SIGA TECHNOLOGIES INC
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                                          2   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                                          3   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.                                          4         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.                                          5         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   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   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   The following are our patent positions as of December 31, 2005.    - -------------------------------------------------------------------------------------------------------------------------                                       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 - -------------------------------------------------------------------------------------------------------------------------                                                                                                        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 - -------------------------------------------------------------------------------------------------------------------------   - ----------------------------------------------------------------------------------------------------                                               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 - ----------------------------------------------------------------------------------------------------         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 - ----------------------------------------------------------------------------------------------------         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   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   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.
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   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         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         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   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   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   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   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   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.
Not applicable.
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.
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.
None.                                          19                                        PART II
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         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.
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.      The year                      Selling,                         Patent        In-process      Impairment    ended                       general &       Research and    preparation    research and    of intangible December 31,     Revenues    administrative    development        fees         development       assets - -------------   ----------  ----------------  --------------  -------------  --------------  ---------------          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                                           21      The year                                                                      Weighted average    ended                                                Net loss per share:    shares outstanding: December 31,     Operating loss         Net loss          basic & diluted       basic and diluted                 ----------------    ----------------   ---------------------  ---------------------       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   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                   ----------------   ----------------   -----------------   -----------------   -----------------        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)
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   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   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   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   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   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   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   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         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.
None                                          30
Index to the Financial Statements     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                                           31                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                                SIGA TECHNOLOGIES, INC.                                   BALANCE SHEETS                          As of December 31, 2005 and 2004                                                                                         December 31,     December 31,                                                                                          2005             2004                                                                                      ------------     ------------    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                                                                                      ============     ============      The accompanying notes are an integral part of these financial statements.                                          33                                SIGA TECHNOLOGIES, INC.                              STATEMENTS OF OPERATIONS                For the Years Ended December 31, 2005, 2004 and 2003                                                                               Year Ended December 31,                                                                     2005             2004             2003                                                                 ------------     ------------     ------------     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)                                                                 ============     ============     ============      The accompanying notes are an integral part of these financial statements.                                          34                                SIGA TECHNOLOGIES, INC.                   STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY               For the Years Ended December 31, 2005, 2004 and 2003                                                                  Series A Convertible                                                                  Preferred Stock                Common Stock                                                            --------------------------    ---------------------------                                                               Shares         Amount         Shares          Amount             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                                                            ===========    ===========    ===========     ===========      The accompanying notes are an integral part of these financial statements.                                     (Continued)                                          35                                SIGA TECHNOLOGIES, INC.                   STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY               For the Years Ended December 31, 2005, 2004 and 2003                                                                                    Stock                              Total                                                             Additional       Subscription     Accumulated      Stockholders'                                                           Paid-in Capital    Outstanding        Deficit           Equity                                                           ---------------   -------------    -------------     -------------            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                                                            =============    =============    =============     =============      The accompanying notes are an integral part of these financial statements.                                          36                                SIGA TECHNOLOGIES, INC.                             STATEMENTS OF CASH FLOWS               For the Years Ended December 31, 2005, 2004 and 2003                                                                                    2005             2004             2003                                                                             ------------     ------------     ------------     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)      The accompanying notes are an integral part of these financial statements.                                          37                                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   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   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   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."                                                                                  Year Ended December 31,                                                                      2005               2004               2003                                                                 --------------     --------------     --------------     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)                                                                 ==============     ==============     ==============   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   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   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:                                                December 31, 2005                               December 31, 2004                               ---------------------------------------------   ---------------------------------------------                               Gross Carrying   Accumulated                    Gross Carrying   Accumulated                                   Amount       Amortization        Net            Amount       Amortization        Net                               --------------   ------------    ------------   --------------   ------------    ------------        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                                ------------    ------------    ------------    ------------    ------------    ------------                                           43   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    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   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   Stock option activity of the Company is summarized as follows:                                                                     Number of     Weighted Average                                                                    Shares       Exercise Price    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  The following table summarizes information about options outstanding at December 31, 2005:                                                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            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                      =================                                 =================   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   The  following  tables  summarize  information  about  warrants  outstanding  at December 31, 2005:                                            Number of       Weighted Average                                         Warrants         Exercise Price       Expiration Dates     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                                       ------------        ------------                          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   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   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):                                        Additions Charged                     Balance at         to Costs and                        Balance at End December 31,     Beginning of Year       Expenses         Deductions          of Year                  -----------------       --------         ----------          -------      2005                  $16,090            $   321                              $16,411 2004                  $13,030            $ 3,060            $    --           $16,090 2003                  $11,144            $ 1,886            $    --           $13,030   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   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   13. Financial  Information By Quarter  (Unaudited) (in thousand,  except for per share data)    2005 For The Quarter Ended                 March 31,       June 30,      September 30,   December 31,       Total                                           ----------      ----------     -------------   ------------    ----------       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   2004 For The Quarter Ended                 March 31,       June 30,      September 30,   December 31,       Total                                           ----------      ----------     -------------   ------------    ----------       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                                           52
None.
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.
None.                                          53                                       PART III
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   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   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
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 $100,000 each.                                 Annual Compensation                                                                                                            Long-Term                                                                                                         Compensation                                                                                                          Securities                                                                          Other Annual                    Underlying Name and Principal Position                  Year        Salary ($)     Comensation ($)    Bonus ($)     Options (#) - ---------------------------                --------     ------------   -----------------  -----------   -------------       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              --               --               --              --   (1)   Mr. Odden became Vice President Business  Development in the third quarter       of 2004.  His annual  salary was $230,000.  He resigned as Vice  President       Business Development in September, 2005.  Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values        The following table provides certain summary information  concerning stock options held as of December 31, 2005 by SIGA's Chief  Executive  Officer and its two most highly compensated  executive officers,  other than its Chief Executive Officer. No options were exercised during fiscal 2005 by any of the officers.                                                                        Value of Unexercised                             Number of Securities Underlying         In-The-Money Options                                  Unexercised Options #           At fiscal Year-End ($) (1)                                  ---------------------           --------------------------                              Exercisable    Unexercisable      Exercisable     Unexercisable                              -----------    -------------      -----------     -------------      Bernard L. Kasten, M.D          933,332       1,666,668              --              --  Thomas N. Konatich              545,000              --              --              --  Dennis E. Hruby, Ph.D           550,000          75,000              --              --   (1) Based upon the closing price on December 31, 2005, as reported on the Nasdaq SmallCap Market and the exercise price per option.                                          57   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   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         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.
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   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                                                                                        Percentage of        Percentage of Name and Address of                                   Amount of Beneficial           Common Stock         Total Voting Beneficial Owner (1)                                      Ownership (2)              Outstanding        Stock Outstanding - --------------------                                 ----------------------       -----------------    -------------------     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%                                           61   * 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   (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    Name and Address of                                                           Percentage of Series A Preferred Beneficial Owner (1)                    Amount of Beneficial Ownership              Shares Outstanding(2) - ---------------------------------      --------------------------------      ----------------------------------    Frank J. and Mary Ann Loccisano                    68,038                                  100%   - ---------- (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:                                                                                              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)      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                                           63   (1)  SIGA   Technologies,   inc.,   Amended  and  Restated  1996  Incentive  and Non-Qualified Stock Option Plan.
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.
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                                        PART IV
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   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               (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   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   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                                      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.    Signature                                 Title of Capacities              Date     /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                                           70                          This Page Intentionally left Blank    EX-23.1 2 d67544_ex23-1.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCT                                                                       EXHIBIT 23.1              CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  We  hereby  consent  to the  incorporation  by  reference  in  the  Registration Statement  on Forms  S-3  (Nos.  333-129756,  333-36682,  333-43750,  333-64414, 333-72553, 333-74390, 333-103231, 333-120742 and 333-112356) and Forms S-8 (Nos. 333-35992,  333-56216 and 333-112935) of SIGA  Technologies,  Inc. of our report dated March 28, 2006 relating to the financial statements, which appears in this Form 10-K.  /s/ PRICEWATERHOUSECOOPERS LLP  New York, New York March 28, 2006    EX-31.1 3 d67544_ex31-1.txt CERTIFICATION                                                                       EXHIBIT 31.1                              CERTIFICATION PURSUANT TO                   SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002  I, Bernard L. Kasten, M.D., certify that:        1.    I  have   reviewed   this  annual   report  on  Form  10-K  of  SIGA             Technologies, Inc.;        2.    Based on my  knowledge,  this  report  does not  contain  any untrue             statement  of a  material  fact  or omit to  state a  material  fact             necessary to make the statements made, in light of the circumstances             under which such  statements  were made, not misleading with respect             to the period covered by this report;        3.    Based on my knowledge, the financial statements, and other financial             information included in this report,  fairly present in all material             respects the financial  condition,  results of  operations  and cash             flows of the  registrant  as of, and for,  the periods  presented in             this report;        4.    The registrant's  other certifying officer and I are responsible for             establishing and maintaining  disclosure controls and procedures (as             defined in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the             registrant and have:              (a)   Designed such disclosure  controls and  procedures,  or caused                   such  disclosure  controls and procedures to be designed under                   our supervision,  to ensure that material information relating                   to the registrant, including its consolidated subsidiaries, is                   made known to us by others within those entities, particularly                   during the period in which this report is being prepared;              (b)   Evaluated the  effectiveness  of the  registrant's  disclosure                   controls  and  procedures  and  presented  in this  report our                   conclusions about the effectiveness of the disclosure controls                   and  procedures,  as of the end of the period  covered by this                   report based on such evaluation; and              (c)   Disclosed  in  this  report  any  change  in the  registrant's                   internal control over financial reporting that occurred during                   the  registrant's  fourth fiscal  quarter that has  materially                   affected,  or is reasonably likely to materially  affect,  the                   registrant's internal control over financial reporting; and        5.    The  registrant's  other  certifying  officer and I have  disclosed,             based  on our  most  recent  evaluation  of  internal  control  over             financial  reporting,  to the  registrant's  auditors  and the audit             committee of registrant's  board of directors (or persons performing             the equivalent functions);              (a)   All significant  deficiencies  and material  weaknesses in the                   design  or  operation  of  internal   control  over  financial                   reporting which are reasonably  likely to adversely affect the                   registrant's ability to record, process,  summarize and report                   financial information; and              (b)   Any fraud,  whether or not material,  that involves management                   or  other  employees  who  have  a  significant  role  in  the                   registrant's internal control over financial reporting.  Date: March 28, 2006                       By: /s/ Bernard L. Kasten, M.D.                                                ------------------------------                                                 Bernard L. Kasten, M.D.                                                Chief Executive Officer    EX-31.2 4 d67544_ex31-2.txt CERTIFICATION                                                                       EXHIBIT 31.2                              CERTIFICATION PURSUANT TO                   SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002  I, Thomas N. Konatich, certify that:        1.    I  have   reviewed   this  annual   report  on  Form  10-K  of  SIGA             Technologies, Inc.;        2.    Based on my  knowledge,  this  report  does not  contain  any untrue             statement  of a  material  fact  or omit to  state a  material  fact             necessary to make the statements made, in light of the circumstances             under which such  statements  were made, not misleading with respect             to the period covered by this report;        3.    Based on my knowledge, the financial statements, and other financial             information included in this report,  fairly present in all material             respects the financial  condition,  results of  operations  and cash             flows of the  registrant  as of, and for,  the periods  presented in             this report;        4.    The registrant's  other certifying officer and I are responsible for             establishing and maintaining  disclosure controls and procedures (as             defined in  Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the             registrant and have:              (a)   Designed such disclosure  controls and  procedures,  or caused                   such  disclosure  controls and procedures to be designed under                   our supervision,  to ensure that material information relating                   to the registrant, including its consolidated subsidiaries, is                   made known to us by others within those entities, particularly                   during the period in which this report is being prepared;              (b)   Evaluated the  effectiveness  of the  registrant's  disclosure                   controls  and  procedures  and  presented  in this  report our                   conclusions about the effectiveness of the disclosure controls                   and  procedures,  as of the end of the period  covered by this                   report based on such evaluation; and              (c)   Disclosed  in  this  report  any  change  in the  registrant's                   internal control over financial reporting that occurred during                   the  registrant's  fourth fiscal  quarter that has  materially                   affected,  or is reasonably likely to materially  affect,  the                   registrant's internal control over financial reporting; and        5.    The  registrant's  other  certifying  officer and I have  disclosed,             based  on our  most  recent  evaluation  of  internal  control  over             financial  reporting,  to the  registrant's  auditors  and the audit             committee of registrant's  board of directors (or persons performing             the equivalent functions);              (a)   All significant  deficiencies  and material  weaknesses in the                   design  or  operation  of  internal   control  over  financial                   reporting which are reasonably  likely to adversely affect the                   registrant's ability to record, process,  summarize and report                   financial information; and              (b)   Any fraud,  whether or not material,  that involves management                   or  other  employees  who  have  a  significant  role  in  the                   registrant's internal control over financial reporting.  Date: March 28, 2006                       By: /s/ Thomas N. Konatich                                                ----------------------                                                Thomas N. Konatich                                                Chief Financial Officer    EX-32.1 5 d67544_ex32-1.txt CERTIFICATION                                                                       Exhibit 32.1                              CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Annual Report of SIGA Technologies,  Inc. (the "Company") on Form 10-K for the year ending  December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bernard L. Kasten, M.D.,  Chief Executive  Officer of the Company,  certify,  pursuant to 18 U.S.C. ss.1350,  as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:        (1)   The Report fully complies with the  requirements of section 13(a) or             15(d) of the Securities Exchange Act of 1934; and        (2)   The  information  contained in the Report  fairly  presents,  in all             material respects, the financial condition and results of operations             of the Company.  March 28, 2006                                                  /S/ Bernard L. Kasten, M.D.                                                 ------------------------------                                                 Bernard L. Kasten, M.D.                                                 Chief Executive Officer    EX-32.2 6 d67544_ex32-2.txt CERTIFICATION                                                                       Exhibit 32.2                              CERTIFICATION PURSUANT TO                              18 U.S.C. SECTION 1350,                              AS ADOPTED PURSUANT TO                   SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Annual Report of SIGA Technologies,  Inc. (the "Company") on Form 10-K for the year ending  December 31, 2005 as filed with the Securities and  Exchange  Commission  on the date  hereof  (the  "Report"),  I,  Thomas  N. Konatich.,  Chief  Financial  Officer of the  Company,  certify,  pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:        (1)   The Report fully complies with the  requirements of section 13(a) or             15(d) of the Securities Exchange Act of 1934; and        (2)   The  information  contained in the Report  fairly  presents,  in all             material respects, the financial condition and results of operations             of the Company.  March 28, 2006                                                  /S/ Thomas N. Konatich                                                 --------------------------                                                 Thomas N. Konatich                                                 Chief Financial Officer    -----END PRIVACY-ENHANCED MESSAGE-----