invest $9.0 million in
the Company, in exchange for an aggregate of 6,250,000 shares of common stock of
the  Company's  common  stock,  and  warrants to purchase up to an  aggregate of
3,125,000 shares of the Company's common stock at an exercise price of $2.00 per
share.  Immediately  prior to the exercise of such  option,  MacAndrews & Forbes
assigned  the right to invest up to $5.0  million in the  Company  to  TransTech
Pharma.  The  Company  and  TransTech  Pharma are  parties  to a drug  discovery
collaboration agreement signed in October 2002.

In accordance  with and subject to the terms and  conditions  of the  securities
purchase  agreement,  MacAndrews & Forbes and certain of its employees  invested
$2.2 million in exchange for 1,499,587 shares of the Company's common stock at a
price of $1.44 per share and received  warrants to purchase up to an  additional
749,794 shares of common stock at an exercise price of $2.00 per share.

In  January  2004,  following  the  approval  of  the  Company's   stockholders,
MacAndrews & Forbes and  TransTech  Pharma  completed the final portion of their
investment.  MacAndrews & Forbes  invested  $1,840,595 in exchange for 1,278,191
shares of common  stock at a price of $1.44 per share,  and warrants to purchase
up to an additional 639,095 shares of common stock at an exercise price of $2.00
per share;  and TransTech  Pharma invested  $5,000,000 in exchange for 3,472,222
shares of common  stock and warrants to purchase up to an  additional  1,736,111
shares  of  common  stock  on the  same  terms.  In  addition,  as  part  of the
investment,  MacAndrews & Forbes and TransTech  Pharma each were given the right
to appoint one board member to the Board of Directors, subject to certain terms


                                       48
<PAGE>

and  conditions.  On  January  8,  2004,  in  accordance  with the  terms of the
investment, the respective designees of MacAndrews & Forbes and TransTech Pharma
were appointed to serve on SIGA's board of directors.

Other Transactions

In 2004, the Company reached a settlement  agreement for breach of contract with
a founder of the Company,  whereby the founder  returned  40,938 common  shares,
150,000  warrants and $15,000 to the Company.  The common shares were retired by
the Company. The Company recorded the settlement amount as other income.

Preferred Stock

Holders  of the  Series  A  Convertible  Preferred  Stock  are  entitled  to (i)
cumulative dividends at an annual rate of 6% payable when and if declared by the
Company's  board of directors;  (ii) in the event of liquidation of the Company,
each  holder is  entitled  to  receive  $1.4375  per share  (subject  to certain
adjustments) plus all accrued but unpaid dividends;  (iii) convert each share of
Series A to a number of fully paid and non-assessable  shares of common stock as
calculated by dividing $1.4375 by the Series A Conversion Price (shall initially
be  $1.4375);  and (iv) vote with the  holders of other  classes of shares on an
as-converted basis.

During the years ended December 31, 2006 and 2004 certain preferred stockholders
converted 68,038 and 13,328 Series A convertible preferred stock,  respectively,
into 68,038 and 13,328 shares of common stock.

On December 31, 2006,  no shares of Series A  Convertible  Preferred  Stock were
outstanding.

7. Stock option plan and warrants

Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan

In January 1996, the Company  implemented  its 1996 Incentive and  Non-Qualified
Stock Option Plan (the "Plan"). The Plan as amended provides for the granting of
up to 11,000,000 shares of the Company's common stock to employees,  consultants
and outside  directors of the Company.  The exercise  period for options granted
under the Plan,  except those granted to outside  directors,  is determined by a
committee of the Board of Directors.  Stock options granted to outside directors
pursuant  to the Plan must have an  exercise  price equal to or in excess of the
fair market value of the Company's common stock at the date of grant.

For the year ended December 31, 2006, the Company recorded  compensation expense
of $470,892  related to stock  options.  The total fair value of options  vested
during the year was $782,157.  The total  compensation  cost not yet  recognized
related to  non-vested  awards at December  31, 2006 is  $332,651.  The weighted
average period over which total  compensation  cost is expected to be recognized
is 2.50 years.

SIGA  calculated the fair value of options  awarded during the three years ended
December  31,  2006,  2005 and  2004  using  the  Black-Scholes  model  with the
following weighted average assumptions:

    Weighted Average Assumptions        2006           2005            2004
                                    ------------   -------------   -------------
      Expected volatility                 59.91%       60% - 75%      74% - 107%
      Dividend Yield                       0.00%           0.00%           0.00%
      Risk-free interest rate              4.49%   3.00% - 4.00%   2.75% - 3.80%
      Expected holding period              5 Yrs       2 - 5 Yrs       2 - 5 Yrs

The Company  calculates  the expected  volatility  using a combination of SIGA's
historical volatility and the volatility of a group of comparable companies. The
risk-free  interest  rate  assumption  is  based  upon  observed  interest  rate
appropriate for the term of the Company's  employee stock options.  The dividend
yield assumption is based on the Company's intent not to issue a dividend in the
foreseeable  future.  The expected holding period assumption was estimated based
on historical  experience and expectation of employee  exercise  behavior in the
future giving consideration to the contractual terms of the award.


                                       49
<PAGE>

Stock options activity of the Company is summarized as follows:

<TABLE>
<CAPTION>
                                                                            Number of     Average Exercise
                                                                             Shares           Price ($)
<S>                                                                          <C>            <C>
Options outstanding at December 31, 2004                                     9,767,061      $       1.99
   Granted                                                                      90,000              1.22
   Forfeited                                                                  (452,500)             1.60
   Exercised                                                                        --                --
                                                                          ------------
Options outstanding at December 31, 2005                                     9,404,561              2.00
   Granted                                                                     337,500              2.26
   Forfeited                                                                (1,265,167)             1.30
   Expired                                                                     (33,334)             1.50
   Exercised                                                                  (897,415)             1.74
                                                                          ------------      ------------
Options outstanding at December 31, 2006                                     7,546,145      $       2.07
                                                                          ============

<CAPTION>
                                                                                               Weighted
                                                                            Number of      Average Intrinsic
                                                                             Shares            Value ($)
<S>                                                                       <C>                       <C>
Nonvested options at December 31, 2005                                       1,987,500                --
Nonvested options at December 31, 2006                                         343,982              1.92
Options vested during 2006                                                     730,733              2.03

Options available for future grant at December 31, 2006                      2,341,399
Weighted average fair value of options granted during 2006                $       1.24
Weighted average fair value of options granted during 2005                $       0.64
Weighted average fair value of options granted during 2004                $       0.98
Weighted average fair value of options forfeited during 2006              $       1.02
</TABLE>

The following table summarizes information about options outstanding at December
31, 2006:

<TABLE>
<CAPTION>
                   Number of         Weighted                            Number Fully
                    Options           Average                              Vested &                              Aggregate
Range of         Outstanding at      Remaining           Weighted       Exercisable at        Weighted       Intrinsic Value at
Exercise          December 31,    Contractual Life   Average Exercise    December 31,     Average Exercise      December 31,
Price($)             2006             (Years)            Price ($)          2006              Price ($)             2006
<S>                  <C>                   <C>                <C>           <C>                    <C>         <C>
0.94 - 1.85          2,670,668             7.29               1.38          2,426,686              1.40        $   5,709,344
2.00 - 2.75          4,437,250             4.47               2.36          4,437,250              2.36            5,838,038
3.94 - 5.50            438,227             3.95               3.36            338,227              4.36                   --
                 -------------                                          -------------                          -------------
                     7,546,145                                              7,202,163                          $  11,547,382
                 =============                                          =============                          =============
</TABLE>

In  February  2003,  the  Company  entered  into an  agreement  with an  outside
consultant for its support in obtaining certain government contracts.  Under the
terms of the agreement, upon meeting certain criteria, the Company was obligated
to issue 400,000 fully vested  warrants with an exercise  price of $1.32 and a 3
year  term.  In 2006,  upon  meeting  such  criteria,  SIGA  recorded a non-cash
consulting charge of $156,470 representing the fair market value of the warrants
on the issuance date.


                                       50
<PAGE>

The  following  tables  summarize  information  about  warrants  outstanding  at
December 31, 2006:

<TABLE>
<CAPTION>
                                                               Weighted Average
                                       Number of Warrants       Exercise Price     Expiration Dates
                                       ------------------      ---------------
<S>                                             <C>            <C>                    <C>
Outstanding at January 1, 2004                  6,389,844      $         2.50
     Granted                                    2,375,206                2.00         08/10/2010
     Exercised                                    (85,228)               1.08
     Canceled / Expired                          (150,000)               1.50
                                       ------------------      ---------------
Outstanding at December 31, 2004                8,529,822      $         2.39
     Granted                                    1,060,000                1.18          11/2/2012
     Exercised                                         --                  --
     Canceled / Expired                          (150,800)               2.38
                                       ------------------      ---------------
Outstanding at December 31, 2005                9,439,022      $         2.26
     Granted                                    1,949,002                3.81         10/19/2013
     Exercised                                 (1,421,109)               1.88
     Canceled / Expired                          (525,000)               3.60
                                       ------------------      ---------------
Outstanding at December 31, 2006                9,441,915      $         2.52
                                       ------------------      ---------------
</TABLE>

                  Number of Warrants
                      Outstanding          Exercise Price

                         5,204,262          1.18 - 1.90
                         1,660,458          2.00 - 3.00
                         2,577,195          3.00 - 4.99
                    --------------
                         9,441,915
                    ==============

8. Related Parties

In January 2004,  TransTech  Pharma  invested $5.0 million in SIGA (See Note 5).
Furthermore,  four  directors  of the Company are also  directors  of  TransTech
Pharma.  During the year ended December 31, 2006, the Company  incurred costs of
$148,000 related to work performed by an affiliate of TransTech Pharma,  Inc., a
related party, in connection with one of the Company's lead product programs. On
December 31, 2006, the Company's  outstanding  payables included $62,109 payable
to the related party and its affiliates.  Accounts receivable as of December 31,
2006, included $46,883 outstanding from TransTech Pharma, Inc.

Additionally,  a director  of the Company is a member of the  Company's  outside
counsel.


                                       51
<PAGE>

9. Property, Plant and Equipment

Property,  plant and  equipment  consisted of the following at December 31, 2006
and 2005:

      Laboratory equipment                     $  1,555,763    $  1,358,489
      Leasehold improvements                      2,089,293         649,211
      Computer equipment                            357,949         306,527
      Furniture and fixtures                        205,628         205,628
      Construction in-progress                           --         804,596
                                               ------------    ------------
                                                  4,208,633       3,324,451
         Less - accumulated depreciation         (2,888,318)     (2,100,304)
                                               ------------    ------------
      Property, plant and equipment, net       $  1,320,315    $  1,224,147
                                               ============    ============

10. Notes Payable

On March 20, 2006,  SIGA entered into a Bridge Note  Purchase  Agreement  ("Note
Purchase  Agreement")  with  PHTN for the  sale of  three 8% Notes by SIGA,  for
$1,000,000  each.  The first,  second and third  Notes were  issued on March 20,
2006, April 19, 2006, and June 19, 2006, respectively. The proceeds of the Notes
were used by the Company for (i) expenses directly related to the development of
SIGA's lead product,  SIGA-246,  (ii) expenses related to the Company's  planned
merger with PHTN and (iii) corporate overhead.  Pursuant to a Security Agreement
between the Company and PHTN,  also entered  into on March 20,  2006,  the Notes
were  secured by a first  priority  security  interest in the  Company's  assets
(other than assets subject to the security  interest granted to General Electric
Capital  Corporation).  On October 23, 2006, the Company paid PHTN $3,114,400 in
full repayment of the three notes and interest accrued thereon.

On May 20, 2005, the Company borrowed  approximately $276,000 under a Promissory
Note payable to General Electric Capital Corporation.  The note is payable in 36
monthly  installments of principal and interest of 10.31% per annum. The note is
collateralized by a master security  agreement dated as of April 29, 2005 and by
specific  property  listed under the master  security  agreement.  Total balance
outstanding at December 31, 2006 was $130,329.  Scheduled  payments for 2007 and
2008 are $107,520 and $22,809, respectively.

11. Income Taxes

The Company has  incurred  losses  since  inception,  which have  generated  net
operating loss  carryforwards of approximately  $34,286,000 at December 31, 2006
for federal and state income tax purposes.  These carryforwards are available to
offset future  taxable  income and begin expiring in 2010 for federal income tax
purposes.  As a result of a  previous  change  in stock  ownership,  the  annual
utilization  of the net operating loss  carryforwards  is subject to limitation.
The  net  operating  loss  carryforwards  and  temporary  differences,   arising
primarily from deferred research and development expenses and differences in the
treatment of  intangible  assets,  result in a noncurrent  deferred tax asset at
December  31,  2006  and  2005  of  approximately  19,057,000  and  $16,411,000,
respectively.  In  consideration  of the  Company's  accumulated  losses and the
uncertainty of its ability to utilize this deferred tax asset in the future, the
Company has  recorded a valuation  allowance  of an equal amount on such date to
fully offset the deferred tax asset.


                                       52
<PAGE>

At December 31, 2005 and 2004,  the Company's  deferred tax assets are comprised
of the following:

                                                         2006           2005

Net Operating Losses                                      13,372         12,121
Deferred Research and Development Costs                    4,195          3,455
Amortization of Acquired Assets                              818            623
Stock Based Compensation                                     184             --
Depreciation of Property Plant and Equipment                 488            212
                                                      ----------     ----------
Total Deferred Tax Asset                                  19,057         16,411
Valuation Allowance                                      (19,057)       (16,411)
                                                      ----------     ----------
Net Deferred Tax Assets                               $       --     $       --
                                                      ==========     ==========

Following is a summary of changes in our  valuation  allowance  for deferred tax
assets  as of and for the  years  ended  December  31,  2006,  2005 and 2004 (in
thousands):

<TABLE>
<CAPTION>
                                          Additions Charged
                        Balance at          to Costs and                             Balance at End of
December 31,         Beginning of Year        Expenses             Deductions              Year
                    -------------------  -------------------     --------------     -------------------
<S>                    <C>                   <C>                  <C>                  <C>
2006                   $    16,411           $     2,646          $        --          $    19,057
2005                   $    16,090           $       321          $        --          $    16,411
2004                   $    13,030           $     3,060          $        --          $    16,090
2003                   $    11,144           $     1,886          $        --          $    13,030
</TABLE>

For the years ended December 31, 2006 and 2005, the Company's effective tax rate
differs from the federal  statutory rate principally due to net operating losses
and other temporary  differences for which no benefit was recorded,  state taxes
and other permanent differences.

The Company's  effective tax rate differs from the U.S. Federal Statutory income
tax rate of 34% as follows:

                                                      2006             2005

Statutory federal income tax rate                       -34.00%          -34.00%
State tax benefit, net of federal taxes                  -3.91%           -5.52%
Other                                                    10.61%           -3.50%
Valuation allowance on deferred tax assets               27.30%           43.02%
                                                  ------------     ------------
  Effective tax rate                                      0.00%            0.00%
                                                  ============     ============

12. Commitments and Contingencies

Operating lease commitments

As of December 31, 2006, our purchase obligations are not material.  The Company
leases  certain  facilities  and office space under  operating  leases.  Minimum
future rental  commitments  under operating leases having  non-cancelable  lease
terms in excess of one year and future minimum  payments under notes payable are
as follows:


                                       53
<PAGE>

<TABLE>
<CAPTION>
                                                    Loans and related
Year ended December 31,        Lease obligations    interest payable    Total commitments
<S>                               <C>                 <C>                   <C>
              2007                $    576,948        $    107,521         $    684,469
              2008                     576,948              22,809              599,757
              2009                     579,648                  --              579,648
              2010                     466,448                  --              466,448
              2011                     443,748                  --              443,748
                                  ------------        ------------         ------------
Total                             $  2,643,740        $    130,330         $  2,774,070
                                  ============        ============         ============
</TABLE>

Other

On October 4, 2006, SIGA exercised its right, pursuant to its Agreement and Plan
of Merger,  dated June 8, 2006,  with  PharmAthene,  Inc.  ("PHTN") (the "Merger
Agreement"), to terminate the transaction pursuant to which a subsidiary of SIGA
was  going to merge  with  PHTN.  Pursuant  to  Section  12.1(a)  of the  Merger
Agreement,  SIGA had an obligation to exclusively  negotiate with PHTN the terms
of a license agreement relating to SIGA-246. On December 20, 2006, PHTN filed an
action against the Company with respect to, among other  matters,  this contract
provision.  In its Complaint,  PHTN asks the Court to order SIGA to enter into a
license  agreement  with  PHTN  with  respect  to  SIGA-246,  as well as issue a
declaration that SIGA is obliged to execute such a license agreement,  and award
damages  resulting from SIGA's  supposed  breach of that  obligation.  PHTN also
alleges that SIGA breached an obligation to negotiate  such a license  agreement
in good faith,  as well as seeks  damages  for  promissory  estoppel  and unjust
enrichment  based on  supposed  information,  capital and  assistance  that PHTN
allegedly provided to SIGA during the negotiation  process.  On January 9, 2007,
SIGA filed a motion to dismiss  the  Complaint  in its  entirety  for failure to
state a claim upon which relief can be granted.  The Court approved the parties'
briefing schedule, with all briefing to be completed by April 13, 2007.

From time to time,  the Company is  involved  in  disputes or legal  proceedings
arising in the ordinary course of business.  The Company  believes that there is
no  dispute  or  litigation  pending  that could  have,  individually  or in the
aggregate,  a material  adverse  effect on its  financial  position,  results of
operations or cash flows.


                                       54
<PAGE>

13. Financial  Information By Quarter (Unaudited) (in thousands,  except for per
share data)

<TABLE>
<CAPTION>
2006 For The Quarter Ended                 March 31,         June 30,      September 30,     December 31,        Total
                                         -------------    -------------   ---------------   --------------   -------------
<S>                                       <C>              <C>              <C>              <C>              <C>
Revenues                                  $     1,394      $     1,459      $     2,036      $     2,369      $     7,258
Selling, general & administrative         $       942      $     1,493      $       802      $     1,387      $     4,624
Research and development                  $     1,658      $     2,431      $     2,156      $     2,904      $     9,149
Patent preparation fees                   $       109      $       113      $        36      $        37      $       295
Operating loss                            $    (1,314)     $    (2,579)     $      (960)     $    (1,957)     $    (6,810)
Net loss                                  $    (2,834)     $    (2,157)     $      (657)     $    (4,251)     $    (9,899)
Net loss per share: basic and diluted     $     (0.11)     $     (0.08)     $     (0.02)     $     (0.14)     $     (0.35)
Market price range for common stock
    High                                  $      1.56      $      1.65      $      1.63      $      4.95      $      4.95
    Low                                   $      0.90      $      1.22      $      1.01      $      1.49      $      0.90

<CAPTION>
2005 For The Quarter Ended                 March 31,         June 30,      September 30,     December 31,        Total
                                         -------------    -------------   ---------------   --------------   -------------
<S>                                       <C>              <C>              <C>              <C>              <C>
Revenues                                  $     1,459      $     1,864      $     2,910      $     2,244      $     8,477
Selling, general & administrative         $       845      $       811      $       415      $       410      $     2,481
Research and development                  $     1,552      $     2,583      $     1,765      $     2,395      $     8,295
Patent preparation fees                   $       175      $        91      $         8      $       (42)     $       232
Operating income (loss)                   $    (1,113)     $    (1,621)     $       722      $      (520)     $    (2,532)
Net income (loss)                         $    (1,107)     $    (1,630)     $       724      $      (275)     $    (2,288)
Net loss per share: basic and diluted     $     (0.05)     $     (0.07)     $      0.03      $     (0.00)     $     (0.09)
Market price range for common stock
    High                                  $      1.69      $      1.44      $      1.10      $      1.35      $      1.69
    Low                                   $      1.28      $      0.99      $      0.70      $      0.87      $      0.70
</TABLE>


                                       55
<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

      None.

Item 9A. Controls and Procedures

      As of the end of the period  covered by this  Annual  Report on Form 10-K,
the  Company's  management,  including  the Chief  Executive  Officer  and Chief
Financial  Officer,  carried  out  an  evaluation  of the  effectiveness  of the
Company's  disclosure controls and procedures.  Based upon that evaluation,  the
Chief  Executive  Officer and Chief  Financial  Officer have  concluded that the
Company's disclosure controls and procedures are effective.

      There  have  been no  changes  in the  Company's  internal  controls  over
financial  reporting  identified in connection  with the evaluation by the Chief
Executive Officer and Chief Financial Officer that occurred during the Company's
fourth fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

      None.


                                       56
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2007 Annual Meeting of Shareholders.

Item 11. Executive Compensation

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2007 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2007 Annual Meeting of Shareholders.

          Equity Compensation Plan Information

      The following table sets forth certain  compensation plan information with
respect to both equity  compensation  plans  approved  by  security  holders and
equity  compensation  plans not approved by security  holders as of December 31,
2006:

<TABLE>
<CAPTION>
                                                                                         Number of securities
                                                                                        remaining available for
                                      Number of securities                               future issuance under
                                        to be issued upon       Weighted-average          equity compensation
                                           exercise of          exercise price of          plans (excluding
                                      outstanding options,    outstanding options,      securities reflected in
                                       warrants and rights     warrants and rights            column (a))
Plan Category                                  (a)                     (b)                       ( c )
<S>                                         <C>                       <C>                       <C>

Equity compensation plans
approved by security holders (1)            7,546,145                 $ 2.07                    2,341,399

Equity compensation plans not
approved by security holders                  190,000                 $ 2.00                           --

Total                                       7,736,145                 $ 2.07                    2,341,399
</TABLE>

(1)   SIGA   Technologies,   inc.,  Amended  and  Restated  1996  Incentive  and
      Non-Qualified Stock Option Plan.

On  December  31,  2006,   options  awarded  outside  of  the  Company's  equity
compensation  plan included  125,000  options  awarded to an employee and 65,000
options  awarded to  consultants.  In May 2000,  the  Company  awarded its Chief
Scientific  Officer  options to acquire  125,000 shares of the Company's  common
stock at an exercise price of $2.00 per share. In July 2000, the Company entered
into an agreement with a consultant to serve as the Company's  public  relations
agent and  awarded the  consultant  options to acquire  shares of the  Company's
common stock.  On December 31, 2006,  the  consultant  holds 27,500  options and
37,500  options  with an exercise  price of $1.50 per share and $1.75 per share,
respectively.


                                       57
<PAGE>

Item 13. Certain Relationships and Related Transactions

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2007 Annual Meeting of Shareholders.

Item 14. Principal Accountant Fees and Services

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2007 Annual Meeting of Shareholders.


                                       58
<PAGE>

                                     PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) and (2). Financial Statements and Financial Statements Schedule.

See Index to  Financial  Statements  under Item 8 in Part II hereof  where these
documents are listed.

(a) (3). Exhibits.

The following is a list of exhibits:

Exhibit
No.             Description
-------         -----------

3(a)        Restated  Articles of Incorporation of the Company  (Incorporated by
            reference to Form S-3  Registration  Statement of the Company  dated
            May 10, 2000 (No. 333-36682)).

3(b)        Bylaws  of the  Company  (Incorporated  by  reference  to Form  SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(a)        Form of Common Stock Certificate  (Incorporated by reference to Form
            SB-2 Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

4(b)        Warrant Agreement dated as of September 15, 1996 between the Company
            and Vincent A. Fischetti (1) (Incorporated by reference to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(c)        Warrant  Agreement dated as of November 18, 1996 between the Company
            and  David de Weese  (1)  (Incorporated  by  reference  to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(d)        Warrant  Agreement  between the Company  and Stefan  Capital,  dated
            September 9, 1999 (Incorporated by reference to the Company's Annual
            Report on Form 10-KSB for the year ended December 31, 1999).

4(e)        Registration Rights Agreement, dated as of May 23, 2003, between the
            Company and Plexus Vaccine Inc.  (Incorporated  by reference to Form
            8-K of the Company filed June 9, 2003).

4(f)        Registration Rights Agreement,  dated as of August 13, 2003, between
            the Company and MacAndrews & Forbes Holdings Inc.  (Incorporated  by
            reference to Form 8-K of the Company filed August 18, 2003).

10(a)       License and Research Support  Agreement  between the Company and The
            Rockefeller University,  dated as of January 31, 1996; and Amendment
            to License and Research  Support  Agreement  between the Company and
            The  Rockefeller   University,   dated  as  of  October  1,  1996(2)
            (Incorporated  by reference to Form SB-2  Registration  Statement of
            the Company dated March 10, 1997 (No. 333-23037)).

10(b)       Research  Agreement between the Company and Emory University,  dated
            as of January 31,  1996(2)  (Incorporated  by reference to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

10(c)       Research  Support  Agreement  between the  Company and Oregon  State
            University,  dated  as  of  January  31,  1996(2)  (Incorporated  by
            reference to Form SB-2  Registration  Statement of the Company dated
            March 10, 1997 (No. 333-23037)).  Letter Agreement dated as of March
            5, 1999 to continue the Research Support Agreement  (Incorporated by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 1999).


                                       59
<PAGE>

10(d)       Option  Agreement  between the Company and Oregon State  University,
            dated  as of  November  30,  1999  and  related  Amendments  to  the
            Agreement  (Incorporated by reference to the Company's Annual Report
            on Form 10-KSB for the year ended December 31, 1999).

10(h)       Clinical Trials Agreement between the Company and National Institute
            of  Allergy  and  Infectious  Diseases,  dated  as of July  1,  1997
            (Incorporated   by  reference  to  Amendment  No.  1  to  Form  SB-2
            Registration  Statement  of the  Company  dated  July 11,  1997 (No.
            333-23037)).

10(i)       Research  Agreement between the Company and The Research  Foundation
            of  State  University  of New  York,  dated  as of July  1,  1997(2)
            (Incorporated   by  reference  to  Amendment  No.  1  to  Form  SB-2
            Registration  Statement  of the  Company  dated  July 11,  1997 (No.
            333-23037)).

10(j)       Collaborative Research and License Agreement between the Company and
            Wyeth,  dated as of July 1,  1997(2)  (Incorporated  by reference to
            Amendment No. 3 to Form SB-2  Registration  Statement of the Company
            dated September 2, 1997 (No. 333-23037)).

10(k)       Research Collaboration and License Agreement between the Company and
            The  Washington  University,  dated  as  of  February  6,  1998  (2)
            (Incorporated  by reference to the  Company's  Annual Report on Form
            10-KSB for the year ended December 31, 1997).

10(l)       Settlement  Agreement and Mutual Release between the Company and The
            Washington  University,  dated as of February 17, 2000 (Incorporated
            by reference to the  Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 1999).

10(m)       Technology  Transfer  Agreement  between the Company and  MedImmune,
            Inc.,  dated as of February 10, 1998  (Incorporated  by reference to
            the  Company's  Annual  Report  on Form  10-KSB  for the year  ended
            December 31, 1997).

10(p)       Option Agreement  between the Company and Ross Products  Division of
            Abbott  Laboratories,  dated  February  28,  2000  (Incorporated  by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 1999).

10(q)       Agreement  between the Company and Oregon State  University  for the
            Company to provide  contract  research  services  to the  University
            dated September 24, 2000 (Incorporated by reference to the Company's
            Annual Report on Form 10-KSB for the year ended December 31, 2000).

10(r)       License and Research  Agreements between the Company and the Regents
            of the University of California dated December 6, 2000 (Incorporated
            by reference to the  Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 2000).

10(s)       Amended and Restated 1996 Incentive and  Non-Qualified  Stock Option
            Plan  dated  August  15,  2001  (Incorporated  by  reference  to the
            Company's  Annual Report on Form 10-KSB for the year ended  December
            31,  2001),  as amended (as set forth in the Form 8-K of the Company
            filed May 27, 2005).

10(u)       Research  and License  Agreement  between the Company and  TransTech
            Pharma,  Inc. dated October 1, 2002 (Filed with the Company's Annual
            Report on Form 10-KSB for the year ended December 31, 2002 initially
            filed  with the  Securities  and  Exchange  Commission  on March 31,
            2003).

10(x)       Contract between the Company and the Department of the US Army dated
            December 12, 2002 (Filed with the  Company's  Annual  Report on Form
            10-KSB for the year ended December 31, 2002 initially filed with the
            Securities and Exchange Commission on March 31, 2003).

10(y)       Contract  between the Company and Four Star Group dated  February 5,
            2003 (Filed with the Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 2002 initially filed with the Securities and
            Exchange Commission on March 31, 2003).


                                       60
<PAGE>

10(aa)      Securities Purchase Agreement,  dated as of August 13, 2003, between
            the Company and MacAndrews & Forbes Holdings Inc.  (Incorporated  by
            reference to Form 8-K of the Company filed August 18, 2003).

10(bb)      Letter Agreement dated October 8, 2003 among the Company, MacAndrews
            & Forbes Holdings Inc. and TransTech Pharma,  Inc.  (Incorporated by
            reference to Form 8-K of the Company filed August 18, 2003).

10(dd)      Non-Employee  Director  Compensation  Summary Sheet (Incorporated by
            reference  to the  Company's  Quarterly  Report on Form 10-Q for the
            quarter ended March 31, 2005).

10(ee)      Director  Compensation  Program,  effective  April 21,  2005 (as set
            forth in the Form 8-K of the Company filed April 26, 2005).

10(ff)      Service  Agreement,  dated as of April 27, 2005, between the Company
            and TransTech Pharma, Inc. (Incorporated by reference to Form 8-K of
            the Company filed May 3, 2005).

10(gg)      Master  Security  Agreement,  dated as of April  29,  2005,  between
            General Electric Capital  Corporation and the Company  (Incorporated
            by reference to Form 8-K of the Company filed May 3, 2005).

10(hh)      Letter  Agreement,  dated as of August 5, 2005,  between the Company
            and John Odden (Incorporated by reference to Form 8-K of the Company
            filed August 11, 2005).

10(ii)      Agreement,  dated as of  September  14,  2005,  between  Saint Louis
            University and the Company (Incorporated by reference to Form 8-K of
            the Company filed September 20, 2005).

10(jj)      Agreement, dated as of September 22, 2005, between the United States
            Army  Medical   Research  and  Material   Command  and  the  Company
            (Incorporated  by  reference  to  Form  8-K  of  the  Company  filed
            September 27, 2005).

10(kk)      Securities Purchase Agreement, dated as of November 2, 2005, between
            Iroquois Master Fund Ltd.,  Cranshire Capital,  L.P., Omicron Master
            Trust,  Smithfield  Fiduciary LLC and the Company  (Incorporated  by
            reference to Form 8-K of the Company filed November 4, 2005).

10(ll)      Exclusive Finder's Agreement,  dated as of November 1, 2005, between
            the Shemano Group,  Inc. and the Company  (Incorporated by reference
            to Form 8-K of the Company filed November 4, 2005).

10(mm)      Letter Agreement,  dated as of February 1, 2006, between the Company
            and Thomas N. Konatich (Incorporated by reference to Form 8-K of the
            Company filed February 7, 2006).

10(oo)      Bridge Note Purchase Agreement,  dated as of March 20, 2006, between
            the Company and PharmAthene, Inc. (Incorporated by reference to Form
            8-K of the Company filed March 22, 2006).

10(pp)      Security Agreement,  dated as of March 20, 2006, between the Company
            and PharmAthene,  Inc. (Incorporated by reference to Form 8-K of the
            Company filed March 22, 2006).

10(qq)      8%  Note,  dated as of March  20,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed March 22, 2006).

10(rr)      Separation  Agreement,  dated  as of March  31,  2006,  between  the
            Company and Bernard Kasten (Incorporated by reference to Form 8-K of
            the Company filed April 3, 2006).

10(ss)      8%  Note,  dated as of April  19,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed April 20, 2006).

10(tt)      Voting  Agreement,  dated as of June 8,  2006,  among  the  Company,
            TransTech Pharma,  Inc.,  MacAndrews & Forbes,  Inc., Howard Gittis,
            Donald G. Drapkin,  James J. Antal,  Thomas E. Constance,  Mehmet C.
            Oz,


                                       61
<PAGE>

            Eric A. Rose and Paul G. Savas  (Incorporated  by  reference to Form
            8-K of the Company filed June 13, 2006).

10(uu)      Agreement  and Plan of Merger,  dated as of June 8, 2006,  among the
            Company, SIGA Acquisition Corp. and PharmAthene,  Inc. (Incorporated
            by reference to Form 8-K of the Company filed June 13, 2006).

10(vv)      8%  Note,  dated  as of June  19,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed June 20, 2006).

10(ww)      Agreement,   dated  as  of   September   29,   2006,   between  SIGA
            Technologies,  Inc.  and  the  National  Institute  of  Allergy  and
            Infectious   Diseases  of  the   National   Institutes   for  Health
            (Incorporated  by  reference  to Form  10-Q/A of the  Company  filed
            November 13, 2006).

10(xx)      Finder's  Agreement,  dated as of  October  18,  2006,  between  the
            Company and Empire Financial Group, Inc.  (Incorporated by reference
            to Form 8-K of the Company filed October 20, 2006).

10(yy)      Securities Purchase Agreement, dated as of October 18, 2006, between
            the Company,  Iroquois Master Fund Ltd.,  Cranshire  Capital,  L.P.,
            Omicron Master Trust,  Rockmore  Investment  Master Fund,  Ltd., and
            Smithfield  Fiduciary LLC  (Incorporated by reference to Form 8-K of
            the Company filed October 20, 2006).

10(zz)      Amended and Restated Employment  Agreement,  dated as of January 22,
            2007,  between  the  Company  and Dennis E. Hruby  (Incorporated  by
            reference to Form 8-K of the Company filed January 22, 2007).

10(aaa)     Amended and Restated Employment  Agreement,  dated as of January 22,
            2007,  between the Company and Thomas N. Konatich  (Incorporated  by
            reference to Form 8-K of the Company filed January 22, 2007).

10(bbb)     Amended and Restated Employment  Agreement,  dated as of January 31,
            2007,  between  the  Company  and  Eric  A.  Rose  (Incorporated  by
            reference to Form 8-K of the Company filed January 31, 2007).

14          The Company's Code of Ethics and Business  Conduct  (Incorporated by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 2003).

21          Subsidiaries of the Registrant

23.1        Consent of Independent Registered Public Accounting Firm.

31.1        Certification  pursuant to Rules  13a-15(e) or  15d-15(e)  under the
            Securities  Exchange Act of 1934, as adopted pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer.

31.2        Certification  pursuant to Rules  13a-15(e) or  15d-15(e)  under the
            Securities  Exchange Act of 1934, as adopted pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer.

32.1        Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  adopted
            pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 - Chief
            Executive Officer.

32.2        Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  adopted
            pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 - Chief
            Financial Officer.

----------
(1)   These  agreements  were  entered  into prior to the  reverse  split of the
      Company's Common Stock and, therefore, do not reflect such reverse split.

(2)   Confidential  information  is  omitted  and  identified  by an * and filed
      separately with the SEC with a request for Confidential Treatment.


                                       62
<PAGE>

                                   SIGNATURES

      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 on
its behalf by the undersigned, thereunto duly authorized.

                                        SIGA TECHNOLOGIES, INC.
                                        (Registrant)

Date: March 15, 2007                    By:    /s/ Eric A. Rose
                                             -----------------------
                                             Eric A. Rose, M.D.
                                             Chief Executive Officer

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                             Title of Capacities                      Date
<S>                                   <C>                                      <C>
/s/ Eric A. Rose, M.D                 Chief Executive Officer and              March 13, 2007
------------------------------        Chairman of the Board
Eric A. Rose, M.D.                    (Principal Executive Officer)


/s/ Thomas N. Konatich                Chief Financial Officer                  March 12, 2007
------------------------------        (Principal Financial Officer and
Thomas N. Konatich                    Principal Accounting Officer)


/s/ Donald G. Drapkin                 Director                                 March 12, 2007
------------------------------
Donald G. Drapkin


/s/ James J. Antal                    Director                                 March 14, 2007
------------------------------
James J. Antal


/s/ Thomas E. Constance               Director                                 March 12, 2007
------------------------------
Thomas E. Constance


/s/ Adnan M. Mjalli, Ph.D.            Director                                 March 15, 2007
------------------------------
Adnan M. Mjalli, Ph.D.


/s/ Mehmet C. Oz, M.D.                Director                                 March 13, 2007
------------------------------
Mehmet C. Oz, M.D.


/s/ Scott Hammer, M.D                 Director                                 March 13, 2007
------------------------------
Scott Hammer, M.D.


/s/ Paul G. Savas                     Director                                 March 13, 2007
------------------------------
Paul G. Savas


/s/ Judy S. Slotkin                   Director                                 March 12, 2007
------------------------------
Judy S. Slotkin


/s/ Michael Weiner, M.D.              Director                                 March 12, 2007
------------------------------
Michael Weiner, M.D.
</TABLE>


                                       63
<PAGE>

                       This Page Intentionally left Blank

<PAGE>

                                  EXHIBIT INDEX

Exhibit
No.             Description
-------         -----------

3(a)        Restated  Articles of Incorporation of the Company  (Incorporated by
            reference to Form S-3  Registration  Statement of the Company  dated
            May 10, 2000 (No. 333-36682)).

3(b)        Bylaws  of the  Company  (Incorporated  by  reference  to Form  SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(a)        Form of Common Stock Certificate  (Incorporated by reference to Form
            SB-2 Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

4(b)        Warrant Agreement dated as of September 15, 1996 between the Company
            and Vincent A. Fischetti (1) (Incorporated by reference to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(c)        Warrant  Agreement dated as of November 18, 1996 between the Company
            and  David de Weese  (1)  (Incorporated  by  reference  to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

4(d)        Warrant  Agreement  between the Company  and Stefan  Capital,  dated
            September 9, 1999 (Incorporated by reference to the Company's Annual
            Report on Form 10-KSB for the year ended December 31, 1999).

4(e)        Registration Rights Agreement, dated as of May 23, 2003, between the
            Company and Plexus Vaccine Inc.  (Incorporated  by reference to Form
            8-K of the Company filed June 9, 2003).

4(f)        Registration Rights Agreement,  dated as of August 13, 2003, between
            the Company and MacAndrews & Forbes Holdings Inc.  (Incorporated  by
            reference to Form 8-K of the Company filed August 18, 2003).

10(a)       License and Research Support  Agreement  between the Company and The
            Rockefeller University,  dated as of January 31, 1996; and Amendment
            to License and Research  Support  Agreement  between the Company and
            The  Rockefeller   University,   dated  as  of  October  1,  1996(2)
            (Incorporated  by reference to Form SB-2  Registration  Statement of
            the Company dated March 10, 1997 (No. 333-23037)).

10(b)       Research  Agreement between the Company and Emory University,  dated
            as of January 31,  1996(2)  (Incorporated  by reference to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

10(c)       Research  Support  Agreement  between the  Company and Oregon  State
            University,  dated  as  of  January  31,  1996(2)  (Incorporated  by
            reference to Form SB-2  Registration  Statement of the Company dated
            March 10, 1997 (No. 333-23037)).  Letter Agreement dated as of March
            5, 1999 to continue the Research Support Agreement  (Incorporated by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 1999).

10(d)       Option  Agreement  between the Company and Oregon State  University,
            dated  as of  November  30,  1999  and  related  Amendments  to  the
            Agreement  (Incorporated by reference to the Company's Annual Report
            on Form 10-KSB for the year ended December 31, 1999).

10(h)       Clinical Trials Agreement between the Company and National Institute
            of  Allergy  and  Infectious  Diseases,  dated  as of July  1,  1997
            (Incorporated   by  reference  to  Amendment  No.  1  to  Form  SB-2
            Registration  Statement  of the  Company  dated  July 11,  1997 (No.
            333-23037)).

<PAGE>

10(i)       Research  Agreement between the Company and The Research  Foundation
            of  State  University  of New  York,  dated  as of July  1,  1997(2)
            (Incorporated   by  reference  to  Amendment  No.  1  to  Form  SB-2
            Registration  Statement  of the  Company  dated  July 11,  1997 (No.
            333-23037)).

10(j)       Collaborative Research and License Agreement between the Company and
            Wyeth,  dated as of July 1,  1997(2)  (Incorporated  by reference to
            Amendment No. 3 to Form SB-2  Registration  Statement of the Company
            dated September 2, 1997 (No. 333-23037)).

10(k)       Research Collaboration and License Agreement between the Company and
            The  Washington  University,  dated  as  of  February  6,  1998  (2)
            (Incorporated  by reference to the  Company's  Annual Report on Form
            10-KSB for the year ended December 31, 1997).

10(l)       Settlement  Agreement and Mutual Release between the Company and The
            Washington  University,  dated as of February 17, 2000 (Incorporated
            by reference to the  Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 1999).

10(m)       Technology  Transfer  Agreement  between the Company and  MedImmune,
            Inc.,  dated as of February 10, 1998  (Incorporated  by reference to
            the  Company's  Annual  Report  on Form  10-KSB  for the year  ended
            December 31, 1997).

10(p)       Option Agreement  between the Company and Ross Products  Division of
            Abbott  Laboratories,  dated  February  28,  2000  (Incorporated  by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 1999).

10(q)       Agreement  between the Company and Oregon State  University  for the
            Company to provide  contract  research  services  to the  University
            dated September 24, 2000 (Incorporated by reference to the Company's
            Annual Report on Form 10-KSB for the year ended December 31, 2000).

10(r)       License and Research  Agreements between the Company and the Regents
            of the University of California dated December 6, 2000 (Incorporated
            by reference to the  Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 2000).

10(s)       Amended and Restated 1996 Incentive and  Non-Qualified  Stock Option
            Plan  dated  August  15,  2001  (Incorporated  by  reference  to the
            Company's  Annual Report on Form 10-KSB for the year ended  December
            31,  2001),  as amended (as set forth in the Form 8-K of the Company
            filed May 27, 2005).

10(u)       Research  and License  Agreement  between the Company and  TransTech
            Pharma,  Inc. dated October 1, 2002 (Filed with the Company's Annual
            Report on Form 10-KSB for the year ended December 31, 2002 initially
            filed  with the  Securities  and  Exchange  Commission  on March 31,
            2003).

10(x)       Contract between the Company and the Department of the US Army dated
            December 12, 2002 (Filed with the  Company's  Annual  Report on Form
            10-KSB for the year ended December 31, 2002 initially filed with the
            Securities and Exchange Commission on March 31, 2003).

10(y)       Contract  between the Company and Four Star Group dated  February 5,
            2003 (Filed with the Company's  Annual Report on Form 10-KSB for the
            year ended December 31, 2002 initially filed with the Securities and
            Exchange Commission on March 31, 2003).

10(aa)      Securities Purchase Agreement,  dated as of August 13, 2003, between
            the Company and MacAndrews & Forbes Holdings Inc.  (Incorporated  by
            reference to Form 8-K of the Company filed August 18, 2003).

10(bb)      Letter Agreement dated October 8, 2003 among the Company, MacAndrews
            & Forbes Holdings Inc. and TransTech Pharma,  Inc.  (Incorporated by
            reference to Form 8-K of the Company filed August 18, 2003).

<PAGE>

10(dd)      Non-Employee  Director  Compensation  Summary Sheet (Incorporated by
            reference  to the  Company's  Quarterly  Report on Form 10-Q for the
            quarter ended March 31, 2005).

10(ee)      Director  Compensation  Program,  effective  April 21,  2005 (as set
            forth in the Form 8-K of the Company filed April 26, 2005).

10(ff)      Service  Agreement,  dated as of April 27, 2005, between the Company
            and TransTech Pharma, Inc. (Incorporated by reference to Form 8-K of
            the Company filed May 3, 2005).

10(gg)      Master  Security  Agreement,  dated as of April  29,  2005,  between
            General Electric Capital  Corporation and the Company  (Incorporated
            by reference to Form 8-K of the Company filed May 3, 2005).

10(hh)      Letter  Agreement,  dated as of August 5, 2005,  between the Company
            and John Odden (Incorporated by reference to Form 8-K of the Company
            filed August 11, 2005).

10(ii)      Agreement,  dated as of  September  14,  2005,  between  Saint Louis
            University and the Company (Incorporated by reference to Form 8-K of
            the Company filed September 20, 2005).

10(jj)      Agreement, dated as of September 22, 2005, between the United States
            Army  Medical   Research  and  Material   Command  and  the  Company
            (Incorporated  by  reference  to  Form  8-K  of  the  Company  filed
            September 27, 2005).

10(kk)      Securities Purchase Agreement, dated as of November 2, 2005, between
            Iroquois Master Fund Ltd.,  Cranshire Capital,  L.P., Omicron Master
            Trust,  Smithfield  Fiduciary LLC and the Company  (Incorporated  by
            reference to Form 8-K of the Company filed November 4, 2005).

10(ll)      Exclusive Finder's Agreement,  dated as of November 1, 2005, between
            the Shemano Group,  Inc. and the Company  (Incorporated by reference
            to Form 8-K of the Company filed November 4, 2005).

10(mm)      Letter Agreement,  dated as of February 1, 2006, between the Company
            and Thomas N. Konatich (Incorporated by reference to Form 8-K of the
            Company filed February 7, 2006).

10(oo)      Bridge Note Purchase Agreement,  dated as of March 20, 2006, between
            the Company and PharmAthene, Inc. (Incorporated by reference to Form
            8-K of the Company filed March 22, 2006).

10(pp)      Security Agreement,  dated as of March 20, 2006, between the Company
            and PharmAthene,  Inc. (Incorporated by reference to Form 8-K of the
            Company filed March 22, 2006).

10(qq)      8%  Note,  dated as of March  20,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed March 22, 2006).

10(rr)      Separation  Agreement,  dated  as of March  31,  2006,  between  the
            Company and Bernard Kasten (Incorporated by reference to Form 8-K of
            the Company filed April 3, 2006).

10(ss)      8%  Note,  dated as of April  19,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed April 20, 2006).

10(tt)      Voting  Agreement,  dated as of June 8,  2006,  among  the  Company,
            TransTech Pharma,  Inc.,  MacAndrews & Forbes,  Inc., Howard Gittis,
            Donald G. Drapkin,  James J. Antal,  Thomas E. Constance,  Mehmet C.
            Oz, Eric A. Rose and Paul G. Savas  (Incorporated  by  reference  to
            Form 8-K of the Company filed June 13, 2006).

10(uu)      Agreement  and Plan of Merger,  dated as of June 8, 2006,  among the
            Company, SIGA Acquisition Corp. and PharmAthene,  Inc. (Incorporated
            by reference to Form 8-K of the Company filed June 13, 2006).

<PAGE>

10(vv)      8%  Note,  dated  as of June  19,  2006,  between  the  Company  and
            PharmAthene,  Inc.  (Incorporated  by  reference  to Form 8-K of the
            Company filed June 20, 2006).

10(ww)      Agreement,   dated  as  of   September   29,   2006,   between  SIGA
            Technologies,  Inc.  and  the  National  Institute  of  Allergy  and
            Infectious   Diseases  of  the   National   Institutes   for  Health
            (Incorporated  by  reference  to Form  10-Q/A of the  Company  filed
            November 13, 2006).

10(xx)      Finder's  Agreement,  dated as of  October  18,  2006,  between  the
            Company and Empire Financial Group, Inc.  (Incorporated by reference
            to Form 8-K of the Company filed October 20, 2006).

10(yy)      Securities Purchase Agreement, dated as of October 18, 2006, between
            the Company,  Iroquois Master Fund Ltd.,  Cranshire  Capital,  L.P.,
            Omicron Master Trust,  Rockmore  Investment  Master Fund,  Ltd., and
            Smithfield  Fiduciary LLC  (Incorporated by reference to Form 8-K of
            the Company filed October 20, 2006).

10(zz)      Amended and Restated Employment  Agreement,  dated as of January 22,
            2007,  between  the  Company  and Dennis E. Hruby  (Incorporated  by
            reference to Form 8-K of the Company filed January 22, 2007).

10(aaa)     Amended and Restated Employment  Agreement,  dated as of January 22,
            2007,  between the Company and Thomas N. Konatich  (Incorporated  by
            reference to Form 8-K of the Company filed January 22, 2007).

10(bbb)     Amended and Restated Employment  Agreement,  dated as of January 31,
            2007,  between  the  Company  and  Eric  A.  Rose  (Incorporated  by
            reference to Form 8-K of the Company filed January 31, 2007).

14          The Company's Code of Ethics and Business  Conduct  (Incorporated by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 2003).

21          Subsidiaries of the Registrant

23.1        Consent of Independent Registered Public Accounting Firm.

31.1        Certification  pursuant to Rules  13a-15(e) or  15d-15(e)  under the
            Securities  Exchange Act of 1934, as adopted pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer.

31.2        Certification  pursuant to Rules  13a-15(e) or  15d-15(e)  under the
            Securities  Exchange Act of 1934, as adopted pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer.

32.1        Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  adopted
            pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 - Chief
            Executive Officer.

32.2        Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  adopted
            pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002 - Chief
            Financial Officer.

----------
(1)   These  agreements  were  entered  into prior to the  reverse  split of the
      Company's Common Stock and, therefore, do not reflect such reverse split.

(2)   Confidential  information  is  omitted  and  identified  by an * and filed
      separately with the SEC with a request for Confidential Treatment.