Edgar Filing: SIGA TECHNOLOGIES INC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

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

For the Quarter Ended Commission File No. 0-23047
June 30, 2004

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

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

420 Lexington Avenue, Suite 601
New York, NY 10170
(Address of principal executive offices) (zip code)

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

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

None
(Title of Class)

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

common stock, $.0001 par value
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes |X| No |_|.

As of August 11, 2004 the registrant had outstanding 23,452,486 shares of common
stock.

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Part I
Financial Information

Item 1. Financial Statements

SIGA TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 30, December 31,
2004 2003
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ASSETS
Current Assets
Cash and cash equivalents ................................................... $ 5,108,022 $ 1,440,724
Accounts receivable ......................................................... 46,981 38,786
Prepaid expenses ............................................................ 70,033 50,338
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Total current assets ....................................................... 5,225,036 1,529,848

Equipment, net .............................................................. 230,964 379,046
Goodwill .................................................................... 898,334 898,334
Intangible assets, net ...................................................... 2,214,142 3,117,357
Other assets ................................................................ 218,269 174,995
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Total assets ............................................................... $ 8,786,745 $ 6,099,580
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ............................................................ $ 626,840 $ 353,051
Accrued expenses and other .................................................. 233,778 195,181
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Total liabilities .......................................................... 860,618 548,232

Stockholders' equity
Series A convertible preferred stock ($.0001 par value, 10,000,000 shares
authorized, 68,038 and 81,366 issued and outstanding at June 30, 2004
and December 31, 2003, respectively) ........................................ 58,672 72,666
Common stock ($.0001 par value, 50,000,000 shares authorized,
23,452,486 and 18,676,851 issued and outstanding at June 30, 2004
and December 31, 2003, respectively) ...................................... 2,345 1,868
Additional paid-in capital .................................................. 47,102,355 40,284,856
Accumulated deficit ......................................................... (39,237,245) (34,808,042)
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Total stockholders' equity ................................................. 7,926,127 5,551,348
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Total liabilities and stockholders' equity ................................. $ 8,786,745 $ 6,099,580
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The accompanying notes are an integral part of these financial statements.

SIGA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three months ended Six months ended
June 30, June 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------

Revenues
Research and development contracts ................... $ 298,537 $ 243,530 $ 459,754 $ 448,674
------------ ------------ ------------ ------------

Operating expenses
Selling, general and administrative .................. 1,111,534 748,476 2,117,394 1,308,784
Research and development ............................. 1,026,450 642,744 2,045,991 1,120,243
Patent preparation fees .............................. 54,901 66,174 146,740 122,106
Loss on impairment of intangible assets .............. 610,063 -- 610,063 --
------------ ------------ ------------ ------------
Total operating expenses .......................... 2,802,948 1,457,394 4,920,188 2,551,133
------------ ------------ ------------ ------------

Operating loss .................................... (2,504,411) (1,213,864) (4,460,434) (2,102,459)

Interest income, net ...................................... 14,776 3,355 31,231 9,712
------------ ------------ ------------ ------------
Net loss .......................................... $ (2,489,635) $ (1,210,509) $ (4,429,203) $ (2,092,747)
============ ============ ============ ============

Weighted average shares outstanding: basic and diluted .... 23,443,881 14,201,723 23,227,213 13,725,091
============ ============ ============ ============
Net loss per share: basic and diluted ..................... (0.11) $ (0.09) (0.19) $ (0.15)
============ ============ ============ ============

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

SIGA TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six months ended
June 30,
2004 2003
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Cash flows from operating activities:
Net loss $(4,429,203) $(2,092,747)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on impairment of intangible assets 610,063 --
Bad debt expense -- 14,000
Depreciation 178,304 172,900
Amortization of intangible assets 278,152 66,796
Stock, options & warrant compensation -- 1,375
Changes in assets and liabilities:
Accounts receivable (8,195) (48,596)
Prepaid expenses (19,695) 28,875
Other assets (28,274) (5,416)
Accounts payable and accrued expenses 312,386 (663,617)
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Net cash used in operating activities (3,106,462) (2,526,430)
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Cash flows from investing activities:
Capital expenditures (30,222) (178,209)
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Net cash used in investing activities (30,222) (178,209)
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Cash flows from financing activities:
Net proceeds from issuance of common stock 6,784,607 1,350,000
Receipts of stock subscriptions outstanding -- 791,940
Proceeds from exercise of options and warrants 19,375 --
Principal payments on capital lease obligations -- (11,206)
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Net cash provided from financing activities 6,803,982 2,130,734
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Net increase (decrease) in cash and cash equivalents 3,667,298 (573,905)
Cash and cash equivalents at beginning of period 1,440,724 2,069,004
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Cash and cash equivalents at end of period $ 5,108,022 $ 1,495,099
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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 $ --

Supplemental information of business acquired:
Fair value of assets acquired:
Equipment $ -- $ 27,711
Intangible assets -- 3,639,000
Goodwill -- 933,334
Less, liabilities assumed and non-cash consideration:
Current liabilities -- (529,142)
Stock issued -- (3,409,000)
Stock options and warrants issued -- (255,873)
Accrued acquisition costs -- (406,030)

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

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

1. Organization and Basis of Presentation

Organization

The financial statements of SIGA Technologies, Inc. (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the rules of the Securities and Exchange Commission
(the "SEC") for quarterly reports on Forms 10-QSB and do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the Company's audited financial statements and notes thereto
for the year ended December 31, 2003, included in the 2003 Form 10-KSB.

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. The Company anticipates that its current resources
will be sufficient to finance anticipated needs for operations and capital
expenditures approximately through the second quarter of 2005. Management's
plans with regard to these matters include continued development of its products
as well as seeking additional research support funds and financial arrangements.
Although management continues to pursue these plans, there is no assurance that
the Company will be successful in obtaining sufficient financing on terms
acceptable to the Company. See Note 5 for recent private placement offerings.

2. Significant Accounting Policies

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.

Equipment

Equipment is stated at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of the respective assets, which are as
follows: laboratory equipment - 5 years; leasehold improvements - life of lease;
computer equipment - 3 years; furniture and fixtures - 7 years.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
No. 104, "Revenue Recognition" which superceded Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements". Four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or
determinable; and (4) collectibility is reasonably assured. Under the provisions
of SAB 104, the Company recognizes revenue from government research grants,
contract research and development and progress payments as services are
performed, provided a contractual arrangement exists, the contract price is
fixed or determinable, and the collection of the resulting receivable is
probable. 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. Non-refundable fees are recognized as
revenue over the term of the arrangement or based on the percentage of costs
incurred to date, estimated costs to complete and total expected contract
revenue. Milestone payments, which generally are related to substantial
scientific or technical achievement, are recognized as revenue when the
milestone is accomplished.

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

Research and development

Research and development costs are expensed as incurred and include costs of
third parties who conduct research and development, pursuant to development and
consulting agreements, on behalf of the Company. 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 and
considered a component of research and development costs.

Business Combinations, Goodwill and Intangible Assets

The Company accounts for business combinations in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" ("SFAS 141"). SFAS 141 requires business combinations completed
after June 30, 2001 to be accounted for using the purchase method of accounting.
It also specifies the types of acquired intangible assets required to be
recognized and reported separately from goodwill.

The Company accounts for the impairment of goodwill in accordance with the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").
Goodwill is not subject to amortization and is tested for impairment annually,
or more frequently if events or changes in circumstances indicate that the asset
may be impaired. The impairment test consists of a comparison of the fair value
of goodwill with its carrying amount. If the carrying amount of goodwill exceeds
its fair value, a second step of the goodwill impairment test shall be performed
to measure the amount of impairment loss, if any. After an impairment loss is
recognized, the adjusted carrying amount of goodwill is its new accounting
basis. The annual impairment testing required under SFAS 142 requires management
to make assumptions and judgments regarding the estimated fair value of the
Company's goodwill. Such assumptions include the present value discount factor
used to determine the fair value of a reporting unit, which is ultimately used
to identify potential goodwill impairment. Such estimated fair values might
produce significantly different results if other reasonable assumptions and
estimates were to be used.

The Company accounts for the impairment of long-lived assets such as acquired
technology, non-compete agreements and research contracts in accordance with the
provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"). SFAS 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. The Company
compares the carrying amount of the asset to the estimated undiscounted future
cash flows expected to result from the use of the asset. If the carrying amount
of the asset exceeds estimated expected undiscounted future cash flows, the
Company records an impairment charge for the difference between the carrying
amount of the asset and its fair value. Changes in events or circumstances to
the Company that may affect long-lived assets include, but are not limited to,
cancellations or terminations of research contracts or pending government
research grants. See Note 4.

Income taxes

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

Net loss per 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

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

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.

For the three months ended June 2004 and 2003 and six months ended June 30, 2004
and 2003, the Company's Series A convertible preferred stock have been excluded
from the computation of diluted loss per share as they are anti-dilutive. For
the three months ended June 2004 and 2003 and six months ended June 30, 2004 and
2003, outstanding options to purchase 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. For the three months ended
June 2004 and 2003 and six months ended June 30, 2004 and 2003, outstanding
warrants to purchase 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.

Accounting estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Significant
estimates include the fair value of goodwill and intangible assets and the value
of options and warrants granted by the Company. Actual results could differ from
those estimates.

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 FDIC 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.

Accounting for stock based compensation

The Company has elected to account for its stock-based compensation programs
according to the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Accordingly, compensation
expense has been recognized to the extent of employee or director services
rendered based on the intrinsic value of compensatory options or shares granted
under the plans. The Company has adopted the disclosure provisions required by
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."

Had compensation cost for stock options granted been determined based upon the
fair value at the grant date for awards, consistent with the methodology
prescribed under SFAS 123, the Company's net loss and net loss per share would
have been as follows:

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
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Net loss applicable to common shareholders, as reported ........ ($2,489,635) ($1,210,509) ($4,429,203) ($2,092,747)
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Add: Stock-based employee compensation expense recorded under
APB No. 25 ..................................................... -- -- -- --
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects ..................................... (169,653) (480,259) (267,803) (503,004)
----------- ----------- ----------- -----------

Pro forma net loss applicable to common shareholders ........... ($2,659,288) ($1,690,768) ($4,697,006) ($2,595,751)
=========== =========== =========== ===========

Net loss per share:
Basic and diluted -as reported ................................. $ (0.11) $ (0.09) $ (0.19) $ (0.15)
=========== =========== =========== ===========

Basic and diluted -pro forma ................................... $ (0.11) $ (0.12) $ (0.20) $ (0.19)
=========== =========== =========== ===========

The fair value of the options granted to employees during 2003 ranged from $0.09
to $2.75 on the date of the respective grant using the Black-Scholes
option-pricing model. There were no options granted in the first half of 2004.
The following weighted-average assumptions were used for 2003: no dividend
yield, expected volatility of 100%, risk free interest rates of 2.89%-3.24% and
an expected term of 3 to 5 years.

Recent Accounting Pronouncements

In December 2003, the FASB revised its FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46R). FIN 46R clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements". FIN 46R requires that a business enterprise review all of its legal
structures used to conduct its business activities, including those to hold
assets, and its majority-owned subsidiaries, to determine whether those legal
structures are variable interest entities (VIEs) required to be consolidated for
financial reporting purposes by the business enterprise. A VIE is a legal
structure for which the holders of a majority voting interest may not have a
controlling financial interest in the legal structure. FIN 46R provides guidance
for identifying those legal structures and provides guidance for determining
whether a business enterprise shall consolidate a VIE. FIN 46R requires that a
business enterprise that holds a significant variable interest in a VIE make new
disclosures in their financial statements. The Company adopted the provisions of
FIN 46R for the period ended March 31, 2004. The Company does not hold any
interests in VIEs that would require consolidation or additional disclosures.

In March 2004, the Emerging Issues Task Force issued EITF 03-6, "Participating
Securities and the Two-Class Method under FASB Statement No. 128". This
statement provides additional guidance on the calculation and disclosure
requirements for earnings per share. The FASB concluded in EITF 03-6 that
companies with multiple classes of common stock or participating securities, as
defined by SFAS No. 128, calculate and disclose earnings per share based on the
two-class method. The adoption of this statement did not have an impact to the
Company's financial statement presentation as the Company is in a loss position.

3. Business acquisition of Plexus Vaccine, Inc.

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.

Selected Unaudited Pro Forma Financial Information

The Company has prepared a condensed pro forma statement of operations in
accordance with SFAS 141, for the three months and six months ended June 30,
2003 as if Plexus were part of the Company as of January 1, 2003.

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

Three Months Ended Six Months Ended
June 30, June 30,
2003 2003
------------------ ----------------

Revenues $ 273,212 $ 543,456

Net loss $ (1,702,421) $ (4,400,995)

Net loss per common share - basic and diluted $ (0.11) $ (0.29)
============ ============

Weighted average number of common shares outstanding 15,337,437 15,265,698
============ ============

4. Intangible Assets

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 this transaction, the Company performed an impairment review of
the intangible assets in accordance with SFAS 144. The impairment of intangible
assets consists of $307,063 of impairments to unamortized intangible assets
related to the grants transferred to Pecos and $303,000 of impairment to the
unamortized covenant not to compete with the President of the Company due to the
reduction of the covenant to one year from the date of termination.

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

Amortization of Intangible Assets

For the three and six months ended June 30, 2004, amortization of intangible
assets was approximately $55,000 and $110,000, respectively, for acquired
technology, approximately $32,000 and $73,000, respectively, for customer
contract and grants, and approximately $45,000 and $96,000, respectively, for
the covenant not to compete. The Company anticipates amortization expense to be
approximately $505,000, $337,000, $253,000, $219,000, and $219,000 for the
fiscal years ending December 31, 2004, 2005, 2006, 2007, and 2008, respectively.

5. Stockholders' Equity

At June 30, 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.

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
adjustment) 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

SIGA TECHNOLOGIES, INC.

Notes to the June 30, 2004 Unaudited Condensed Consolidated Financial Statements

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.

In January 2004, 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, and TransTech Pharma, Inc., a related party to the
Company and an affiliate of MacAndrews & Forbes ("TransTech Pharma"), completed
the final portion of their investment, following the approval of the Company's
stockholders at its annual meeting of stockholders held on January 8, 2004.
Immediately following the stockholders' meeting, MacAndrews & Forbes invested
$1,840,595 in exchange for 1,278,191 shares of common stock at a price of $1.44
per share, and warrants to purchase up to an additional 639,095 shares of common
stock at an exercise price of $2.00 per share; and TransTech Pharma invested
$5,000,000 in exchange for 3,472,222 shares of common stock and warrants to
purchase up to an additional 1,736,111 shares of common stock on the same terms.
In addition, as part of the investment, MacAndrews & Forbes and TransTech Pharma
each were given the right to appoint one board member to the Board of Directors,
subject to certain terms and conditions. On January 8, 2004, in accordance with
the terms of the investment, the respective designees of MacAndrews & Forbes and
TransTech Pharma were appointed to serve on SIGA's board of directors.

In 2004, the Company paid $120,000 to TransTech Pharma for work performed in
connection with the DegP SBIR grant.

6. Acquisition of Certain Assets from ViroPharma Incorporated

In June 2004, the Company signed an asset purchase agreement with ViroPharma
Incorporated to acquire certain antiviral programs targeting certain agents of
biological warfare for a purchase price of $1,000,000 in cash and 1,000,000
shares of the Company's common stock on the date of the closing. The programs
being acquired are currently the subject of grants from the National Institute
of Health. The closing of the acquisition is subject to customary closing
conditions, including obtaining approval of the transfer of the grants from the
National Institute of Health.

7. Subsequent Events

In July 2004, the Company entered in an employment agreement with Bernard L.
Kasten, M.D. to serve as the Company's Chief Executive Officer. The employment
agreement provides for an annual salary of $250,000 plus bonus 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 option grant
of 2,500,000 options, of which 500,000 vest upon signing, 1 million options vest
over the 3-year initial term and the remaining 1 million options vest over the
renewal term.

In August 2004, the Compensation Committee granted 420,500 options to purchase
the Company's common stock to its employees, which included 150,000 options to
both the Chief Financial Officer and the Chief Scientific Officer. The options
were granted at an exercise price equal to the fair market value of the shares
on the date of the grant.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion should be read in conjunction with our
financial statements and notes to those statements and other financial
information appearing elsewhere in this Quarterly Report. In addition to
historical information, the following discussion and other parts of this
Quarterly 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. The effort to
develop a drug for Smallpox is being aided by a $1.6 million contract with the
U.S. Army which began in January 2003.

We are developing technology for the mucosal delivery of our
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. Our anti-infectives programs are
aimed at the increasingly serious problem of drug resistance, and they are
designed to block the ability of infectious agents to attach to human tissue,
the first step in the infection process.

In May 2004, we sold intangible assets from our immunological
bioinformatics technology and certain non-core vaccine development assets to a
privately-held company, Pecos Labs, Inc. ("Pecos") in exchange for 150,000
shares of Pecos common stock. As a result of this transaction, we performed an
impairment review of the intangible 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 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,
we reduced the covenant not to compete with the 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 June 2004, we signed an asset purchase agreement with ViroPharma
Incorporated to acquire certain antiviral programs targeting certain agents of
biological warfare for a purchase price of $1,000,000 in cash and 1,000,000
shares of our common stock on the date of the closing. The programs being
acquired are currently the subject of grants from the National Institute of
Health. The closing of the acquisition is subject to customary closing
conditions, including obtaining approval of the transfer of the grants from the
National Institute of Health.

We do not have commercial biomedical products, and we do not expect
to have such products for several years, if at all. We believe that we will need
additional funds to complete the development of our biomedical products. Our
plans with regard to these matters include continued development of our
products, as well as seeking additional research support funds and financial
arrangements. Although we continue to pursue these plans, there is no assurance
that we will be successful in obtaining sufficient financing on terms acceptable
to us. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty. Management believes it has sufficient
funds to support operations through the second quarter of 2005.

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

To date, we have not marketed, or generated revenues from the
commercial sale of any products. Our biopharmaceutical product candidates are
not expected to be commercially available for several years, if at all.

Accordingly, we expect to incur operating losses for the foreseeable future.
There can be no assurance that we will ever achieve profitable operations.

Significant Accounting Policies

Financial Reporting Release No. 60, requires all companies to
include a discussion of critical accounting policies or methods used in the
preparation of financial statements. Note 2 of the Notes to the Financial
Statements include a summary of the significant accounting policies and methods
used in the preparation of our Financial Statements. The following is a brief
discussion of the more significant accounting policies and methods used by us.
In addition, Financial Reporting Release No. 67 was recently released by the SEC
to require all companies to include a discussion to address, among other things,
liquidity, off-balance sheet arrangements, contractual obligations and
commercial commitments.

Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff
Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition", which superceded
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements". Four basic criteria must be met before revenue can be recognized:
(1) persuasive evidence of an arrangement exists; (2) delivery has occurred or
services rendered; (3) the fee is fixed or determinable; and (4) collectibility
is reasonably assured. Under the provisions of SAB 104, the Company recognizes
revenue from government research grants, contract research and development and
progress payments as services are performed, provided a contractual arrangement
exists, the contract price is fixed or determinable, and the collection of the
resulting receivable is probable. Milestone payments, which generally are
related to substantial scientific or technical achievement, are recognized as
revenue when the milestone is accomplished.

Income Taxes

Income taxes are accounted for under the asset and liability method
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Deferred income taxes are recorded for temporary
differences between financial statement carrying amounts and the tax basis of
assets and liabilities. Deferred tax assets and liabilities reflect the tax
rates expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more likely than
not that some or all of the deferred tax asset will not be realized. A full
valuation has been taken on the deferred taxes as the Company has had recurring
losses since inception and expects to have a net loss in the upcoming year.

Business Combinations, Goodwill and Intangible Assets

We account for business combinations in accordance with the
provisions of SFAS No. 141, "Business Combinations" ("SFAS 141"). SFAS 141
requires business combinations completed after June 30, 2001, to be accounted
for using the purchase method of accounting. It also specifies the types of
acquired intangible assets required to be recognized and reported separately
from goodwill.

We account for the impairment of goodwill in accordance with the
provisions of SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").
Goodwill is not subject to amortization and is tested for impairment annually,
or more frequently, if events or changes in circumstances indicate that the
asset may be impaired. The impairment test consists of a comparison of the fair
value of goodwill with its carrying amount. If the carrying amount of goodwill
exceeds its fair value, a second step of the goodwill impairment test shall be
performed to measure the amount of impairment loss, if any. After an impairment
loss is recognized, the adjusted carrying amount of goodwill is its new
accounting basis. The annual impairment testing required under SFAS 142 requires
management to make assumptions and judgments regarding the estimated fair value
of the Company's goodwill. Such assumptions include the present value discount
factor used to determine the fair value of a reporting unit, which is ultimately
used to identify potential goodwill impairment. Such estimated fair values might
produce significantly different results if other reasonable assumptions and
estimates were to be used.

We account for the impairment of long-lived assets such as
non-compete agreements and research contracts in accordance with the provisions
of SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"). SFAS No. 144 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company compares the
carrying amount of the asset to the estimated undiscounted future cash flows
expected to result from the use of the asset. If the carrying amount of the
asset exceeds estimated expected undiscounted future cash flows,

the Company records an impairment charge for the difference between the carrying
amount of the asset and its fair value. Changes in events or circumstances to
the Company that may affect long-lived assets include cancellations or
terminations of research contracts or pending government research grants.

Contractual Obligations, Commercial Commitments and Purchase Obligations

As of June 30, 2004, our purchase obligations are not material. We
lease certain facilities and office space under operating leases. Minimum future
rental commitments under operating leases having non-cancelable lease terms in
excess of one year are as follows:

Year ended December 31,

2004 $128,824
2005 86,398
2006 87,737
2007 94,921
2008 19,416
Thereafter --
--------
Total $417,296
========

Recent Accounting Pronouncements

In March 2004, the Emerging Issues Task Force issued EITF 03-6,
"Participating Securities and the Two-Class Method under FASB Statement No.
128". This statement provides additional guidance on the calculation and
disclosure requirements for earnings per share. The FASB concluded in EITF 03-6
that companies with multiple classes of common stock or participating
securities, as defined by SFAS No. 128, calculate and disclose earnings per
share based on the two-class method. The adoption of this statement did not have
an impact to the Company's financial statement presentation as the Company is in
a loss position.

Results of Operations

Three months ended June 30, 2004 and June 30, 2003

Revenues from grants and research and development contracts were
$298,537 for the three months ended June 30, 2004, compared to $243,530 for the
same period of 2003, an approximate 23% increase. Revenue from the Small
Business Innovation Research (SBIR) grant was approximately $181,955 in the
three month period ended June 30, 2004 compared to $158,840 for the prior year
period, an approximate 15% increase. The increase was due to accelerated
activity to complete the project funded by the grant. Work under the grant was
completed in May of the current three month period. Revenue from the U.S. Army
contract increased approximately 15% in the current year quarter to $92,582 from
$80,360 in 2003. The increase reflects the higher budget for the second year of
the contract. Other revenue in the current year period was approximately $24,000
compared to the prior year period of $4,330.

Selling, general and administrative expenses for the three months
ended June 30, 2004 were $1,111,534 an increase of approximately 49% from
expenses of $748,476 for the three months ended June 30, 2003. Approximately 74%
of the $363,058 increase was due to severance payments of approximately $270,000
made in connection with the termination of the employment agreement with the
President of the Company. The increase in the current year period was also due
to higher professional fees compared to the prior year period. Legal expenses
increased from approximately $99,000 to approximately $190,600, an approximate
93% increase, due to increased expenses associated with corporate compliance
matters under Sarbanes-Oxley, the sale of certain non-core vaccine assets and
litigation against one of our former consultants. Also contributing to the
increase in the current year period was the approximately $105,000 increase in
consulting expenses associated with our efforts to secure government contracts.
In the current year three month period insurance, travel and amortization
expenses declined compared to the prior year period.

Research and development expenses increased approximately 60% to
$1,026,450 for the three months ended June 30, 2004 from $642,744 for the same
period in 2003. Amortization of intangible assets of $86,335 for the
amortization of certain intangible assets acquired in the Plexus transaction
were approximately $60,000 higher for the three months ended June 30, 2004
compared to the prior year period as the Plexus transaction occurred at the end
of May 2003. Payments made for sponsored and sub-contracted research increased
by approximately $203,208, an approximate 53% of the increase in research and
development expenses for the three months ended June 30, 2004 compared to prior
year. The increase consisted of a $120,000 payment to TransTech Pharma, Inc., a
related party, for work performed in connection with the DegP SBIR grant. Lab
supply expense increased approximately 47% in the current year period to
approximately $147,300, as a result of increased activity on our lead research
and development programs. Increases in the period ended June 30, 2004 were
partially offset by lower consulting and travel expenses compared to the prior
year period.

All of our product programs are in the early stage of development
except for the strep vaccine which is in Phase I clinical trials. At this stage
of development, we cannot make estimates of the potential cost for any program
to be completed or the time it will take to complete the project. For the three
months ended June 30, 2004, excluding non-cash charges of $157,897, we estimate
that we spent a total of $868,553 on all our research programs: approximately
$278,000 or 32% of the total for the development of the Smallpox antiviral;
approximately $148,000 or 17% of the total on the strep vaccine; approximately
$165,000 or 19% of the total on the DegP anti-infective; approximately $209,000
or 24% of the total on the smallpox vaccine and other vaccines including those
being developed under agreements acquired from Plexus; and the remaining
approximately 8% of the total on other anti-infectives.

For the three months ended June 30, 2003, excluding non-cash charges
of $96,573, we estimate we spent a total of $546,171 on all our product
programs: approximately $191,000, or 35% of the total for the strep vaccine
program; approximately $109,000 or 20% of the total was for the smallpox
antiviral program; approximately $109,000 or 20% of the total was for the DegP
anti-infectives program; approximately 82,000 or 15% on the smallpox and other
vaccine programs including vaccines acquired from Plexus; and approximately
$55,000 or 10% of the total for other anti-infectives.

We are working with TransTech Pharma on our Smallpox anti-viral
products and our DegP broad spectrum anti-biotic. There is a high risk of
non-completion of any program because of the lead time to program completion and
uncertainty of the costs. Net cash inflows from any products developed from
these programs is at least two to three years away. However, we could receive
additional grants, contracts or technology licenses in the short-term. The
potential cash and timing is not known and we cannot be certain if they will
ever occur.

The risk of failure to complete any program is high, as each is in
the relatively early stage of development. Products for the biological warfare
defense market, such as the Smallpox anti-viral, could be available for sale in
two to three years. We believe the products directed toward this market are on
schedule. We expect the future research and development cost of this program to
increase as the potential products enter animal studies and safety testing.
Funds for future development will be partially paid for by the contract we have
with the U.S. Army, additional government funding and from future financing. If
we are unable to obtain additional federal grants and contracts or funding in
the required amounts, the development timeline for these products would slow or
possibly be suspended. The clinical trials for our Strep vaccine through Phase
II are being funded under an agreement with the NIH. The time to market for this
product should be several years from now because of the nature of the FDA
requirements for approval of a pediatric vaccine. We expect to fund the
development of the Strep vaccine beyond the Phase II clinical trials through a
corporate collaboration or from additional funding from debt or equity
financings. We do not yet have a corporate partner for this product and there is
no assurance that we will ever have one or that we will be able to raise the
funds needed to go forward. If the funding is not available or the clinical
trials are not successful, the program could be delayed or cancelled. We believe
this product program is on schedule. Delay or suspension of any of our programs
could have an adverse impact on our ability to raise funds in the future, enter
into collaborations with corporate partners or obtain additional federal funding
from contracts or grants.

Patent preparation expenses for the three months ended June 30, 2004
were $54,901 compared to $66,174 for the three months ended June 30, 2003. The
17% decrease does not reflect any material change in activities to maintain our
intellectual property position.

For the three months ended June 30, 2004, we incurred a $307,063
loss on impairment of intangible assets due to the transfer of certain grants to
Pecos Labs, Inc. and incurred an impairment of $303,000 to intangible assets due
to the change of the covenant not to compete with our President who was
terminated during the current year period.

Interest income, net was $14,776 for the three months ended June 30,
2004, compared to $3,355 for the three months ended June 30, 2003. The increase
is the result of higher cash balances in the three months ended June 30, 2004
compared to the prior year period.

Six months ended June 30, 2004 and June 30, 2003

Revenues from grants and research and development contracts were
$459,754 for the six months ended June 30, 2004, compared to $448,674 for the
same period of 2003, an approximate 3% increase. Revenue from the Small Business
Innovation Research (SBIR) grant declined by approximately 13% in the six month
period ended June 30, 2004 due to the smaller budget for the second year of the
grant. The decrease in revenue from the SBIR grant was largely offset by
increased revenue from the U.S. Army contract due to the increase in funds
budgeted for this contract in the current year.

Selling, general and administrative expenses for the six months
ended June 30, 2004 were $2,117,394 an increase of approximately 62% from
expenses of $1,308,784 for the six months ended June 30, 2003. Approximately 44%
of the increase was due to materially higher legal expenses. The expenses were
incurred as the result of costs incurred to review and amend our corporate
governance policies and procedures to ensure compliance with Sarbanes Oxley
regulations. Also contributing to the increase in legal expenses were costs
incurred in connection with a review of a potential business combination, the
sale of certain non-core vaccine assets and a legal action the Company initiated
against a former consultant. Payroll expenses also accounted for approximately
49% of the increase in the six months ended June 30, 2004. The increase was the
result of the addition of former Plexus employees to our staff in May 2003 and,
therefore, only partially included in the prior year balance, and the
approximate $270,000 severance payment associated with the termination agreement
entered into with our former President in May 2004. Consulting expenses for
marketing efforts to present our programs to agencies of the federal government
were also higher in the current year period. Furthermore, the six months ended
June 30, 2004 had an increase of approximately $41,000 for amortization of
certain intangible assets acquired in the Plexus transaction in May 2003
compared to the prior year period, which was only a partial period of
amortization.

Research and development expenses increased approximately 83% to
$2,045,991 for the six months ended June 30, 2004 from $1,120,243 for the same
period in 2003. Amortization of certain intangible assets acquired in connection
with the Plexus acquisition increased by approximately $157,000 and accounted
for approximately 17% of the period to period increase. Payroll expense for the
six months ended June 30, 2004, increased approximately 30% to $750,581 compared
to prior year expense of approximately $579,000. The increase was the result of
the addition of former Plexus employees to our staff, an increase in staff to
accelerate development on our lead products and a bonus payment to our Chief
Scientific Officer. Sponsored research expense increased by approximately
$360,000 for the six months ended June 30, 2004 compared to the same period in
2003 as the result of payments for work being performed on former Plexus
programs at a Danish University and payments made to TransTech Pharma, Inc. for
work performed on our SBIR grant.

All of our product programs are in the early stage of development
except for the strep vaccine which is in Phase I clinical trials. At this stage
of development, we cannot make estimates of the potential cost for any program
to be completed or the time it will take to complete the project. For the six
months ended June 30, 2004, excluding non-cash charges of $325,171 we estimate
that we spent a total of $1,720,820 on all our research programs: approximately
$534,000 or 31% of the total for the development of the smallpox antiviral;
approximately $293,000 or 17% of the total on the strep vaccine; approximately
$327,000 or 19% of the total on the DegP anti-infective; approximately $396,000
or 23% of the total on the smallpox vaccine and other vaccines including those
being developed under agreements acquired from Plexus; and the remaining
$172,000 or approximately 10% of the total on other anti-infectives.

For the six months ended June 30, 2003, excluding non-cash charges
of $163,570, we estimate we spent a total of $956,673 on all our product
programs: approximately $306,000, or 32% of total for the strep vaccine program;
approximately $191,000 or 20% of the total was for the smallpox antiviral
program; approximately $191,000 or 20% of the total was for the DegP
anti-infectives program; approximately $96,000 or 10% of the total for other
anti-infectives; and approximately $143,500 or 15% of the total was for the
smallpox vaccines and other vaccine programs including the vaccines acquired
from Plexus.

Patent preparation expenses for the six months ended June 30, 2004
were $146,740 compared to $122,106 for the six months ended June 30, 2003. The
20% increase was the result of increased costs of patent work required on the
intellectual property acquired in the Plexus transaction, including foreign
patent filings.

For the six months ended June 30, 2004, we incurred a $307,063 loss
on impairment of intangible assets due to the transfer of certain grants to
Pecos Labs, Inc. and incurred an impairment of $303,000 to intangible assets due
to the change of the covenant not to compete with our President who was
terminated during the current year period.

Interest income, net was $31,231 for the six months ended June 30,
2004, compared to $9,712 for the six months ended June 30, 2003. The increase is
the result of higher cash balances in the six months ended June 30, 2004
compared to the prior year period.

Liquidity and Capital Resources

As of June, 2004, we had $5,108,022 in cash and cash equivalents.

In May 2004, we sold intangible assets from our immunological
bioinformatics technology and certain non-core vaccine development assets to a
privately-held company, Pecos Labs, Inc. ("Pecos") in exchange for 150,000
shares of Pecos common stock. As a result of this transaction, we performed an
impairment review of the intangible 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 October 2003, MacAndrews & Forbes Holdings Inc. and its permitted
assignees, exercised their option to invest an additional $9,000,000 in us under
the terms of the agreement signed in August 2003, as amended in October 2003.
Upon exercise of the option, 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. The warrants

have an initial exercise price of $2.00 per share and a term of seven years. The
sale of the remaining 4,750,413 shares of common stock and warrants to purchase
2,375,206 shares of common stock on the same terms was subject to shareholder
approval. On January 8, 2004, at a meeting of shareholders, the transaction was
approved, the additional $6,840,595 of gross proceeds was received and the
common shares and warrants were issued.

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

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

We lease certain facilities and office space under operating leases.
Minimum future rental commitments under operating leases having noncancellable
lease terms are $128,842, $86,398 and $87,737 for the years ending December 31,
2004, 2005 and 2006, respectively.

Off-Balance Sheet Arrangements

SIGA does not have any off-balance sheet arrangements.

Risk Factors That May Affect Results of Operations and Financial Condition

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

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

We incurred net losses of approximately $4.4 million for the six
months ended June 30, 2004, $5.3 million and approximately $3.3 million for the
years ended December 31, 2003 and 2002, respectively. As of June 30, 2004,
December 31, 2003 and December 31, 2002, our accumulated deficit was
approximately $39.2 million, $34.8 million and $29.5 million, respectively. We
expect to continue to incur significant operating expenditures. We will need to
generate significant revenues to achieve and maintain profitability.

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

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

We continue to be dependent on our ability to raise money in the
equity markets. There is no guarantee that we will continue to be successful in
raising such funds. If we are unable to raise additional equity funds, we may be
forced to discontinue or cease certain operations. We currently have sufficient
operating capital to finance our operations into approximately the second
quarter of 2005. Our annual operating needs vary from year to year depending
upon the amount of revenue generated through grants and licenses and the amount
of projects we undertake, as well as the amount of resources we expend, in
connection with acquisitions all of which may materially differ from year to
year and may adversely affect our business.

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

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

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

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

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

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

o developments concerning proprietary rights, including patents;

o developments concerning our collaborations;

o regulatory developments in the United States and foreign countries;

o economic or other crises and other external factors;

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

o changes in financial estimates by securities analysts; and

o sales of our common stock.

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

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

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

The following table presents the high and low bid range of our stock
for the past eight quarters.

Bid Range

2002 High Low
---- ----- -----

Third Quarter .................................... $1.39 $0.65
Fourth Quarter ................................... $2.15 $0.65

2003 High Low
---- ----- -----

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

2004 High Low
---- ----- -----

First Quarter .................................... $2.82 $1.83
Second Quarter ................................... $2.12 $1.25

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. The strep vaccine program is in Phase I clinical trials.
All other programs are in the pre-clinical stage of development. Our biological
warfare defense products do not need human clinical trials for approval by the
FDA. We will need to perform two animal models and provide safety data for a
product to be approved. Our other products will be subject to the approval
guidelines under FDA regulatory requirements which include a number of phases of
testing in humans.

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

We have limited experience in conducting pre-clinical testing and
clinical trials. Even if we receive initially positive pre-clinical or clinical
results, such results do not mean that similar results will be obtained in the
later stages of drug development, such as additional pre-clinical testing or
human clinical trials. All of our potential drug 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, 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
government grants and contracts, 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 procure governments
grants and contracts, enter into additional collaborative and license agreements
with third parties and maintain the agreements we currently have in place.
Substantially all of our revenues for the six months ended June 30, 2004 and the
years ended December 31, 2003 and 2002, respectively, were derived from revenues
related to grants, contracts and license agreements. We will receive little or
no revenues under our collaborative agreements if our collaborators' research,
development or marketing efforts are unsuccessful, or if our agreements are
terminated early. Additionally, if we do not enter into new collaborative
agreements, we will not receive future revenues from new sources. Our future
revenue is substantially dependent on the continuing contract work being
performed for the U.S. Army which expires at the end of December 2007. These
agreements are for specific work to be performed under the agreements and could
only be canceled by the other party thereto for non-performance by the other
party thereto.

Several factors will affect our future receipt of revenues from
collaborative arrangements, including the amount of time and effort expended by
our collaborators, the timing of the identification of useful drug targets and
the timing of the discovery and development of drug candidates. Under our
existing agreements, we may not earn significant milestone payments until our
collaborators have advanced products into clinical testing, which may not occur
for many years, if at all.

We have material agreements with the following collaborators:

o The Rockefeller University. The term of our agreement with
Rockefeller is for the duration of the patents and a number of
pending patents. As we do not currently know when any patents
pending or 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 Wyeth. Our license agreement expires on the earlier of June
30, 2007, or the last to expire patent that we have
sub-licensed to them. Wyeth has the right to terminate the
agreement on 90 days written notice. If terminated, all rights
granted to Wyeth will revert to us, except for any compound
identified by Wyeth prior to the date of termination and
subject to the milestones and royalty obligations of the
agreement.

o National Institutes of Health. Under our collaborative
agreement with the NIH, it 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 were party to another
collaborative agreement with the NIH under which we received a
grant for approximately $865,000. The term of this agreement
expired in May 2004.

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

o Regents of the University of California. We have licensed
certain technology from Regents under an exclusive license
agreement. We are required to pay minimum royalties under this
agreement. This agreement is related to our agreement with
Wyeth and expires at the same time as that agreement. It can
be cancelled earlier if we default on our obligations or if
Wyeth cancels its agreement with SIGA and we are not able to
find a replacement for Wyeth. We have currently met all our
obligations under this agreement.

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

We may face limitations on our ability to attract suitable acquisition
opportunities or to integrate additional acquired businesses and the failure to
consummate an acquisition may significantly drain our resources.

Our ability to make acquisitions will depend in part on the relative
attractiveness of shares of our common stock as consideration for potential
acquisition candidates. This attractiveness may depend largely on the relative
market price,

our ability to register common stock and capital appreciation prospects of our
common stock. Failure to make an acquisition will limit our ability to grow, but
will not be central to our continued existence. Costs associated with failed
acquisitions, may result in significant operating costs that may need to be
financed from operations or from additional equity capital.

We may not be able to consummate potential acquisitions or an acquisition may
not enhance our business or may decrease rather than increase our earnings.

In the future, we may issue additional securities in connection with
one or more acquisitions, which may dilute our existing shareholders. Future
acquisitions could also divert substantial management time and result in short
term reductions in earnings or special transaction or other charges. In
addition, we cannot guarantee that we will be able to successfully integrate the
businesses that we may acquire into our existing business. Our shareholders may
not have the opportunity to review, vote on or evaluate future acquisitions.

The biopharmaceutical market in which we compete and will compete is highly
competitive.

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

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

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

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

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

o must meet requirements for institutional review board oversight;

o must meet requirements for informed consent;

o must meet requirements for good clinical and manufacturing
practices;

o are subject to continuing FDA oversight;

o may require large numbers of test subjects; and

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

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

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

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

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

The costs to establish the validity of patents, to defend against
patent infringement claims of others and to assert infringement claims against
others can be expensive and time consuming, even if the outcome is favorable. 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 seven 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 two additional patent applications in the U.S.
and two applications in Europe relating to this technology. We are joint owner
with Washington University of seven issued patents in the U.S. and two 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 the exclusive owner of one U.S.
patent and one PCT application that relates to our DegP product opportunities.

The following is our patent position as of June 30, 2004

--------------------------------------------------------------------------------------------------
Number Number
Number Co- Exclusively
Exclusively Exclusively Licensed Number Number Patent
PATENTS Licensed Licensed from Exclusively Owned by Expiration
from with Oregon Licensed SIGA Dates
Rockefeller Washington State from UCLA
Univ. Univ. University
--------------------------------------------------------------------------------------------------

2013,
2014 (3),
2015 (4),
2016 (2),
U.S. 7 7 1 1 2017,
2019 (2),
2020(2),
2021
--------------------------------------------------------------------------------------------------
2004,2009
2014 (2),
Australia 5 2 1 2015,2016
2019,2020
--------------------------------------------------------------------------------------------------
Canada 3 1 2004,2010
2014,2019
--------------------------------------------------------------------------------------------------
2004,2009
Europe 3 2 2010,2014
2020
--------------------------------------------------------------------------------------------------
2004 (2),
Japan 4 2 2010,2012
2014,2020
--------------------------------------------------------------------------------------------------
Mexico 1 2016
--------------------------------------------------------------------------------------------------
New Zealand 1 2016
--------------------------------------------------------------------------------------------------

APPLICATIONS

--------------------------------------------------------------------------------------------------
U.S. applications 2 4 1 2
--------------------------------------------------------------------------------------------------
U.S. provisionals 3
--------------------------------------------------------------------------------------------------
Australia 1 1 3
--------------------------------------------------------------------------------------------------
China 1
--------------------------------------------------------------------------------------------------
Canada 3 1 1 1 3
--------------------------------------------------------------------------------------------------
Europe 2 1 1 3
--------------------------------------------------------------------------------------------------
Japan 3 1 3
--------------------------------------------------------------------------------------------------

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

We may have difficulty managing our growth.

We expect to experience growth in the number of our employees and
the scope of our operations. This growth has placed, and may continue to place,
a significant strain on our management and operations. Our ability to manage
this

growth will depend upon our ability to broaden our management team and our
ability to attract, hire and 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 healthcare insurers, health maintenance organizations, pharmacy benefits
management companies and other organizations. Third-party payors are
increasingly disputing the prices charged for pharmaceutical products. If
third-party reimbursement was not available or sufficient to allow profitable
price levels to be maintained for drugs developed by us or our collaborative
partners, it could adversely affect our business.

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

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

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

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

o regulatory approval may be withdrawn;

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

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

o sales of the affected products may drop significantly;

o our reputation in the marketplace may suffer; and

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

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

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

Although our management believes that we have the ability to acquire
or produce quantities of genetically engineered commensals sufficient to support
our present needs for research and our projected needs for our initial clinical
development programs, management believes that improvements in our manufacturing
technology will be required to enable us to meet the volume and cost
requirements needed for certain commercial applications of commensal products.
Products based on commensals have never been manufactured on a commercial scale.
The manufacture of all of our products will be subject to current GMP
requirements prescribed by the FDA or other standards prescribed by the
appropriate regulatory agency in the country of use. There can be no assurance
that we will be able to manufacture products, or have products manufactured for
us, in a timely fashion at acceptable quality and prices, that we or third party
manufacturers can comply with GMP, or that we or third party manufacturers will
be able to manufacture an adequate supply of product.

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

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

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

Our certificate of incorporation allows our Board of Directors to
issue up to 10,000,000 shares of preferred stock and to fix the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of these shares without any further vote or action by the
stockholders. The rights of the holders of common stock will be subject to, and
could be adversely affected by, the rights of the holders of any preferred stock
that we may issue in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock, thereby
delaying, deferring or preventing a change in control.

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

Our Directors, executive officers and principal stockholders
beneficially own a significant percentage of our common stock and preferred
stock. They also have, through the exercise or conversion of certain securities,
the right to acquire additional common stock. As a result, these stockholders,
if acting together, have the ability to significantly influence the outcome of
corporate actions requiring shareholder approval. Additionally, this
concentration of ownership may have the effect of delaying or preventing a
change in control of SIGA. At June 30, 2004, Directors, Officers and principal
stockholders beneficially owned approximately 48.4% of our stock.

Item 3. Controls and Procedures

As of the end of the fiscal quarter ended June 30, 2004, the Company's
management, including the Acting Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15(d)-15(e) of the Securities Exchange Act of 1934, as amended). Based on that
evaluation, the Acting Chief Executive Officer and Chief Financial Officer
concluded that such disclosure controls and procedures were effective for
recording, processing, summarizing and reporting information that the Company is
required to disclose in reports filed under the Securities and Exchange Act of
1934, as amended.

There have been no changes in the Company's internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the
Securities Exchange Act, as amended) or in other factors during the fiscal
quarter ended June 30, 2004, that materially affected, or are reasonably likely
to materially affect, the Company's internal controls over financial reporting.

Part II
Other information

Item 1. Legal Proceedings - SIGA is not a party, nor is its property the subject
of, any legal proceedings other than routine litigation incidental to its
business.

Item 2. Changes in Securities and Use of Proceeds - None

Item 3. Defaults upon Senior Securities - None

Item 4. Submission of Matters to a Vote of Security Holders - None

Item 5. Other Information - None

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1 Employment Agreement dated as of July 2, 2004, between SIGA
Technologies, Inc. and Bernard L. Kasten, M.D.

31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

(1) On June 1, 2004, SIGA filed a Current Report on Form 8-K dated
June 1, 2004, pursuant to which SIGA reported under Item 5 that SIGA issued a
press release announcing the completed sale of its immunological bioinformatics
technology and certain non-core vaccine development assets to Pecos Labs, Inc.

(2) On June 9, 2004, SIGA filed a Current Report on Form 8-K dated
June 1, 2004, pursuant to which SIGA reported under Item 5 that SIGA issued a
press release announcing the signing of an asset purchase agreement to acquire
certain antivial programs targeting potential agents of biological warfare from
ViroPharma Incorporated.

(3) On July 6, 2004, SIGA filed a Current Report on Form 8-K dated
July 6, 2004, pursuant to which SIGA reported under Item 5 that SIGA issued a
press release announcing the appointment of Bernard L. Kasten, M.D. as its Chief
Executive Officer.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.

SIGA Technologies, Inc.
(Registrant)

Date August 16, 2004 By: /s/ Thomas N. Konatich
------------------------

Thomas N. Konatich
Chief Financial Officer
(Authorized Signatory and
Principal Accounting Officer
and Financial Officer and Vice
President, Finance)