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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

For the Fiscal Year Ended
December 31, 2004                                  (Commission File No. 0-23047)

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

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

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

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

           Securities registered pursuant to Section 12(b) of the Act:
                                      None
                                (Title of Class)

           Securities registered pursuant to Section 12(g) of the Act:
                         common stock, $.0001 par value
                                (Title of Class)

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. |_|.

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based upon the closing  sale price of the common stock on March 28,
2005 as reported on the Nasdaq SmallCap Market was approximately $37,485,991. As
of March 28, 2005 the registrant  had  outstanding  24,500,648  shares of common
stock.

Portions of the registrant's  definitive  proxy  statement,  which will be filed
within 120 days of December 31, 2004,  are  incorporated  by reference into Part
III.

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<PAGE>

                             SIGA Technologies, Inc.

                                    Form 10-K

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                      Page No.
<S>        <C>                                                                              <C>
PART I

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

Item 2.    Properties.......................................................................14

Item 3.    Legal Proceedings................................................................14

Item 4.    Submission of Matters to a Vote of Security Holders..............................14



PART II

Item 5.    Market For Registrant's Common Equity, Related Stockholder Matters and
           Issuer Purchases of Equity Securities............................................16

Item 6.    Selected Financial Data..........................................................17

Item 7.    Management's Discussion and Analysis of Financial Condition and Results
           of Operations....................................................................18

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 and Executive Officers of the Registrant...............................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...................................57

Item 14.   Principal Accountant Fees and Services...........................................57

PART IV

Item 15.   Exhibits.........................................................................58

SIGNATURES..................................................................................62
</TABLE>


<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 volatile and competitive
nature of the  biotechnology  industry,  (ii)  changes in  domestic  and foreign
economic  and  market  conditions,  and (iii) 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  company  incorporated in Delaware on December 9,
1996.  We aim to  discover,  develop and  commercialize  novel  anti-infectives,
antibiotics and vaccines for serious infectious diseases, including products for
use  in  defense  against   biological  warfare  agents  such  as  Smallpox  and
Arenaviruses  (hemorrhagic  fevers).  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.

Product Candidates and Market Potential

      SIGA Biological Warfare Defense Product Portfolio

      Anti-Smallpox Drug: 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  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.

      Anti-Arenavirus Drug: Arenaviruses are hemorrhagic fever viruses that have
been  classified  as Category A agents by the  Centers  for Disease  Control and
Prevention  (CDC) due to the great  risk  that  they pose to public  health  and
national  safety.  Among the  Category A viruses  recognized  by the Centers for
Disease Control and Prevention,  there are four hemorrhagic  fever  arenaviruses
(Junin,  Machupo,  Guanarito  and Sabia  viruses)  for which there are no United
States Food and Drug  Administration  (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.  SIGA  also has  earlier  stage
programs  against  other   hemorrhagic  fever  viruses  including  Lassa  virus,
Lymphocytic choriomeningitis virus (LCMV), and Ebola in development. We


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<PAGE>

believe  that the  availability  of  arenavirus  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.

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

      Antibiotics:  To combat the problems  associated with emerging  antibiotic
resistance,  our scientists are developing  drugs designed to hit 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.

      The U.S.  government's  proposed  budget for the  Department  of  Homeland
Security (the "DHS") for the fiscal year beginning October 1, 2005 includes $2.5
billion of federal  spending on Project  BioShield.  In addition to contributing
funds to the DHS,  the  Department  of Defense  will be looking  for  innovative
approaches to the prevention and treatment of biological  warfare agents. One of
the major concerns is Smallpox -- although declared extinct in 1980 by the World
Health Organization,  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 Centers
for Disease  Control and  Prevention  (the  "Centers  for Disease  Control")  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.  At an estimated $15 per dose,  the cost
would be approximately  $900 million.  Further the CBO reports that the DHS will
spend an additional $1 billion to replace expired stocks in 2007-2013.

      The FDA has 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  potential  products  in animal  models
approved  for sale  within a  relatively  short time frame if our  programs  are
successful.  Our  Chief  Scientific  Officer,  Dennis  Hruby,  has over 20 years
experience  working  on  Smallpox-related   research  and  has  been  leading  a
SIGA/Oregon State University consortium working on an antiviral drug development
project for the past two years.


                                       3
<PAGE>

      The market  potential 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  government's  purchase of  approximately  $800
million worth of an older version Smallpox vaccines to have an inventory on hand
if needed is evidence of such market potential.

      SIGA Anti-Infectives Product Portfolio

      Our anti-infectives  program is targeted principally toward drug-resistant
bacteria and  hospital-acquired  infections.  According  to  estimates  from the
Centers  for  Disease  Control,   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.

      Gram-Positive  Antibiotic  Technology:   One  of  our  key  anti-infective
programs is based on a novel target for antibiotic therapy.  Our scientists have
identified an enzyme, a selective protease,  used by most Gram-positive bacteria
to anchor certain  proteins to the bacterial cell wall.  These surface  proteins
are the  means by which  certain  bacteria  recognize,  adhere  to and  colonize
specific  tissue.  Our  strategy  is to  develop  protease  inhibitors  as novel
antibiotics.  We believe  protease  inhibitors will have wide  applicability  to
Gram-positive bacteria in general, including antibiotic resistant staphylococcus
and a broad  range of  serious  infectious  diseases  including  meningitis  and
respiratory tract infections.  In 1997, we entered into a collaborative research
and license agreement with Wyeth to identify and develop protease  inhibitors as
novel antibiotics. In the first quarter of 2001, we received a milestone payment
from Wyeth for delivery of the first  quantities of protease for screening,  and
high-throughput  screening for protease inhibitors was initiated.  In connection
with our effort on this program we have entered  into a license  agreement  with
the University of California at Los Angeles for certain  technology  that may be
incorporated  into our  development  of  products  for  Wyeth.  High  throughput
screening  of compound  libraries  has been  completed  and lead  compounds  are
currently being evaluated in the laboratory and in animals.

      Gram-Negative  Antibiotic  Technology:  In 1998,  we entered into a set of
technology  transfer and related  agreements with MedImmune,  Inc., Astra AB and
Washington  University,   pursuant  to  which  we  acquired  rights  to  certain
Gram-negative  antibiotic targets,  products,  screens and services developed at
Washington University. In February 2000, we ended our collaborative research and
development  relationship  with Washington  University on this technology.  (See
"Collaborative  Research and Licenses").  We maintain a non-exclusive license to
technology  acquired  through  these  related  agreements.  We  are  using  this
technology in the development of antibiotics against Gram-negative pathogens. As
described above,  these bacteria use structures  called pili to adhere to target
tissue,  and we plan to  exploit  the  assembly  and  export of these  essential
infective  structures as novel  anti-infective  targets.  We continue to work on
enhancing  the  intellectual  property  that we jointly  share  with  Washington
University.

      Broad-Spectrum Antibiotic Technology: An initial host response to pathogen
invasion  is the  release  of oxygen  radicals,  such as  superoxide  anions and
hydrogen peroxide. The DegP protease is a first-line defense against these toxic
compounds,  which  are  lethal  to  invading  pathogens,  and is a  demonstrated
virulence  factor for  several  important  Gram-negative  pathogens:  Salmonella
typhimurium,  Salmonella typhi, Brucella melitensis and Yersinia enterocolitica.
In all  of  these  pathogens  it  was  demonstrated  that  organisms  lacking  a
functional DegP protease were  compromised for virulence and showed an increased
sensitivity  to oxidative  stress.  It was also  recently  demonstrated  that in
Pseudomonas  aeruginosa  conversion  to  mucoidy,  the  so-called  CF  phenotype
involves two DegP homologues.

      Our scientists  recently  demonstrated that the DegP protease is conserved
in Gram-positive pathogens,  including S. pyogenes, S. pneumoniae, S. mutans and
S. aureus.  Moreover, our investigators have shown a conservation of function of
this  important  protease in  Gram-positive  pathogens  and we believe that DegP
represents a true broad-spectrum anti-infective development target. Our research
has  uncovered a  virulence-associated  target of the DegP protease that will be
used to design an assay for high-throughput  screening for the identification of
lead inhibitors of this potentially important anti-infective target.


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<PAGE>

      Market for Anti-infective Programs.

      There  are  currently  more than 100  million  prescriptions  written  for
antibiotics  annually  in the U.S.  and we  estimate  the  worldwide  market for
antibiotics to be more than $26 billion.  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.

Technology

      Anti-Infectives Technology: Prevention of Attachment and Infectivity

      The  bacterial   infectious   process  generally   includes  three  steps:
colonization,  invasion  and  disease.  The  adherence  of  bacteria to a host's
surface is crucial  to  establishing  colonization.  Bacteria  adhere  through a
number  of  mechanisms,  but  generally  by  using  highly  specialized  surface
structures  which,  in turn,  bind to specific  structures  or  molecules on the
host's cells or, as discussed below, to inanimate  objects residing in the host.
Once adhered,  many  bacteria will invade the host's cells and either  establish
residence or continue invasion into deeper tissues.  During any of these stages,
the invading bacteria can cause the outward  manifestations of disease,  in some
cases through the  production  and release of toxin  molecules.  The severity of
disease,  while dependent on a large combination of factors, is often the result
of the ability of the bacteria to persist in the host. These bacteria accomplish
this  persistence  by  using  surface  molecules  which  can  alter  the  host's
nonspecific  mechanisms  or its highly  specific  immune  responses  to clear or
destroy the organisms.

      Unlike conventional  antibiotics,  our  anti-infectives  approaches aim to
block the ability of pathogenic bacteria to attach to and colonize human tissue,
thereby preventing  infection at its earliest stage. Our scientific  strategy is
to inhibit the expression of bacterial  surface proteins  required for bacterial
infectivity.  We  believe  that  this  approach  has  promise  in the  areas  of
hospital-acquired  drug-resistant infections and a broad range of other diseases
caused by bacteria.

      Many  special  surface  proteins  used by  bacteria to infect the host are
anchored in the bacterial cell wall.  Scientists at The  Rockefeller  University
("Rockefeller")  have  identified an amino acid sequence and related  enzyme,  a
selective protease,  that are essential for anchoring proteins to the surface of
most Gram-positive  bacteria.  Published  information  indicates that this amino
acid sequence is shared by more than 50 different  surface  proteins  found on a
variety of Gram-positive  bacteria. This commonality suggests that this protease
represents a promising  target for the  development of a new class of antibiotic
products for the treatment of a wide range of infectious  diseases.  Experiments
by our scientists have shown that without this sequence,  proteins cannot become
anchored to the bacterial surface and thus the bacteria are no longer capable of
attachment,  colonization  or  infection.  Such  "disarmed"  bacteria  should be
readily cleared by the body's immune system.  Our drug discovery  strategy is to
use a combination of structure-based  drug design and high throughput  screening
procedures to identify compounds that inhibit the protease, thereby blocking the
anchoring process. If successful,  this strategy should provide relief from many
Gram-positive  bacterial  infections,  but may prove  particularly  important in
combating  diseases  caused  by  the  emerging  antibiotic   resistance  of  the
Gram-positive organisms Streptococcu,  aureus, Streptococcus pneumoniae, and the
enterococci.

      In contrast to the above program, which focuses on Gram-positive bacteria,
our pilicide  program,  based upon  initial  research  performed  at  Washington
University in St. Louis  ("Washington  University"),  focuses on a number of new
and novel targets all of which impact on the ability of  Gram-negative  bacteria
to assemble  adhesive pili on their surfaces.  Pili are proteins on the surfaces
of Gram-negative bacteria -- such as E. coli,  salmonella,  and shigella -- that
are required for the attachment of the bacteria to human tissue,  the first step
in  the   infection   process.   This   research   program  is  based  upon  the
well-characterized  interaction  between a periplasmic protein -- a chaperone --
and the protein  subunits  required to form pili. In addition to describing  the
process by which  chaperones  and pili subunits  interact,  we have developed an
assay systems necessary to screen for potential therapeutic compounds,  and have
provided  an  initial  basis  for  selecting  novel  antibiotics  that  work  by
interfering with the pili adhesion mechanism.


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<PAGE>

      Vaccine Technologies: Mucosal Immunity and Vaccine Delivery

      Using proprietary technology licensed from Rockefeller, SIGA is 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.   Our  vaccine  candidates  use  genetically  engineered
commensals to deliver  antigens for a variety of pathogens to the mucosal immune
system. When administered,  the genetically  engineered  commensals colonize the
mucosal  surface and replicate.  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.

      Our commensal vaccine candidates use Gram-positive  bacteria.  Rockefeller
scientists  have  identified  a  protein  region  that is used by  Gram-positive
bacteria to anchor  proteins  to their  surfaces.  We are using the  proprietary
technology  licensed from  Rockefeller to combine  antigens from a wide range of
infectious organisms,  both viral and bacterial, with the surface protein anchor
region of a variety of commensal organisms. By combining a specific antigen with
a specific  commensal,  vaccines may be tailored to both the target pathogen and
its mucosal point of entry.

      To target an immune response to a particular  mucosal surface, a commensal
vaccine would employ a commensal  organism that naturally inhabits that surface.
For example,  vaccines  targeting  sexually  transmitted  diseases  might employ
Lactobacillus  acidophilus,  a commensal colonizing the female urogenital tract.
Vaccines targeting gastrointestinal diseases could employ Lactobacillus casei, a
commensal  colonizing the  gastrointestinal  tract.  We have  conducted  initial
experiments  using  Streptococcus  gordonii ("S.  gordonii"),  a commensal  that
colonizes the oral cavity and which may be used in vaccines targeting  pathogens
that enter through the upper respiratory tract, such as the influenza virus.

      By using  an  antigen  unique  to a given  pathogen,  the  technology  may
potentially  be applied to any  infectious  agent that enters the body through a
mucosal  surface.  Our scientists have expressed and anchored a variety of viral
and bacterial  antigens on the outside of S. gordonii,  including the M6 protein
from  group A  streptococcus,  a group  of  organisms  that  causes  a range  of
diseases,  including strep throat,  necrotizing fasciitis,  impetigo and scarlet
fever. In addition, proteins from other infectious agents, such as HIV and human
papilloma  virus have also been  expressed  using this  system.  We believe this
technology  will enable the  expression of most  antigens  regardless of size or
shape. In animal studies, we have shown that the administration of a genetically
engineered S. gordonii  vaccine  prototype  induces both a local mucosal  immune
response and a systemic immune response.

      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:   Mucosal
            vaccines  in  general  may  be  more  effective  than   conventional
            parenteral  vaccines,  due to mucosal  vaccines'  ability to produce
            both a systemic and local (mucosal) immune response.

      o     Safety  advantage  over other live  vectors:  A number of  bacterial
            pathogens  have  been  genetically  rendered  less  infectious,   or
            attenuated,  for use as live vaccine 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.

      o     Potential for combined  vaccine  delivery:  The  Children's  Vaccine
            Initiative,  a worldwide  effort to improve  vaccination of children
            sponsored by the World Health Organization (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. We
            believe our commensal delivery technology can be an effective method
            of delivery of  multi-component


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<PAGE>

            vaccines within a single  commensal  organism that address  multiple
            diseases or diseases  caused by  multiple  strains of an  infectious
            agent.

      o     Eliminating need for refrigeration:  One of the problems confronting
            the  effective  delivery  of  parenteral  vaccines  is the  need for
            refrigeration at all stages prior to injection. The stability of the
            commensal  organisms in a  freeze-dried  state  would,  for the most
            part, eliminate the need for special climate conditions,  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.  The  potential  for
            eliminating  the need for  refrigeration  would add  considerably to
            these savings by reducing the costs  inherent in  refrigeration  for
            vaccine delivery.

      Strep Throat Vaccine Candidate.  Until the age of 15, many children suffer
from recurrent  strep throat  infections.  Up to three percent of  ineffectively
treated strep throat cases progress to rheumatic  fever,  a  debilitating  heart
disease, which worsens with each succeeding streptococcal  infection.  Since the
advent  of  penicillin  therapy,  rheumatic  fever  in  the  United  States  has
experienced  a dramatic  decline.  However,  in the last two decades,  rheumatic
fever has experienced a resurgence in the United States.  Part of the reason for
this is the latent  presence of this  organism  in  children  who do not display
symptoms of a sore throat,  and,  therefore,  remain  untreated  and at risk for
development  of  rheumatic  fever.  Based on data from the  Centers  for Disease
Control and Prevention, there are five to 10 million cases of pharyngitis due to
group A streptococcus  in the United States each year. There are over 32 million
children in the principal age group targeted by us for  vaccination.  Worldwide,
it is estimated  that one percent of all school age  children in the  developing
world have rheumatic heart disease.  Additionally,  despite the relative ease of
treating strep throat with antibiotics,  the specter of antibiotic resistance is
always present. In fact, resistance to erythromycin,  the second line antibiotic
in patients allergic to penicillin, has appeared in a number of cases.

      o     We  believe  that the reason no  vaccine  for strep  throat has been
            developed  is because of problems  associated  with  identifying  an
            antigen that is common to the more than 120  different  serotypes of
            group A  streptococcus,  the bacterium  that causes the disease.  We
            have licensed from Rockefeller a proprietary antigen which is common
            to most types of group A  streptococcus,  including  types that have
            been associated with rheumatic  fever.  When this antigen was orally
            administered to animals,  it was shown to provide protection against
            multiple  types  of  group A  streptococcal  infection.  Using  this
            antigen,  we are  seeking  to  develop a mucosal  vaccine  for strep
            throat.

      o     SIGA  has  taken a  parallel  vaccine  development  track  with  two
            formulations  of the  cross-protective  streptococcal  antigen.  One
            approach  expresses  the strep throat  antigen on the surface of the
            commensal  bacterium,  Streptococcus  gordonii,  which  lives on the
            surface  of the teeth and gums.  Pre-clinical  research  in mice and
            rabbits has  established  the ability of this  vaccine  candidate to
            colonize and induce both a local and systemic immune  response.  The
            other candidate uses a subunit (purified protein) approach, in which
            the  antigen  is  delivered  intranasally  with a  mucosal  adjuvant
            (enhances the immune  response).  Like the commensal  approach,  the
            subunit  approach has provided  significant  protection in mice from
            challenges  by multiple  serotypes.  We are  collaborating  with the
            National Institutes of Health ("NIH") and the University of Maryland
            Center for Vaccine  Development on the clinical  development of this
            vaccine  candidate.   In  cooperation  with  the  NIH  we  filed  an
            Investigational  New  Drug  Application  ("IND")  with  the  FDA  in
            December 1997. The first stage of these clinical  trials,  using the
            commensal  delivery  system without the strep throat  antigen,  were
            completed at the  University  of Maryland in 2000.  The study showed
            the  commensal  delivery  system  to be  well-tolerated  and that it
            spontaneously  eradicated or was easily  eradicated by  conventional
            antibiotics.  A  second  clinical  trial of the  commensal  delivery
            system without the strep throat antigen was initiated in 2000 at the
            University of Maryland.  The study was completed in January 2002 and
            the results  corroborated the results of the earlier study regarding
            tolerance and spontaneous eradication. Further development continues
            principally  on  the  subunit   approach,   which  is  currently  in
            pre-clinical studies.

      o     In the U.S.  there are about 19 million  children  aged 2 to 6 years
            who could be candidates to receive such a vaccine at the time of its
            introduction  and then around 4 million  babies born each year to be
            protected.  Assuming a charge of $25 per dose and three doses needed
            for protection, there could be a potential market


                                       7
<PAGE>

            for a strep  throat  vaccine of $1.4  billion to immunize the entire
            U.S.  population of 2 to 6 year olds and,  thereafter,  $300 million
            per year to maintain immunization in new births.

      Surface Protein Expression System ("SPEX")

      The ability to overproduce many bacterial and human proteins has been made
possible through the use of recombinant DNA technology.  The introduction of DNA
molecules  into E. coli has been the  method of choice to  express a variety  of
gene   products,   because   of  these   bacteria's   rapid   reproduction   and
well-understood  genetics.  Yet despite the  development  of many  efficient  E.
coli-based gene expression  systems,  the most important concern continues to be
associated with subsequent  purification  of the product.  Recombinant  proteins
produced in this manner do not readily cross E. coli's outer membrane,  and as a
result,  proteins must be purified from the bacterial  cytoplasm or  periplasmic
space.  Purification  of proteins from these cellular  compartments  can be very
difficult.   Frequently   encountered   problems  include  low  product  yields,
contamination with potentially toxic cellular material (i.e., endotoxin) and the
formation of large amounts of partially folded  polypeptide chains in non-active
aggregates termed inclusion bodies.

      To overcome these  problems,  we have taken  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  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.

Collaborative Research and Licenses

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

      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 sublicensees,  where
applicable,  and we are  responsible  for the  costs of filing  and  prosecuting
patent  applications.  The  agreement  also  requires  us to pay 15% of  certain
milestone  payments  we receive  from Wyeth to  Rockefeller,  if any,  under our
collaborative  and  license  agreement  with  Wyeth.   Accordingly,   under  the
agreement,  which is our  only  agreement  that  requires  us to make  milestone
payments,  we could be required to make milestone  payments to Rockefeller of up
to an aggregate  amount of  approximately  $1.1  million.  To date,  we have not
received  any  milestone  payments  from Wyeth  that would  require us to make a
payment to Rockefeller.  The primary potential  products from this collaboration
are the strep vaccine and the broad spectrum antibiotic. Under the agreement, we
paid the university  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.


                                       8
<PAGE>

      Oregon State University.  Oregon State University  ("OSU") is also a party
to our license  agreement with  Rockefeller,  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.

      During  1999,  we acquired  an option to enter into a license  with OSU in
which we will  acquire  the  rights  to  certain  technology  pertaining  to the
potential development of a chlamydia vaccine. In February 2000, we exercised our
option and pursuant to an exclusive  license agreement dated March 2000, we have
made payments to OSU of  approximately  $25,000 as part of our obligation  under
the option.

      In September 2000, we entered into a subcontract with OSU. The contract is
for a project which is targeted towards developing novel antiviral drugs capable
of preventing disease and pathology for Smallpox in the event this pathogen were
to be used as an agent of  bioterrorism.  The project is being funded by a grant
from the NIH. The basic virology aspects of the project will be conducted at OSU
and the drug  development  will be  performed by us under the  subcontract.  The
budget for the subcontract  work was negotiated on a year by year basis with OSU
and depended on the progress of the program and funding  available.  In the year
ended December 31, 2001 we recognized revenue of $15,000. On October 5, 2001 the
agreement was extended  through  August 31, 2002.  For the period ended December
31, 2002 we recognized  $75,000 in revenue.  The  agreement  was extended  again
through August 31, 2003. The sub-contract is on a year to year renewal.  Through
December 31, 2003 we received a total of $130,000  under the  agreement.  During
the year ended December 31, 2003 work under the subcontract was completed.

      Wyeth. We have entered into a collaborative research and license agreement
with Wyeth in connection with the discovery and  development of  anti-infectives
for  the  treatment  of  gram-positive  bacterial  infections.  Pursuant  to the
agreement,  Wyeth provided funding for a joint research and development program,
subject to certain milestones, through September 30, 1999 and is responsible for
additional milestone payments.  In May 2001, we entered into an amendment to the
July 1,  1997  agreement.  The  amendment  extended  the  term  of the  original
agreement to September 30, 2001. The extension provided for Wyeth to continue to
pay us at a rate of $450,000 per year through the term of the amended agreement.
During the term of the agreement as amended,  we received $787,500 from Wyeth to
support work  performed by SIGA under the agreement and $237,500 for achieving a
research  milestone.  For the year ended December 31, 2001 we recognized revenue
of $1,025,000. The agreement to fund additional research was not extended beyond
September 30, 2001.

      Wyeth  is  obligated  to  make  milestone  payments  to us as any  product
developed  progresses  through the FDA approval process under our agreement with
Wyeth,  which is the only agreement pursuant to which we are entitled to receive
milestone payments.  For products developed we could receive up to approximately
$13 million in  milestone  payments  for approval of the product in the U.S. and
Japan.  We would also receive  royalty  payments of 2% on the first  $300,000 of
cumulative  licensed product sales, 4% on annual sales up to $100 million, 6% on
annual sales  between $100 million and $250 million and 8% on annual sales above
$250 million.  The license will expire on the earlier of 10 years or the last to
expire issued patent.  Wyeth has the right to terminate the agreement  early, on
ninety days written  notice.  If terminated  early,  all rights granted to Wyeth
revert to SIGA except with respect to any compound identified by Wyeth as of the
date of termination and subject to the milestone and royalty  obligations of the
agreement.

      National  Institutes  of Health.  We have entered  into a clinical  trials
agreement  with the NIH pursuant to which the NIH,  with our  cooperation,  will
conduct  clinical  trials of our strep throat vaccine  candidate.  The agreement
will fund trials  through  Phase II of the FDA approval  process.  To date,  two
Phase I clinical  trials  have been  conducted  for the strep  vaccine  delivery
system.  We are working to optimize  and test the vaccine  formulation  prior to
initiating  Phase I clinical trials with the recombinant  commensal vector based
vaccine. The agreement may


                                       9
<PAGE>

be  terminated  unilaterally  by the parties  upon sixty days prior  notice.  If
terminated  we will receive  copies of all data,  reports and other  information
related to the trials and any unused vaccine.

      Prior to 2002 we  received  grants  amounting  to  $247,000 to support our
antibiotic and vaccine development  programs.  In June 2002, we received a Phase
II Small Business Innovation  Research (SBIR) grant for approximately  $865,000.
The grant was for the two year period beginning June, 1, 2002 and ending May 31,
2004.  In  August  2004 we were  awarded  two  Phase I and two  Phase II  grants
totaling  approximately  $12.1  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, 2004,  2003 and,  2002,  we have  recognized  revenue from the SBIR
grants of $1,415,000, $388,000 and $270,000, respectively.

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

      Washington  University.  In  February  1998,  we  entered  into a research
collaboration  and  worldwide  license  agreement  with  Washington   University
pursuant  to which we  obtained  the right  and  license  to make,  use and sell
antibiotic  products  based  on  gram-negative  technology  for  all  human  and
veterinary  diagnostic and  therapeutic  uses. The license  covered five pending
United States patent applications and corresponding foreign patent applications.
The  agreement  generally  required  us to pay  royalties  on sales of  products
developed from the licensed technologies and fees on revenues from sublicensees,
where applicable, and we were responsible for certain milestone payments and for
the  costs of  filing  and  prosecuting  patent  applications.  Pursuant  to the
agreement,  we agreed to provide funding to Washington  University for sponsored
research  through  February  6,  2001,  with  exclusive  license  rights  to all
inventions and discoveries resulting from this research.  During 1999, a dispute
arose  between the parties  regarding  their  respective  performance  under the
agreement.  In February  2000,  the parties  reached a settlement  agreement and
mutual release of their obligations under the research collaboration  agreement.
Under the terms of the settlement,  we are released from any further payments to
Washington  University and have  disclaimed  any rights to the patents  licensed
under the original agreement.  As part of the settlement  agreement,  we entered
into a  non-exclusive  license  to  certain  patents  covered  in  the  original
agreement.  SIGA and Washington University will share equally the responsibility
for  the   administration  and  the  expenses  for  the  prosecution  of  patent
applications  and /or patents in the  agreement.  The  collaboration  is for the
gram-negative  product  opportunity.  We will  receive  licensing  revenue  from
Washington  University  that  derives  from the  commercialization  of  products
covered by patent rights of the agreement.  The royalty will be 20% of the first
$400,000  received and 10% of the next $1,000,000  received with a total payment
of licensing  revenues to us not to exceed  $500,000.  The term of our agreement
with  Washington  University  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.  We have currently
met all our obligations under this agreement.

      Abbott Laboratories.  In March 2000, we entered into an agreement with the
Ross Products  Division of Abbott  Laboratories  ("Ross").  The agreement grants
Ross an  exclusive  option to  negotiate  an  exclusive  license to certain SIGA
technology and patents in addition to certain research development  services. In
exchange for  research  services  and the option,  Ross was  obligated to pay us
$120,000  in three  installments  of $40,000.  The first  payment of $40,000 was
received  in  March  2000  and was  recognized  ratably,  over  the  term of the
arrangement.  The remaining  installments  are contingent  upon meeting  certain
milestones under the agreement and will be recognized as revenue upon completion
and acceptance of such milestones.  The first milestone was met, and we received
an additional payment of $40,000 in the quarter ended September 30, 2000. During
the years ended December 31, 2001 and 2000, we recognized  revenue in the amount
of $45,000  and  $80,000,  respectively.  The  development  agreement  was for a
sexually transmitted disease potential product opportunity. The research program
was completed in late 2001 and additional work was performed into 2003,  however
the  additional  work could not be completed  due to the inability of one of our
sub-contractors  to perform.  As a result, we gave Ross notice of termination on
January 26, 2004 and all rights to the technology reverted to us.

      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


                                       10
<PAGE>

fee of $10,000.  As of December 31, 2004 we have made payments of  approximately
$91,000 under the license. In the event that we sub-license the license, we must
pay Regents 15% of all royalty  payments made to SIGA.  Under the agreement,  we
will also pay Regents 15% of all royalties  received  from Wyeth.  The agreement
applies to the gram positive product opportunity and our collaborative agreement
with  Wyeth.  The  term  of  the  agreement  is  until  the  expiration  of  the
last-to-expire  patent  licensed  under this  agreement.  The  agreement  may be
terminated  by Regents if we default on any of our  obligations,  the  agreement
with Wyeth is terminated and a substitute agreement is not entered into or if we
give notice that we do not intend to make product from the licensed  technology.
We have currently met all our obligations under this agreement.

      U.S. Army Medical  Research  Acquisition  Activity.  In December  2002, we
entered  into  a four  years  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 and the total amount  approximated  $1.6 million.
Annual payments over the term of the agreement will be approximately $400,000.


      TransTech  Pharma,  Inc. In October 2002, we entered into a drug discovery
collaboration agreement with TransTech Pharma, Inc. ("TransTech Pharma").  Under
the  agreement,   SIGA  and  TransTech  Pharma  collaborate  on  the  discovery,
optimization and development of lead compounds to 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 2004, 2003 and 2002 from this collaboration.

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  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.

      The following are our patent positions as of December 31, 2004.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                 Number
                  Number          Number       Exclusively      Number
                Exclusively   Co-Exclusively    Licensed      Exclusively      Number
  PATENTS        Licensed        Licensed         from         Licensed       Owned by      Patent Expiration Dates
                   from            with          Oregon        from UCLA        SIGA
                Rockefeller     Washington        State
                   Univ.           Univ.       University
----------------------------------------------------------------------------------------------------------------------
<S>                 <C>             <C>            <C>           <C>             <C>       <C>
                                                                                           2008, 2013(2), 2014 (6),
     U.S.            8               7              1                             1        2015 (2), 2016 (2), 2017,
                                                                                                2019, 2020 (2)
----------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                 Number
                  Number          Number       Exclusively      Number
                Exclusively   Co-Exclusively    Licensed      Exclusively      Number
  PATENTS        Licensed        Licensed         from         Licensed       Owned by      Patent Expiration Dates
                   from            with          Oregon        from UCLA        SIGA
                Rockefeller     Washington        State
                   Univ.           Univ.       University
----------------------------------------------------------------------------------------------------------------------
<S>                 <C>             <C>            <C>           <C>             <C>        <C>
----------------------------------------------------------------------------------------------------------------------
                                                                                             2009, 2013, 2014 (2),
 Australia           5               2              1                                        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
----------------------------------------------------------------------------------------------------------------------
</TABLE>

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


                                       12
<PAGE>

      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, 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 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 has 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. To date,  the FDA has not
given clearance to any products submitted under the amended regulations.

      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.

      Commercialization  of animal  health  products  can be  accomplished  more
rapidly than human health products.  Unlike the human market,  potential vaccine
or therapeutic  products can be tested  directly on the target animal as soon as
the product leaves the research  laboratory.  The data collected in these trials
is  submitted  to the U.S.  Department  of  Agriculture  for review and eventual
product approval.

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,    AVI   Biopharma,    Avant
Immuno-therapeutics,  Inc,  Bavarian Nordic AS,  Chimerix Inc.,  Dynport Vaccine
Company,  Bioport,  Dor Biopharma,  Inc.,  Pharmathene,  and  Microbiotix,  Inc.
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 can be no  assurance  that our  competitors  will not 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.


                                       13
<PAGE>

Human Resources and Facilities

      As of March 14, 2005 we had 35 full time employees.  None of our employees
are covered by a collective  bargaining  agreement  and we consider our employee
relations to be good.

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 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 10,000 square feet under a lease that expires
in December 2007.

Item 3. Legal Proceedings

      SIGA is not a party, nor is its property the subject of, any pending legal
proceedings other than routine litigation incidental to its business.

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

      At our Annual  Meeting of  Stockholders  held on December  14,  2004,  our
stockholders  elected our Board of  Directors  and  ratified  our  selection  of
independent registered public accounting firm:


                                       14
<PAGE>

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


      Director                                   Votes For             Withheld
      --------                                   ---------             --------
      Donald G. Drapkin                          20,719,841            914,668
      Bernard L. Kasten, M.D.                    21,456,084            178,425
      Thomas E. Constance                        21,454,002            180,507
      Adnan M. Mjalli, Ph.D.                     21,457,759            176,750
      Mehmet C. Oz, M.D.                         20,717,866            916,643
      Eric A. Rose, M.D.                         21,458,009            175,500
      Paul G. Savas                              21,457,602            176,907
      Michael A. Weiner, M.D.                    21,459,189            175,320
      Judy S. Slotkin                            21,459,682            174,827
      James J. Antal                             21,457,264            177,245

      Our stockholders ratified the selection of  PricewaterhouseCoopers  LLP as
our  independent  registered  public  accounting firm for the fiscal year ending
December 31, 2004 by casting 21,550,273 votes in favor of this proposal,  26,320
votes against the proposal and 57,916 abstained.


                                       15
<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  SmallCap  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 SmallCap Market.

                                   Price Range

2003                                                              High       Low
        First Quarter .....................................     $ 1.49    $ 1.02
        Second Quarter ....................................     $ 1.91    $ 1.09
        Third Quarter .....................................     $ 2.13    $ 1.61
        Fourth Quarter ....................................     $ 2.60    $ 1.80

        2004                                                     High       Low
        First Quarter .....................................     $ 2.34    $ 1.85
        Second Quarter ....................................     $ 1.93    $ 1.29
        Third Quarter .....................................     $ 1.63    $ 1.23
        Fourth Quarter ....................................     $ 1.75    $ 1.35

      As of March 28, 2005,  the closing bid price of our common stock was $1.53
per share.  There were 106  holders of record as of March 28,  2005.  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  contractual
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.

Recent Sales of Unregistered Securities

      All of the following  sales of  unregistered  securities were made without
registration  under the  Securities  Act in  reliance  upon the  exemption  from
registration  afforded  under Section 4(6) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder. Accordingly, the transfer of the securities
is  subject to  substantial  restrictions.  Securities  were only  purchased  by
"Accredited  Investors"  as that term is defined under Rule 501 of Regulation D.
Proceeds from the offerings were used for general working capital purposes.

      In August 2004, we acquired certain  government grants and two early stage
antiviral  programs,  Smallpox  and  Arenavirus,  targeting  certain  agents  of
biological  warfare from  ViroPharma.  As part of the  purchase  price for these
assets they were issued 1,000,000 shares of our common stock.

      In August  2003,  we entered into an  agreement  with  MacAndrews & Forbes
Holdings Inc.  ("MacAndrews & Forbes"), a holding company of which the Company's
Chairman  of the  Board of  Directors  is Vice  Chairman  and a  director.  Upon
consummation of the agreement,  MacAndrews & Forbes and its permitted  assignees
invested an initial  $1,000,000  in SIGA in exchange  for 694,444  shares of our
common  stock at a price of $1.44 per share and  warrants  to  purchase  347,222
shares  of  common  stock at an  initial  exercise  price of  $2.00  per  share.
MacAndrews  & Forbes  and its  permitted  assignees  also  received  an  option,
exercisable  through October 13, 2003, to invest up to an additional  $9,000,000
in SIGA on the same  terms.  Upon  exercise  of the option in October  2003,  we
received gross


                                       16
<PAGE>

proceeds of  $2,159,405  in exchange for  1,499,587  shares of common stock at a
price of $1.44 per share and warrants to purchase 749,794 shares of common stock
at an initial  exercise price of $2.00 per share. In January 2004, upon approval
of the Company's  shareholders,  MacAndrews & Forbes and its permitted assignee,
TransTech  Pharma,  Inc.,  invested  the  remaining  $6,840,595  in exchange for
4,750,413  shares of common stock and warrants to purchase  2,375,206  shares of
common stock at an exercise price of $2.00 per share.  All warrants issued under
the agreement have a term of seven years.

      In June 2003,  the Company  raised  gross  proceeds  of $1.5  million in a
private  offering of 1,250,000  shares of common stock.  In connection  with the
offering the Company issued warrants to purchase 625,000 shares of the Company's
common stock to placement  agents.  The warrants are  exercisable  at a price of
$2.00 per share and have a term of five years.

      In May 2003,  we  acquired  substantially  all of the  assets of Plexus in
exchange for 1,950,000  shares of our common stock and the assumption of certain
liabilities,  including  promissory notes for loans we previously made to Plexus
for $50,000 and $20,000.

      In December 2002 and January 2003, we completed a private  placement of 34
units  consisting  of 1.7 million  shares of common  stock to a group of private
investors.  The  gross  proceeds  from the  offering  were  $1,865,000  with net
proceeds to SIGA of approximately $1,682,000.

      In October 2002, we completed a private  placement of units  consisting of
an  aggregate  of  1,037,500  shares of common  stock and  warrants  to purchase
518,750  shares of  common  stock at an  exercise  price of $2.25 per share to a
group of private  investors.  The offering yielded net proceeds of approximately
$935,000.

      See Item 12 for certain equity  compensation  information  with respect to
equity compensation plans.

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 $15,000  settlement  amount as
other income.

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, 2004, 2003, 2002, 2001 and 2000.

<TABLE>
<CAPTION>
                              Selling, general                                    In-process
The year ended                       &           Research and      Patent        research and    Impairment of
December 31,     Revenues      administrative    development   preparation fees   development   intangible assets
--------------   --------     ----------------   ------------  ----------------  ------------   -----------------
<S>               <C>             <C>              <C>             <C>             <C>              <C>
2004              $ 1,839         $ 4,042          $ 4,165         $   393         $   568          $ 2,118
2003              $   732         $ 2,646          $ 2,943         $   300                          $   137
2002              $   344         $ 1,838          $ 1,766         $   105
2001              $ 1,160         $ 2,571          $ 1,733         $   117
2000              $   483         $ 4,851          $ 2,609         $   107

<CAPTION>
                                                                            Weighted average
The year ended                                         Loss per share:     shares outstanding
December 31,      Operating loss      Net Loss         basic & diluted      basic & diluted
--------------    --------------      --------         ---------------     ------------------
<S>                 <C>               <C>                 <C>                  <C>
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
2001                $ (3,262)         $ (3,730)           $ (0.44)              8,499,961
2000                $ (7,084)         $ (7,790)           $ (1.08)              7,202,856
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                              Total         Net cash used
As of and for the year                     Cash & cash     stockholders'    in operating
ended December 31,         Total assets    equivalents        equity         activities
------------------         ------------    -----------     -------------    -------------
<S>                          <C>             <C>             <C>              <C>
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)
2001                         $ 4,208         $ 3,148         $ 3,541          $ (2,944)
2000                         $ 3,210         $ 1,707         $   925          $ (3,938)
</TABLE>

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

      The following  discussion should be read in conjunction with our 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, we have been principally  engaged in
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.  The effort
to  develop  a drug for  Smallpox  is being  aided by SBIR  grants  from the NIH
totaling  approximately  $5.8 million that were awarded in the third  quarter of
2004 and a $1.6 million contract with the U.S. Army which began in January 2003.
The Arenavirus  program is being  supported by SBIR grants from the NIH totaling
approximately $6.3 million that were awarded in the third quarter of 2004.

      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 several  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  sufficient  financing on terms acceptable to us. The
financial  statements do not include any adjustments  that might result from the
outcome of this  uncertainty.  Management  believes it has sufficient  funds and
projected cash flows to support operations beyond December 31, 2005.

      Our  biotechnology  operations  are run out of 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 and strategic alliances. While we have had success in obtaining strategic
alliances  and grants,  no  assurance  can be given 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.


                                       18
<PAGE>

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  financial
statements, which we discuss under the heading "Results of Operations" following
this section of our MD&A.  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,  which impacts
goodwill  impairments;  assessment of recoverability of long-lived assets, which
primarily impacts operating income when we impair intangible  assets.  Below, we
discuss these policies further, as well as the estimates and judgments involved.
We also have other  policies that we consider key accounting  policies,  such as
for  revenue  recognition;  however,  these  policies  do not require us to make
estimates or judgments that are difficult or subjective.

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 financial  statements.
Note 2 of the Notes to the Consolidated  Financial Statements includes a summary
of all of the significant accounting policies.

      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  performs an annual review in the fourth quarter of each year,
or more frequently if indicators of potential  impairment exist, to determine if
the carrying value of the recorded goodwill is impaired.  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 2004,  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. The
estimated  fair values might produce  significantly  different  results if other
reasonable assumptions and estimates were to be used.

      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 3.5-4 years.


                                       19
<PAGE>

      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.

Recent Accounting Pronouncements

      In December  2004, the FASB issued SFAS No. 123R,  "Share-Based  Payment."
SFAS No. 123R  requires  employee  stock  options and rights to purchase  shares
under stock participation plans to be accounted for under the fair value method,
and eliminates the ability to account for these  instruments under the intrinsic
value method  prescribed  by APB Opinion No. 25, and allowed  under the original
provisions of SFAS No. 123. SFAS No. 123R requires the use of an option  pricing
model for estimating fair value,  which is amortized to expense over the service
periods.  The  requirements  of SFAS No. 123R are effective  for fiscal  periods
beginning  after June 15,  2005.  SFAS No.  123R  allows for either  prospective
recognition of compensation expense or retrospective  recognition,  which may be
back to the original  issuance of SFAS No. 123 or only to interim periods in the
year of adoption. The Company is currently evaluating these transition methods.

      In  March  2004,  the  Emerging  Issues  Task  Force  issued  EITF  03-06,
"Participating  Securities  and the  Two-Class  Method under FASB  Statement No.
128".  This  statement  provides  additional  guidance  on the  calculation  and
disclosure requirements for earnings per share. The FASB concluded in EITF 03-06
that  companies  with  multiple   classes  of  common  stock  or   participating
securities,  as defined by SFAS No. 128,  calculate  and  disclose  earnings per
share based on the two-class method. The adoption of this statement did not have
an impact to our financial  statements  presentation as the Company is in a loss
position.

Results of Operations

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

                                                2004        2003         2002
                                             ----------  ----------   ----------

      Revenue                                    100%        100%         100%
                                             ----------  ----------   ----------
      Selling, general and administrative        220%        362%         534%
      Research and development                   227%        402%         513%
      Patent preparation fees                     21%         41%          31%
      In-process research and development         31%          0%           0%
      Impairment of intangible assets            115%         19%           0%
                                             ----------  ----------   ----------
      Operating loss                             514%        723%         978%

Years ended December 31, 2004, 2003 and 2002

      Revenues from grants and research and development  contracts  approximated
$1,839,200  for the year ended  December  31, 2004  compared to $731,700 for the
year ended December 31, 2003. The approximate 151% increase is the result of the
award of two Phase I and two Phase II SBIR  grants by the NIH  during  the third
quarter  of 2004.  The Phase II grants are for a two year  period  ending in the
third  quarter  of 2006.  The  total  grant  award was for  approximately  $12.1
million.  For the year ended December 31, 2004 we recorded revenue of $1,049,600
from  these  grants.  We also  received  a one year SBIR  grant from the NIH for
$252,000 in August 2004 to support our Strep vaccine program. For the year ended
December 31, 2004 we recorded  revenue of $85,600 from this grant.  Revenue from
our contract with the U.S. Army was $425,100 for 2004;  compared to $315,300 for
the year ended  December 31, 2003. The  approximate  35% increase was due to the
higher budget for work  performed in 2004.  For the year ended December 31, 2004
we received  revenue of $254,800 from an SBIR grant for our DegP anti  infective
that we


                                       20
<PAGE>

completed in the second quarter of 2004. For the year ended December 31, 2003 we
received $387,800 from this grant.

      Revenue of $731,700 for the year ended December 31, 2003 was approximately
112% higher than revenue of $344,450 for the year ended  December 31, 2002.  The
increase  for the year ended  December  31,  2003 from the prior  year  reflects
$290,000 in revenue  from the first year of our $1.6 million  contract  with the
U.S. Army for our work on the  development of a Smallpox drug.  Revenue from our
Phase II Small Business Innovation Research (SBIR) grant also increased. Revenue
from the SBIR  grant for the year  ended  December  31,  2003 was  approximately
$388,000, an approximate 44% increase over the year ended December 31, 2002. The
SBIR grant, which was a two year grant for a total of $865,000, ended on May 31,
2004.

      Selling,  general and administrative  expenses for the year ended December
31, 2004 were  $4,042,000  compared to expenses of $2,646,600 for the year ended
December  31,  2003.  The  increase of  $1,395,400,  or  approximately  53%, was
primarily  due to an increase of  $628,000  in payroll  expense,  and a $693,000
increase in legal expenses.  Payroll expenses  increased by  approximately  128%
primarily due to the addition of a Chief Executive  Officer and a Vice President
- Business Development, bonuses paid to employees, and the costs associated with
the  termination of the  Employment  Agreement  with our former  President.  The
increase  in legal  expenses  of 272%  from  2003 was the  result  of the  costs
incurred to review and amend our corporate governance policies and procedures to
ensure compliance with the regulations  promulgated under the Sarbanes Oxley Act
of 2002, as well as the NASDAQ stock market.  Also  contributing to the increase
in legal  expenses  were the  costs  incurred  in  connection  with a  potential
business combination, the sale of certain non-core vaccine assets, the hiring of
our new CEO, a legal action that we initiated  against a former  founder and the
work  performed  relative to the  acquisition  of certain assets and grants from
ViroPharma. Increases in travel expense, rent, amortization and filing fees were
offset by decreases in depreciation, insurance and miscellaneous expenses.

      The $2,646,600 of selling,  general and  administrative  expenses incurred
for the year ended December 31, 2003  represented  an increase of  approximately
44% from an expense of $1,838,500  for the year ended  December 31, 2002. Of the
$808,100  increase,  approximately  $553,000 was the result of higher consulting
expenses  associated with our marketing  program to find  additional  sources of
government grant and contract funding and increased  investor relations efforts.
Approximately  $184,000  of the  increase  was the result of  increased  payroll
expense  reflecting  the  administrative  employees who were added in connection
with the acquisition of substantially all the assets of Plexus. In addition, the
year ended  December  31,  2003  included  non-cash  expenses  of  approximately
$123,000  associated with the amortization of certain intangible assets acquired
in the Plexus transaction.  These increases were partially offset by lower legal
and  accounting  fees. For the year ended December 31, 2002 legal and accounting
fees were  approximately  $176,000 higher than the expenses  incurred in 2003 as
the result of work done in 2002 on a proposed merger.

      Research  and  development  expenses  were  $4,165,800  for the year ended
December 31,  2004;  an increase of  approximately  42% from the  $2,942,800  of
expenses incurred for the year ended December 31, 2003.  Amortization expense of
$635,900 represented  approximately 35% of the increase. These expenses were the
result of the  acquisition  of certain assets from Plexus in 2003 and ViroPharma
in 2004.  Payroll expenses  increased  approximately  28% to $1,654,000 for 2004
from  $1,289,700  incurred in 2003. The increase was the result of the expansion
of staff to service the grants  acquired  from  ViroPharma  and bonuses  paid to
employees.  Sponsored  research  increased  by  approximately  117%  in  2004 to
$486,000 from $223,500 in 2003.  The increase was the result of payments made to
a Danish  university  for former  Plexus  programs,  a payment made to TransTech
Pharma for work  performed  on an SBIR grant  that was  completed  in the second
quarter and  payments  to Oregon  State  University  for work on the strep grant
received in 2004.  Expenses  for lab  supplies  increased  approximately  16% to
$472,890  from  $407,076  as a result  of  accelerated  development  of our lead
product programs.

      For the year ended  December 31, 2003  research and  development  expenses
increased approximately 67% to $2,942,800 from $1,766,400 for the same period in
2002.  Approximately  $504,000  of the  increase  was the  result of 64%  higher
payroll  expense  caused by the  addition  of Plexus  R&D  personnel  as well as
additional staffing for our ongoing Smallpox and anti-infectives  programs.  For
the year ended December 31, 2003 we recognized non-cash charges of approximately
$262,000 for the amortization of certain intangible assets acquired from Plexus;
no similar  charges were  recognized in the prior year. In addition,  lab supply
expenses were  approximately  $400,000,  an increase of approximately 83% in the
year ended December 31, 2003 from the prior year spending level of


                                       21
<PAGE>

approximately $219,000. The increase reflects increased activity on our Smallpox
and DegP programs.  Sponsored research increased to approximately  $315,000,  an
82% increase from the prior year. The increase was due to payment for work being
performed on former Plexus programs at a Danish University.

      All of our product programs are in the early stage of development. At this
stage of  development,  we cannot make  estimates of the potential  cost for any
program to be completed or the time it will take to complete the project.  There
is a high risk of  non-completion  of any  program  because  of the lead time to
program  completion  and  uncertainty  of the costs.  Net cash  inflows from any
products  developed  from these  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 is in the
relatively  early stage of  development.  Products  for the  biological  warfare
defense market, such as the Smallpox anti-viral,  could be available for sale 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 this program to
increase as the  potential  products  enter animal  studies and safety  testing.
Funds for future  development will be partially paid for by NIH SBIR grants, the
contract  we have with the U.S.  Army,  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.  The clinical trials for our Strep
vaccine  through  Phase II would be funded under an agreement  with the NIH. The
time to market for this product  should be several years from now because of the
nature of the FDA requirements for approval of a pediatric vaccine. We expect to
fund the  development of the Strep vaccine  beyond the Phase II clinical  trials
through a corporate collaboration or from additional funding from debt or equity
financings. We do not yet have a corporate partner for this product and there is
no  assurance  that we will  ever  have one or that we will be able to raise the
funds  needed to go forward.  If the funding is not  available  or the  clinical
trials are not successful, the program could be delayed or cancelled. We believe
this product program is on schedule.  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, 2004 were
$393,100 an approximate 31% increase from expenses of $300,500 incurred in 2003.
The  increase  was the result of  increased  costs  arising  from the Plexus and
ViroPharma asset  acquisitions.  The $300,500 of expense incurred in 2003 was an
approximate 187% increase over the $104,700 expense incurred in 2002, the result
of increased costs of patent work required on the intellectual property acquired
in the Plexus transaction, including foreign patent filings.

      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  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  will be  available  for the  development  of future  product
candidates that utilize the technology  acquired from Plexus


                                       22
<PAGE>

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 Labs, Inc. ("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.

      For the year ended  December 31, 2003, we incurred a loss on impairment of
assets as a result of taking a non-cash  charge of  $137,000  to the  intangible
assets  acquired  in the Plexus  transaction  to reflect  the  termination  of a
research agreement. No similar charge was incurred in 2002.

      Total  operating  loss for the year ended December 31, 2004 was $9,448,300
compared to a loss of $5,294,900  for 2003. Of the current loss,  $2,686,500 was
the  result of  non-cash  charges  incurred  for the  impairment  of assets  and
recognition of in-process  research and  development  expense.  Excluding  these
expenses,  the  current  year loss was  approximately  28% higher than the prior
year.  The  increase  in  the  loss  was  due to  higher  selling,  general  and
administrative  expenses,  higher research and  development  expenses and higher
patent costs as described in detail above. These increases were partially offset
by increased revenue.

      Total  operating loss for the year ended December 31, 2003 was $5,294,900,
an approximate 57% increase from the $3,365,100 loss incurred for the year ended
December  31, 2002.  The  increase in the loss is the result of higher  selling,
general and  administration  expenses and research and  development  expenses as
described above,  partially offset by higher revenues.  Approximately 27% of the
increase in the net loss was the result of non-cash charges incurred in the year
ended December 31, 2003.

      Other  income was $75,000 in the year ended  December 31, 2004 an increase
of approximately 311% from the $18,300 for the year ended December 31, 2003. The
increase  was mainly due to  interest  income  related to higher  cash  balances
during 2004 compared to 2003.  In 2004 we also received  other income of $15,000
as the result of the settlement of a legal action with a former founder.

      Other  income  of  $18,300  for the  year  ended  December  31,  2003  was
approximately 46% lower than the $34,100  recognized for the year ended December
31, 2002 and reflected a reduction in interest income due to lower cash balances
and interest yields in the year ended December 31, 2003 compared to prior year.

Liquidity and Capital Resources

      As of December 31, 2004 we had $2,020,938 in cash and cash equivalents. We
believe that these funds and our projected  cash flows are sufficient to support
our operations  beyond December 31, 2005, and that sufficient cash flows will be
available to meet our business objectives.

      In August 2004, we acquired certain  government grants and two early stage
antiviral  programs,  Smallpox  and  Arenavirus,  targeting  certain  agents  of
biological  warfare from  ViroPharma  for a purchase price of $1,000,000 in cash
and  1,000,000  shares of our  common  stock.  As part of the  closing,  we were
awarded  Phase I and II SBIR grants from the NIH  totaling  approximately  $12.1
million,  which will be received over the next two years, for the development of
drugs for the treatment of Smallpox and Arenavirus as noted above.

      In  May  2004,   we  sold   intangible   assets  from  our   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. As a result of this  transaction,  we performed an
impairment review of the intangible


                                       23
<PAGE>

assets and concluded that the carrying amount of certain transferred  intangible
assets of $307,063  would not be  recoverable.  In addition,  we terminated  our
employment  agreement  with our  President.  We paid  approximately  $270,000 in
severance  to our former  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,  we reduced the covenant not to
compete with our former  President to one year from the date of termination.  We
recognized  $303,000 of  impairment to the  unamortized  covenant not to compete
with our former  President due to the reduction of the covenant to one year from
the date of termination.

      In August  2003,  we entered into an  agreement  with  MacAndrews & Forbes
Holdings Inc.  ("MacAndrews & Forbes"), a holding company of which the Company's
Chairman  of the  Board of  Directors  is Vice  Chairman  and a  director.  Upon
consummation of the agreement,  MacAndrews & Forbes and its permitted  assignees
invested an initial  $1,000,000  in SIGA in exchange  for 694,444  shares of our
common  stock at a price of $1.44 per share and  warrants  to  purchase  347,222
shares  of  common  stock at an  initial  exercise  price of  $2.00  per  share.
MacAndrews  & Forbes  and its  permitted  assignees  also  received  an  option,
exercisable  through October 13, 2003, to invest up to an additional  $9,000,000
in SIGA on the same  terms.  Upon  exercise  of the option in October  2003,  we
received gross proceeds of $2,159,405 in exchange for 1,499,587 shares of common
stock at a price of $1.44 per share and warrants to purchase  749,794  shares of
common stock at an initial  exercise price of $2.00 per share.  In January 2004,
upon  approval  of the  Company's  shareholders,  MacAndrews  &  Forbes  and its
permitted assignees invested the remaining  $6,840,595 in exchange for 4,750,413
shares of common stock and warrants to purchase 2,375,206 shares of common stock
at an exercise price of $2.00 per share. All warrants issued under the agreement
have a term of seven years.

      In June 2003,  the Company  raised  gross  proceeds  of $1.5  million in a
private  offering of 1,250,000  shares of common stock.  In connection  with the
offering,  the  Company  issued  warrants  to  purchase  625,000  shares  of the
Company's  common stock to placement  agents.  The warrants are exercisable at a
price of $2.00 per share and have a term of five years.

      In May 2003,  we  acquired  substantially  all of the  assets of Plexus in
exchange for 1,950,000  shares of our common stock and the assumption of certain
liabilities,  including  promissory notes for loans we previously made to Plexus
for $50,000 and $20,000.

      In December 2002 and January 2003, we completed a private  placement of 34
units  consisting  of 1.7 million  shares of common  stock to a group of private
investors.  The  gross  proceeds  from the  offering  were  $1,865,000  with net
proceeds to SIGA of approximately $1,682,000.

      We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
beyond  December 31, 2005. In addition,  we will attempt to generate  additional
working capital  through a combination of  collaborative  agreements,  strategic
alliances, research grants, equity and debt financing. However, no assurance can
be provided that additional  capital will be obtained  through these sources or,
if obtained, will be 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.


                                       24
<PAGE>

Contractual Obligations, Commercial Commitments and Purchase Obligations

      As of December 31, 2004,  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:

        Year ended December 31,
          2005                                 $   239,700
          2006                                     255,400
          2007                                     261,800
          2008                                     133,200
          2009                                     135,900
          2010                                      22,700
                                               -----------
        Total                                  $ 1,048,700
                                               ===========

Off-Balance Sheet Arrangements

      SIGA does not have any off-balance sheet arrangements.

Risk Factors That May Affect Results of Operations and Financial Condition

      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  $9.4  million,  $5.3 million and
$3.3 million for the years ended December 31, 2004, 2003 and 2002, respectively.
As  of  December  31,  2004,  2003  and  2002,  our   accumulated   deficit  was
approximately $44.2 million, $34.8 million and $29.5 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  and financial  condition 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.

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 December 31, 2005. Our annual
operating  needs  vary from year to year  depending  upon the  amount of revenue
generated  through  grants 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.


                                       25
<PAGE>

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 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.  Our biological warfare defense products do not need human clinical
trials for  approval by the FDA.  We will need to perform two animal  models and
provide  safety data for a product to be approved.  Our other  products  will be
subject to the  approval  guidelines  under FDA  regulatory  requirements  which
include a number of phases of testing in humans.

      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


                                       26
<PAGE>

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
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
collaborative  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, 2004,  2003 and 2002,  respectively,  were derived from
revenues related to grants,  contracts and license  agreements.  We will receive
little or no revenues under our collaborative  agreements if our  collaborators'
research,   development  or  marketing  efforts  are  unsuccessful,  or  if  our
agreements  are  terminated  early.  Additionally,  if we do not enter  into new
collaborative  agreements, we will not receive future revenues from new sources.
Our future  revenue  is  substantially  dependent  on the  continuing  grant and
contract work being performed for the NIH under two major grants which expire in
September  2006 and the U.S.  Army which  expires at the end of  December  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  by the
other party thereto.

      Several   factors  will  affect  our  future   receipt  of  revenues  from
collaborative arrangements,  including the amount of time and effort expended by
our  collaborators,  the timing of the identification of useful drug targets and
the  timing of the  discovery  and  development  of drug  candidates.  Under our
existing  agreements,  we may not earn significant  milestone payments 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.  Under our  collaborative  agreement
            with the NIH we have  received  SBIR Grants  totaling  approximately
            $12.1 million in 2004.  The term of these grants expire in September
            2006.  We are paid as the work is performed and the agreement can be
            cancelled for non-performance. We also have 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.  We are current in all our
            obligations under our agreements.

      o     The  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


                                       27
<PAGE>

            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.

      o     Oregon State University ("OSU"). 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 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. We have also entered into a subcontract agreement with
            OSU for us to perform  work under a grant OSU has from the NIH.  The
            subcontract  agreement was renewable  annually and the current terms
            expired on August 31, 2003.  Work on this agreement was completed in
            2003.

      o     Wyeth. Our license agreement expires on the earlier of June 30, 2007
            or the last to  expire  patent  that we have  sub-licensed  to them.
            Wyeth has the right to  terminate  the  agreement on 90 days written
            notice.  If  terminated,  all rights granted to Wyeth will revert to
            us, except for any compound identified by Wyeth prior to the date of
            termination and subject to the milestones and royalty obligations of
            the agreement.

      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.  We  have
            currently met all our obligations under this agreement.

      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.  This
            agreement is related to our agreement  with Wyeth and expires at the
            same  time as that  agreement.  It can be  cancelled  earlier  if we
            default on our  obligations  or if Wyeth cancels its agreement  with
            SIGA and we are not able to find a  replacement  for Wyeth.  We have
            currently met all our obligations under this agreement.

      o     U.S. Army Medical Research Acquisition  Activity.  In December 2002,
            we entered  into a four years  contract  with the U.S.  Army Medical
            Research  Acquisition  Activity (USAMRAA) to develop a drug to treat
            Smallpox. We are current in all our obligations under our agreement.

      o     TransTech  Pharma,  Inc.  Under  our  collaborative  agreement  with
            TransTech  Pharma,  TransTech Pharma is required to collaborate with
            us on the discovery,  optimization and development of lead compounds
            to 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.  We
            are current in all obligations under this agreement.

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


                                       28
<PAGE>

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  Investigational  New  Drug  ("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;

      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 the
            IND application 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.


                                       29
<PAGE>

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.

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 out patent  positions  as of December 31, 2004 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 growth has placed,  and may continue to 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


                                       30
<PAGE>

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  $5,000,000 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.

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 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.


                                       31
<PAGE>

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,  if any,
after they 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.

The manufacture of genetically  engineered  commensals is 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.

      Although our  management  believes  that we have the ability to acquire or
produce quantities of genetically  engineered  commensals  sufficient to support
our present needs for research and our projected needs for our initial  clinical
development programs, management believes that improvements in our manufacturing
technology  will  be  required  to  enable  us  to  meet  the  volume  and  cost
requirements  needed for certain commercial  applications of commensal products.
Products based on commensals have never been manufactured on a commercial scale.
The  manufacture  of all  of  our  products  will  be  subject  to  current  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


                                       32
<PAGE>

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 and preferred 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, 2004,  Directors,  Officers  and  principal  stockholders
beneficially owned approximately 48.1% of our stock.

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

<TABLE>
<S>                                                                                               <C>
Report of Independent Registered Public Accounting Firm............................................35

Consolidated Balance Sheets as of December 31, 2004 and 2003.......................................36

Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002.........37

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31,
   2004, 2003 and 2002.............................................................................38

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002.........40

Notes to Consolidated Financial Statements.........................................................41
</TABLE>


                                       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. at December 31, 2004 and 2003, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2004 in conformity with accounting principles generally accepted in
the United States of America.  These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these 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.


/s/ PRICEWATERHOUSECOOPERS LLP

New York, New York
February 22, 2005


                                       35
<PAGE>

                             SIGA TECHNOLOGIES, INC.

                           CONSOLIDATED BALANCE SHEETS

                        As of December 31, 2004 and 2003


<TABLE>
<CAPTION>
                                                                                      December 31,     December 31,
                                                                                          2004             2003
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents .....................................................    $  2,020,938     $  1,440,724
   Accounts receivable ...........................................................         108,904           38,786
   Prepaid expenses ..............................................................         278,547           50,338
                                                                                      ------------     ------------
    Total current assets .........................................................       2,408,389        1,529,848

   Property, plant and equipment, net ............................................         508,015          379,046
   Goodwill ......................................................................         898,334          898,334
   Intangible assets, net ........................................................       2,114,297        3,117,357
   Other assets ..................................................................         181,725          174,995
                                                                                      ------------     ------------
    Total assets .................................................................    $  6,110,760     $  6,099,580
                                                                                      ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities
   Accounts payable ..............................................................    $  1,148,277     $    353,051
   Accrued expenses and other ....................................................         403,072          195,181
                                                                                      ------------     ------------
    Total liabilities ............................................................       1,551,349          548,232

Commitments and contingencies

Stockholders' equity
   Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
   authorized, 68,038 and 81,366 issued and outstanding at December 31, 2004
   and December 31, 2003, respectively) ..........................................          58,672           72,666
   Common stock ($.0001 par value, 50,000,000 shares authorized,
     24,500,648 and 18,676,851 issued and outstanding at December 31, 2004
     and December 31, 2003, respectively) ........................................           2,450            1,868
   Additional paid-in capital ....................................................      48,679,650       40,284,856
   Accumulated deficit ...........................................................     (44,181,361)     (34,808,042)
                                                                                      ------------     ------------
    Total stockholders' equity ...................................................       4,559,411        5,551,348
                                                                                      ------------     ------------
    Total liabilities and stockholders' equity ...................................    $  6,110,760     $  6,099,580
                                                                                      ============     ============
</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, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                      2004             2003             2002
                                                                  ------------     ------------     ------------
<S>                                                               <C>              <C>              <C>
Revenues
     Research and development ................................    $  1,839,182     $    731,743     $    344,450
                                                                  ------------     ------------     ------------

Operating expenses
     Selling, general and administrative .....................       4,041,973        2,646,586        1,838,470
     Research and development ................................       4,165,849        2,942,809        1,766,368
     Patent preparation fees .................................         393,100          300,494          104,700
     In-process research and development .....................         568,329               --               --
     Impairment of intangible assets .........................       2,118,219          136,750               --
                                                                  ------------     ------------     ------------
        Total operating expenses .............................      11,287,470        6,026,639        3,709,538
                                                                  ------------     ------------     ------------

        Operating loss .......................................      (9,448,288)      (5,294,896)      (3,365,088)

Other income, net ............................................          74,969           18,256           34,061
                                                                  ------------     ------------     ------------
        Net loss .............................................    $ (9,373,319)    $ (5,276,640)    $ (3,331,027)

Deemed dividend related to beneficial conversion feature .....              --               --           29,200
                                                                  ------------     ------------     ------------
        Net loss applicable to common shareholders ...........    $ (9,373,319)    $ (5,276,640)    $ (3,360,227)
                                                                  ============     ============     ============

Weighted average shares outstanding: basic and diluted .......      23,724,026       15,717,138       10,450,529
                                                                  ============     ============     ============
Net loss per share: basic and diluted ........................    $      (0.40)    $      (0.34)    $      (0.32)
                                                                  ============     ============     ============
</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, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                                 Series A
                                                                                Convertible
                                                                              Preferred Stock               Common Stock
                                                                          ------------------------    -----------------------
                                                                            Shares        Amount        Shares       Amount
<S>                                                                        <C>          <C>           <C>          <C>
          Balance at January 1, 2002                                         379,294    $  398,441    10,139,553   $    1,016

Net proceeds from issuance of common stock ($1.00 to $1.09 per share)                                  2,737,500          274
Issuance of common shares upon exercise of stock options                                                  25,000            3
Issuance of preferred stock to settle dividends payable                       31,466        45,233
Amortization of deferred compensation
Stock options issued to non-employee
Deemed dividend related to beneficial conversion feature
Net loss
                                                                          ----------    ----------    ----------   ----------
          Balance at December 31, 2002                                       410,760       443,674    12,902,053        1,293
                                                                          ==========    ==========    ==========   ==========

Net proceeds from issuance of common stock ($1.20 to $1.44 per share)                                  3,444,031          344
Issuance of common stock upon acquisition                                                              1,950,000          195
Issuance of stock options and warrants upon acquisition
Issuance of common stock upon exercise of stock options and warrants                                      27,582            3
Conversion of preferred stock for common stock                              (353,185)     (371,008)      353,185           33
Issuance of preferred stock for anti-dilution                                 23,791
Stock options issued to non-employee
Receipt of stock subscriptions outstanding
Net loss
                                                                          ----------    ----------    ----------   ----------
          Balance at December 31, 2003                                        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 a 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
                                                                          ==========    ==========    ==========   ==========
</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, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                          Additional      Deferred        Stock                           Total
                                                           Paid-in          Comp-      Subscriptions    Accumulated    Stockholders'
                                                           Capital        ensation      Outstanding       Deficit         Equity
                                                         ------------   ------------   -------------  --------------   ------------
<S>                                                      <C>            <C>            <C>            <C>              <C>
             Balance at January 1, 2002                  $ 29,348,786   $    (35,583)  $         --   $  (26,171,175)  $  3,541,485

Net proceeds from issuance of common stock
    ($1.00 to $1.09 per share)                              2,559,924                      (791,940)                      1,768,258
Issuance of common shares upon exercise of stock options       28,093                                                        28,096
Issuance of preferred stock to settle dividends payable                                                                      45,233
Amortization of deferred compensation                                         35,583                                         35,583
Stock options issued to non-employee                           85,458                                                        85,458
Deemed dividend related to beneficial conversion feature       29,200                                        (29,200)
Net loss                                                                                                  (3,331,027)    (3,331,027)
                                                         ------------   ------------   ------------   --------------   ------------
             Balance at December 31, 2002                  32,051,461             --       (791,940)     (29,531,402)     2,173,086
                                                         ============   ============   ============   ==============   ============

Net proceeds from issuance of common stock
    ($1.20 to $1.44 per share)                              4,171,652                                                     4,171,996
Issuance of common stock upon acquisition                   3,408,805                                                     3,409,000
Issuance of stock options and warrants upon acquisition       255,873                                                       255,873
Issuance of common stock upon exercise of
    stock options and warrants                                 24,715                                                        24,718
Conversion of preferred stock for common stock                370,975                                                            --
Issuance of preferred stock for anti-dilution                                                                                    --
Stock options issued to non-employee                            1,375                                                         1,375
Receipt of stock subscriptions outstanding                                                  791,940                         791,940
Net loss                                                                                                  (5,276,640)    (5,276,640)
                                                         ------------   ------------   ------------   --------------   ------------
             Balance at December 31, 2003                $ 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 a 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
                                                         ============   ============   ============   ==============   ============
</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, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                                       Year Ended December 31,
                                                                               2004             2003             2002
                                                                           ------------     ------------     ------------
<S>                                                                        <C>              <C>              <C>
Cash flows from operating activities:
  Net loss ............................................................    $ (9,373,319)    $ (5,276,640)    $ (3,331,027)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    In-process research and development ...............................         568,329               --               --
    Impairment of intangible assets ...................................       2,118,219          136,750               --
    Bad debt expense ..................................................              --           26,000               --
    Depreciation ......................................................         221,719          354,667          317,032
    Amortization of intangible assets .................................         832,534          384,893               --
    Stock based compensation ..........................................          47,400            1,375          121,041
    Changes in assets and liabilities:
      Accounts receivable .............................................         (70,118)          (4,635)          (5,151)
      Prepaid expenses ................................................        (231,210)          53,889           49,189
      Other assets ....................................................          (6,729)         (10,827)         (16,295)
      Accounts payable and accrued expenses ...........................       1,003,117         (997,640)         216,926
                                                                           ------------     ------------     ------------
      Net cash used in operating activities ...........................      (4,890,058)      (5,332,168)      (2,648,285)
                                                                           ------------     ------------     ------------
Cash flows from investing activities:
  Acquisition of intangible assets ....................................      (1,033,022)              --               --
  Capital expenditures ................................................        (350,688)        (273,560)         (46,235)
                                                                           ------------     ------------     ------------
      Net cash flow used in investing activities ......................      (1,383,710)        (273,560)         (46,235)
                                                                           ------------     ------------     ------------
  Cash flows from financing activities:
  Net proceeds from issuance of common stock ..........................       6,784,607        4,171,996        1,768,258
  Receipts of stock subscriptions outstanding .........................              --          791,940               --
  Proceeds from exercise of options and warrants ......................          69,375           24,718           28,096
  Principal payments on capital lease obligations .....................              --          (11,206)        (180,990)
                                                                           ------------     ------------     ------------
      Net cash provided from financing activities .....................       6,853,982        4,977,448        1,615,364
                                                                           ------------     ------------     ------------
  Net increase (decrease) in cash and cash equivalents ................         580,214         (628,280)      (1,079,156)
  Cash and cash equivalents at beginning of period ....................       1,440,724        2,069,004        3,148,160
                                                                           ------------     ------------     ------------
  Cash and cash equivalents at end of period ..........................    $  2,020,938     $  1,440,724     $  2,069,004
                                                                           ============     ============     ============
Non-cash supplemental information:
  Conversion of preferred stock to common stock .......................    $     13,994     $    371,008     $         --
  Transfer of intangible assets for investment in Pecos Labs, Inc. ....    $     15,000     $         --     $         --
  Shares issued for acquisition of intangible assets ..................    $  1,480,000     $         --     $         --
  Shares issued for services ..........................................    $     47,400     $         --     $         --

Supplemental information of business acquired:
Fair value of assets acquired:
    Equipment .........................................................    $         --     $     27,711     $         --
    Intangible assets .................................................              --        3,639,000               --
    Goodwill ..........................................................              --          898,334               --
  Less, liabilities assumed and non-cash consideration:
    Current liabilities ...............................................              --         (494,142)              --
    Stock issued ......................................................              --       (3,409,000)              --
    Stock options and warrants issued .................................              --         (255,873)              --
    Accrued acquisition costs .........................................              --         (460,030)              --
</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 engaged in the discovery,
development  and   commercialization   of  vaccines,   antibiotics,   and  novel
anti-infectives  for  the  prevention  and  treatment  of  infectious  diseases,
including products for use in defense against  biological  warfare agents.  SIGA
applies  bacterial  and viral  genomics  in the  design and  development  of its
products.  The Company's product development programs emphasize the increasingly
serious problem of drug resistant bacteria and emerging pathogens.

Basis of presentation

The  accompanying  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 financial arrangements. Although management continues
to pursue these plans, there is no assurance that the Company will be successful
in obtaining sufficient financing on terms acceptable to the Company. Management
believes  that its cash flows are  sufficient to support its  operations  beyond
December 31, 2005, and that  sufficient cash flows will be available to meet the
Company's  business  objectives.  In the  event  that  sufficient  funds are not
available,  the Company will need to postpone or discontinue  planned operations
and projects.  Continuance of the Company as a going concern is dependent  upon,
among  other  things,  the success of the  Company's  research  and  development
programs and the Company's ability to obtain adequate  financing.  The financial
statements do not include any adjustments  relating to the recoverability of the
carrying amount of recorded  assets and  liabilities  that might result from the
outcome of these uncertainties.



2.    Summary of Significant Accounting Policies

Use of Estimates

The 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  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 and


                                       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, 2004,  2003 and 2002,  revenues  from National
Institute  of  Health  ("NIH")  SBIR  grants  approximated  77%,  54%  and  78%,
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,  2004,  2003 and 2002 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 employees 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  performs an annual  review in the fourth  quarter of each year,  or
more frequently if indicators of potential impairment exist, to determine if the
carrying  value of the recorded  goodwill is impaired.  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 2004,  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. The
estimated  fair values might produce  significantly  different  results if other
reasonable assumptions and estimates were to be used.

Identified Intangible Assets

Acquisition-related  intangible  assets include  acquired  technology,  customer
contracts,  grants and covenants not to compete, and are amortized on a straight
line basis over periods ranging from 3.5-4 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.  Changes  in events  or  circumstances  that may  affect
long-lived assets include, but are not limited to, cancellations or terminations
of research contracts or pending government grants (Note 4).


                                       42
<PAGE>

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 all
of the 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, 2004, 2003 and 2002
and as a result, certain equity instruments are excluded from the calculation of
diluted loss per share. At December 31, 2004, 2003 and 2002, 68,038,  81,366 and
410,760 shares,  respectively,  of the Company's Series A convertible  preferred
stock have been excluded from the  computation of diluted loss per share as they
are anti-dilutive.  At December 31, 2004, 2003 and 2002,  outstanding options to
purchase  9,762,061,  6,460,811  and  5,807,561  shares,  respectively,  of  the
Company's  common stock with  exercise  prices  ranging from $1.00 to $5.50 have
been  excluded  from the  computation  of  diluted  loss  per  share as they are
anti-dilutive.  At December 31,  2004,  2003 and 2002,  outstanding  warrants to
purchase  8,469,594,  6,329,616  and  4,675,144  shares,  respectively,  of  the
Company's  common stock,  with exercise  prices ranging from $1.00 to $3.63 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.

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.

Stock compensation

The Company applies the  recognition  and  measurement  principles of Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB  25")  and  related  interpretations  in  accounting  for its  stock-based
compensation   program.   Accordingly,   employees'   and   directors'   related
compensation  expense is recognized only to the extent of the intrinsic value of
the compensatory options or shares granted.


                                       43
<PAGE>

The following  table  illustrates  the effect on net income (loss)  available to
common  stockholders and earnings (loss) per share as if the Company had applied
the  fair  value  recognition  provisions  of  SFAS  No.  123,  "Accounting  for
Stock-Based  Compensation" ("SFAS 123"), as amended by SFAS 148, "Accounting for
Stock-Based  Compensation  - Transaction  and  Disclosure,  an amendment to FASB
Statement No. 123."

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                    2004             2003             2002
                                                                ------------     ------------     ------------
<S>                                                             <C>               <C>              <C>
Net loss applicable to common shareholders, as reported ....     ($9,373,319)     ($5,276,640)     ($3,360,227)
                                                                ============     ============     ============
Add: Stock-based employee compensation expense
recorded under APB No. 25 ..................................              --               --           35,583

Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects .....................      (1,105,330)        (687,766)        (153,882)
                                                                ------------     ------------     ------------
Pro forma net loss applicable to common shareholders .......    ($10,478,649)     ($5,964,406)     ($3,478,526)
                                                                ============     ============     ============
Net loss per share:
Basic and diluted -as reported .............................          $(0.40)          $(0.34)          $(0.32)
                                                                ============     ============     ============
Basic and diluted -pro forma ...............................          $(0.44)          $(0.38)          $(0.33)
                                                                ============     ============     ============
</TABLE>

The fair value of the options  granted to employees  during 2004,  2003 and 2002
ranged  from  $0.09  to  $2.75 on the date of the  respective  grant  using  the
Black-Scholes option-pricing model.

The value of options granted in 2004, 2003 and 2002 was estimated at the date of
grant using the following weighted average assumptions:

                                   2004               2003              2002
                               -------------     -------------      ------------
Expected life                    2 - 5 Yrs         3 - 5 Yrs         3 - 5 Yrs
Risk free interest rate        2.75% - 3.80%     2.89% - 3.24%      2.87% - 4.5%
Volatility                      74% - 107%            100%              100%
Dividend yield                      0%                 0%                0%

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 December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." SFAS No.
123R requires  employee stock options and rights to purchase  shares under stock
participation  plans to be  accounted  for  under  the fair  value  method,  and
eliminates  the ability to account  for these  instruments  under the  intrinsic
value method  prescribed  by APB Opinion No. 25, and allowed  under the original
provisions of SFAS No. 123. SFAS No. 123R requires the use of an option  pricing
model for estimating fair value,  which is amortized to expense over the service
periods.  The  requirements  of SFAS No. 123R are effective  for fiscal  periods
beginning  after June 15,  2005.  SFAS No.  123R  allows for either  prospective
recognition of compensation expense or retrospective  recognition,  which may be
back to the original  issuance of SFAS No. 123 or only to interim periods in the
year of adoption. The Company is currently evaluating these transition methods.

In March 2004, the Emerging Issues Task Force issued EITF 03-06,  "Participating
Securities  and the  Two-Class  Method  under  FASB  Statement  No.  128".  This
statement  provides  additional  guidance  on  the  calculation  and  disclosure
requirements  for  earnings  per share.  The FASB  concluded  in EITF 03-06 that
companies with multiple


                                       44
<PAGE>

classes of common stock or participating securities, as defined by SFAS No. 128,
calculate  and disclose  earnings per share based on the two-class  method.  The
adoption of this  statement  did not have an impact on the  Company's  financial
statements presentation as the Company is in a loss position.

3.    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").   Each  program  is  in  the  early  stage  of
development and the Company expects both programs to be completed in or by 2006.
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  approximately
$104,000 to the Arenavirus program) ("IPRD").  The grants are amortized over the
contractual  life of each  grant or 2 years.  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.

Business Acquisition

On May 23, 2003, the Company acquired  substantially all of the assets of Plexus
Vaccine  Inc.,  ("Plexus")  and assumed  certain  liabilities  in  exchange  for
1,950,000  shares of the  Company's  common  stock and 190,950 of the  Company's
options and  warrants at an  exercise  price of $1.62 per share.  The results of
operations  of Plexus have been  included in the  Statement of Operations of the
combined entity since May 23, 2003.

In determining the non-cash purchase price of Plexus,  the equity  consideration
has been  calculated  based on Emerging  Issues Task Force  ("EITF") No.  99-12,
"Accounting for Formula  Arrangements  under EITF 95-19".  For this calculation,
the Company  used the average  market  price for a few days before and after May
14, 2003, the  announcement  date.  Based on EITF 99-12, the value of the common
stock issued was approximately  $3,409,000.  The value attributed to the options
and warrants exchanged was approximately  $255,900.  In addition,  loans made to
Plexus,  payments made on behalf of Plexus prior to the asset purchase agreement
and costs incurred for the transaction amounted to $406,030.

The allocation of the total purchase price of $4,070,903 is as follows:

                                         Useful Life        Fair Value
                                       ---------------    --------------

        Equipment, net                   3 - 7 years       $    27,711
        Liabilities assumed                  N/A              (494,142)
        Acquired technology               10 years           2,191,000
        Customer contract and grants     3 1/2 years           741,000
        Covenant not to compete          3 1/2 years           707,000
        Goodwill                         Indefinite            898,334
                                                           -----------
        Purchase Price                                     $ 4,070,903
                                                           ===========

In May 2004, the Company sold certain intangible assets originally acquired from
Plexus, to Pecos Labs, Inc. ("Pecos"). See Note 4 "Intangible Assets".


                                       45
<PAGE>

Selected Unaudited Pro Forma Financial Information

The Company has  prepared a  condensed  pro forma  statement  of  operations  in
accordance  with SFAS 141, for the years ended  December 31, 2003 and 2002 as if
Plexus were part of the Company as of January 1, 2003 and 2002, respectively.

<TABLE>
<CAPTION>
                                                                        Years Ended
                                                                        December 31,
                                                                    2003             2002
                                                               ------------     ------------
<S>                                                            <C>              <C>
       Revenues                                                $    826,525     $    516,828
       Net loss                                                $ (7,527,206)    $ (5,398,730)
       Net loss per common share - basic and diluted           $      (0.46)    $      (0.44)
       Weighted average number of common shares outstanding      16,481,110       12,400,529
</TABLE>

In the fourth quarter of 2003, a customer contract acquired with the acquisition
of Plexus was  cancelled.  Management  recorded an impairment  loss of $136,750,
included in the  Company's  operating  expenses for the year ended  December 31,
2003, to reflect the cancellation.

4.    Intangible Assets

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

<TABLE>
<CAPTION>
                                            December 31, 2004                            December 31, 2003
                                -----------------------------------------    -----------------------------------------
                                  Gross                                        Gross
                                 Carrying      Accumulated                    Carrying      Accumulated
                                  Amount       Amortization       Net          Amount       Amortization       Net
                                -----------    ------------   -----------    -----------    ------------   -----------
<S>                             <C>            <C>            <C>            <C>            <C>            <C>
Acquired grants                 $ 1,962,693    $   327,118    $ 1,635,575    $        --    $        --    $        --
Customer contract and grants         83,571         19,499         64,072        604,250        128,772        475,478
Covenants not to compete            202,000        117,833         84,167        707,000        122,860        584,140
Acquired technology                 330,483             --        330,483      2,191,000        133,261      2,057,739
                                -----------    -----------    -----------    -----------    -----------    -----------
                                $ 2,578,747    $   464,450    $ 2,114,297    $ 3,502,250    $   384,893    $ 3,117,357
                                -----------    -----------    -----------    -----------    -----------    -----------
</TABLE>

Amortization expense for intangible assets and costs included the following:

                                                        2004             2003
                                                    -----------      -----------
Amortization of acquired grants                     $   327,118      $        --
Amortization of customer contract and grants             89,344          128,772
Impairment of customer contract and grants              322,063          136,750
Amortization of covenants not to compete                196,972          122,860
Impairment of covenants not to compete                  303,000               --
Amortization of acquired technology                     219,100          133,261
Impairment of acquired technology                     1,508,156               --
                                                    -----------      -----------
                                                    $ 2,965,753      $   521,643
                                                    -----------      -----------

The  Company  anticipates   amortization  expense  to  approximate   $1,182,000,
$767,500,  $82,600,  and $82,600 for the years ending  December 31, 2005,  2006,
2007, and 2008, respectively.

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


                                       46
<PAGE>

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  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 $307,063 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.

The  Company is  accounting  for its  investment  in Pecos using the cost method
under  Accounting  Principles  Board  Opinion  No.  18,  "The  Equity  Method of
Accounting  for  Investments  in Common  Stock" based upon its 10%  ownership of
Pecos.  The Company valued the 150,000 common shares at $0.10 per share based on
an investment made at a concurrent time by an outside investor to Pecos at $0.10
per share.

5.    Stockholders' Equity

At December  31, 2004,  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.

2004 Placements

In August 2003, the Company  entered into a securities  purchase  agreement with
MacAndrews & Forbes Holdings Inc.  ("MacAndrews & Forbes"), a holding company of
which the  Company's  Chairman of the Board of Directors is Vice  Chairman and a
director.  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.


                                       47
<PAGE>

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 (see Note 7).

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
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.

In 2004,  the Company  incurred  costs of $161,000  related to work performed by
TransTech  Pharma and its affiliates in connection  with the DegP SBIR grant and
other grants.

2003 Placements

In June 2003,  the Company  raised  gross  proceeds of $1.5 million in a private
offering for 1,250,000  shares of common stock.  In connection with the offering
the Company issued warrants to purchase  625,000 shares of the Company's  common
stock to placement  agents.  Each of the warrants are  exercisable at a price of
$2.00 per share and have a term of five years.

2002 Placements

In December  2002,  the Company  raised  gross  proceeds of $1.865  million in a
private  offering of common stock and warrants to purchase the Company's  common
stock. The Company sold 1,700,000 shares of common stock. In connection with the
offering the Company issued 171,216 warrants to purchase shares of the Company's
common stock to placement  agents.  The warrants are  exercisable  at a price of
$1.65 and have a term of five  years.  The  Company  received  net  proceeds  of
$891,000  prior to December 31, 2002 and net proceeds of $791,940 after December
31,  2002.  As such,  as of  December  31,  2002,  the  Company  had  recorded a
subscription receivable of $791,940.

In October 2002, the Company raised gross proceeds of $1.04 million in a private
offering of common stock and warrants to purchase the  Company's  common  stock.
The Company  sold  1,037,500  shares of common stock and 518,750  warrants.  The
warrants are  exercisable at $2.25 and have a term of five years.  In connection
with the offering the Company issued 103,750  warrants to purchase shares of the
Company's  common stock to placement  agents.  The warrants are exercisable at a
price of $1.50 and have a term of five  years.  The fair  value of the  warrants
attributable to consultants on the date of grant was approximately $64,670.

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.


                                       48
<PAGE>

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,  2004  and  2003,   certain   preferred
stockholders  converted 13,328 and 353,185 Series A convertible  preferred stock
into 13,328 and 353,185, respectively, shares of common stock.

6. 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 10,000,000 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.

Stock option activity of the Company is summarized as follows:

<TABLE>
<CAPTION>
                                                                                  Weighted Average
                                                               Number of Shares    Exercise Price
<S>                                                              <C>                <C>
Options outstanding on January 1, 2002                             5,139,811        $      2.50
     Granted                                                         777,750               2.66
     Forfeited                                                       (85,000)              3.80
     Exercised                                                       (25,000)              1.13
                                                                 -----------        -----------
Options outstanding at December 31, 2002                           5,807,561        $      2.52
     Granted                                                         813,250               1.79
     Forfeited                                                      (160,000)              4.81
     Exercised                                                            --                 --
                                                                 -----------        -----------
Options outstanding at December 31, 2003                           6,460,811        $      2.33
     Granted                                                       3,442,500               1.34
     Forfeited                                                      (138,334)              1.77
     Exercised                                                        (2,916)              1.77
                                                                 -----------        -----------
Options outstanding at December 31, 2004                           9,762,061        $      1.99
                                                                 ===========        ===========

Options available for future grant at December 31, 2004               22,898
Weighted average fair value of options granted during 2004       $      0.98
Weighted average fair value of options granted during 2003       $      1.14
</TABLE>


                                       49
<PAGE>

The following table summarizes information about options outstanding at December
31, 2004:

<TABLE>
<CAPTION>
                        Number            Weighted Average
                    Outstanding at      Remaining Contractual    Weighted Average     Number Exercisable     Weighted Average
Exercise Price     December 31, 2004        Life (Years)          Exercise Price     at December 31, 2004     Exercise Price
<S>                     <C>                     <C>                   <C>                   <C>                   <C>
 1.00 - 1.85            4,586,584               8.98                  $ 1.40                1,804,415             $ 1.47
 2.00 - 2.75            4,837,250               6.19                  $ 2.38                4,762,250             $ 2.38
 3.94 - 5.5               338,227               4.16                  $ 4.36                  312,227             $ 4.39
                     ------------                                                         -----------
                        9,762,061                                                           6,878,892
                     ============                                                         ===========
</TABLE>

At December 31, 2004,  options held outside of the plan included 125,000 options
granted to an employee and 125,000  options  granted to consultants and have not
been included in the above tables.

The  following  tables  summarize  information  about  warrants  outstanding  at
December 31, 2004:

<TABLE>
<CAPTION>
                                                              Weighted Average
                                      Number of Warrants       Exercise Price            Expiration Dates
<S>                                            <C>            <C>                     <C>
Outstanding at January 1, 2002                 4,231,428      $           3.61
     Granted                                     793,716                  2.03        09/30/2007 - 12/31/2007
     Canceled / Expired                         (350,000)                 7.32
                                      ------------------      ----------------
Outstanding at December 31, 2002               4,675,144      $           3.06
     Granted                                   2,161,250                  1.98        12/31/2007 - 03/01/2012
     Exercised                                   (40,562)                 1.19
     Canceled / Expired                         (466,216)                 5.83
                                      ------------------      ----------------
Outstanding at December 31, 2003               6,329,616      $           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               8,469,594      $           2.39
                                      ------------------      ----------------
</TABLE>

                                      Number of Warrants
                                          Outstanding         Exercise Price

                                                 568,410       1.45 - 1.69
                                               5,349,972       2.00 - 2.25
                                               2,551,212       2.94 - 3.63
                                      ------------------
                                               8,469,594
                                      ==================

In February 2003, the Company entered into a 12-month consulting  agreement with
an outside  consultant in the amount of $249,420 to provide  marketing  research
support.  Upon being awarded  research  contracts in excess of $2.0 million from
such support, the Company is obligated to issue 400,000 fully vested warrants at
an exercise  price of $1.32 with an  expiration  of 3 years.  As of December 31,
2004, the Company had not yet been awarded  contracts in excess of $2.0 million.
In March 2004,  the Company  renewed the  consulting  agreement in the amount of
$320,000 for an additional eight months from March 1, 2004.

During  2003,  the  Company  extended  3,225,000  options  held by the  Board of
Directors for an additional 5 years. The Company accounted for such extension in
accordance with Financial  Accounting Standard Board  Interpretation  Number 44,
"Accounting  for  Certain   Transactions   Involving  Stock  Compensation  -  An
Interpretation of APB


                                       50
<PAGE>

Opinion Number 25". No compensation  cost was incurred with the extension as the
exercise  prices of the  options  were  higher than the fair value of the common
stock at the date of modification.

2002 Grants

In September  2002, the Company entered into a four-month  consulting  agreement
under which a consultant  assisted the Company with public relations  efforts in
the United  States and Europe in exchange  for a monthly  retainer of $3,500 for
the four-month  term and 50,000 fully vested  options to purchase  shares of the
Company's  common stock.  Of the amount of fully vested  options,  25,000 shares
have an  exercise  price of $1.50 per share and 25,000  shares  have an exercise
price of $1.75.  Upon grant, the Company  recorded a $31,618 stock  compensation
charge to operations based upon the fair value of the options.

In April 2002, in connection with an existing consulting agreement,  the Company
granted a consultant an option to purchase 15,000 shares of the Company's common
stock  under the  Plan.  Upon  grant,  the  Company  recorded  a  $10,269  stock
compensation charge to operations based upon the fair value of the option.

In connection  with the  development  of its licensed  technologies  the Company
entered  into  a  consulting  agreement  with a  scientist  who  developed  such
technologies,   under  which  the  consultant  serves  as  the  Company's  Chief
Scientific Advisor. In June 2001, the Company entered into an amended consulting
agreement with the scientist  under which the scientist was to provide  services
to the Company for a three-year  period  commencing  on September  10, 2001.  In
consideration for the consulting services the scientist was to be paid an annual
fee of $50,000 payable quarterly. In addition, the Company granted the scientist
options  to  purchase  225,000  shares of common  stock at $3.94 per  share.  On
September 10, 2001, ten percent of the options vested and the remaining  options
were to vest in 36 monthly  installments  beginning  on  October  10,  2001.  In
September 2002, the Company and the consultant  terminated their arrangement and
all unvested  options were forfeited.  For the year ended December 31, 2002, the
Company recorded a stock compensation charge of $58,904.

7.    Related Parties

Directors

The Company's Chairman of the Board of Directors is Vice Chairman and a director
of MacAndrews & Forbes. During 2003 and January 2004, MacAndrews & Forbes, along
with  TransTech  Pharma,  invested  $10.0  million  in  SIGA.  Furthermore,  two
directors of the Company are also directors of TransTech Pharma. Additionally, a
director of the Company, is a member of the Company's outside counsel. (See Note
5).

Collaborative Research Agreements

In October 2002, the Company  entered into a  collaborative  research  agreement
with TransTech Pharma, a related party, for the discovery and treatment of human
diseases.  Under the terms of the  agreement,  TransTech  Pharma and the Company
have agreed to contribute each of their respective services and share equally in
costs of specified research projects. In consideration of the services performed
by  TransTech  Pharma and use of its  proprietary  technology,  SIGA  granted an
exclusive, fully-paid,  nontransferable,  nonsublicenseable,  limited license to
use existing rights to patents and technologies. Both parties will share equally
in the ownership of compounds  and related  intellectual  property  derived from
such research efforts.  In January 2004,  TransTech Pharma invested $5.0 million
in SIGA (See Note 5).


                                       51
<PAGE>

8.    Property, Plant and Equipment

Property,  plant and  equipment  consisted of the following at December 31, 2004
and 2003:

       Laboratory equipment                      $  1,259,711     $  1,134,110
       Leasehold improvements                         632,435          690,138
       Computer equipment                             212,077          199,209
       Furniture and fixtures                         194,890          292,817
       Construction in-progress                       163,397               --
                                                 ------------     ------------
                                                    2,462,510        2,316,274

          Less - Accumulated depreciation          (1,954,495)      (1,937,228)
                                                 ------------     ------------

       Property, plant & equipment, net          $    508,015     $    379,046
                                                 ============     ============

9.    Income Taxes

The Company has  incurred  losses  since  inception,  which have  generated  net
operating loss  carryforwards of approximately  $31,350,000 at December 31, 2004
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,  2004  and  2003 of  approximately  $16,500,000  and  $13,030,000,
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.

Following is a summary of changes in our  valuation  allowance  for deferred tax
assets  as of and for the  years  ended  December  31,  2004,  2003 and 2002 (in
thousands):

<TABLE>
<CAPTION>
                                        Additions
                    Balance at       Charged to Costs                      Balance at
December 31,     Beginning of Year     and Expenses       Deductions       End of Year
                ------------------  ------------------  --------------   ---------------
<S>                  <C>                 <C>               <C>              <C>
2004                 $ 13,030            $  3,470          $     --         $ 16,500
2003                 $ 11,144            $  1,886          $     --         $ 13,030
2002                 $  9,811            $  1,333          $     --         $ 11,144
</TABLE>

For the years ended December 31, 2004 and 2003, 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.

10. Commitments and Contingencies

Employment agreements

In July 2004, the Company  entered into a 3-year  employment  agreement with its
Vice  President  of  Business  Development,   commencing  in  August  2004.  The
employment  agreement  provides  for an annual  salary of $230,000  plus bonuses
based on certain objectives and goals. Under the agreement,  the Company granted
the  employee  an option to acquire  200,000  shares of its  common  stock at an
exercise price of $1.40,  of which 50,000 options vested upon signing and 50,000
vests at each of the next 3  anniversaries.  At the  discretion  of the Board of
Directors the employee may be granted  additional  awards of up to 25,000 shares
each,  upon meeting  certain  milestones.  The  agreement has a one year renewal
option.


                                       52
<PAGE>

In July 2004, the Company  entered into an employment  agreement with Bernard L.
Kasten,  M.D. to serve as the Company's Chief  Executive  Officer  ("CEO").  The
employment  agreement  provides for an annual  salary of $250,000  plus,  at the
discretion of the Board of Directors,  bonus  payments for a 3-year initial term
with an automatic  3-year  renewal unless either party gives notice that it does
not want to renew. The agreement also provides for an award of 2,500,000 options
to purchase  common  stock with an  exercise  price of $1.30,  of which  500,000
vested upon signing,  one million  options vest over the 3-year initial term and
the  remaining 1 million  options  vest over the renewal  term.  The CEO is also
entitled to additional options, to be granted upon meeting certain milestones.

In July 2004, the Company  entered into an amendment to its existing  employment
agreement  with  the  Company's  Chief  Scientific  Officer.   Pursuant  to  the
amendment,  the employment  agreement is effective through December 31, 2007 and
provides for an annual salary of $225,000  plus, at the  discretion of the Board
of  Directors,  a bonus not to  exceed  50% of the  Chief  Scientific  Officer's
salary.  The agreement  also provides for an option grant of 150,000  options to
purchase  common stock with an exercise price of $1.40,  of which 75,000 vest on
December  31, 2005 and 75,000 vest on December 31, 2006.  In October  2002,  the
Company  granted  the CSO  options to acquire  300,000  shares of the  Company's
common  stock at an  exercise  price of  $2.50.  Upon  such  grant,  the CSO was
required to  surrender  50,000  shares  granted  under a previous  grant with an
exercise  price of $3.94.  Under the October 2002 grant,  75,000  shares  vested
immediately,  75,000  shares  vested on  September  1, 2003 and 2004 and  75,000
shares will vest on September 1, 2005. As such,  50,000  options are  considered
variable options under APB 25 as replacement awards for the options surrendered.
For the  years  ended  December  31,  2004,  2003 and  2002,  there was no stock
compensation  charge as the fair value of the underlying  common stock was below
the exercise price of the option.

In June 2004, the Company  entered into an amendment to its existing  employment
agreement with the Company's Chief Financial Officer. Pursuant to the amendment,
the employment agreement is effective through December 31, 2005 and provides for
an annual  salary of $230,000  plus a one-time  payment of $50,000 for the Chief
Financial  Officer's  prior  service  as  Acting  Chief  Executive  Officer.  An
additional  bonus not to exceed 25% of the Chief Financial  Officer's salary may
be awarded at the  discretion  of the Board of  Directors.  The  agreement  also
provides for an option grant of 150,000 options to purchase common stock with an
exercise  price of $1.40,  of which 75,000 vested upon signing and the remainder
to vest on a prorata basis from January 1, 2005 through December 31, 2005.

In May 2003, the President and CEO of Plexus Vaccine was appointed  President of
SIGA. The President and the Company entered into an employment agreement for the
period  of  May  23,  2003  until  December  31,  2005.   Under  the  agreement,
compensation  was set at an annual  minimum base salary of $216,000 with certain
benefits, as defined. Additionally,  300,000 options were granted under the Plan
at an exercise price of $1.81 per share.  Of such grant,  100,000 options vested
immediately,  100,000  options  were  scheduled  to  vest  in May  2004  and the
remaining  100,000 options were scheduled to vest in May 2005. In May 2004, upon
selling  intangible  assets  from  the  Company's  immunological  bioinformatics
technology and certain non-core vaccine development assets to Pecos, the Company
terminated  its  employment  agreement  with its  President.  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.

Operating lease commitments

The Company leases certain  facilities and office space under operating  leases.
Rent  expense  for the  years  ended  December  31,  2004,  2003  and  2002  was
approximately  $297,000,  $235,000 and $213,000,  respectively.  Minimum  future
rental  commitments under operating leases having  noncancelable  lease terms in
excess of one year are as follows:


                                       53
<PAGE>

Year ended December 31,
  2005                                  $   239,700
  2006                                      255,400
  2007                                      261,800
  2008                                      133,200
  2009                                      135,900
  2010                                       22,700
                                        -----------
Total                                   $ 1,048,700
                                        ===========

Other

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>

11.   Financial Information By Quarter (Unaudited) (in thousand,  except for per
      share data)

<TABLE>
<CAPTION>
2004 For The Quarter Ended                   March 31,        June 30,       September 30,    December 31,
                                           ------------     ------------    --------------   --------------
<S>                                         <C>              <C>              <C>              <C>
Revenues                                    $      161       $      299       $      533       $      846
Selling, general & administrative           $    1,006       $    1,112       $      919       $    1,005
Research and development                    $    1,020       $    1,026       $      827       $    1,292
Patent preparation fees                     $       92       $       55       $       84       $      162
In-process research and development         $       --       $       --       $      568       $       --
Impairment of intangible assets             $       --       $      610       $       --       $    1,508
Operating loss                              $    1,956       $    2,504       $    1,865       $    3,123
Net loss                                    $    1,940       $    2,490       $    1,837       $    3,106
Net loss per share: basic and diluted       $     0.08       $     0.11       $     0.08       $     0.13
Market price range for common stock
     High                                   $     2.34       $     1.93       $     1.63       $     1.75
     Low                                    $     1.85       $     1.29       $     1.23       $     1.35

<CAPTION>
2003 For The Quarter Ended                   March 31,        June 30,       September 30,    December 31,
                                           ------------     ------------    --------------   --------------
<S>                                         <C>              <C>              <C>              <C>
Revenues                                    $      205       $      244       $      176       $      107
Selling, general & administrative           $      560       $      748       $      684       $      654
Research and development                    $      477       $      643       $    1,001       $      822
Patent preparation fees                     $       56       $       66       $       65       $      113
In-process research and development         $       --       $       --       $       --       $       --
Impairment of intangible assets             $       --       $       --       $       --       $      137
Operating loss                              $      889       $    1,214       $    1,574       $    1,619
Net loss                                    $      882       $    1,211       $    1,571       $    1,613
Net loss per share: basic and diluted       $     0.07       $     0.09       $     0.09       $     0.09
Market price range for common stock
     High                                   $     1.49       $     1.91       $     2.13       $     2.60
     Low                                    $     1.02       $     1.09       $     1.61       $     1.80
</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 has materially  affected,  or is 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 2005 Annual Meeting of Shareholders.

Item 11. Executive Compensation

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2005 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 2005 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions

      Information  required by this item is  incorporated  by reference from our
Proxy Statement for the 2005 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 2005 Annual Meeting of Shareholders.


                                       57
<PAGE>

                                     PART IV

Item 15. Exhibits

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

2(a)        Asset  Purchase  Agreement,  dated as of May 14,  2003,  between the
            Company and Plexus Vaccine Inc.  (Incorporated  by reference to Form
            8-K of the Company filed June 9, 2003).

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)).

3(c)        Certificate of  Designations of Series and  Determination  of Rights
            and  Preferences  of  Series A  Convertible  Preferred  Stock of the
            Company dated July 2, 2001 (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).

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).


                                       58
<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(e)       Employment  Agreement  between the  Company and Dr.  Kevin F. Jones,
            dated as of January 1, 1996  (Incorporated by reference to Form SB-2
            Registration  Statement  of the  Company  dated  March 10, 1997 (No.
            333-23037)).

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

10(g)       Employment Agreement between the Company and Dr. Dennis Hruby, dated
            as of April 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(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(n)       Employment Agreement between the Company and Dr. Dennis Hruby, dated
            as of January 1, 1998  (Incorporated  by reference to the  Company's
            Annual Report on Form 10-KSB for the year ended  December 31, 1997).
            Amendment   to  the   Agreement,   dated  as  of  October  15,  1999
            (Incorporated  by reference to the  Company's  Annual Report on Form
            10-KSB for the year  ended  December  31,  1999).  Amendment  to the
            Agreement  dated as of June 12, 2000.  Amendment  to the  Agreement,
            dated as of January  31,  2002  (Incorporated  by  reference  to the
            Company's  Annual Report on Form 10-KSB for the year ended  December
            31, 2001). Amendment to the Agreement,  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). Amendment to the Agreement,  dated as
            of  July  29,  2004  (Incorporated  by  reference  to the  Company's
            Quarterly  Report on Form 10QSB for the quarter ended  September 30,
            2004).

10(o)       Employment Agreement between the Company and Thomas Konatich,  dated
            as of April 1, 1998  (Incorporated  by  reference  to the  Company's
            Annual Report on Form 10-KSB for the year ended  December 31, 1997).
            Extension  and Amendment of the  Agreement,  dated as of January 19,
            2000


                                       59
<PAGE>

            (Incorporated  by reference to the  Company's  Annual Report on Form
            10-KSB  for  the  year  ended  December  31,  1999).  Amendment  and
            Restatement  of  the   Agreement,   dated  as  of  October  6,  2000
            (Incorporated  by reference to the  Company's  Annual Report on Form
            10-KSB for the year ended  December 31, 2000).  Amendment and Waiver
            to the  Agreement,  dated as of January  31, 2002  (Incorporated  by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 2001). Amendment to the Agreement, dated November
            5, 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). Amendment to Amended and
            Restated  Agreement,  dated as of July  29,  2004  (Incorporated  by
            reference to the  Company's  Quarterly  Report on Form 10QSB for the
            quarter ended September 30, 2004).

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).

10(t)       Small  Business  Innovation  Grant to the Company  from the National
            Institutes  of Health  dated May 17, 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(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(v)       Retainer  Agreement  between the Company  and Saggi  Captial,  Inc.,
            dated  November 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(w)       Retainer  Agreement  between the Company and Bridge Ventures,  Inc.,
            dated  November 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(z)       Employment Agreement,  dated as of May 23, 2003, between the Company
            and Susan K. Burgess,  Ph.D.  (Incorporated by reference to Form 8-K
            of the Company filed June 9, 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(cc)      Employment  Agreement dated as of July 2, 2004,  between the Company
            and  Bernard L.  Kasten,  M.D.  (Incorporated  by  reference  to the
            Company's  Quarterly Report on Form 10QSB for the quarter ended June
            30, 2004).

10(dd)      Employment Agreement, dated as of July 29, 2004, between the Company
            and John Odden (Incorporated by reference to the Company's Quarterly
            Report on Form 10QSB for the quarter ended September 30, 2004).

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).

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.


                                       61
<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 29, 2005                        By:  /s/ Bernard L. Kasten, M.D.
                                                 ---------------------------
                                                 Bernard L. Kasten, M.D.
                                                 Chief Executive Officer

      Pursuant to the  requirements  of the Securities 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/ Bernard L. Kasten, M.D.
---------------------------------
Bernard L. Kasten, M.D.                     Chief Executive Officer            March 29, 2005


/s/ Thomas N. Konatich
---------------------------------
Thomas N. Konatich                          Chief Financial Officer            March 29, 2005


/s/ Donald G. Drapkin
---------------------------------
Donald G. Drapkin                           Chairman of the Board              March 29, 2005


/s/  James J. Antal
---------------------------------
James J. Antal                              Director                           March 29, 2005


/s/ Thomas E. Constance
---------------------------------
Thomas E. Constance                         Director                           March 29, 2005


/s/ Adnan M. Mjalli, Ph.D.
---------------------------------
Adnan M. Mjalli, Ph.D.                      Director                           March 29, 2005


/s/ Mehmet C. Oz, M.D.
---------------------------------
Mehmet C. Oz, M.D.                          Director                           March 29, 2005


/s/ Eric A. Rose, M.D.
---------------------------------
Eric A. Rose, M.D.                          Director                           March 29, 2005


/s/  Paul G. Savas
---------------------------------
Paul G. Savas                               Director                           March 29, 2005


/S/  Judy S. Slotkin
---------------------------------
Judy S. Slotkin                             Director                           March 29, 2005

/s/ Michael Weiner, M.D.
---------------------------------
Michael Weiner, M.D.                        Director                           March 29, 2005
</TABLE>