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

                                    FORM 10-K

(Mark One)

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

      For the fiscal year ended December 31, 2005

      Or

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

      For the transition period from _________________ to _________________

Commission File No. 0-23047

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

                   Delaware                                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 if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act Yes |_| No |X|.

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or 15 (d) of the Act Yes |_| No |X|.

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. |X|.

<PAGE>

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

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based upon the closing  sale price of the common stock on March 15,
2006 as reported on the Nasdaq SmallCap Market was approximately $29,946,000. As
of March 15, 2006 the registrant  had  outstanding  26,500,648  shares of common
stock.

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                             SIGA Technologies, Inc.

                                    Form 10-K

                                Table of Contents

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

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

Item 1A.  Risk Factors That May Affect Results of Operations and
          Financial Condition........................................................11

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

Item 2.   Properties.................................................................19

Item 3.   Legal Proceedings..........................................................19

Item 4.   Submission of Matters to a Vote of Security Holders........................19

PART II

Item 5.   Market For Registrant's Common Equity, Related Stockholder Matters
          and Issuer Purchases of Equity Securities..................................20

Item 6.   Selected Financial Data....................................................21

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations......................................................22

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.................30

Item 8.   Financial Statements and Supplementary Data................................31

Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure...................................................53

Item 9A.  Controls and Procedures....................................................53

Item 9B.  Other Information..........................................................53

PART III

Item 10.  Directors and Executive Officers of the Registrant.........................54

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

Item 12.  Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters............................................60

Item 13.  Certain Relationships and Related Transactions.............................64

Item 14.  Principal Accountant Fees and Services.....................................64

PART IV

Item 15.  Exhibits...................................................................65

SIGNATURES...........................................................................70
</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 lead product,  SIGA-246,  is an orally
administered  anti-viral  drug that targets the smallpox virus. In December 2005
the Food and Drug  Administration  (FDA) accepted our  Investigational  New Drug
(IND) application for SIGA-246 and granted the program  "Fast-Track" status. Our
anti-viral  programs  are  designed to prevent or limit the  replication  of the
viral  pathogen.  Our  anti-infectives  programs  are aimed at the  increasingly
serious problem of drug resistance.  We are also developing a technology for the
mucosal  delivery of our  vaccines  which may allow the vaccines to activate the
immune  system at the mucus lined  surfaces of the body -- the mouth,  the nose,
the lungs and the  gastrointestinal  and urogenital tracts -- the sites of entry
for most infectious agents.

Product Candidates and Market Potential

      SIGA Biological Warfare Defense Product Portfolio

Anti-Smallpox  Drug:  Smallpox  virus is classified as a Category A agent by the
Center for Disease  Control and  Prevention  (CDC) and is considered  one of the
most  significant  threats  for  use as a  biowarfare  agent.  While  deliberate
introduction of any pathogenic  agent would be  devastating,  we believe the one
that holds the greatest  potential  for harming the general U.S.  population  is
Smallpox.  At present there is no effective  drug with which to treat or prevent
Smallpox  infections.  To  address  this  serious  risk,  SIGA  scientists  have
identified a lead drug candidate,  SIGA-246,  which inhibits  vaccinia,  cowpox,
ectromelia  (mousepox),  monkeypox,  camelpox,  and variola  replication in cell
culture but not other  unrelated  viruses.  Given the safety  concerns  with the
current smallpox vaccine, there should be several uses for an effective smallpox
antiviral drug:  prophylactically,  to protect the non-immune who are at risk to
exposure;  therapeutically,  to  prevent  disease  or death in those  exposed to
smallpox;  and lastly,  as an adjunct treatment to the  immunocompromised.  SIGA
scientists  are also working on several other  smallpox drug targets,  including
the  viral  proteinases,  to  develop  additional  drug  candidates  for  use in
combination  therapy if necessary.  In December  2005,  the FDA approved our IND
application  for SIGA-246.  We plan to start Phase I clinical trials in 2006, to
evaluate the safety and  tolerability of single  escalating doses of SIGA-246 in
healthy  volunteers.  The  Phase  I  human  trials  will  be  performed  at  the
Bio-defense  Clinical  Research Branch of the National  Institute of Allergy and
Infectious Diseases (NIAID),  which is part of the federal government's National
Institutes of Health (NIH).  The primary  objective of the initial study will be
to evaluate the safety and tolerability of single  escalating doses of SIGA-246.
In 2005, the drug demonstrated significant antiviral activity in various


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<PAGE>

animal models of poxvirus disease,  including the complete  protection of golden
ground squirrels from lethal doses of monkeypox virus.

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

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

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

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

      Market for Biological Defense Programs

      The Department of Homeland Security (the "DHS")  appropriation bill signed
by  President  Bush on October 1, 2003 created a  discretionary  reserve of $5.6
billion   to   fund   Project    BioShield    for   a   period   of   10   years
(www.aamc.org/advocacy/library/laborhhs/labor0022.htm).   $3.4  billion  may  be
obligated  during the first 5 years of the bill,  and was included in the United
States     government's     budgets     for     fiscal     2004     and     2005
(www.whitehouse.gov/omb/budget/fy2006/tables.html).  The  remainder  is reserved
for the last 5 years of the bill.  Project BioShield was introduced to encourage
pharmaceutical   and   biotechnology    companies   to   develop    bioterrorism
countermeasures.  One of the major  concerns in the field of biological  warfare
agents is  Smallpox -  although  declared  extinct  in 1980 by the World  Health
Organization  (WHO),  there is a threat that a rogue nation or a terrorist group
may have an illegal inventory of the virus that causes Smallpox.  The only legal
inventories of the virus are held under  extremely  tight security at the CDC in
Atlanta,  Georgia and at a laboratory in Russia. As a result of this threat, the
U.S.  government has announced its intent to make  significant  expenditures  on
finding a way to  counteract  the virus if turned  loose by  terrorists  or on a
battlefield.  The Congressional  Budget Office (the "CBO") reported that the DHS
projects the  acquisition  of 60 million  doses of new Smallpox  vaccines over a
three year


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<PAGE>

period,  commencing in 2005.  Further the CBO reports that the DHS will spend an
additional  $1  billion  to  replace  expired  stocks in  2007-2013.  The market
opportunity for our biological  warfare defense products has not been quantified
as yet beyond the  potential to obtain a share of the  approximately  $9 billion
the federal government is committing to support research in the coming year.

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

      SIGA Antibiotics Product Portfolio

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

      SIGA Antivirals Product Portfolio

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

      Market for Anti-infective Programs

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

Technology

      Antiviral Technology: Two Approaches

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


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<PAGE>

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

      Vaccine Technologies: Mucosal Immunity and Vaccine Delivery

      Using  proprietary   technology   licensed  from  Rockefeller   University
(Rockefeller),  SIGA 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 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.


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<PAGE>

      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 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  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.

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

      The ability to overproduce many bacterial and human proteins has been made
possible through the use of recombinant DNA technology.  The introduction of DNA
molecules  into  Escherichia  coli (E.  coli)  has been the  method of choice to
express  a  variety  of  gene  products,   because  of  this  bacterium'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  bacterial
commensal  mucosal  vaccines,  we  have  developed  methods  which,  instead  of
anchoring the foreign  protein to the surface of the  recombinant  Gram-positive
bacteria,  result in it being secreted into the  surrounding  medium in a manner
which  is  readily  amenable  to  simple  batch  purification.  We  believe  the
advantages  of this  approach  include the ease and lower cost of  Gram-positive
bacterial  growth,  the likelihood  that secreted  recombinant  proteins will be
folded properly, and the ability to purify recombinant proteins from the culture
medium  without having to disrupt the bacterial  cells and  liberating  cellular
contaminants.  Gram-positive  bacteria  may be grown simply in scales from those
required  for  laboratory  research up to  commercial  mass  production.  Recent
developments in the construction of these recombinant  bacteria have resulted in
a plasmid-based  expression system (PLEX), in which engineered  genetic elements
(plasmids)  are cloned into  commensal  bacteria  for protein  production.  This
system  allows for higher  protein  production  levels  than the  original  SPEX
constructs.  In  addition,  the PLEX and SPEX  systems  may be used in  concert,
enabling  greater  flexibility  in protein  secretion  for  purification  or for
surface expression of multiple proteins - e.g. for  multi-component  combination
vaccines.

Collaborative Research and Licenses

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

      National Institutes of Health. In August 2004, we were awarded two Phase I
and two Phase II Small  Business  Innovation  Research  (SBIR)  grants  totaling
approximately  $11.1  million to support our work on Smallpox and  Arenaviruses.
The grants  were  acquired  as part of our  acquisition  of certain  assets from
ViroPharma


                                       6
<PAGE>

Incorporated  ("Viropharma").  For the years ending December 31, 2005, 2004 and,
2003, we have recognized revenue from the SBIR grants of $6,596,000, $1,415,000,
and $388,000 respectively.

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

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

      United  States Army Medical  Research and Material  Command.  In September
2005, we entered into a $3.2  million,  one year contract with the United States
Army Medical Research and Material  Command  (USAMRMC).  The agreement,  for the
rapid identification and treatment of anti-viral diseases, is funded through the
United States Air Force (USAF).  It is anticipated that our efforts will aid the
USAF Special  Operations  Command in its use of computational  biology to design
and develop specific  countermeasures  against biological threat agents Smallpox
and Adenovirus. In 2005, we recognized revenue of $653,000 from this contract.

      United  States Army Medical  Research  Acquisition  Activity.  In December
2002, we entered into a four year  contract with the U.S. Army Medical  Research
Acquisition Activity (USAMRAA) to develop a drug to treat Smallpox. The contract
start date was  January  1, 2003 for the total  amount of $1.6  million.  Annual
payments over the term of the agreement will be approximately  $400,000.  In the
years ended December 31, 2005, 2004 and 2003 we recognized  revenue of $427,000,
$425,000, and $315,000 respectively.

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

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

      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 and is now subject to renewal on a year to year basis.
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.

      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


                                       7
<PAGE>

to certain  inventions in exchange for a non-refundable  license issuance fee of
$15,000 and an annual  maintenance  fee of $10,000.  As of December  31, 2005 we
have made payments of  approximately  $101,000  under the license.  In the event
that we sub-license the license, we must pay Regents 15% of all royalty payments
made to SIGA. We have currently met all our obligations under this agreement.

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

      TransTech  Pharma,  Inc. In October 2002, we entered into a drug discovery
collaboration agreement with TransTech Pharma, Inc., a related party ("TransTech
Pharma").  Under the  agreement,  SIGA and TransTech  Pharma  collaborate on the
discovery, optimization and development of lead compounds to certain therapeutic
agents.  The costs of development  are shared.  SIGA and TransTech  Pharma would
share  revenues  generated  from  licensing and profits from any  commercialized
product sales.  The agreement will be in effect until  terminated by the parties
or upon  cessation  of research  or sales of all  products  developed  under the
agreement.  If the  agreement  is  terminated,  relinquished  or expires for any
reason certain rights and benefits will survive the termination. Obligations not
expressly  indicated to survive the agreement will terminate with the agreement.
No revenues were recognized in 2005, 2004 and 2003 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 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.


                                       8
<PAGE>

The following are our patent positions as of December 31, 2005.

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

<CAPTION>
----------------------------------------------------------------------------------------------------
                                              Number         Number
                              Number      Co-Exclusively   Exclusively       Number
                            Exclusively      Licensed       Licensed      Exclusively       Number
     APPLICATIONS          Licensed from       with        from Oregon   Licensed from     Owned by
                            Rockefeller     Washington        State           UCLA           SIGA
                               Univ.           Univ.       University
----------------------------------------------------------------------------------------------------
<S>                             <C>             <C>            <C>            <C>             <C>
  U.S. applications             1               4                             2               3
----------------------------------------------------------------------------------------------------
  U.S. provisionals                                                                           6
----------------------------------------------------------------------------------------------------
         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


                                       9
<PAGE>

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

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

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

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

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

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

Competition

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

Human Resources and Facilities

      As of March 15, 2006 we had 42 full time employees.  None of our employees
are covered by a collective  bargaining  agreement  and we consider our employee
relations to be good.


                                       10
<PAGE>

Availability of Reports and Other Information

      We file annual,  quarterly,  and current reports,  proxy  statements,  and
other  documents with the Securities and Exchange  Commission  ("SEC") under the
Securities  Exchange Act of 1934 (the "Exchange  Act").  The public may read and
copy any materials that we file with the SEC at the SEC's Public  Reference Room
at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information
on  the  operation  of  the  Public   Reference  Room  by  calling  the  SEC  at
1-800-SEC-0330.  Also,  the SEC  maintains  an Internet  website  that  contains
reports,  proxy and  information  statements,  and other  information  regarding
issuers,  including  us, that file  electronically  with the SEC. The public can
obtain any documents that we file with the SEC at http://www.sec.gov.

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

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

      o     Code of Ethics and Business Conduct

      o     Amended and Restated Audit Committee Charter

      o     Compensation Committee Charter

      o     Nominating and Corporate Governance Committee Charter

      o     Procedure for Sending Communications to the Board of Directors

      o     Procedures   for   Security   Holder    Submission   of   Nominating
            Recommendations

      o     2004 Policy on Confidentiality of Information and Securities Trading

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

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

Item 1A. Risk Factors

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

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

      We incurred net losses of approximately  $2.3 million,  $9.4 million,  and
$5.3  million  for  the  years  ended   December  31,  2005,   2004,  and  2003,
respectively.  As of December 31, 2005, 2004 and 2003, our  accumulated  deficit
was approximately $46.5 million, $44.2 million and $34.8 million,  respectively.
We expect to continue to incur significant operating expenditures.  We will need
to generate significant revenues to achieve and maintain profitability.

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


                                       11
<PAGE>

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

      We  continue to be  dependent  on our ability to raise money in the equity
markets. There is no guarantee that we will continue to be successful in raising
such funds. If we are unable to raise additional  equity funds, we may be forced
to  discontinue  or cease  certain  operations.  We  currently  have  sufficient
operating  capital to finance our  operations  beyond March 31, 2007. 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.

Our stock  price is, and we expect it to remain,  volatile,  which  could  limit
investors' ability to sell stock at a profit.

      The  volatile  price of our stock  makes it  difficult  for  investors  to
predict the value of their  investment,  to sell shares at a profit at any given
time, or to plan purchases and sales in advance. A variety of factors may affect
the market price of our common stock. These include, but are not limited to:

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

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

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

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

o     developments concerning proprietary rights, including patents;

o     developments concerning our collaborations;

o     regulatory developments in the United States and foreign countries;

o     economic or other crises and other external factors;

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

o     changes in financial estimates by securities analysts; and

o     sales and short selling activity of our common stock.

      Additionally,  because there is not a high volume of trading in our stock,
any information about SIGA in the media may result in significant  volatility in
our stock price.

      We will not be able to control many of these factors,  and we believe that
period-to-period  comparisons of our financial  results will not  necessarily be
indicative of our future performance.

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

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

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


                                       12
<PAGE>

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

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

      o     be safe, non-toxic and effective;

      o     otherwise meet applicable regulatory standards;

      o     receive the necessary regulatory approvals;

      o     develop into commercially viable drugs;

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

      o     be successfully marketed;

      o     be reimbursed by government and private insurers; and

      o     achieve customer acceptance.

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

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

      Until and unless we successfully  make a product,  our ability to generate
revenues  will  largely   depend  on  our  ability  to  enter  into   additional
collaborative  agreements,  strategic alliances,  research grants, contracts and
license  agreements  with third parties and maintain the agreements we currently
have in place.  Substantially  all of our revenues for the years ended  December
31, 2005,  2004 and 2003,  respectively,  were derived from revenues  related to
grants,  contracts and license  agreements.  Our current revenue is derived from
contract  work  being  performed  for the NIH under two major  grants  which are
scheduled to expire in September  2006 and  contracts  with the U.S.  Army which
expire in September  2006 and 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.  We may not earn significant  milestone
payments under our existing  collaborative  agreements  until our  collaborators
have  advanced  products  into  clinical  testing,  which may not occur for many
years, if at all.

      We have material agreements with the following collaborators:

      o     National  Institutes of Health.  Under our  collaborative  agreement
            with the NIH we have  received  SBIR Grants  totaling  approximately
            $11.1 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.


                                       13
<PAGE>

      o     United  States  Army  Medical  Research  and  Material  Command.  In
            September  2005 we entered into a $3.2  million,  one year  contract
            with the USAMRMC.  The agreement,  for the rapid  identification and
            treatment of anti-viral  diseases, is funded through the USAF. It is
            anticipated  that our efforts will aid the USAF  Special  Operations
            Command in its use of  computational  biology to design and  develop
            specific  countermeasures  against biological threat agents Smallpox
            and  Adenovirus.  We are  current in all our  obligations  under our
            agreement.

      o     Saint Louis  University.  On September  1, 2005,  we entered into an
            agreement with Saint Louis University for the continued  development
            of one of our Smallpox  drugs.  The agreement is funded  through the
            NIH.  Under the  agreement,  SIGA will  receive  approximately  $1.0
            million  during the term of  September 1, 2005 to February 28, 2006.
            We are current in all our obligations under our agreement.

      o     United  States  Army  Medical  Research  Acquisition   Activity.  In
            December  2002, we entered into a four year contract with USAMRAA to
            develop  a drug  to  treat  Smallpox.  We  are  current  in all  our
            obligations under our agreement.

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

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

      o     TransTech  Pharma,  Inc.  Under  our  collaborative  agreement  with
            TransTech Pharma, a related party, TransTech Pharma is collaborating
            with  us on the  discovery,  optimization  and  development  of lead
            compounds to certain  therapeutic  agents.  We and TransTech  Pharma
            have agreed to share the costs of development and revenues generated
            from licensing and profits from any  commercialized  products sales.
            The agreement  will be in effect until  terminated by the parties or
            upon cessation of research or sales of all products  developed under
            the  agreement.  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


                                       14
<PAGE>

candidates  and to establish  and maintain a market for our product  candidates.
There  also are  many  companies,  both  public  and  private,  including  major
pharmaceutical  and  chemical  companies,   specialized   biotechnology   firms,
universities   and   other   research   institutions   engaged   in   developing
pharmaceutical  and  biotechnology   products.  Many  of  these  companies  have
substantially greater financial,  technical, research and development, and human
resources than us.  Competitors may develop products or other  technologies that
are more  effective  than any that are being  developed  by us or may obtain FDA
approval for products more rapidly than us. If we commence  commercial  sales of
products,  we still must  compete in the  manufacturing  and  marketing  of such
products,  areas in which we have no  experience.  Many of these  companies also
have manufacturing  facilities and established marketing capabilities that would
enable such companies to market competing  products through existing channels of
distribution.  Two companies with similar  profiles are VaxGen,  Inc.,  which is
developing   vaccines  against  anthrax,   Smallpox  and  HIV/AIDS;   and  Avant
Immunotherapeutics,  Inc.,  which has vaccine  programs for agents of biological
warfare.

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

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

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

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

      o     must meet requirements for institutional review board oversight;

      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


                                       15
<PAGE>

and/or  required to cease using a technology  necessary  to carry out  research,
development and commercialization. At present we are unaware of any or potential
infringement claims against our patent portfolio.

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

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

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

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, 2005 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.


                                       16
<PAGE>

We may have difficulty managing our growth.

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

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

      Our biopharmaceutical research and development involves the controlled use
of hazardous and radioactive  materials and biological  waste. We are subject to
federal,  state and local laws and regulations  governing the use,  manufacture,
storage,  handling and disposal of these  materials and certain waste  products.
Although we believe that our safety  procedures  for  handling and  disposing of
these materials comply with legally prescribed standards, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the  event of an  accident,  we  could  be held  liable  for  damages,  and this
liability could exceed our resources. The research and development activities of
our  company do not  produce any  unusual  hazardous  products.  We do use small
amounts of 32P, 35S and 3H, which are stored, used and disposed of in accordance
with Nuclear Regulatory  Commission ("NRC")  regulations.  We maintain liability
insurance in the amount of  approximately  $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


                                       17
<PAGE>

not be able to obtain such insurance.  Even if such insurance is obtainable,  it
may not be available at a reasonable  cost or in a sufficient  amount to protect
us against liability.

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

      If we or others  identify  side  effects  after any of our products 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 biotechnology  products can be a  time-consuming  and complex
process which may delay or prevent  commercialization  of our  products,  or may
prevent  our  ability  to  produce  an  adequate   volume  for  the   successful
commercialization of our products.

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

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

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

The future  issuance of preferred  stock may adversely  affect the rights of the
holders of our common stock.

      Our certificate of incorporation allows our Board of Directors to issue up
to  10,000,000  shares  of  preferred  stock  and  to  fix  the  voting  powers,
designations,   preferences,   rights   and   qualifications,   limitations   or
restrictions  of  these  shares  without  any  further  vote  or  action  by the
stockholders.  The rights of the holders of common stock will be subject to, and
could be adversely affected by, the rights of the holders of any preferred stock
that we may  issue  in the  future.  The  issuance  of  preferred  stock,  while
providing desirable flexibility in connection with possible


                                       18
<PAGE>

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, 2005,  Directors,  Officers  and  principal  stockholders
beneficially owned approximately 46.0% of our stock.

Item 1B. Unresolved Staff Comments

      Not applicable.

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

      On  February  28,  2006,   Four  Star  Group,   a  Division  of  Executive
Intelligence  Network,  LLC filed suit in the Supreme  Court of the State if New
York naming as defendants  SIGA  Technologies,  Inc.,  Bernard  Kasten and "John
Odgen  [sic]." In 2004,  SIGA renewed a contract with Four Star under which Four
Star was to assist  SIGA in  identifying  and  obtaining  contracts  and grants.
Plaintiff Four Star alleges that SIGA breached its contract by allegedly failing
to  compensate  Four  Star  within  the time set by the  contract  and that SIGA
breached the contract,  and tortuously  interfered with Four Star's  contractual
relationships,  by allegedly soliciting and/or hiring certain affiliates of Four
Star.  Four Star and SIGA have  stipulated that SIGA has until April 12, 2006 to
answer,  move or  otherwise  respond  to the  complaint.  SIGA  believes  it has
meritorious defenses to Four Star's claims.

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

      None.


                                       19
<PAGE>

                                     PART II

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

Price Range of Common Stock

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

                                   Price Range

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

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

      As of March 15, 2006,  the closing bid price of our common stock was $1.13
per share. There were 97 holders of record as of March 15, 2006. 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  there  under.  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 November  2005, we sold  2,000,000  shares of our common stock at $1.00
per share and warrants to purchase  1,000,000  shares of our common  stock.  The
warrants are initially  exercisable  at 110% of the closing price on the closing
date of the  transaction  ($1.18  per  share)  at any time and from time to time
through and including the seventh anniversary of the closing date. The investors
are also entitled to purchase  additional shares of our common stock for a gross
amount of  $2,000,000  at an initial price of $1.10 per share for a period of 90
trading days following the effectiveness of a registration statement. An initial
registration  statement  relating  to the  common  stock  sold and the shares of
common stock  underlying the warrants became effective on December 2, 2005. With
respect to the  transaction,  we entered into an Exclusive  Finder's  Agreement.
Finder's fees under the agreement  include cash  compensation of 7% of the gross
amount  financed and a warrant to acquire  60,000  shares of our common stock at
terms equal to the investors' warrants. Net proceeds from the November financing
were $1,792,000.


                                       20
<PAGE>

      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 we 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 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,  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 125,000 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 Vaccine
Inc.  (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.

      See Item 11 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, 2005, 2004, 2003, 2002, and 2001.

<TABLE>
<CAPTION>
  The year                      Selling,                         Patent        In-process      Impairment
   ended                       general &       Research and    preparation    research and    of intangible
December 31,     Revenues    administrative    development        fees         development       assets
-------------   ----------  ----------------  --------------  -------------  --------------  ---------------
<S>              <C>            <C>              <C>             <C>             <C>            <C>
  2005           $  8,477       $  2,481         $  8,295        $    232        $     --       $     --
  2004           $  1,839       $  4,042         $  4,166        $    393        $    568       $  2,118
  2003           $    732       $  2,646         $  2,943        $    300                       $    137
  2002           $    344       $  1,838         $  1,766        $    105
  2001           $  1,160       $  2,571         $  1,733        $    117
</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>
  The year                                                                      Weighted average
   ended                                                Net loss per share:    shares outstanding:
December 31,     Operating loss         Net loss          basic & diluted       basic and diluted
                ----------------    ----------------   ---------------------  ---------------------
<S>                <C>                 <C>                  <C>                   <C>
 2005              $   (2,532)         $   (2,288)          $    (0.09)           24,824,824
 2004              $   (9,448)         $   (9,373)          $    (0.40)           23,724,026
 2003              $   (5,296)         $   (5,277)          $    (0.34)           15,717,138
 2002              $   (3,365)         $   (3,331)          $    (0.32)           10,450,529
 2001              $   (3,262)         $   (3,730)          $    (0.44)            8,499,961

<CAPTION>
As of and for the                                                                 Total           Net cash used
   year ended                          Cash & cash          Long term         stockholders'       in operating
  December 31,      Total assets       equivalents         obligations           equity            activities
                  ----------------   ----------------   -----------------   -----------------   -----------------
<S>                 <C>                 <C>               <C>                   <C>                <C>
 2005               $    6,132          $    1,772        $      642            $    3,231         $    (1,392)
 2004               $    6,111          $    2,021                              $    4,559         $    (4,890)
 2003               $    6,100          $    1,441                              $    5,551         $    (5,332)
 2002               $    2,830          $    2,069                              $    2,173         $    (2,648)
 2001               $    4,208          $    3,148                              $    3,541         $    (2,944)
</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,  an  agreement  with Saint  Louis  University,  funded by the NIH that was
signed in September  2005, 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 one to three  years,  if at all. We believe that we will
need additional  funds to complete the  development of our biomedical  products.
Our plans with regard to these  matters  include  continued  development  of our
products as well as seeking  additional  research  support  funds and  financial
arrangements.  Although we continue to pursue these plans, there is no assurance
that we will be successful in obtaining 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 March 31, 2007.

      Our  biotechnology  operations  are  based  in our  research  facility  in
Corvallis,  Oregon.  We continue to seek to fund a major  portion of our ongoing
antiviral,  antibiotic and vaccine  programs through a combination of government
grants and strategic alliances. While we have had success in obtaining strategic
alliances and grants,


                                       22
<PAGE>

there is no assurance that we will continue to be successful in obtaining  funds
from these sources. Until additional relationships are established, we expect to
continue  to  incur  significant   research  and  development  costs  and  costs
associated  with the  manufacturing  of product for use in  clinical  trials and
pre-clinical  testing.  It is expected  that general and  administrative  costs,
including patent and regulatory costs,  necessary to support clinical trials and
research and development will continue to be significant in the future.

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

Critical Accounting Estimates

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

Significant Accounting Policies

      The  following is a brief  discussion of the more  significant  accounting
policies and methods used by us in the preparation of our 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 2005,  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.


                                       23
<PAGE>

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 1-4 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.

Recent Accounting Pronouncements

      In December 2004, the FASB issued SFAS 123(R),  which requires the Company
to recognize  compensation  expense for stock options granted to employees based
on the  estimated  fair  value of the  equity  instrument  at the time of grant.
Currently, the Company discloses the pro forma net income and earnings per share
as if the Company applied the fair value  recognition  provisions of SFAS 123 as
amended  by FAS 148.  The  requirements  of SFAS  123(R) are  effective  for the
Company in the first  quarter of fiscal  2006.  We will  recognize  compensation
expense for stock based awards issued after  January 1, 2006 on a  straight-line
basis over the requisite  service period for the entire award. We also expect to
record  expense of  approximately  $440,000 and $400,000 in fiscal 2006 and 2007
related to previously issued,  unvested stock options. SIGA will continue to use
the  Black-Scholes  model  for  evaluating  the fair  market  value of its stock
options.

      In May 2005, the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Correction  - a  Replacement  of APB  Opinion No. 20 and FASB  Statement  No. 3"
("SFAS 154").  SFAS 154 changes the  requirements for the accounting for and the
reporting  of a  change  in  accounting  principle.  SFAS  154  requires  that a
voluntary change in accounting principle be applied retroactively with all prior
period financial statements presented using the new accounting  principle.  SFAS
154 is effective  for  accounting  changes and  corrections  of errors in fiscal
years beginning after December 15, 2005. We will apply the  requirements of SFAS
154 on any changes in principle made on or after January 1, 2006.

Results of Operations

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

                                               2005         2004         2003
                                             --------     --------     --------

      Revenue                                     100%         100%         100%
                                             --------     --------     --------
      Selling, general and administrative          29%         220%         362%
      Research and development                     98%         227%         402%
      Patent preparation fees                       3%          21%         401%
      In-process research and development           0%          31%           0%
      Impairment of intangible assets               0%         115%          19%
                                             --------     --------     --------
      Operating loss                               30%         514%         723%


                                       24
<PAGE>

Years ended December 31, 2005, 2004 and 2003

      Revenues for the years ended  December  31, 2005 and 2004 were  $8,477,000
and $1,839,000,  respectively.  The increase of $6,638,000 or 361% from the year
ended  December  31,  2004  related to the award of two Phase I and two Phase II
SBIR grants by the NIH during the third quarter of 2004, an agreement with Saint
Louis  University  entered into in September 2005, and an agreement with USAMRMC
entered into in September 2005.

      The grants  awarded by the NIH during the third quarter of 2004 to support
our Smallpox and  Arenaviruses  programs are for a two year period ending in the
third quarter of 2006. The total award for these grants was $11.1  million.  For
the years ended December 31, 2005 and 2004 we recorded  revenues of $6.4 million
and $1.0  million,  respectively,  from  these  grants,  mainly  reflecting  the
continued  development  of our Smallpox  oral  antiviral  drug. In 2004, we also
received a one year SBIR grant from the NIH for  $252,000  to support  our Strep
vaccine  program.  In 2005 and 2004 we recorded revenue of $156,000 and $86,000,
respectively, from this grant.

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

      On September 22, 2005,  we entered into a $3.2 million,  one year contract
with  USAMRMC.  The  agreement,  for the rapid  identification  and treatment of
anti-viral diseases, is funded through the USAF (the "USAF Agreement").  Advance
payments  under  the  USAF  Agreement,  received  prior  to the  performance  of
services,  are deferred and recognized as revenue when the related  services are
performed. In 2005, we recognized revenues of $653,000 from the USAF Agreement.

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

      Revenues of $1,839,000 for the year ended December 31, 2004 increased $1.1
million  compared to $731,700  recognized  for the year ended December 31, 2003.
The 151%  increase  resulted from the award of two Phase I and two Phase II SBIR
grants by the NIH during the third quarter of 2004.  For the year ended December
31, 2004 we recorded  revenue of $1,049,600 from these grants.  In 2004, we also
recorded  $85,600 from the NIH grant  awarded to us in August of 2004 to support
our Strep  vaccine  program.  Revenue from our contract  with the U.S.  Army was
$425,000 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  completed  in the  second
quarter of 2004. For the year ended December 31, 2003 we received  $387,800 from
this grant.

      Selling,  general and  administrative  expenses (SG&A) were $2,481,000 and
$4,042,000  for the years ended  December 31, 2005 and 2004.  SG&A declined $1.6
million or 39% primarily due to $1.0 million  decline in legal fees and $401,000
decline in consulting  fees. In 2005, upon the  re-negotiation  of certain legal
invoices,  we received and recorded  credits of $303,000 in legal  expenses.  In
addition to the credits  received by SIGA,  legal fees declined by approximately
$711,000  from the year ended  December  31, 2004  reflecting  higher legal fees
during the 2004 period due to the acquisition of certain assets from ViroPharma,
the review and amendment of our corporate  governance policies and procedures to
ensure compliance with Sarbanes Oxley Act of 2002 and NASDAQ requirements. Legal
expenses  in 2004 were also  incurred  in  connection  with the sale of  certain
non-core vaccine assets and a legal action that the Company  initiated against a
former founder.  In 2004, we incurred higher  consulting  expenses in connection
with our efforts to secure certain government contracts.  Our agreement with the
consulting group was terminated in October 2004.

      SG&A  expenses  for the year  ended  December  31,  2004  were  $4,042,000
compared to  $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


                                       25
<PAGE>

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.

      Research and  development  (R&D) expenses for the years ended December 31,
2005  and  2004  were  $8,295,000  and  4,165,800,  respectively.  R&D  expenses
increased $4.1 million or 99% primarily due to preclinical  development  work in
connection  with our two lead product  programs,  work  performed to support our
recent  agreements  with Saint Louis  University and the USAF, the hiring of new
employees  and the  increase  in  amortization  expense.  In 2005,  we  incurred
approximately $3.0 million to support preclinical development work in connection
with our Smallpox and Arenaviruses  programs.  Our research staff increased from
23  scientists  at December  31, 2004 to 33  scientists  at December  31,  2005,
resulting  in  an  increase  of  $705,000  in  payroll  and  related   expenses.
Amortization  of intangible  assets in the amount of $1,097,000 and $636,000 for
the  years  ended  December  31,  2005  and  2004,   respectively,   represented
approximately 11% of the increase.

      R&D expenses of $4,165,800  for the year ended December 31, 2004 increased
approximately  42% from the  $2,942,800 of expenses  incurred for the year ended
December 31, 2003.  Amortization expense of $636,000  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 $473,000 from $407,000 as a result of
accelerated development of our lead product programs.

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

      The risk of failure to complete any program is high,  as each,  other than
our smallpox program that is scheduled to enter phase I clinical trials in 2006,
is in the  relatively  early stage of  development.  Products for the biological
warfare defense market, such as the SIGA-246 Smallpox anti-viral, could generate
revenues in one to three  years.  We believe the products  directed  toward this
market are on schedule.  We expect the future research and  development  cost of
our biological  warfare defense  programs to increase as the potential  products
enter animal studies and safety testing,  including  human safety trials.  Funds
for  future  development  will be  partially  paid for by NIH 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.  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 years ended December 31, 2005 and 2004
were $232,000 and $393,000, respectively. The decline of $161,000 or 41% relates
to the termination of our relations with Plexus and


                                       26
<PAGE>

Pecos Labs Inc. (Pecos), and the reduction in the number of patents supported by
SIGA, in addition to a refund of $83,000  received in 2005 from our patent legal
counsel.

      Patent  preparation  expenses  for the year ended  December  31, 2004 were
$393,000  compared to $300,500 incurred in 2003. The 31% increase was the result
of increased costs arising from the Plexus and ViroPharma asset acquisitions.

      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 in May 2003.  These
factors  resulted in a significant  reduction in forecasted  revenues related to
that  technology  and a  reduction  in the future  remaining  useful  life,  and
triggered  the related  intangible  asset  impairment.  The amount of impairment
recorded  by us in  December  2004 was  determined  using the  two-step  process
impairment  review as required by SFAS 144. In the first step,  we compared  the
projected  undiscounted net cash flows  associated with the technology  acquired
from Plexus over its remaining life against its carrying  amount.  We determined
that the carrying  amount of the  technology  acquired from Plexus  exceeded its
projected  undiscounted  cash flows.  In the second step,  we estimated the fair
value of the technology using the income method of valuation, which included the
use of estimated  discounted cash flows. Based on our assessment,  we recorded a
non-cash impairment charge of approximately $1.5 million in December 2004, which
was included as a component of our operating  loss. In May 2004, we performed an
impairment  review  of our  intangible  assets  in  accordance  with SFAS 144 in
connection  with the sale of certain  intangible  assets from our  immunological
bioinformatics   technology  and  certain  non-core  vaccine  development  to  a
privately-held  company,  Pecos. We recorded an impairment charge of $307,000 to
the grants transferred to Pecos and $303,000 to the covenant not to compete with
our President who was terminated during the current year period.

      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.

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

      Total  operating  loss of $9,448,000 for the year ended December 31, 2004,
increased  $4,152,000  from the loss of  $5,296,000  in 2003.  $2,686,500 of the
operating loss recognized in 2004 related to non-cash  charges  incurred for the
impairment  of assets and  recognition  of in-process  research and  development
expense. Excluding


                                       27
<PAGE>

these expenses,  the loss recognized in 2004 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 higher revenues.

      A gain from the decrease in common stock rights and common stock  warrants
was recorded in connection with the sale and issuance of common stock,  warrants
and rights in 2005. In November 2005, we sold 2,000,000  shares of the Company's
common stock at $1.00 per share,  warrants to purchase  1,000,000  shares of the
Company's common stock and rights to purchase additional shares of the Company's
common stock for a gross amount of  $2,000,000  at an initial price of $1.10 per
share. The warrants and rights to purchase  additional common stock of SIGA were
recorded at fair market value and  classified as  liabilities at the time of the
transaction.  A gain of $253,000 was recorded by us,  reflecting  the decline in
the fair value of the  warrants and the rights to acquire  additional  shares of
our common stock, from the time of the transaction to December 31, 2005.

      Other income for the years ended  December 31,  2005,  2004,  and 2003 was
$9,000, $75,000, and $18,000, respectively. Other income in 2004 was higher than
2005 and 2003 mainly due to  interest  income  received on higher cash  balances
during that year. In 2004 we also received other income of $15,000 as the result
of the settlement of a legal action with a former founder.

Liquidity and Capital Resources

      As of December 31, 2005 we had $1,772,489 in cash and cash equivalents. We
believe that these funds and our anticipated  cash flows,  including  receipt of
funding from government  contracts and grants, will be sufficient to support our
operations beyond March 31, 2007.

      On March 9,  2006,  SIGA  entered  into a term sheet for the merger of the
Company with PharmAthene, Inc. Under the provisions of the term sheet, the Chief
Executive  Officer of  PharmAthene  will serve as President and Chief  Executive
Officer of the combined  company and the Board of Directors  for the new company
will  reflect  the  new  proportionate   ownership.  It  is  expected  that  the
shareholders of SIGA will own approximately  32% of the combined company,  which
is anticipated to remain listed on the NASDAQ stock market.  The  transaction is
conditioned  on,  among other  things,  the  execution  of a  definitive  merger
agreement, approval of the shareholders of each company, regulatory approval and
other customary  closing  conditions.  In connection with the  transaction,  the
Company and  PharmAthene  also  entered  into a Bridge Note  Purchase  Agreement
whereby  PharmAthene  will  provide  SIGA  with  up to  $3  million  in  interim
financing.

      In November  2005, we sold  2,000,000  shares of our common stock at $1.00
per share and warrants to purchase  1,000,000  shares of our common  stock.  The
warrants are initially  exercisable  at 110% of the closing price on the closing
date of the  transaction  ($1.18  per  share)  at any time and from time to time
through and including the seventh anniversary of the closing date. The investors
are also entitled to purchase  additional shares of our common stock for a gross
amount of  $2,000,000  at an initial price of $1.10 per share for a period of 90
trading days following the effectiveness of a registration statement. An initial
registration  statement  relating  to  the  common  stock  sold  and  the  stock
underlying the warrants  became  effective on December 2, 2005.  With respect to
the transaction, we entered into an Exclusive Finder's Agreement.  Finder's fees
under the agreement include cash compensation of 7% of the gross amount financed
and a warrant to acquire 60,000 shares of our common stock at terms equal to the
investors' warrants. Net proceeds from the November financing were $1,792,000.

      In May, 2005, we borrowed  approximately  $276,000 under a Promissory Note
payable  to  General  Electric  Capital  Corporation.  The note is payable in 36
monthly  installments of principal and interest of 10.31% per annum. The note is
secured  by a  master  security  agreement  dated as of  April  29,  2005 and by
specific  property  listed under the master  security  agreement.  Total Balance
outstanding at December 31, 2005 was $214,225.

      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


                                       28
<PAGE>

grants from the NIH totaling approximately $11.1 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 2005, we began to expand our research  facility in  Corvallis,  Oregon.
The  expanded  facility  will  accommodate  the  increase  in our  research  and
development staff and is expected to be completed in the second quarter of 2006.
Until the  facility  expansion  is  completed,  the  project  is  classified  as
construction in-progress in property, plant and equipment. In 2006, we expect to
incur approximately $500,000 to complete the expansion.

      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 in exchange  for 150,000  shares of Pecos common
stock. As a result of this transaction, we performed an impairment review of the
intangible 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,  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  assignee 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  125,000  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.

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

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


                                       29
<PAGE>

      On March 20, 2006, we received  $1.0 million  under a $3.0 million  Bridge
Note Purchase Agreement between the Company and PharmAthene Inc. We believe that
our existing cash combined with  anticipated  cash flows,  including  receipt of
future funding from government contracts and grants and receipt of the remaining
$2.0 million funding under the Bridge Note Purchase Agreement will be sufficient
to support our operations  beyond March 31, 2007, and that sufficient cash flows
will be available to meet our business  objectives.  We have developed a plan to
further  reduce the Company's  operating  expenses in the event that  sufficient
funds are not available, or if we are not able to obtain funding from the Bridge
Note  Purchase  Agreement or the  anticipated  government  contracts and grants,
which would be sufficient  to enable us to operate  beyond March 31, 2007. If we
are not  unable to raise  adequate  capital  or  achieve  profitability,  future
operations will need to be scaled back or discontinued.

Contractual Obligations, Commercial Commitments and Purchase Obligations

      As of December 31, 2005,  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,

           2006                             $  255,400
           2007                                261,800
           2008                                133,200
           2009                                135,900
           2010                                 22,700
                                            ----------
      Total                                 $  809,000
                                            ==========

Off-Balance Sheet Arrangements

      SIGA does not have any off-balance sheet arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      None


                                       30
<PAGE>

Item 8. Financial Statements and Supplementary Data

                        Index to the Financial Statements

<TABLE>
<S>                                                                                                     <C>
Report of Independent Registered Public Accounting Firm.................................................32

Balance Sheets as of December 31, 2005 and 2004.........................................................33

Statements of Operations for the years ended December 31, 2005, 2004 and 2003...........................34

Statements of Changes in Stockholders' Equity for the years ended December 31, 2005, 2004 and 2003......35

Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003...........................37

Notes to Financial Statements...........................................................................38
</TABLE>


                                       31
<PAGE>

             Report of Independent Registered Public Accounting Firm

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

In our opinion,  the accompanying  balance sheets and the related  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, 2005 and 2004,  and the results of their  operations and their cash
flows for each of the three  years in the  period  ended  December  31,  2005 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
March 28, 2006


                                       32
<PAGE>

                             SIGA TECHNOLOGIES, INC.

                                 BALANCE SHEETS

                        As of December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                                                     December 31,     December 31,
                                                                                         2005             2004
                                                                                     ------------     ------------
<S>                                                                                  <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents ....................................................    $  1,772,489     $  2,020,938
   Accounts receivable ..........................................................         883,054          108,904
   Prepaid expenses .............................................................         160,144          278,547
                                                                                     ------------     ------------
    Total current assets ........................................................       2,815,687        2,408,389

   Property, plant and equipment, net ...........................................       1,224,147          508,015
   Goodwill .....................................................................         898,334          898,334
   Intangible assets, net .......................................................         932,735        2,114,297
   Other assets .................................................................         234,126          181,725
                                                                                     ------------     ------------
    Total assets ................................................................    $  6,105,029     $  6,110,760
                                                                                     ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities
   Accounts payable .............................................................    $  1,251,854     $  1,148,277
   Accrued expenses and other ...................................................         452,082          403,072
   Deferred revenue .............................................................         347,319               --
   Common stock rights ..........................................................          73,400               --
   Note payable .................................................................         107,520               --
                                                                                     ------------     ------------
    Total current liabilities ...................................................       2,232,175        1,551,349

Non-current portion of note payable .............................................         106,705               --
Common stock warrants ...........................................................         535,119               --
                                                                                     ------------     ------------
    Total liabilities ...........................................................       2,873,999        1,551,349

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

Stockholders' equity
   Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
     authorized, 68,038 issued and outstanding at December 31, 2005
     and December 31, 2004) .....................................................          58,672           58,672
   Common stock ($.0001 par value, 50,000,000 shares authorized,
     26,500,648 and 24,500,648 issued and outstanding at December 31, 2005
     and December 31, 2004, respectively) .......................................           2,650            2,450
   Additional paid-in capital ...................................................      49,638,619       48,679,650
   Accumulated deficit ..........................................................     (46,468,911)     (44,181,361)
                                                                                     ------------     ------------
    Total stockholders' equity ..................................................       3,231,030        4,559,411
                                                                                     ------------     ------------
    Total liabilities and stockholders' equity ..................................    $  6,105,029     $  6,110,760
                                                                                     ============     ============
</TABLE>

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


                                       33
<PAGE>

                             SIGA TECHNOLOGIES, INC.

                            STATEMENTS OF OPERATIONS

              For the Years Ended December 31, 2005, 2004 and 2003

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                    2005             2004             2003
                                                                ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>
Revenues
      Research and development .............................    $  8,476,741     $  1,839,182     $    731,743
                                                                ------------     ------------     ------------

Operating expenses
      Selling, general and administrative ..................       2,481,489        4,041,973        2,646,586
      Research and development .............................       8,295,262        4,165,849        2,942,809
      Patent preparation fees ..............................         232,329          393,100          300,494
      In-process research and development ..................              --          568,329               --
      Impairment of intangible assets ......................              --        2,118,219          136,750
                                                                ------------     ------------     ------------
         Total operating expenses ..........................      11,009,080       11,287,470        6,026,639
                                                                ------------     ------------     ------------

         Operating loss ....................................      (2,532,339)      (9,448,288)      (5,294,896)

Decrease in fair market value of common stock rights
      and common stock warrants ............................         235,730               --               --
Other income, net ..........................................           9,059           74,969           18,256
                                                                ------------     ------------     ------------
         Net loss ..........................................    $ (2,287,550)    $ (9,373,319)    $ (5,276,640)

Weighted average shares outstanding: basic and diluted .....      24,824,824       23,724,026       15,717,138
                                                                ============     ============     ============
Net loss per share: basic and diluted ......................    $      (0.09)    $      (0.40)    $      (0.34)
                                                                ============     ============     ============
</TABLE>

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


                                       34
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 2005, 2004 and 2003

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

<S>                                                           <C>         <C>             <C>            <C>
      Balance at January 1, 2003                               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 former founder                                                                     (40,938)             (4)
Stock issued for services                                                                     30,000               3
Net loss
                                                           -----------    -----------    -----------     -----------
     Balance at December 31, 2004                               68,038    $    58,672     24,500,648     $     2,450
                                                           -----------    -----------    -----------     -----------
Net proceeds allocated to the issuance of common
     stock ($1.00 per share)                                                               2,000,000     $       200
Stock options issued to members of the Board
     of Directors
Net loss
                                                           -----------    -----------    -----------     -----------
     Balance at December 31, 2005                               68,038    $    58,672     26,500,648     $     2,650
                                                           ===========    ===========    ===========     ===========
</TABLE>

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

                                   (Continued)


                                       35
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 2005, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                Stock                              Total
                                                            Additional       Subscription     Accumulated      Stockholders'
                                                          Paid-in Capital    Outstanding        Deficit           Equity
                                                          ---------------   -------------    -------------     -------------
<S>                                                        <C>              <C>              <C>               <C>
      Balance at January 1, 2003                           $  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 former founder                                               4                                                  --
Stock issued for services                                         47,397                                --            47,400
Net loss                                                                                        (9,373,319)       (9,373,319)
                                                           -------------    -------------    -------------     -------------
     Balance at December 31, 2004                          $  48,679,650    $          --    $ (44,181,361)    $   4,559,411
                                                           -------------    -------------    -------------     -------------
Net proceeds allocated to the issuance of common
     stock ($1.00 per share)                               $     947,269                                             947,469
Stock options issued to members of the Board
     of Directors                                                 11,700                                              11,700
Net loss                                                                                        (2,287,550)       (2,287,550)
                                                           -------------    -------------    -------------     -------------
     Balance at December 31, 2005                          $  49,638,619    $          --    $ (46,468,911)    $   3,231,030
                                                           =============    =============    =============     =============
</TABLE>

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


                                       36
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                            STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2005, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                2005             2004             2003
                                                                            ------------     ------------     ------------
<S>                                                                         <C>              <C>              <C>
Cash flows from operating activities:
Net loss ...............................................................    $ (2,287,550)    $ (9,373,319)    $ (5,276,640)
Adjustments to reconcile net loss to net
cash used in operating activities:
  Purchase in-process research & development ...........................              --          568,329               --
  Loss on impairment of intangible assets ..............................              --        2,118,219          136,750
  Loss on impairment of investments ....................................          15,000               --               --
  Loss on write-off of prepaid expenses ................................         116,243               --               --
  Bad debt expense .....................................................              --               --           26,000
  Depreciation .........................................................         145,809          221,719          354,667
  Amortization of intangible assets ....................................       1,181,562          832,534          384,893
  Decrease in fair market value of common stock rights and warrants ....        (235,730)              --               --
  Stock based compensation .............................................              --           47,400            1,375
  Issuance of stock options to non-employee directors ..................          11,700               --               --
  Changes in assets and liabilities:
     Accounts receivable ...............................................        (774,150)         (70,118)          (4,635)
     Prepaid expenses ..................................................           2,160         (231,210)          53,889
     Other assets ......................................................         (67,401)          (6,729)         (10,827)
     Deferred Revenue ..................................................         347,319               --               --
     Accounts payable and accrued expenses .............................         152,587        1,003,117         (997,640)
                                                                            ------------     ------------     ------------
     Net cash used in operating activities .............................      (1,392,451)      (4,890,058)      (5,332,168)
                                                                            ------------     ------------     ------------

Cash flows from investing activities:
  Acquisition of intangible assets .....................................              --       (1,033,022)              --
  Capital expenditures .................................................        (861,941)        (350,688)        (273,560)
                                                                            ------------     ------------     ------------
     Net cash used in investing activities .............................        (861,941)      (1,383,710)        (273,560)
                                                                            ------------     ------------     ------------

Cash flows from financing activities:
  Proceeds from note payable ...........................................         276,434               --               --
  Repayment of note payable ............................................         (62,209)              --               --
  Net proceeds from issuance of common stock and derivatives ...........       1,791,718        6,784,606        4,171,996
  Receipt of stock subscription outstanding ............................              --               --          791,940
  Principal payments on capital lease obligations ......................              --               --          (11,206)
  Proceeds from exercise of options and warrants .......................              --           69,376           24,718

                                                                            ------------     ------------     ------------
     Net cash provided from financing activities .......................       2,005,943        6,853,982        4,977,448
                                                                            ------------     ------------     ------------

Net increase (decrease) in cash and cash equivalents ...................        (248,449)         580,214         (628,280)
Cash and cash equivalents at beginning of period .......................       2,020,938        1,440,724        2,069,004
                                                                            ------------     ------------     ------------
Cash and cash equivalents at end of period .............................    $  1,772,489     $  2,020,938     $  1,440,724
                                                                            ============     ============     ============

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 assets from ViroPharma Inc. .........              --     $  1,480,000               --
  Shares issued for services ...........................................    $     11,700     $     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.


                                       37
<PAGE>

                             SIGA TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization

SIGA  Technologies,  Inc.  ("SIGA" or the  "Company") is a  bio-defense  company
engaged in the discovery,  development and commercialization of products for use
in defense against  biological warfare agents such as Smallpox and Arenaviruses.
In December 2005, the FDA accepted the SIGA's IND  application for the Company's
lead product,  SIGA-246, an orally administered anti-viral drug that targets the
smallpox virus.  The Company is also engaged in the discovery and development of
other novel  anti-infectives,  vaccines,  and antibiotics for the prevention and
treatment of serious infectious diseases.  The Company's anti-viral programs are
designed  to  prevent  or  limit  the  replication  of viral  pathogens.  SIGA's
anti-infectives  programs are aimed at 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 commercially  reasonable terms or that the
Company will be able to secrure funding from  anticipated  government  contracts
and grants.

On March 20, 2006, the Company received $1.0 million under a $3.0 million Bridge
Note Purchase  Agreement between the Company and PharmAthene Inc. (see Note 12).
Management  believes that existing  cash combined with  anticipated  cash flows,
including  receipt of future  funding from  government  contracts and grants and
receipt of the  remaining  $2.0 million  funding  under the Bridge Note Purchase
Agreement  will be sufficient to support its  operations  beyond March 31, 2007,
and that sufficient cash flows will be available to meet the Company's  business
objectives.  Management  has  developed a plan to further  reduce the  Company's
operating  expenses in the event that sufficient funds are not available,  or if
the  Company  is not able to  obtain  funding  from  the  Bridge  Note  Purchase
Agreement or the  anticipated  government  contracts and grants,  which would be
sufficient  to enable the  Company  to operate  beyond  March 31,  2007.  If the
Company is unable to raise  adequate  capital or achieve  profitability,  future
operations  will  need to be scaled  back or  discontinued.  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 or issued by the  Company.  Estimates
and  assumptions  are reviewed  periodically  and the effects of  revisions  are
reflected in the financial  statements  in the period they are  determined to be
necessary. Actual results could differ from these estimates.



                                       38
<PAGE>

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  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, 2005,  2004,  and 2003,  revenues from National
Institute of Health ("NIH") SBIR grants was 87%, 77%, and 54%, 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, 2005, 2004, and 2003, the Company had no allowance
for doubtful accounts.

Research and development

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

Goodwill

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

The Company  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 2005, 2004 and 2003 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.


                                       39
<PAGE>

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 1-4 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 (See Note 4).

Income taxes

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

Net loss per common share

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

The Company  incurred  losses for the years ended  December 31, 2005,  2004, and
2003,  and as a  result,  certain  equity  instruments  are  excluded  from  the
calculation  of diluted loss per share.  At December  31, 2005 and 2004,  68,038
shares of the Company's Series A convertible  preferred stock have been excluded
from the  computation  of diluted loss per share as they are  anti-dilutive.  At
December 31, 2003, 81,366 shares 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, 2005, 2004, and 2003, outstanding options to
purchase  9,399,561,  9,762,061,  and  6,460,811  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, 2005,  2004, and 2003,  outstanding  warrants to
purchase  9,378,794,  8,469,594,  and  6,329,616  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.


                                       40
<PAGE>

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.

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,
                                                                     2005               2004               2003
                                                                --------------     --------------     --------------
<S>                                                             <C>                <C>                <C>
Net loss applicable to common shareholders, as reported ....       ($2,287,550)       ($9,373,319)       ($5,276,640)
                                                                ==============     ==============     ==============
Add: Stock-based compensation expense recorded
     under APB No. 25 ......................................            11,700                 --                 --
Deduct: Total stock-based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects .....................          (709,285)        (1,105,330)          (687,766)
                                                                --------------     --------------     --------------
Pro forma net loss applicable to common shareholders .......       ($2,985,135)      ($10,478,649)        (5,964,406)
                                                                ==============     ==============     ==============
Net loss per share:
Basic and diluted -as reported .............................    $        (0.09)    $        (0.40)    $        (0.34)
                                                                ==============     ==============     ==============
Basic and diluted -pro forma ...............................    $        (0.12)    $        (0.44)    $        (0.38)
                                                                ==============     ==============     ==============
</TABLE>

The fair value of the options  granted to employees and directors of the Company
during  2005,  2004,  and  2003  ranged  from  $0.58 to $1.30 on the date of the
respective grant using the Black-Scholes option-pricing model.

The value of options  granted in 2005,  2004, and 2003 was estimated at the date
of grant using the following weighted average assumptions:

                                   2005              2004              2003
                              ---------------  ----------------  ---------------

Expected life                    2 - 5 Yrs         2 - 5 Yrs        3 - 5 Yrs
Risk free interest rate        3.00% - 4.00%     2.75% - 3.80%    2.89% - 3.24%
Volatility                       60% - 75%        74% - 107%          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 123(R),  which  requires the Company to
recognize  compensation  expense for stock options granted to employees based on
the  estimated  fair  value  of the  equity  instrument  at the  time of  grant.
Currently, the Company discloses the pro forma net income and earnings per share
as if the Company applied the fair value  recognition  provisions of SFAS 123 as
mended by SHAS 148.  The  requirements  of SFAS  123(R)  are  effective  for the
Company  in the first  quarter  of  fiscal  2006.  The  Company  will  recognize
compensation  expense for stock based awards  issued after  January 1, 2006 on a
straight-line  basis over the requisite service period for the entire award. The
Company also expects to record expense of approximately $440,000 and $400,000 in
fiscal 2006 and 2007 related to previously issued,  unvested stock options.  The
Company will continue to use the  Black-Scholes  model for  evaluating  the fair
market value of its stock options.


                                       41
<PAGE>

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Correction  - a  Replacement  of APB  Opinion No. 20 and FASB  Statement  No. 3"
("SFAS 154").  SFAS 154 changes the  requirements for the accounting for and the
reporting  of a  change  in  accounting  principle.  SFAS  154  requires  that a
voluntary change in accounting principle be applied retroactively with all prior
period financial statements presented using the new accounting  principle.  SFAS
154 is effective  for  accounting  changes and  corrections  of errors in fiscal
years beginning after December 15, 2005. The Company will apply the requirements
of SFAS 154 on any changes in principle made on or after January 1, 2006.

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").  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.


                                       42
<PAGE>

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."

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 as if Plexus
were part of the Company as of January 1, 2003.

      Revenues                                                   $    826,525
      Net loss                                                   $ (7,527,206)
      Net loss per common share - basic and diluted              $      (0.46)
      Weighted average number of common shares outstanding         16,481,110

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, 2005                               December 31, 2004
                              ---------------------------------------------   ---------------------------------------------
                              Gross Carrying   Accumulated                    Gross Carrying   Accumulated
                                  Amount       Amortization        Net            Amount       Amortization        Net
                              --------------   ------------    ------------   --------------   ------------    ------------
<S>                            <C>             <C>             <C>             <C>             <C>             <C>
Acquired grants                $  1,962,693    $  1,308,465    $    654,228    $  1,962,693    $    327,118    $  1,635,575
Customer contract and grants         83,571          52,927          30,644          83,571          19,499          64,072
Covenants not to compete            202,000         202,000              --         202,000         117,833          84,167
Acquired technology                 330,483          82,620         247,863         330,483              --         330,483
                               ------------    ------------    ------------    ------------    ------------    ------------
                               $  2,578,747    $  1,646,012    $    932,735    $  2,578,747    $    464,450    $  2,114,297
                               ------------    ------------    ------------    ------------    ------------    ------------
</TABLE>


                                       43
<PAGE>

Amortization expense for intangible assets and costs included the following:

                                                             Year Ended
                                                             December 31,
                                                         2005           2004
                                                     ------------   ------------

Amortization of acquired grants                      $    981,347   $    327,116
Amortization of customer contract and grants               33,428         89,345
Impairment of customer contract and grants                     --        322,063
Amortization of covenants not to compete                   84,167        196,973
Impairment of covenants not to compete                         --        303,000
Amortization of acquired technology                        82,620        219,100
Impairment of acquired technology                              --      1,508,156
                                                     ------------   ------------
                                                     $  1,181,562   $  2,965,753
                                                     ------------   ------------

The Company anticipates  amortization expense to approximate $767,500,  $82,600,
and  $82,600  for  the  years  ending   December  31,  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  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 $322,063 of impairments to
unamortized  intangible  assets  related to the grants  transferred to Pecos and
$303,000 of  impairment  to the  unamortized  covenant  not to compete  with the
President  of the Company due to the  reduction of the covenant to one year from
the date of termination.


                                       44
<PAGE>


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

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.

2005 Placement

In November 2005, the Company entered into a Securities  Purchase  Agreement for
the issuance and sale of 2,000,000 shares of the Company's common stock at $1.00
per share and  warrants to purchase  1,000,000  shares of the  Company's  common
stock.  The warrants are initially  exercisable  at 110% of the closing price on
the closing date of the transaction  ($1.18 per share) at any time and from time
to time through and including the seventh  anniversary  of the closing date. The
investors  are also  entitled to  purchase  additional  shares of the  Company's
common stock for a gross amount of  $2,000,000  at an initial price of $1.10 per
share  for  a  period  of 90  trading  days  following  the  effectiveness  of a
registration statement. An initial registration statement relating to the common
stock sold and the stock underlying the warrants became effective on December 2,
2005.  With respect to the  transaction,  the Company  entered into an Exclusive
Finder's Agreement.  Finder's fees under the agreement include cash compensation
of 7% of the gross amount financed and a warrant to acquire 60,000 shares of the
Company's  common stock at terms equal to the investors'  warrants.  The Company
received gross proceeds of $2,000,000  from the transaction on November 3, 2005.
Net proceeds from were $1,792,000.

The Company  accounted for the  transaction  under the  provisions of EITF 00-19
which requires that free standing derivative financial  instruments that require
net cash  settlement be classified as assets or  liabilities  at the time of the
transaction,  and recorded at their fair value. On November 2, 2005, the Company
recorded the warrants to acquire  common stock and the option to acquire  common
stock as  liabilities  with  estimated  fair  value of  $631,000  and  $213,000,
respectively. EITF 00-19 also requires that any changes in the fair value of the
derivative  instruments  be  reported  in  earnings  as long  as the  derivative
contracts are  classified as assets or  liabilities.  At December 31, 2005,  the
fair  market  value of the  warrants to acquire  common  stock and the option to
acquire   additional   shares  of  common   stock  was   $535,000  and  $73,000,
respectively.  The Company applied the Black-Scholes model to calculate the fair
values of the respective derivative instruments using the contracted term of the
instruments. Management estimates the expected volatility using a combination of
the Company's historical  volatility and the volatility of a group of comparable
companies.  SIGA recorded a gain of $236,000 for the decline in the instruments'
fair value form the date of the transaction to December 31, 2005.

2003 and 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.

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.


                                       45
<PAGE>

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 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  125,000 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.

Other Transactions

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

Preferred Stock

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

During the year ended December 31, 2004 certain preferred stockholders converted
13,328 Series A convertible preferred stock into 13,328 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 11,000,000 shares of the Company's common stock to employees,  consultants
and outside  directors of the Company.  The exercise  period for options granted
under the Plan,  except those granted to outside  directors,  is determined by a
committee of the Board of Directors.  Stock options granted to outside directors
pursuant  to the Plan must have an  exercise  price equal to or in excess of the
fair market value of the Company's common stock at the date of grant.



                                       46
<PAGE>

Stock option activity of the Company is summarized as follows:

<TABLE>
<CAPTION>
                                                                 Number of     Weighted Average
                                                                   Shares       Exercise Price
<S>                                                             <C>              <C>
Options outstanding on January 1, 2003                             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
     Granted                                                          90,000             1.22
     Forfeited                                                      (452,500)            1.60
     Exercised                                                            --               --
                                                                ------------     ------------
Options outstanding at December 31, 2005                           9,399,561     $       2.00
                                                                ============     ============

Options available for future grant at December 31, 2005            1,385,398
Weighted average fair value of options granted during 2005      $       0.64
Weighted average fair value of options granted during 2004      $       0.98
Weighted average fair value of options granted during 2003      $       1.14
</TABLE>
The following table summarizes information about options outstanding at December
31, 2005:

<TABLE>
<CAPTION>
                                            Weighted
                                             Average       Weighted                           Weighted
                          Number            Remaining      Average         Number             Average
                      Outstanding at       Contractual     Exercise     Exercisable at        Exercise
Exercise Price       December 31, 2005     Life (Years)     Price      December 31, 2005       Price
<S>                          <C>               <C>         <C>                 <C>            <C>
     1.00 - 1.85             4,224,084         7.99        $   1.37            2,249,584      $   1.40
     2.00 - 2.75             4,837,250         5.19        $   2.38            4,837,250      $   2.38
     3.94 - 5.5                338,227         3.16        $   4.36              325,227      $   4.38
                     -----------------                                 -----------------
                             9,399,561                                         7,412,061
                     =================                                 =================
</TABLE>

At December 31, 2005,  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.


                                       47
<PAGE>

The  following  tables  summarize  information  about  warrants  outstanding  at
December 31, 2005:

<TABLE>
<CAPTION>
                                        Number of       Weighted Average
                                        Warrants         Exercise Price       Expiration Dates
<S>                                      <C>              <C>               <C>
Outstanding at January 1, 2003           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
    Granted                              1,060,000                1.18            11/2/2012
    Exercised                                   --                  --
    Canceled / Expired                    (150,800)               2.38
                                      ------------        ------------
Outstanding at December 31, 2005         9,378,794        $       2.26
                                      ------------        ------------
</TABLE>

                       Number of
                       Warrants
                       Outstanding        Exercise Price ($)

                         1,583,410           1.18 - 1.69
                         5,294,172           2.00 - 2.25
                         2,501,212           2.94 - 3.63
                       -----------
                         9,378,794
                       ===========

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 the Company  being awarded  research  contracts in excess of $2.0
million from such support,  and  recognizing  $2.0 million in revenues from such
contracts, 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, 2005,
the Company had not yet  recognized the minimum of $2.0 million in revenues from
the related contract.

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 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.

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 (See Note 5).
Additionally,  a director  of the Company is a member of the  Company's  outside
counsel.

Other related party transactions

In January 2004,  TransTech  Pharma  invested $5.0 million in SIGA (See Note 5).
During the year ended December 31, 2005, the Company  incurred costs of $461,000
related to services provided by TransTech Pharma, Inc., a related party, and its
affiliates mostly in connection with one of the Company's lead product programs.
On December 31, 2005,  the  Company's  outstanding  payables  included  $339,000
payable to the  related  party and its  affiliates.  Accounts  receivable  as of
December 31, 2005, included $25,400 outstanding from TransTech Pharma, Inc.


                                       48
<PAGE>

8. Property, Plant and Equipment

Property,  plant and  equipment  consisted of the following at December 31, 2005
and 2004:

      Laboratory equipment                    $  1,358,489     $  1,259,711
      Leasehold improvements                       649,211          632,435
      Computer equipment                           306,527          212,077
      Furniture and fixtures                       205,628          194,890
      Construction in-progress                     804,596          163,397
                                              ------------     ------------
                                                 3,324,451        2,462,510
           Less - Accumulated depreciation      (2,100,304)      (1,954,495)
                                              ------------     ------------
      Property, plant and equipment, net      $  1,224,147     $    508,015
                                              ============     ============

9. Note Payable

On May 20, 2005, the Company borrowed  approximately $276,000 under a Promissory
Note payable to General Electric Capital Corporation.  The note is payable in 36
monthly  installments of principal and interest of 10.31% per annum. The note is
collateralized by a master security  agreement dated as of April 29, 2005 and by
specific  property  listed under the master  security  agreement.  Total balance
outstanding at December 31, 2005 was $214,225.  Scheduled  payments for 2006 and
2007 are $107,520 and $106,705, respectively.

10. Income Taxes

The Company has  incurred  losses  since  inception,  which have  generated  net
operating loss  carryforwards of approximately  $31,079,000 at December 31, 2005
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,  2005  and  2004 of  approximately  $16,411,000  and  $16,090,000,
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.

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

                                                         2005           2004

Net Operating Losses                                      12,121         11,810
Deferred Research and Development Costs                    3,455          3,950
Amortization of Acquired Assets                              623             60
Depreciation of Property Plant and Equipment                 212            270
                                                      ----------     ----------
Total Deferred Tax Asset                                  16,411         16,090
Valuation Allowance                                      (16,411)       (16,090)
                                                      ----------     ----------
Net Deferred Tax Assets                               $       --     $       --
                                                      ==========     ==========


                                       49
<PAGE>

Following is a summary of changes in our  valuation  allowance  for deferred tax
assets  as of and for the  years  ended  December  31,  2005,  2004 and 2003 (in
thousands):

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

For the years ended December 31, 2005 and 2004, 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.

11. 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  provided  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
would have vested at each of the next 3 anniversaries.  At the discretion of the
Board of Directors the employee might have been granted  additional awards of up
to 25,000 shares each, upon meeting certain milestones.  The agreement had a one
year renewal option. Effective September 16, 2005, the employee resigned and his
options were forfeited.

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  ratably 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 (CSO).  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


                                       50
<PAGE>

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,  2005,  2004,  and 2003  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
vested on a prorata basis from January 1, 2005 through December 31, 2005.

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:

      Year ended December 31,

          2006                               $   255,400
          2007                                   261,800
          2008                                   133,200
          2009                                   135,900
          2010                                    22,700
                                             -----------
      Total                                  $   809,000
                                             ===========

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.

12. Subsequent Event

On March 9, 2006,  SIGA  entered into a term sheet for the merger of the Company
with  PharmAthene,  Inc.  Under  the  provisions  of the term  sheet,  the Chief
Executive  Officer of  PharmAthene  will serve as President and Chief  Executive
Officer of the combined  company and the Board of Directors  for the new company
will  reflect  the  new  proportionate   ownership.  It  is  expected  that  the
shareholders of SIGA will own approximately  32% of the combined company,  which
is anticipated to remain listed on the NASDAQ stock market.  The  transaction is
conditioned  on,  among other  things,  the  execution  of a  definitive  merger
agreement, approval of the shareholders of each company, regulatory approval and
other customary  closing  conditions.  In connection with the  transaction,  the
Company and  PharmAthene  also  entered  into a Bridge Note  Purchase  Agreement
whereby  PharmAthene  will  provide  SIGA  with  up to  $3  million  in  interim
financing.


                                       51
<PAGE>

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

<TABLE>
<CAPTION>
2005 For The Quarter Ended                 March 31,       June 30,      September 30,   December 31,       Total
                                          ----------      ----------     -------------   ------------    ----------
<S>                                       <C>             <C>             <C>            <C>             <C>
Revenues                                  $    1,459      $    1,864      $    2,910     $    2,244      $    8,477
Selling, general & administrative         $      845      $      811      $      415     $      410      $    2,481
Research and development                  $    1,552      $    2,583      $    1,765     $    2,395      $    8,295
Patent preparation fees                   $      175      $       91      $        8     $      (42)     $      232
Operating income (loss)                   $   (1,113)     $   (1,621)     $      722     $     (520)     $   (2,532)
Net income (loss)                         $   (1,107)     $   (1,630)     $      724     $     (258)     $   (2,271)
Net loss per share: basic and diluted     $    (0.05)     $    (0.07)     $     0.03     $    (0.00)     $    (0.09)
Market price range for common stock
   High                                   $     1.69      $     1.44      $     1.10     $     1.35      $     1.69
   Low                                    $     1.28      $     0.99      $     0.70     $     0.87      $     0.70

<CAPTION>
2004 For The Quarter Ended                 March 31,       June 30,      September 30,   December 31,       Total
                                          ----------      ----------     -------------   ------------    ----------
<S>                                       <C>             <C>             <C>            <C>             <C>
Revenues                                  $      161      $      299      $      533     $      846      $    1,839
Selling, general & administrative         $    1,006      $    1,112      $      919     $    1,005      $    4,042
Research and development                  $    1,020      $    1,026      $      827     $    1,292      $    4,165
Patent preparation fees                   $       92      $       55      $       84     $      162      $      393
In-process research and development       $       --      $       --      $      568     $       --      $      568
Impairment of intangible assets           $       --      $      610      $       --     $    1,508      $    2,118
Operating loss                            $    1,956      $    2,504      $    1,865     $    3,123      $    9,448
Net loss                                  $    1,940      $    2,490      $    1,837     $    3,106      $    9,373
Net loss per share: basic and diluted     $     0.08      $     0.11      $     0.08     $     0.13      $     0.40
Market price range for common stock
   High                                   $     2.34      $     1.93      $     1.63     $     1.75      $     2.34
   Low                                    $     1.85      $     1.29      $     1.23     $     1.35      $     1.23
</TABLE>


                                       52
<PAGE>

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

      None.

Item 9A. Controls and Procedures

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

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

Item 9B. Other Information

      None.


                                       53
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

      All  directors  are  elected  each  year  at  SIGA's  annual   meeting  of
stockholders and hold office for one year terms until the next annual meeting of
stockholders  and until their  successors  have been duly elected and qualified.
SIGA's executive officers serve terms pursuant to employment  agreements,  which
are summarized below.

      Name                             Age     Position
      ----                             ---     --------
      Donald G. Drapkin*               58      Chairman of the Board
      James J. Antal*                  55      Director
      Thomas E. Constance*             69      Director
      Dennis E. Hruby                  54      Chief Scientific Officer
      Bernard L. Kasten Jr. M.D.       59      Director, Chief Executive Officer
      Thomas N. Konatich               60      Chief Financial Officer
      Adnan M. Mjalli, Ph.D.           42      Director
      Mehmet C. Oz, M.D. *             43      Director
      Eric A. Rose, M.D. *             53      Director
      Paul G. Savas*                   43      Director
      Judy S. Slotkin*                 52      Director
      Michael A.  Weiner, M.D. *       59      Director

      *     Determined by the Board of Directors to be  independent  pursuant to
            Rule 4200 of the NASD Marketplace Rules.

      There  are no  family  relations  between  any of our  directors  and  our
executive officers.

      Donald G.  Drapkin  has served as  Chairman of the Board and a director of
SIGA since April 19, 2001.  Mr. Drapkin has been Vice Chairman and a director of
MacAndrews  & Forbes  Holdings  Inc. and various of its  affiliates  since 1987.
Prior to joining  MacAndrews & Forbes, Mr. Drapkin was a partner in the law firm
of  Skadden,  Arps,  Slate,  Meagher & Flom LLP for more than  five  years.  Mr.
Drapkin is also a director  of the  following  corporations  which file  reports
pursuant to the Securities Exchange Act of 1934: Allied Security Holdings,  LLC,
Anthracite Capital,  Inc., Playboy  Enterprises,  Inc., Revlon Consumer Products
Corporation,  Revlon Inc.  and Nephros,  Inc. Mr.  Drapkin is also a director of
PharmaCore, Inc. and TransTech Pharma, Inc.

      James J. Antal has served as a director of SIGA since  November  2004. Mr.
Antal has been an active  consultant and founding  investor in several  Southern
California  based  emerging  companies,  including  serving  as Chief  Financial
Advisor to Black  Mountain Gold Coffee Co.,  since his  retirement in 2002.  Mr.
Antal was the Chief Financial Officer and Chief Investment  Officer from 1996 to
2002 for Experian,  a $1.6 billion  global  information  services  subsidiary of
UK-based GUS plc. Prior to the GUS  acquisition of Experian (the former TRW Inc.
Information  Systems and Services  businesses),  Mr. Antal held various  finance
positions  with TRW from 1978 to 1996,  including  Senior VP of Finance  for TRW
Information  Systems and Services and TRW Inc.  Corporate  Director of Financial
Reporting and Accounting.  He earned his undergraduate degree in accounting from
The Ohio State  University  in 1973,  and became a certified  public  accountant
(Ohio) in 1974. He engaged in active  practice as a CPA with Ernst & Ernst until
1978.  Mr.  Antal  has  served  as a  director  of First  American  Real  Estate
Solutions, an Experian joint venture with First American Financial Corp.

      Thomas E. Constance has served as a director of SIGA since April 19, 2001.
Mr.  Constance is Chairman and, since 1994, a partner of Kramer Levin Naftalis &
Frankel LLP, a law firm in New York City. Mr.  Constance was a director of Kroll
Inc.,  which ceased to file reports  pursuant to the Securities  Exchange Act of
1934 in  August  2004.  Mr.  Constance  serves  as a  Trustee  of the M.D.  Sass
Foundation and St. Vincent's  Services.  He also serves on the Advisory Board of
Directors of Barington Capital, L.P.

      Bernard L. Kasten Jr., M.D. has been a director of SIGA since May 23, 2003
and  became  Chief  Executive  Officer in the third  quarter  of 2004.  Prior to
becoming Chief Executive Officer of SIGA and since February 2002,


                                       54
<PAGE>

Dr.  Kasten  had been  Vice  President,  Medical  Affairs  of  MedPlus  Inc.,  a
healthcare information technology company and a wholly-owned subsidiary of Quest
Diagnostics, Inc., a diagnostic testing, information and services company. Since
1975,  Dr. Kasten has been a Diplomat of the American  Board of Pathology with a
sub-specialty certification in 1976 in Medical Microbiology.  Dr. Kasten's staff
appointments have included service in the Division of Laboratory Medicine at The
Cleveland Clinic; Associate Director of Pathology and Laboratory Services at the
Bethesda  Hospital Systems in Cincinnati,  Ohio and Chief Laboratory  Officer at
Quest Diagnostics Incorporated. Dr. Kasten was a founder of Plexus Vaccine Inc.,
a vaccine company of which SIGA acquired  substantially all of the assets in May
2003.  Dr.  Kasten is an author of  "Infectious  Disease  Handbook" 5th Edition,
2003, Lexi-Comp Inc.

      Adnan M.  Mjalli,  Ph.D.  has served as a director  of SIGA since  January
2004. Dr. Mjalli founded TransTech Pharma, Inc., a privately held drug discovery
company  in High  Point,  North  Carolina,  in 1999 and has since  served as its
President and Chief Executive  Officer.  He also serves as Chairman of the Board
of  PharmaCore,  Inc.  where he  previously  served  as  President  and CEO from
December of 1998 to November  2000.  Dr. Mjalli  obtained his Ph.D. in medicinal
chemistry in 1989 from the University of Exeter,  UK. His postdoctoral  work was
carried out at the University of Rochester.  Prior to founding TransTech Pharma,
he held various  positions of increasing  responsibility  in research and senior
management at several  pharmaceutical  and  biotechnology  companies,  including
Merck & Co., Inc.

      Mehmet C. Oz, M.D.  has served as a director of SIGA since April 19, 2001.
Dr. Oz has been a Cardiac Surgeon at Columbia University  Presbyterian  Hospital
since 1993 and a  Professor  of Surgery  and Vice  Chairman  for  Cardiovascular
Services of the  Department of Surgery there since July 2001. Dr. Oz directs the
following  programs  at New  York  University  Presbyterian  Hospital,  Columbia
University:  the Cardiovascular  Institute,  the complementary medicine program,
the clinical  profusion program and clinical trials of new surgical  technology.
Dr. Oz received his undergraduate  degree from Harvard  University in 1982, and,
in  1986,  he  received  a joint  M.D./M.B.A.  degree  from  the  University  of
Pennsylvania Medical School and the Wharton School of Business.

      Eric A. Rose,  M.D. has served as a director of SIGA since April 19, 2001.
From April 19,  2001 until  June 21,  2001,  Dr.  Rose  served as Interim  Chief
Executive  Officer of SIGA. Dr. Rose is currently  Chairman of the Department of
Surgery and  Surgeon-in-Chief  of the Columbia  Presbyterian  Center of New York
Presbyterian  Hospital,  a position he has held since August 1994. Dr. Rose is a
past President of the International  Society for Heart and Lung Transplantation.
Dr. Rose was recently  appointed as Morris & Rose Milstein  Professor of Surgery
at Columbia  University's  College of  Physicians  and  Surgeons'  Department of
Surgery. Dr. Rose is a director of PharmaCore,  Inc., TransTech Pharma, Inc. and
a former  director of Nexell  Therapeutics  Inc.  (f/k/a  VimRx).  Dr. Rose is a
graduate of both Columbia College and Columbia  University College of Physicians
& Surgeons.

      Paul G. Savas has served as a director  of SIGA since  January  2004.  Mr.
Savas  has been a Senior  Vice  President  of  Finance  at  MacAndrews  & Forbes
Holdings,  Inc. and its affiliates since October 2002, and was Vice President of
MacAndrews & Forbes and its affiliates  from 1998 until 2002. He was Director of
Corporate  Finance at  MacAndrews & Forbes from 1994 until 1998.  From  December
1988 until April 1994,  Mr.  Savas  served in the  Finance  Department  of NYNEX
Corporation holding the positions of Associate Director of Corporate Finance and
Staff Director of External Reporting.

      Judy S. Slotkin has served as a director of SIGA since  November 2004. Ms.
Slotkin was Co-Head of the Finance  Committee of the Modern  Africa Fund, a $120
million  private  equity fund,  from 1998 until 2003.  Ms.  Slotkin was formerly
Department  Head  in the  Corporate  Finance  Division  of  Citigroup  (Citibank
Investment Bank) where she was responsible for various  businesses and the first
head of the group's  Capital  Markets  Desk.  Prior to that,  Ms.  Slotkin  held
various  positions in the Citigroup  (Citibank)  commercial bank. Ms. Slotkin is
also a founding member of the Food Allergy Initiative,  an organization  funding
research,  legislative  initiatives and education regarding food allergies.  Ms.
Slotkin received her undergraduate degree in accounting from Fairleigh Dickinson
University  in 1976 and, in 1980,  she  received her MBA in Finance from Fordham
University.

      Michael A.  Weiner,  M.D. has served as a director of SIGA since April 19,
2001. Dr. Weiner is the Hettinger Professor of Pediatrics at Columbia University
College of Physicians  and Surgeons  since 1996. Dr. Weiner is also the Director
of  Pediatric  Oncology  at New York  Presbyterian  Hospital.  Dr.  Weiner was a
director of Nexell Therapeutics,  Inc. (f/k/a VimRx) from March 1996 to February
1999. Dr. Weiner is a 1972


                                       55
<PAGE>

graduate of the New York State Health Sciences Center at Syracuse and was a post
graduate student at New York University and Johns Hopkins University.

Committees of the Board of Directors

      The Board of  Directors  currently  has,  and  appoints  the  members  of,
standing Audit, Compensation and Nominating and Corporate Governance Committees.
Each member of the Audit,  Compensation and Nominating and Corporate  Governance
Committees is an Independent  Director.  Each of these  committees has a written
charter  approved by the Board of the  Directors  in March 2004.  A copy of each
charter  is  posted on  SIGA's  website  at  www.siga.com  under the  "Corporate
Governance" section.

      Audit  Committee.  The  Audit  Committee,   which  currently  consists  of
directors  Paul G.  Savas,  Judy S.  Slotkin  and James J.  Antal,  held  eleven
meetings  during 2005.  The Board of Directors has  determined  that each of the
members of the Audit Committee is "independent" under the applicable laws, rules
and  regulations.  The  Company  has  determined  that Mr.  Savas  is an  "Audit
Committee  financial expert" within the meaning of Regulation S-K promulgated by
the Securities  and Exchange  Commission  (the "SEC").  The purpose of the Audit
Committee is to assist the Board of Directors in the  oversight of the integrity
of the financial statements of SIGA, SIGA's compliance with legal and regulatory
matters, the independent  registered public accounting firm's qualifications and
independence,  and the  performance  of  SIGA's  independent  registered  public
accounting  firm. The primary  responsibilities  of the Audit  Committee are set
forth in its charter,  and include various matters with respect to the oversight
of SIGA's accounting and financial reporting process and audits of the financial
statements of SIGA on behalf of the Board of Directors. The Audit Committee also
selects the independent  registered public accounting firm to conduct the annual
audit of the financial  statements of SIGA;  reviews the proposed  scope of such
audit;  reviews  accounting and financial  controls of SIGA with the independent
registered  public  accounting  firm and our  financial  accounting  staff;  and
reviews and approves  transactions between us and our directors,  officers,  and
their  affiliates.  A copy of the Audit Committee charter is available on SIGA's
website (as described above).

Code of Ethics

      SIGA has adopted a code of ethics and business conduct that applies to its
officers,  directors and  employees,  including  without  limitation,  our Chief
Executive  Officer,  Chief Financial Officer and Chief Scientific  Officer.  The
Code  of  Ethics  and  Business  Conduct  is  available  on  SIGA's  website  at
www.siga.com under the "Corporate Governance" section.


                                       56
<PAGE>

Item 11. Executive Compensation

      The following table sets forth the total  compensation paid or accrued for
the years ended  December 31, 2005,  2004 and 2003, for each person who acted as
SIGA's Chief  Executive  Officer at any time during the year ended  December 31,
2005, and its most highly compensated  executive officers,  other than its Chief
Executive Officer, whose salary and bonus for the fiscal year ended December 31,
2005 were in excess of $100,000 each.

                               Annual Compensation

<TABLE>
<CAPTION>
                                                                                                        Long-Term
                                                                                                        Compensation
                                                                                                         Securities
                                                                         Other Annual                    Underlying
Name and Principal Position                  Year        Salary ($)     Comensation ($)    Bonus ($)     Options (#)
---------------------------                --------     ------------   -----------------  -----------   -------------
<S>                                          <C>          <C>                   <C>          <C>            <C>
Bernard L. Kasten, M.D                       2005         250,000               --               --              --
Chief Executive Officer                      2004         113,636               --               --       2,500,000
                                             2003              --               --               --              --

Thomas N. Konatich                           2005         230,000               --           35,000              --
Chief Financial Officer                      2004         218,485               --           50,000         150,000
                                             2003         210,000               --               --              --

Dennis E. Hruby, Ph.D                        2005         225,000               --          112,500              --
Chief Scientific Officer                     2004         213,363               --           63,000         150,000
                                             2003         210,000               --               --              --

John R. Odden
Vice President Business Development (1)      2005         175,070               --               --              --
                                             2004          82,257               --               --         200,000
                                             2003              --               --               --              --
</TABLE>

(1)   Mr. Odden became Vice President Business  Development in the third quarter
      of 2004.  His annual  salary was $230,000.  He resigned as Vice  President
      Business Development in September, 2005.

Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

      The following table provides certain summary information  concerning stock
options held as of December 31, 2005 by SIGA's Chief  Executive  Officer and its
two most highly compensated  executive officers,  other than its Chief Executive
Officer. No options were exercised during fiscal 2005 by any of the officers.

<TABLE>
<CAPTION>
                                                                    Value of Unexercised
                            Number of Securities Underlying         In-The-Money Options
                                 Unexercised Options #           At fiscal Year-End ($) (1)
                                 ---------------------           --------------------------
                             Exercisable    Unexercisable      Exercisable     Unexercisable
                             -----------    -------------      -----------     -------------
<S>                             <C>           <C>                    <C>             <C>
Bernard L. Kasten, M.D          933,332       1,666,668              --              --

Thomas N. Konatich              545,000              --              --              --

Dennis E. Hruby, Ph.D           550,000          75,000              --              --
</TABLE>

(1) Based upon the closing price on December 31, 2005, as reported on the Nasdaq
SmallCap Market and the exercise price per option.


                                       57
<PAGE>

Option Grants for the Year Ended December 31, 2005

No options  were granted  during the year ended  December 31, 2005 to anyone who
served as Chief Executive Officer and its three highest paid employees.

Long-Term Incentive Plans--Awards in Last Fiscal Year

      As of January 1, 1996,  we adopted our 1996  Incentive  and  Non-Qualified
Stock Option Plan. An amendment and  restatement  of such plan, as amended,  was
adopted on May 3, 2001 and was further refined by the Board of Directors on June
29, 2001 (the "Plan").  The Plan was approved by our  stockholders  at an annual
meeting on August  15,  2001.  Stock  options  may be granted to key  employees,
consultants  and outside  directors  pursuant to the Plan.  The Plan was amended
again at our annual meeting on January 8, 2004, when our  stockholders  voted to
increase  the maximum  number of shares of common stock  available  for issuance
under the Plan from 7,500,000 to  10,000,000.  At our annual meeting on May, 26,
2005, the Plan was amended when our  stockholders  voted to increase the maximum
number of shares of common  stock  available  for  issuance  under the Plan from
10,000,000 to 11,000,000.

      The Plan is administered by our  Compensation  Committee which  determines
persons to be granted stock  options,  the amount of stock options to be granted
to each such  person,  and the  terms and  conditions  of any stock  options  as
permitted under the Plan. The members of the  Compensation  Committee are Mehmet
C. Oz, M.D.,  Paul G. Savas and Donald G. Drapkin.  See "Committees of the Board
of Directors" above for more information.

      Both Incentive  Options and Nonqualified  Options may be granted under the
Plan.  An Incentive  Option is intended to qualify as an incentive  stock option
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code").  Any Incentive  Option granted under the Plan will have an
exercise  price of not less than 100% of the fair market  value of the shares on
the date on which such option is granted.  With respect to an  Incentive  Option
granted to an employee who owns more than 10% of the total combined voting stock
of SIGA or of any parent or  subsidiary  of SIGA,  the  exercise  price for such
option must be at least 110% of the fair market  value of the shares  subject to
the option on the date the option is granted.

      The Plan,  as amended,  provides  for the  granting of options to purchase
11,000,000  shares of common stock, of which 9,399,561  options were outstanding
as of December 31, 2005.

      During the fiscal year ending  December  31, 2005,  the named  Officers of
SIGA received no long-term incentive compensation under the Plan.

Employment Contracts and Directors Compensation

Directors' Compensation

      Directors  who are not  currently  receiving  compensation  as officers or
employees of the Company or any of its affiliates receive $1,000 per meeting for
board  meetings  and  will  be  reimbursed  for  expenses  incurred  by  them in
connection  with  serving on our Board of  Directors.  The chairman of the Audit
Committee  receives  $1,000 per meeting for meetings of the Audit  Committee and
all other members of the Audit  Committee  receive $500 per meeting for meetings
of the Audit  Committee.  Members of  Compensation  Committee and Nominating and
Corporate  Governance  Committee  receive  $500 per meeting for  meetings of the
Compensation Committee and Nominating and Corporate Governance Committee.

      Non-employee  directors  receive an initial grant of 25,000 options,  upon
such  non-employee  director's  first election to the Board of Directors,  which
such options are granted under SIGA's  Amended and Restated  1996  Incentive and
Non-Qualified Stock Option Plan. In addition,  non-employee directors receive an
annual grant of 10,000  options under SIGA's Amended and Restated 1996 Incentive
and Non-Qualified Stock Option Plan, made at


                                       58
<PAGE>

each Annual  Meeting.  All such options have an exercise price equal to the fair
market value of the underlying SIGA shares on the date of grant.

Employment Contracts

      Dr. Bernard L. Kasten, SIGA's Chief Executive Officer, is employed by SIGA
under an  employment  agreement  dated July 2,  2004.  The  initial  term of the
employment  agreement  expires on July 2, 2007. The employment  agreement  will,
however, automatically renew for an additional three (3) years following the end
of the initial  term,  unless  either Dr. Kasten or SIGA provides at least three
(3) months advance notice of his/its desire not to renew. Dr. Kasten receives an
annual base salary of $250,000 and his  employment  agreement  also provides for
additional  bonus payments at the discretion of the Board of Directors.  On July
2, 2004, he received  options to purchase  2,500,000 shares of common stock with
an exercise price of $1.30 per share, of which 500,000 shares vested on the date
of grant;  with respect to the next  1,000,000  shares,  an  additional  166,666
shares  shall vest on the end of each six (6) month  period  after date of grant
until the end of the sixth six (6) month  period at which  time  166,667  shares
shall vest. In the event Dr. Kasten's employment renews as described above, with
respect to the  balance  of  1,000,000  shares of common  stock,  an  additional
166,666 shares shall vest at the end of each six (6) month period  commencing at
the  beginning  of the  renewal  term  until  the end of the sixth six (6) month
period at which time 166,667 shares shall vest. Dr. Kasten also received options
to purchase up to 4,800,000  shares of common stock,  with an exercise  price of
$1.30 per share, if various milestones set forth in his employment agreement are
met. Dr. Kasten is also eligible to receive additional stock options and bonuses
at the  discretion of the Board of Directors.  SIGA may terminate the employment
agreement for cause (as such term is defined in the employment agreement) or for
any other reason, provided that upon any termination for any other reason (other
than cause),  Dr.  Kasten shall  receive his salary due and payable  through the
date of  termination  plus a  severance  amount (as  defined  in the  employment
agreement)  to be paid through a specified  period  during which his time vested
options shall  continue to vest. If within 90 days prior to or 12 months after a
change of control (as such term is defined in the employment  agreement) of SIGA
either Dr.  Kasten's  employment  is terminated or Dr. Kasten is no longer Chief
Executive  Officer of the  surviving  organization  and elects to terminate  his
employment  as a result of the  change  of  control,  Dr.  Kasten  will  receive
payments as specified in the employment agreement.

      Thomas N.  Konatich,  SIGA's  Vice  President,  Chief  Financial  Officer,
Secretary and Treasurer, is employed by SIGA under an employment agreement dated
April 1, 1998,  as amended on January  19,  2000,  as amended  and  restated  on
October 6, 2000,  as amended as of January 31,  2002,  as amended on November 5,
2002,  as amended on July 29,  2004 and as amended  on  February  1, 2006.  This
employment  agreement  expires on  December  31,  2006.  Mr.  Konatich  was also
formerly employed as SIGA Acting Chief Executive Officer, which duties concluded
on July 2, 2004.  Mr.  Konatich  receives an annual base salary of $230,000  and
received a one-time  payment of $50,000  for his prior  service as Acting  Chief
Executive  Officer.  His  employment  agreement  also provides for an additional
bonus payment at the  discretion of the Board of Directors and not to exceed 25%
of his annual base salary amount.  He received options to purchase 95,000 shares
of common  stock,  at $4.44 on April 1, 1998.  The options  vested on a pro rata
basis on the first, second, third and fourth anniversaries of the agreement.  On
January 19, 2000, he received an additional  grant to purchase 100,000 shares at
an exercise  price of $2.00 per share.  These  options  vest on a pro rata basis
each quarter  through  January 19, 2002. On January 31, 2002,  Mr.  Konatich was
granted an  "Incentive  Stock  Option" to purchase  50,000 shares at an exercise
price  of  $3.94  per  share.   Such  options  vest  in  eight  equal  quarterly
installments  beginning on April 20, 2002. On November 5, 2002, Mr. Konatich was
granted an  Incentive  Stock  Option to purchase  150,000  shares at an exercise
price of $2.50 per share.  75,000 of these options vested immediately and 75,000
options vested on September 1, 2003. On July 29, 2004, Mr.  Konatich was granted
an Incentive  Stock Option to purchase  150,000  shares at an exercise  price of
$1.40  per  share.  75,000  of these  options  vested  immediately  and with the
remaining  75,000  options  vesting  on a pro rata  basis  from  January 1, 2005
through  December  31,  2005  with  no  provision  for  acceleration  under  any
circumstances. Mr. Konatich is also eligible to receive additional stock options
and bonuses at the discretion of the Board of Directors.  SIGA may terminate the
employment  agreement  with or  without  cause (as such term is  defined  in the
employment  agreement),  provided that upon any termination  without cause, SIGA
will be obligated to continue to pay Mr. Konatich's salary and all other amounts
due  under the  employment  agreement  for the  remainder  of the  term.  If Mr.
Konatich  is  terminated  due to a change of control (as such term is defined in
the  employment  agreement),  SIGA  shall pay Mr.  Konatich  a change in control
amount (as such term is defined in the  employment  agreement)  plus his accrued
and unpaid  base  salary,  and,  upon the first event  constituting  a change of
control,  all stock options and other  stock-based  grants to Mr. Konatich shall
immediately and irrevocably  vest and become  exercisable  upon the date of such
event.


                                       59
<PAGE>

      Dr. Dennis E. Hruby, Chief Scientific  Officer,  is employed by SIGA under
an employment  agreement dated January, 1, 1998, as amended on June 16, 2000, as
amended on  January  31,  2002,  as amended on October 3, 2002 and as amended on
July 29, 2004. This employment agreement expires on December 31, 2007. Dr. Hruby
receives a base salary of $225,000 per year and his  employment  agreement  also
provides  for  additional  bonus  payments  at the  discretion  of the  Board of
Directors and not to exceed 50% of his base salary  amount.  Dr. Hruby  received
options to purchase  10,000 shares of common stock at an exercise price of $5.00
per share on April 1, 1997 and  40,000  shares  of common  stock at an  exercise
price of $4.63 per share on April 1, 1998. The options  became  exercisable on a
pro rata  basis on the first,  second,  third and  fourth  anniversaries  of the
agreement.  Under the June 16, 2000 amendment,  Dr. Hruby was granted options to
purchase  125,000 shares of SIGA's common stock at $2.00 per share.  The options
vest  ratably over the  remaining  term of the  amendment.  The January 31, 2002
amendment  changed  the  terms of the  lock-up  agreed  to in the June 16,  2000
amendment to the  employment  agreement  limiting  Hruby's  ability to sell SIGA
stock. On January 31, 2002, Dr. Hruby was granted an "Incentive Stock Option" to
purchase  50,000  shares at an exercise  price of $3.94 per share.  Such options
vest in four equal annual installments  beginning on August 15, 2002. As part of
the  October 3, 2002  amendment,  Dr.  Hruby was  granted an option to  purchase
300,000  shares of common  stock.  Options with respect to 75,000  shares vested
upon the signing of the amendment and an additional  75,000 shares shall vest on
a pro rata basis on September 1 of each 2003, 2004 and 2005. The options have an
exercise price of $2.50 per share. Dr. Hruby  surrendered his option to purchase
up to 50,000  shares of common stock of SIGA at an exercise  price of $3.94 that
he was granted  under an earlier  amendment.  On July 29,  2004,  Dr.  Hruby was
granted an  Incentive  Stock  Option to purchase  150,000  shares at an exercise
price of $1.40 per share, which options shall vest in 75,000 share increments on
December 31 of each year, commencing December 31, 2005. Dr. Hruby is eligible to
receive  additional  stock options and bonuses at the discretion of the Board of
Directors. SIGA may terminate the employment agreement with or without cause (as
such  term is  defined  in the  employment  agreement),  provided  that upon any
termination  without cause SIGA will be obligated to continue to pay Dr. Hruby's
salary for the remainder of the term. In addition,  SIGA shall have the right to
terminate  Dr.  Hruby's  employment  upon one (1) year written  notice with such
termination being treated as a termination for cause. If Dr. Hruby is terminated
due to a  change  of  control  (as  such  term  is  defined  in  the  employment
agreement), SIGA shall pay Dr. Hruby a change in control amount (as such term is
defined in the  employment  agreement)  plus his accrued and unpaid base salary,
and, upon the first event  constituting  a change of control,  all stock options
and other stock-based grants to Dr. Hruby shall immediately and irrevocably vest
and become exercisable upon the date of such event.

Compensation Committee Interlocks and Insider Participation

      None.

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

      The  following  tables  set  forth  certain   information   regarding  the
beneficial  ownership of SIGA's  voting  securities  as of March 15, 2006 of (i)
each person  known to SIGA to  beneficially  own more than 5% of the  applicable
class of voting  securities,  (ii) each  director and director  nominee of SIGA,
(iii) each Named Officer and (iv) all  directors and executive  officers of SIGA
as a group.  As of March 16, 2006, a total of 26,500,648  shares of Common Stock
and a total of 68,038 shares of Series A Preferred Stock were outstanding.  Each
share of Common  Stock and Series A  Preferred  Stock is entitled to one vote on
matters  on which  holders  of Common  Stock are  eligible  to vote.  The column
entitled  "Percentage of Total Voting Stock Outstanding" shows the percentage of
total voting stock beneficially owned by each listed party.

      The  number  of  shares  beneficially  owned  is  determined  under  rules
promulgated by the Securities and Exchange  Commission,  and the  information is
not necessarily  indicative of beneficial ownership for any other purpose. Under
those rules, beneficial ownership includes any shares as to which the individual
has sole or shared  voting power or  investment  power and also any shares which
the  individual  has the right to  acquire  within  60 days of March  15,  2006,
through the exercise or conversion of any stock  option,  convertible  security,
warrant or other right. Unless otherwise indicated,  each person or entity named
in the table has sole voting power and investment


                                       60
<PAGE>

power (or shares  that  power with that  person's  spouse)  with  respect to all
shares of capital stock listed as owned by that person or entity.

                            Ownership of Common Stock

<TABLE>
<CAPTION>
                                                                                    Percentage of        Percentage of
Name and Address of                                   Amount of Beneficial           Common Stock         Total Voting
Beneficial Owner (1)                                      Ownership (2)              Outstanding        Stock Outstanding
--------------------                                 ----------------------       -----------------    -------------------
<S>                                                         <C>                          <C>                  <C>
Beneficial Holders

MacAndrews & Forbes Inc. (3)
35 East 62nd Street
New York, NY 10021 ..............................           5,036,458(4)                 17.9%                17.8%

TransTech Pharma, Inc.
4170 Mendenhall Oaks Parkway
High Point, NC  27265 ...........................           5,208,333(5)                 18.5%                18.4%

Officers and Directors
Donald G. Drapkin (6)
35 East 62nd Street
New York, NY 10021 ..............................           1,808,326(7)                  6.5%                 6.4%

James J. Antal
30952 Steeplechase Dr.
San Juan Capistrano, CA 94704 ...................              46,154(8)                    *                    *

Judy S. Slotkin (19)
888 Park Avenue
NY, NY 10021 ....................................              35,000(9)                    *                    *

Thomas E. Constance
1177 Avenue of the Americas,
New York, NY 10036 ..............................             263,467(10)                   *                    *

Bernard L. Kasten Jr., M.D.(11) .................           1,462,358(12)                 5.3%                 5.3%

Adnan M. Mjalli, Ph.D
4170 Mendenhall Oaks Parkway, Suite 110
High Point, NC 27265 ............................              35,000(13)                   *                    _

Mehmet C. Oz, M.D.
177 Fort Washington Ave
New York, NY 10032 ..............................             135,000(14)                   *                    *

Eric A. Rose, M.D. (15)
122 East 78th Street
New York, NY 10021 ..............................             800,090(16)                 2.9%                 2.9%

Paul G. Savas
35 East 62nd Street
New York, NY 10021 ..............................              61,222(17)                   *                    *

Michael A. Weiner, M.D.
161 Fort Washington Ave.
New York, NY 10032 ..............................             135,000(14)                   *                    *

Thomas N. Konatich ..............................             545,000(18)                 2.0%                 2.0%

Dennis E. Hruby, Ph.D ...........................             550,000(18)                 2.0%                 2.0%

All Executive Officers and Directors as a
group (thirteen persons) ........................           5,864,117(20)                18.6%                18.6%
</TABLE>


                                       61
<PAGE>

* Less than 1%

(1)   Unless otherwise indicated the address of each beneficial owner identified
      is 420 Lexington Avenue, Suite 408, New York, NY 10170.

(2)   Unless  otherwise  indicated,  each person has sole  investment and voting
      power with respect to the shares indicated.  For purposes of this table, a
      person or group of persons is deemed to have "beneficial ownership" of any
      shares as of a given  date  which  such  person  has the right to  acquire
      within 60 days after such date.  For purposes of computing the  percentage
      of outstanding  shares held by each person or group of persons named above
      on a given date,  any security  which such person or persons has the right
      to acquire within 60 days after such date is deemed to be outstanding  for
      the  purpose of  computing  the  percentage  ownership  of such  person or
      persons,  but is not deemed to be outstanding for the purpose of computing
      the percentage ownership of any other person.

(3)   MacAndrews & Forbes Inc. is a direct wholly-owned subsidiary of MacAndrews
      & Forbes Holdings Inc., a holding company whose sole stockholder is Ronald
      O. Perelman.

(4)   Includes  1,678,820  shares of common  stock  issuable  upon  exercise  of
      warrants.

(5)   Includes  1,736,111  shares of common  stock  issuable  upon  exercise  of
      warrants.

(6)   Mr.  Drapkin  is a  director  and Vice  Chairman  of  MacAndrews  & Forbes
      Holdings  Inc.  and  MacAndrews  & Forbes Inc. and a director of TransTech
      Pharma.

(7)   Includes  1,135,000  shares of common  stock  issuable  upon  exercise  of
      options,  shares of common  stock  underlying  a warrant to purchase up to
      347,826  shares of common  stock and shares of common  stock  underlying a
      warrant to  purchase  up to 30,500  shares of common  stock (the  "Drapkin
      September 2001 Investor  Warrant").  However,  the Drapkin  September 2001
      Investor  Warrant  provides that,  with certain limited  exceptions,  such
      warrant is not exercisable if, as a result of such exercise, the number of
      shares  of  common  stock  beneficially  owned  by  Mr.  Drapkin  and  his
      affiliates  (other  than  shares  of  common  stock  which  may be  deemed
      beneficially owned through the ownership of the unexercised portion of the
      Drapkin  September  2001  Investor  Warrant)  would  exceed  9.99%  of the
      outstanding  shares of common  stock.  Does not  include  shares of common
      stock that Mr. Drapkin,  as a director and Vice Chairman of Mafco Holdings
      Inc. and  MacAndrews & Forbes or as director of TransTech  Pharma,  may be
      deemed  to  beneficially  own  and  as  to  which  Mr.  Drapkin  disclaims
      beneficial ownership.

(8)   Includes 35,000 shares of common stock issuable upon exercise of options.

(9)   Includes 35,000 shares of common stock issuable upon exercise of options.

(10)  Includes  12,200  shares  issuable  upon  exercise of warrants and 235,000
      shares of common stock issuable upon exercise of options.

(11)  Dr.  Kasten  became our Chief  Executive  Officer in the third  quarter of
      2004.

(12)  Includes  1,350 shares of common stock  issuable upon exercise of warrants
      and 1,099,998 shares of common stock issuable upon exercise of options.

(13)  Includes  35,000 shares of common stock issuable upon exercise of options.
      Does not include shares of common stock that Dr. Mjalli,  as a director of
      TransTech  Pharma,  may be deemed to beneficially  own and as to which Dr.
      Mjalli disclaims beneficial ownership.

(14)  Includes  12,500  shares  issuable  upon  exercise of warrants and 110,000
      shares issuable upon exercise of options.

(15)  Dr. Rose is a director of TransTech Pharma.


                                       62
<PAGE>

(16)  Includes  88,610 shares of common stock issuable upon exercise of warrants
      and 610,000 shares of common stock issuable upon exercise of options. Does
      not  include  shares of common  stock  that Dr.  Rose,  as a  director  of
      TransTech  Pharma,  may be deemed to beneficially  own and as to which Dr.
      Rose disclaims beneficial ownership.

(17)  Includes  8,681 shares of common stock  issuable upon exercise of warrants
      and 35,000 shares issuable upon exercise of options.

(18)  Neither of Messrs.  Konatich  and Hruby own  shares of common  stock.  All
      shares listed as beneficially owned by each of Messrs.  Konatich and Hruby
      are shares issuable upon exercise of stock options.

(19)  Does not include  34,722  shares of common  stock  owned by Ms.  Slotkin's
      spouse to which she disclaims beneficial ownership.

(20)  See footnotes (6)-(19).

                      Ownership of Series A Preferred Stock

<TABLE>
<CAPTION>
Name and Address of                                                           Percentage of Series A Preferred
Beneficial Owner (1)                    Amount of Beneficial Ownership              Shares Outstanding(2)
---------------------------------      --------------------------------      ----------------------------------
<S>                                                <C>                                     <C>
Frank J. and Mary Ann Loccisano                    68,038                                  100%
</TABLE>

----------
(1)   Unless otherwise indicated the address of each beneficial owner identified
      is 420 Lexington Avenue, Suite 408, New York, NY 10170.

(2)   Percentage  of  beneficial  ownership  of  Series  A  Preferred  Stock  is
      calculated based on the assumption that there were 68,038 shares of Series
      A Preferred Stock outstanding on March 15, 2006.

Equity Compensation Plan Information

      The following table sets forth certain  compensation plan information with
respect to both equity  compensation  plans  approved  by  security  holders and
equity  compensation  plans not approved by security  holders as of December 31,
2005:

<TABLE>
<CAPTION>
                                                                                          Number of securities
                                                                                         remaining available for
                                                                                          future issuance under
                                    Number of securities to      Weighted-average          equity compensation
                                    be issued upon exercise      exercise price of          plans (excluding
                                    of outstanding options,    outstanding options,       securities reflected
Plam Category                         warrants and rights       warrants and rights          in column (a))
                                              (a)                       (b)                        (c)
<S>                          <C>            <C>                       <C>                       <C>
Equity compensation plans
approved by security holders (1)            9,399,561                 $  2.00                   1,385,398

Equity compensation plans not
approved by security holders                  250,000                 $  2.00                          --

Total                                       9,649,561                 $  2.00                   1,385,398
</TABLE>


                                       63
<PAGE>

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

Item 13. Certain Relationships and Related Transactions

      Thomas E.  Constance,  a director of SIGA,  is  Chairman  of Kramer  Levin
Naftalis & Frankel LLP, a law firm in New York City,  which SIGA has retained to
provide legal services.

      Adnan M. Mjalli, a director of SIGA, is also President and Chief Executive
Officer of TransTech Pharma.

Item 14. Principal Accountant Fees and Services

Audit Fees

      PricewaterhouseCoopers  LLP billed  SIGA  $182,500 in the  aggregate,  for
professional  services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended  December 31, 2005,  reviews of the interim
financial  statements  included in SIGA's Forms 10-Q filed during the year ended
December 31, 2005 and consents and reviews of various  documents  filed with the
SEC during the year ended December 31, 2005.

      PricewaterhouseCoopers  LLP billed  SIGA  $213,300 in the  aggregate,  for
professional  services rendered by them for the audit of SIGA's annual financial
statements for the fiscal year ended  December 31, 2004,  reviews of the interim
financial statements included in SIGA's Forms 10-QSB filed during the year ended
December 31, 2004 and consents and reviews of various  documents  filed with the
SEC during the year ended December 31, 2004.

Audit Related Fees

      There were no Audit Related Fees in 2005 and 2004.

Tax Fees

      PricewaterhouseCoopers  LLP did not render any  professional  services for
tax  compliance,  tax advice or tax planning  during  either of the fiscal years
ended December 31, 2005 or December 31, 2004.

All Other Fees

      PricewaterhouseCoopers  LLP did not  provide  any  products  or render any
professional  services  (other  than those  covered  above under  "Audit  Fees,"
"Audited  Related Fees," and "Tax Fees") during either of the fiscal years ended
December 31, 2005 or December 31, 2004.

Policy  on Audit  Committee  Pre-Approval  of Audit  and  Permissible  Non-Audit
Services of Independent Registered Public Accounting Firm

      The Audit  Committee's  policy is to pre-approve all audit and permissible
non-audit  services  provided by the independent  registered  public  accounting
firm.  These services may include audit services,  audit-related  services,  tax
services,  and other services.  SIGA did not make use in fiscal year 2004 of the
rule that waives  pre-approval  requirements  for non-audit  services in certain
cases if the fees for these services  constitute  less than 5% of the total fees
paid to the auditor during the year.


                                       64
<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).


                                       65
<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



                                       66
<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),  as amended (as set forth in the Form 8-K of the Company
            filed May 27, 2005).

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  Capital,  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).


                                       67
<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)      Non-Employee  Director  Compensation  Summary Sheet (Incorporated by
            reference  to the  Company's  Quarterly  Report on Form 10-Q for the
            quarter ended March 31, 2005).

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

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

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

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

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

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

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

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

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

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.


                                       68
<PAGE>

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.


                                       69
<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 28 2006                      By:  /s/ Bernard L. Kasten, M.D.
                                               ---------------------------
                                               Bernard L. Kasten, M.D.
                                               Chief Executive Officer

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

<TABLE>
<CAPTION>
Signature                                 Title of Capacities              Date
<S>                                       <C>                              <C>

/s/ Bernard L. Kasten, M.D.
---------------------------------
Bernard L. Kasten, M.D.                   Chief Executive Officer          March 28, 2006


/s/ Thomas N. Konatich
---------------------------------
Thomas N. Konatich                        Chief Financial Officer          March 28, 2006


/s/ Donald G. Drapkin
---------------------------------
Donald G. Drapkin                         Chairman of the Board            March 28, 2006


/s/ James J. Antal
---------------------------------
James J. Antal                            Director                         March 27, 2006


/s/ Thomas E. Constance
---------------------------------
Thomas E. Constance                       Director                         March 27, 2006


/s/ Adnan M. Mjalli, Ph.D.
---------------------------------
Adnan M. Mjalli, Ph.D.                    Director                         March 27, 2006


/s/ Mehmet C. Oz, M.D.
---------------------------------
Mehmet C. Oz, M.D.                        Director                         March 28, 2006


/s/ Eric A. Rose, M.D
---------------------------------
Eric A. Rose, M.D.                        Director                         March 27, 2006


/s/ Paul G. Savas
---------------------------------
Paul G. Savas                             Director                         March 27, 2006


/S/ Judy S. Slotkin
---------------------------------
Judy S. Slotkin                           Director                         March 27, 2006


/s/ Michael Weiner, M.D.
---------------------------------
Michael Weiner, M.D.                      Director                         March 27, 2006
</TABLE>


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<PAGE>

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