siga_10k.htm
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
(Mark One)
 
x     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2009
 
Or
 
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ___________

Commission File No. 0-23047
 
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 13-3864870
(State or other jurisdiction of (IRS Employer Identification. No.)
incorporation or organization)
 
35 East 62nd Street 10065
New York, NY (zip code)
(Address of principal executive offices)  

Registrant’s telephone number, including area code: (212) 672-9100
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
common stock, $.0001 par value Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act:
 
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes o No x.
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act Yes o No x.
 
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o.
 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one): Large Accelerated Filer o Accelerated Filer x Non-Accelerated Filer o Smaller Reporting Company o.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x.
 
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June 30, 2009 as reported on the Nasdaq Capital Market was approximately $314,569,000.
 
As of February 23, 2010 the registrant had outstanding 43,228,135 shares of common stock.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The following document is incorporated herein by reference:
 
Document Parts Into Which Incorporated
Proxy Statement for the Company's 2010 Annual Part III
Meeting of Stockholders  


SIGA Technologies, Inc.
 
Form 10-K
 
Table of Contents
 
     Page No.
PART I     
Item 1. Business   2
Item 1A. Risk Factors 12
Item 1B. Unresolved Staff Comments 27
Item 2.   Properties 27
Item 3. Legal Proceedings 27
Item 4. Reserved 27
 
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28
Item 6. Selected Financial Data 29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38
Item 8. Financial Statements and Supplementary Data 39
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 58
Item 9A. Controls and Procedures 58
Item 9B. Other Information 59
 
PART III
Item 10. Directors, Executive Officers and Corporate Governance 60
Item 11. Executive Compensation 60
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 60
Item 13. Certain Relationships and Related Transactions, and Director Independence 61
Item 14. Principal Accountant Fees and Services 61
 
PART IV
Item 15. Exhibits, Financial Statements and Schedules 62
SIGNATURES 68


Item 1. Business
 
     Certain statements in this Annual Report on Form 10-K, including certain statements contained in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of SIGA is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (ii) the risk that SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products, (iii) the risk that SIGA may not be able to obtain anticipated funding for its development projects or other needed funding, (iv) the risk that SIGA may not be able to secure funding from anticipated government contracts and grants, (v) the risk that SIGA may not be able to secure or enforce sufficient legal rights in its products, including patent protection, for its products, (vi) the risk that any challenge to our patent and other property rights, if adversely determined, could affect our business and, even if determined favorably, could be costly, (vii) the risk that regulatory requirements applicable to SIGA’s products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products, (viii) the risk that the U.S. Biomedical Advanced Research & Development Authority (“BARDA”) may not complete the procurement set forth in its solicitation for the acquisition of smallpox antiviral for the strategic national stockpile, or may complete it on different terms, (ix) the risk that the volatile and competitive nature of the biotechnology industry may hamper SIGA’s efforts, (x) the risk that the changes in domestic and foreign economic and market conditions may adversely affect SIGA’s ability to advance its research or its products, and (xi) the effect of federal, state, and foreign regulation on SIGA’s businesses. All such forward-looking statements are current only as of the date on which such statements were made. SIGA does not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
 
Introduction
 
     SIGA Technologies, Inc. is referred to throughout this report as “SIGA,” “the Company,” “we” or “us.”
 
     Since we were incorporated in Delaware on December 28, 1995, SIGA has pursued the research, development and commercialization of novel products for the prevention and treatment of serious infectious diseases, including products for use in defense against biological warfare agents such as smallpox and Arenaviruses. Our lead product, ST-246®, is an orally administered antiviral drug that targets orthopox viruses. In December 2006 the FDA granted Orphan Drug designation to ST-246® for the prevention and treatment of smallpox. In May 2009, we submitted a response to a Request for Proposal (“RFP”) issued by BARDA with respect to the purchase of 1.7 million courses of a smallpox antiviral (the “BARDA Smallpox RFP”), and, in June 2009, BARDA informed us that our response to the BARDA Smallpox RFP was deemed technically acceptable and in the competitive range. There can be no assurance that SIGA or any other company will receive an award pursuant to this RFP. Further, any award on this RFP would be subject to negotiation of final contract terms and specifications; thus, the final terms under any contract with BARDA may be materially different than those indicated in the RFP.
 
     Our antiviral programs are designed to prevent or limit the replication of the viral pathogen. As a result of the success of our efforts to develop products for use against agents of biological warfare, we have not spent significant resources to further the development of our anti-infective technologies.
 
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Product Candidates and Market Potential
 
     SIGA Biological Warfare Defense Product Portfolio
 
     Anti-Orthopoxvirus Drug: Smallpox virus is classified as a Category A agent by the U.S. Centers for Disease Control and Prevention (“CDC”) and is considered one of the most significant threats for use as a biowarfare agent. While deliberate introduction of any pathogenic agent would be devastating, we believe the one that holds the greatest potential for harming the general U.S. population is smallpox. At present there is no effective drug with which to treat or prevent smallpox infections. To address this serious risk, SIGA scientists have identified a lead drug candidate, ST-246®, which inhibits vaccinia, cowpox, ectromelia (mousepox), monkeypox, camelpox, and variola (smallpox) replication in cell culture and in various animal models, but not other unrelated viruses. Given the safety concerns with the current smallpox vaccine, there should be several uses for an effective smallpox antiviral drug: prophylactically, to protect the non-immune who are at risk to exposure; therapeutically, to reduce mortality and morbidity in those infected with the smallpox virus; and lastly, as an adjunct to the smallpox vaccine in order to reduce the frequency of serious adverse events due to the live virus used for vaccination. In December 2005, the FDA approved our IND application for ST-246®. In June 2006, we successfully completed the first human clinical safety study of ST-246®. The trial showed the drug to be well-tolerated in healthy human volunteers at all tested orally administered doses. In addition, data from blood level exposure was sufficient to support once a day dosing. The study was a double-blind, randomized, placebo controlled, and ascending single dose study. In 2006, ST-246® became the first drug ever to demonstrate 100% protection against human smallpox virus in a primate trial conducted at the CDC. Later in 2006, in two non-human primate trials the drug demonstrated 100% protection for animals injected with high doses of monkeypox virus. One study was sponsored by the National Institute of Allergy and Infectious Diseases (“NIAID”) at the National Institutes of Health (“NIH”). The second study was conducted by the U.S. Army Medical Research Institute of Infectious Diseases (“USAMRIID”) and was funded by the Department of Defense’s Threat Reduction Agency (“DTRA”). In late 2006, ST-246® received Orphan Drug designation for both the treatment and prevention of smallpox. An additional Phase I clinical trial was started in February 2007. The trial was a 21 day, escalating, multiple-dose, Phase I safety, tolerability and pharmacokinetics study of ST-246® at three different dosages in healthy volunteers. The study was completed in December 2007 and as reported the preliminary results indicated that the drug is safe and well tolerated at all tests doses. In August 2008 a Phase I bioequivalence was performed at the Orlando Clinical Research Center in Orlando, Florida to compare ST-246® polymorph form I to form V. We submitted the final Clinical Study Report for that study to the FDA in May 2009. In June 2009 a two phase multiple dose safety/pharmacokinetics evaluation clinical trial was begun to evaluate the effectiveness of ST-246® at different dosage levels. We estimate the final Clinical Study Report for that study will be submitted to the FDA in the second quarter of 2010. During 2006, SIGA was awarded grants and contracts from the NIH totaling approximately $21 million for the continued development of ST-246®. In 2007, SIGA was awarded a grant from the NIH for a total of approximately $600,000, to support the development of ST-246® treatment of smallpox vaccine-related adverse events. In 2008, SIGA was awarded a $55 million contract from the NIH to support the development of additional formulations and orthopox-related indications for ST-246®. In 2008, SIGA was also awarded $20 million from the NIH in supplemental funding to the Company’s existing $16.5 million contract. In September 2009, SIGA received a three-year, $3.0 million Phase II grant from the NIH to fund the continued development of ST-246® treatment of smallpox vaccine-related adverse events.
 
     Anti-Arenavirus Drug: Arenaviruses are hemorrhagic fever viruses that have been classified as Category A agents by the CDC due to the great risk that they pose to public health and national safety. Among the Category A viruses recognized by the CDC, there are four hemorrhagic fever arenaviruses (Junin, Machupo, Guanarito and Sabia viruses) for which there are no FDA approved treatments available. In order to meet this threat, SIGA scientists have identified two lead drug candidates, ST-294 and ST-193, which have demonstrated significant antiviral activity in cell culture assays against arenavirus pathogens. We have also demonstrated the therapeutic efficacy of ST-193 in several animal challenge studies. SIGA also has programs against other hemorrhagic fever viruses, including Dengue Fever, Rift Valley Fever, Lymphocytic choriomeningitis virus and Ebola. We believe that the availability of hemorrhagic fever virus antiviral drugs will address national and global security needs by acting as a significant deterrent and defense against the use of arenaviruses as weapons of bioterrorism. In 2006, SIGA received a three-year grant of $6.0 million from the NIH to support the development of antiviral drugs for Lassa fever virus. In 2008, SIGA received a two-year Phase I grant of $1.0 million from the NIH to support the development of antiviral drugs against Dengue Fever.
 
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     Broad Spectrum Antiviral: Research and development efforts currently underway at SIGA are aimed at developing a comprehensive biodefense against those microbial agents most likely to be deployed as biological weapons. A broad-spectrum antiviral would have great utility against natural or intentional introduction of these agents into population centers, as well as provide a treatment option in areas where these pathogens are endemic. Screening for antivirals against specific CDC Category A and B pathogens, utilizing SIGA’s high throughput screening program, led to the identification of a unique collection of compounds with broad spectrum antiviral activity. Compounds with potent, non-toxic activity against a diversity of virus families are currently being characterized with respect to antiviral mechanism(s) of action. SIGA chemi-informatics tools are being employed to explore and determine structure-activity relationships within lead compound series. To date, we have documented sub-micromolar activity of the broad spectrum antiviral candidate, ST-669, against viruses in the Poxviridae, Filoviridae, Bunyaviridae, Arenaviridae, Flaviviridae, Togaviridae, Retroviridae, and Picornaviridae families. Lead series are currently being assessed with respect to the mechanism of antiviral action, formulated for testing in vivo, and administered by multiple routes and dosing regimens to those small animal species traditionally used for modeling the pathogenesis of Category A viruses. In September 2009, the Company was awarded a two-year, $1.7 million grant from the NIAID to support the development of broad spectrum, small-molecule inhibitors of bunyaviruses. The grant was awarded under the American Recovery and Reinvestment Act of 2009 (“the Recovery Act”).
 
     Dengue antiviral: Dengue fever, dengue hemorrhagic fever, and dengue shock syndrome are caused by one of four serotypes of dengue virus of the genus Flavivirus. Dengue is considered by the World Health Organization to be the most important arthropod-borne viral disease with an estimated 50-100 million people infected with the virus each year. There is currently no approved antiviral or vaccine for the treatment or prevention of dengue-mediated disease. SIGA currently has four drug series in the pre-clinical development stage, each with activity against all four serotypes of virus. Compounds from two of these series have recently shown efficacy in a murine model of disease, including ST-610 and ST-148. In 2008, SIGA was awarded a $1.0 million, two-year grant from the NIH to support lead optimization and animal efficacy for our Dengue antiviral program.
 
     Market for Biological Defense Programs
 
     The market for biodefense countermeasures has grown dramatically as a result of the increased awareness of the threat of global terror activity in the wake of the September 11, 2001 terrorist attacks and the October 2001 anthrax letter attacks. The U.S. government is the principal source of worldwide biodefense spending. Most U.S. government spending on biodefense programs results from development funding awarded by NIAID, BARDA and the Department of Defense (“DoD”), and procurement of countermeasures by The U.S. Department of Health and Human Services (“HHS”), the CDC and the DoD. The U.S. government is now the largest source of development and procurement funding for academic institutions and biotechnology companies conducting biodefense research or developing vaccines and immunotherapies directed at potential agents of bioterror or biowarfare.
 
     The Project BioShield Act, which became law in 2004, authorizes the procurement of countermeasures for biological, chemical, radiological and nuclear attacks for the Strategic National Stockpile (“SNS”), which is a national repository of medical assets and countermeasures designed to provide federal, state and local public health agencies with medical supplies needed to treat those affected by terrorist attacks, natural disasters, industrial accidents and other public health emergencies. Project BioShield provided appropriations of $5.6 billion to be expended over ten years. The Pandemic and All-Hazards Preparedness Act (“the Preparedness Act”), passed in 2006, established BARDA as the agency responsible for awarding procurement contracts for biomedical countermeasures and providing development funding for advanced research and development in the biodefense arena. The Preparedness Act supplements the funding available under Project BioShield for radiological, nuclear, chemical and biological countermeasures, and provides funding for infectious disease pandemics. Funding for BARDA is created by annual appropriations by Congress. Congress also appropriates annual funding for the CDC for the procurement of medical assets and countermeasures for the SNS and for NIAID to conduct biodefense research. This appropriation funding supplements amounts available under Project BioShield.
 
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     Since 2002, HHS has provided over $10 billion to States and localities through various programs to enhance their emergency preparedness activities and to better enable them to respond to large-scale, natural or man-made public health emergencies, such as acts of bioterrorism or infectious disease outbreaks. One of the major concerns in the field of biological warfare agents is smallpox – although declared extinct in 1980 by the World Health Organization (WHO), there is a threat that a rogue nation or a terrorist group may have an illegal inventory of the virus that causes smallpox. The only legal inventories of the virus are held under extremely tight security at the CDC in Atlanta, Georgia and at a laboratory in Russia. As a result of this threat, the U.S. government has announced its intent to make significant expenditures on finding a way to counteract the virus if turned loose by terrorists or on a battlefield.
 
     In addition to the U.S. government, we believe that other potential additional markets for the sale of biodefense countermeasures include:
     The FDA amended its regulations, effective June 30, 2002, so that certain new drug and biological products used to reduce or prevent the toxicity of chemical, biological, radiological, or nuclear substances may be approved for use in humans based on evidence of effectiveness derived only from appropriate animal studies and any additional supporting data. We believe that this change could make it possible for us to have our products which have been proven effective in animal studies to be approved for sale more quickly than under the standard regulatory path.
 
     SIGA Antivirals Product Portfolio
 
     SIGA currently has the following antiviral programs which are in various stages of development, ranging from initial research and screening to Phase I human clinical trials: Orthopox antiviral, New World Arenavirus antiviral, Old World Arenavirus antiviral, Filovirus (Ebola & Marburg) antivirals, Dengue Fever virus antiviral, and Bunyavirus antivirals. Currently there are no approved antivirals available against any of these viruses.
 
Technology
 
     Antiviral Technology: Two Approaches
 
     SIGA has two approaches to the discovery and development of new antiviral compounds: high-throughput screening (“HTS”) and rational drug design. For HTS SIGA uses whole cell virus inhibition assays, pseudotype virus inhibition assays, as well as validated target biochemical assays. SIGA currently has a 200,000 small molecule compound library in-house that is utilized for screening in these various assays. This strategy allows for both target specific and target neutral screening and identification of novel antiviral compounds. Compounds are also screened for toxicity in various cell lines to develop a therapeutic index (“TI”) which is the concentration that the compound is toxic to 50% of the cells (CC50) divided by the concentration of compound required to inhibit 50% of the virus (EC50) (TI= CC50/EC50). Once hits are identified with an acceptable TI they are selected for chemical optimization and proceed into the antiviral drug development pipeline.
 
     For rational drug design SIGA applies advanced receptor structure-based Virtual Ligand Screening technology for ligand/inhibitor discovery. The analysis of the structure reveals potentially “drugable” pockets. The technology allows us to utilize the three-dimensional structure of the target receptor to screen large virtual compound collections as well as databases of commercially available compounds and prioritize them for subsequent experimental validation. Rational drug design is also used to develop structure activity relationships and lead optimization.
 
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Collaborative Research and Licenses
 
     We have entered into the following license agreements, collaborative research arrangements and contracts:
 
     National Institutes of Health. On September 23, 2009, the Company was awarded a two-year, $1.7 million grant from the NIH to support the development of broad spectrum, small-molecule inhibitors of bunyaviruses. The grant was awarded under the Recovery Act. In September 2009, SIGA was awarded a three-year, $3.0 million Phase II grant from the NIH to fund the continued development of ST-246® treatment of smallpox vaccine-related adverse events. On September 1, 2008, we were awarded a five-year, $55.0 million contract from the NIAID to support the development of additional formulations and orthopox-related indications for ST-246, our lead orthopox drug candidate. In September 2008, we were awarded $20.0 million from the NIAID in supplemental funding to our existing $16.5 million contract, to accelerate process development related to large-scale manufacturing and packaging of ST-246® and commercial-scale validation. The term of the contract was extended through September 28, 2011. In September 2008, we received a two-year, $1.0 million Phase I grant from the NIH to fund lead optimization and animal efficacy for our Dengue antiviral program. In September 2007, we received a two-year, $600,000 grant supporting the development of ST-246® treatment of smallpox vaccine-related adverse events. In July 2007, the NIH awarded us a two-year grant for a total of $530,000 to support our Strep Bacterial Commensal Vector (“BCV”) program as a subunit vaccine delivery system. In October and August 2006, the NIH awarded us a $16.5 million, 3-year contract and a $4.8 million, 3-year grant, respectively, both to advance the development of our lead drug candidate, ST-246®. In September 2006, the NIH awarded us a $6.0 million, 3-year grant for the development of an antiviral drug for Lassa fever virus. In August 2004, we were awarded four grants totaling approximately $11.1 million to support our work on smallpox and arenaviruses. For the years ending December 31, 2009, 2008, and 2007, we have recognized grants-related revenue of $3.1 million, $3.0 million, and $2.6 million, respectively, from grants with the NIH. In 2009, 2008 and 2007, we recognized $10.7 million, $5.0 million, and $2.2 million, respectively, in revenue from our contracts with the NIH.
 
     SIGA receives cash payments from the NIH under its grants on monthly and semi-monthly bases, and under its contract on a monthly basis, as the work is performed and the related revenue is recognized. SIGA’s current NIH grants and contracts do not include milestone payments. The agreements can be cancelled for non-performance and if cancelled, the Company will not receive funds for additional future work under the agreements.
 
     For a discussion of research and development expenses, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
 
Competition
 
     The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and intense competition. Our competitors include most of the major pharmaceutical companies which have financial, technical and marketing resources significantly greater than ours. Biotechnology and other pharmaceutical competitors include Acambis, Achillion Pharmaceuticals, Arrow Therapeutics, Celldex Therapeutics, Inc., Bavarian Nordic AS, Chimerix Inc., Bioport, Emergent BioSolutions and Novartis. Academic institutions, governmental agencies and other public and private research organizations are also conducting research activities and seeking patent protection and may commercialize products on their own or through joint venture.
 
     Our biodefense product candidates face significant competition for U.S. government funding for both development and procurement of medical countermeasures for biological, chemical and nuclear threats, diagnostic testing systems and other emergency preparedness countermeasures.
 
     Our potential commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop. In addition, we may not be able to compete effectively if our product candidates do not satisfy government procurement requirements, particularly requirements of the U.S. government with respect to biodefense products.
 
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Human Resources and Research Facilities
 
     As of February 15, 2010, we had 55 full-time employees. None of our employees is covered by a collective bargaining agreement, and we consider our employee relations to be good. Our research and development facilities are located in Corvallis, Oregon where we lease approximately 18,100 square feet under a lease agreement signed in January 2007, which expires in December 2011. Our facility in Oregon has been improved to meet the special requirements necessary for the operation of our research and development activities. In January 2010 we entered into a sublease agreement for a 5,700 square foot additional research facility in Corvallis, Oregon.
 
Intellectual Property and Proprietary Rights
 
     Our commercial success will depend in part on our and our collaborators’ ability to obtain and maintain patent protection for our proprietary technologies, drug targets and potential products and to effectively preserve our trade secrets. Because of the substantial length of time and expense associated with bringing potential products through the development and regulatory clearance processes to reach the marketplace, the pharmaceutical industry places considerable importance on obtaining patent and trade secret protection. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date. Accordingly, we cannot predict the type and breadth of claims allowed in these patents.
 
     We have exclusively licensed the rights to five issued U.S. patents and one issued European patent. These patents have varying lives and they are related to licensed technology for the strep and Gram-positive products. We have one additional patent application in the U.S. and one application in Europe relating to this technology. In addition, we have a nonexclusive license from Washington University of one issued patent in the U.S. This patent is for the technology used for the Gram-negative product opportunities. We are also exclusive owner of six U.S. patents and eleven U.S. utility patent applications. One of these U.S. utility applications relates to our DegP product opportunities. We are also exclusive owner of two U.S. provisional patent applications.
 
     The following are our patent positions as of December 31, 2009:
 
PATENTS        Number
Non-
Exclusively
Licensed
from
Washington
Univ.		        Number
Owned by
SIGA		        Patent Expiration Dates
U.S.   1   6 2014 (4), 2015 (3), 2021 (1), 2016
(2), 2013 (1), 2017 (1)
Europe       2   2021 (1), 2015 (1), 2014 (1)

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APPLICATIONS                Number
Owned by
SIGA
U.S. applications 11
U.S. provisionals 2
PCT 11
Australia   6
Canada 10
Europe 9
Japan 9

     We also rely upon trade secret protection for our confidential and proprietary information. No assurance can be given that other companies will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or that we can meaningfully protect our trade secrets.
 
Government Regulation
 
     Regulatory Approval Process. Regulation by governmental authorities in the United States and other countries will be a significant factor in the production and marketing of any biopharmaceutical products that we may develop. The nature and the extent to which such regulations may apply to us will vary depending on the nature of any such products. Virtually all of our potential biopharmaceutical products will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approval procedures by the FDA and similar health authorities in foreign countries. Various federal statutes and regulations also govern or influence the manufacturing, safety, labeling, storage, record keeping and marketing of such products. The process of obtaining these approvals and the subsequent compliance with appropriate federal and foreign statutes and regulations requires the expenditure of substantial resources.
 
     In order to test clinically, produce and market products for diagnostic or therapeutic use, a company must comply with mandatory procedures and safety standards established by the FDA and comparable agencies in foreign countries. Before beginning human clinical testing of a potential new drug in the United States, a company must file an IND and receive clearance from the FDA. This application is a summary of the pre-clinical studies that were conducted to characterize the drug, including toxicity and safety studies, as well as an in-depth discussion of the human clinical studies that are being proposed.
 
     The pre-marketing program required for approval by the FDA of a new drug typically involves a time-consuming and costly three-phase process. In Phase I, trials are conducted with a small number of healthy patients to determine the early safety profile, the pattern of drug distribution and metabolism. In Phase II, trials are conducted with small groups of patients afflicted with a target disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase III, large scale, multi-center comparative trials are conducted with patients afflicted with a target disease in order to provide enough data for statistical proof of efficacy and safety required by the FDA and others.
 
     The FDA amended its regulations, effective June 30, 2002, so that certain new drug and biological products used to reduce or prevent the toxicity of chemical, biological, radiological, or nuclear substances may be approved for use in humans based on evidence of effectiveness derived only from appropriate animal studies and any additional supporting data.
 
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     The FDA closely monitors the progress of each of the three phases of clinical testing and may, in its discretion, reevaluate, alter, suspend or terminate the testing based on the data that have been accumulated to that point and its assessment of the risk/benefit ratio to the patient. Estimates of the total time required for carrying out such clinical testing vary between two and ten years. Upon completion of such clinical testing, a company typically submits a New Drug Application (“NDA”) or Product License Application (“PLA”) to the FDA that summarizes the results and observations of the drug during the clinical testing. Based on its review of the NDA or PLA, the FDA will decide whether to approve the drug. This review process can be quite lengthy, and approval for the production and marketing of a new pharmaceutical product can require a number of years and substantial funding; there can be no assurance that any approvals will be granted on a timely basis, if at all.
 
     Once the product is approved for sale, FDA regulations govern the production process and marketing activities, and a post-marketing testing and surveillance program may be required to monitor continuously a product’s usage and its effects. Product approvals may be withdrawn if compliance with regulatory standards is not maintained. Other countries in which any products developed by us may be marketed could impose a similar regulatory process.
 
     An alternative regulatory mechanism is also available. The Emergency Use Authorization authority allows the FDA Commissioner to strengthen the public health protections against biological, chemical, radiological, and nuclear agents that may be used to attack the American people or the U.S. armed forces. Under this authority, the FDA Commissioner may allow medical countermeasures to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions caused by such agents, when there is no adequate, approved, and available alternative.
 
     Legislation and Regulation Related to Bioterrorism Counteragents and Pandemic Preparedness. Because some of our drug candidates are intended for the treatment of diseases that may result from acts of bioterrorism or for pandemic preparedness, they may be subject to the specific legislation and regulation described below and elsewhere herein.
 
     Project BioShield. The Project BioShield Act of 2004 provides expedited procedures for bioterrorism related procurement and awarding of research grants, making it easier for HHS to quickly commit funds to countermeasure projects. Project BioShield relaxes procedures under the Federal Acquisition Regulation for procuring property or services used in performing, administering or supporting biomedical countermeasure research and development. In addition, if the Secretary of HHS deems that there is a pressing need, Project BioShield authorizes the Secretary to use an expedited award process, rather than the normal peer review process, for grants, contracts and cooperative agreements related to biomedical countermeasure research and development activity.
 
     Under Project BioShield, the Secretary of HHS, with the concurrence of the Secretary of the Department of Homeland Security and upon the approval of the President, can contract to purchase unapproved countermeasures for the SNS in specified circumstances. Congress is notified of a recommendation for a stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying the countermeasure to the SNS is paid on delivery of a substantial portion of the countermeasure. To be eligible for purchase under these provisions, the Secretary of HHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, from pre-clinical and clinical trials, to support a reasonable conclusion that the countermeasure will qualify for approval or licensing within eight years. Project BioShield also allows the Secretary of HHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this authority, the Secretary of HHS must conclude that:
     Although this provision permits the Secretary of HHS to circumvent the FDA approval process, its use would likely be limited to rare circumstances.
 
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     Public Readiness and Emergency Preparedness Act. The Public Readiness and Emergency Preparedness Act, or PREP Act, provides immunity for manufacturers from all claims under state or federal law for “loss” arising out of the administration or use of a “covered countermeasure.” However, injured persons may still bring a suit for “willful misconduct” against the manufacturer under some circumstances. “Covered countermeasures” include security countermeasures and “qualified pandemic or epidemic products”, including products intended to diagnose or treat pandemic or epidemic disease, such as pandemic vaccines, as well as treatments intended to address conditions caused by such products. For these immunities to apply, the Secretary of HHS must issue a declaration in cases of public health emergency or “credible risk” of a future public health emergency. Since 2007, the Secretary of HHS has issued 8 declarations under the PREP Act to protect from liability countermeasures that are necessary to prepare the nation for potential pandemics or epidemics, including a declaration on October 10, 2008, that provides immunity from tort liability as it relates to smallpox countermeasures.
 
     Foreign Regulation. As noted above, in addition to regulations in the United States, we might be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our drug candidates. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The actual time required to obtain clearance to market a product in a particular foreign jurisdiction may vary substantially, based upon the type, complexity and novelty of the pharmaceutical drug candidate, the specific requirements of that jurisdiction, and in some countries whether the FDA has previously approved the drug for marketing. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary from country to country.
 
     Regulations Regarding Government Contracting. The status of an organization as a government contractor in the United States and elsewhere means that the organization is also subject to various statutes and regulations, including the Federal Acquisition Regulation, which governs the procurement of goods and services by agencies of the United States and other countries. These governing statutes and regulations can impose stricter penalties than those normally applicable to commercial contracts, such as criminal and civil damages liability and suspension and debarment from future government contracting. In addition, pursuant to various statutes and regulations, government contracts can be subject to unilateral termination or modification by the government for convenience in the United States and elsewhere, detailed auditing requirements, statutorily controlled pricing, sourcing and subcontracting restrictions and statutorily mandated processes for adjudicating contract disputes.
 
     American Recovery and Reinvestment Act. The Recovery Act was passed on February 13, 2009 in response to the current economic crisis. The Recovery Act is designed to spur job creation and preservation, increase economic activity and investment in long-term economic growth, and improve levels of accountability and transparency in government spending, in part through grants like the one we were awarded in September 2009. Recipients of Recovery Act funds are required to report quarterly on the amount of funds spent, the status of the funded project, the number of jobs created and/or saved as a result of the funded project, and other details, all of which are made available to the public through the federal government’s official Recovery Act website, Recovery.gov. Compliance with Recovery Act requirements will thus involve increased public disclosure regarding our activities, and may increase our costs.
 
Availability of Reports and Other Information
 
     We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov.
 
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     In addition, our company website can be found on the Internet at www.siga.com. The website contains information about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, access www.siga.com, click on “Investor Relations” and “SEC Filing”.
 
     The following corporate governance related documents are also available on our website:
     To review these documents, access www.siga.com and click on “Corporate Governance”.
 
     Any of the above documents can also be obtained in print by any shareholder upon request to the Secretary, SIGA Technologies, Inc., 35 East 62nd Street, New York, New York 10065.
 
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Item 1A. Risk Factors
 
     This report contains forward-looking statements and other prospective information relating to future events. These forward-looking statements and other information are subject to risks and uncertainties that could cause our actual results to differ materially from our historical results or currently anticipated results including the following:
 
Risks Related to Our Financial Position and Need for Additional Financing
 
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 $17.6 million, $8.6 million, and $5.6 million, for the years ended December 31, 2009, 2008, and 2007, respectively. On January 1, 2009, we recognized a $2.7 million increase in our opening accumulated deficit balance reflecting the cumulative effect of a change in accounting principle recorded in connection with certain warrants to acquire shares of the Company’s common stock. As of December 31, 2009, 2008, and 2007, our accumulated deficit was approximately $90.9 million, $70.6 million, and $62.0 million, respectively. We expect to continue to have significant operating expenses. We will need to generate significant revenues to achieve and maintain profitability.
 
     We cannot guarantee that we will achieve sufficient revenues for profitability. Even if we do achieve profitability, we cannot guarantee that we can sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow slower than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, then our business, results of operations, financial condition and cash flows will be materially and adversely affected. Because our strategy might include acquisitions of other businesses, acquisition expenses and any cash used to make these acquisitions will reduce our available cash.
 
Our business will suffer if we are unable to raise additional equity funding.
 
     Unless and until we successfully sell any of our products, such as pursuant to the BARDA Smallpox RFP, we will continue to be dependent on our ability to raise money through the exercise of existing options or warrants or through the issuance of new equity. There is no guarantee that we will continue to be successful in raising such funds. If we are unable to raise additional equity funds, we may be forced to discontinue or cease certain operations. We currently have sufficient operating capital to finance our operations beyond the next twelve months. Our annual operating needs vary from year to year depending upon the amount of revenue generated through grants, contracts and licenses and the amount of projects we undertake, as well as the amount of resources we expend, in connection with acquisitions all of which may materially differ from year to year and may adversely affect our business.
 
     Any additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us.
 
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Risks Related to Our Common Stock
 
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 investments, 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:
     Additionally, because the volume of trading in our stock fluctuates significantly at times, 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.
 
A 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 our future activities, could also 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 a change of control.
 
     Our directors, executive officers and principal stockholders beneficially own a significant percentage of our common stock. They also have, through the exercise or conversion of certain securities, the right to acquire additional common stock. As a result, these stockholders, if acting together, have the ability to significantly influence the outcome of corporate actions requiring shareholder approval. Additionally, this concentration of ownership may have the effect of delaying or preventing a change in control of SIGA. As of December 31, 2009, directors, officers and principal stockholders beneficially owned approximately 31.0% of our stock.
 
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Risks Related to Our Dependence on U.S. Government Contracts and Grants
 
Most of our immediately foreseeable future revenues are contingent upon grants and contracts from the U. S. government, and we may not achieve sufficient revenues from these agreements to attain profitability.
 
     Until and unless we successfully sell any of our products, our ability to generate revenues will largely depend on our ability to enter into additional research grants, collaborative agreements, strategic alliances, contracts and license agreements with third parties or maintain the agreements we currently have in place. Substantially all of our revenues for the years ended December 31, 2009, 2008, and 2007, respectively, were derived from grants and contracts. Our current revenue is primarily derived from contract work being performed for the NIH under grants and two major contracts which are scheduled to expire from September 2011 through September 2013.
 
Our future business may be harmed as a result of the government contracting process, which is a competitive bidding process that involves risks not present in the commercial contracting process.
     The U.S. government may choose to award future contracts for the supply of smallpox anti-virus and other biodefense product candidates that we are developing to our competitors instead of to us. If we are unable to win particular contracts, we may not be able to operate in the market for products that are provided under those contracts for a number of years. For example, BARDA has issued a request for proposal for treatment courses for symptomatic individuals exposed to smallpox for the SNS. We have submitted a proposal responding to this request for proposal. We expect that our ability to secure an award will depend primarily on the technical merits of ST-246®. The U.S. government may purchase another company’s product candidate instead. If we are unable to consistently win new contract awards over an extended period, or if we fail to anticipate all of the costs and resources that will be required to secure such contract awards, our growth strategy and our business, financial condition, and operating results could be materially adversely affected.
 
The success of our business with the U.S. government depends on our compliance with regulations and obligations under our U.S. government contracts and various federal statutes and regulations.
 
      Our business with the U.S. government is subject to specific procurement regulations and a variety of other legal compliance obligations. These laws and rules include those related to:
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     In addition, before awarding us any contracts, the U.S. government could require that we respond satisfactorily to a request to substantiate our commercial viability and industrial capabilities. Compliance with these obligations increases our performance and compliance costs. Failure to comply with these regulations and requirements could lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. The termination of a government contract or relationship as a result of our failure to satisfy any of these obligations would have a negative impact on our operations and harm our reputation and ability to procure other government contracts in the future.
 
Unfavorable provisions in government contracts, some of which may be customary, may harm our future business, financial condition and potential operating results.
 
     Government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts, including provisions that allow the government to:
     Generally, government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the government’s convenience. Under general principles of government contracting law, if the government terminates a contract for convenience, the terminated company may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination.
 
     If the government terminates a contract for default, the defaulting company is entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items from another source. Our government contracts could be terminated under these circumstances. Some government contracts grant the government the right to use, for or on behalf of the U.S. government, any technologies developed by the contractor under the government contract. If we were to develop technology under a contract with such a provision, we might not be able to prohibit third parties, including our competitors, from using that technology in providing products and services to the government.
 
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Risks Related to Product Development
 
Our business depends significantly on our success in completing development of and commercializing drug candidates that are still under development. If we are unable to commercialize these drug candidates, or experience significant delays in doing so, our business will be materially harmed.
 
     We have invested a substantial majority of our efforts and financial resources in the development of our drug candidates. Our ability to generate near-term revenue is particularly dependent on the success of our smallpox antiviral drug candidate ST-246®. The commercial success of our drug candidates will depend on many factors, including:
     We expect to rely on FDA regulations known as the “animal rule” to obtain approval for our biodefense drug candidates. The animal rule permits the use of animal efficacy studies together with human clinical safety trials to support an application for marketing approval. These regulations are relatively new, and we have limited experience in the application of these rules to the drug candidates that we are developing. It is possible that results from these animal efficacy studies may not be predictive of the actual efficacy of our drug candidates in humans. If we are not successful in completing the development and commercialization of our drug candidates, our business could be harmed.
 
We will not be able to commercialize our drug candidates if our pre-clinical development efforts are not successful, our clinical trials do not demonstrate safety or our clinical trials or animal studies do not demonstrate efficacy.
 
     Before obtaining regulatory approval for the sale of our drug candidates, we must conduct extensive pre-clinical development, clinical trials to demonstrate the safety of our drug candidates and clinical or animal trials to demonstrate the efficacy of our drug candidates. Pre-clinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials or animal efficacy studies will be successful, and interim results of a clinical trial or animal efficacy study do not necessarily predict final results.
 
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     A failure of one or more of our clinical trials or animal efficacy studies can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, pre-clinical testing and the clinical trial or animal efficacy study process that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates, including:
We are in various stages of product development and there can be no assurance of successful commercialization.
 
     In general, our research and development programs are at an early stage of development. To obtain FDA approval for our biological warfare defense products we will be required to perform at least one animal efficacy model and provide animal and human safety data. Our other products will be subject to the usual 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 candidate we develop 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 predict with certainty whether any drug resulting from our research and development efforts will be commercially available within the next several years, or if they will be available at all.
 
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     Even if we receive initially positive pre-clinical or clinical results, such results do not mean that similar results will be obtained in 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:
     In addition, third parties may preclude us from marketing our drugs through enforcement of their proprietary rights that we are not aware of, or third parties may succeed in marketing equivalent or superior drug products. Our failure to develop safe, commercially viable drugs would have a material adverse effect on our business, financial condition and results of operations.
 
Risks Related to Commercialization
 
Because we must obtain regulatory clearance or otherwise operate under strict legal requirements in order to test and market our products in the U. S., we cannot predict whether or when we will be permitted to commercialize our products.
 
     A pharmaceutical product cannot generally 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 and its intended use.
 
     Before commencing clinical trials in humans, we must submit and receive clearance from the FDA by means of an IND application. Institutional review boards and the FDA oversee clinical trials and such trials:
     Before receiving FDA clearance to market a product in the absence of a medical or public health emergency, we must demonstrate that the product is safe and effective on the patient population that will be treated. Data we obtain from pre-clinical 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.
 
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     If full 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 full marketing clearance.
 
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 resources, 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. Three companies with similar profiles are VaxGen, Inc., which is developing vaccines against anthrax, smallpox and HIV/AIDS; Avant Immunotherapeutics, Inc., which has vaccine programs for agents of biological warfare; and Chimerix, Inc., which is developing an alternative smallpox therapeutic.
 
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 product we develop may not achieve market acceptance. The degree of market acceptance of any of our products will depend on a number of factors, including:
     Physicians, patients or the medical community in general may not accept or utilize any product we may develop. Our ability to generate 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 we develop, 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 have obtained and intend to keep in place product liability insurance with respect to drugs we 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.
 
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We may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market, which could harm sales of the affected products.
 
     If we or others identify side effects after any of our products are on the market, or if manufacturing problems occur:
     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.
 
Healthcare reform and controls on healthcare spending may limit the price we charge for any products and the amounts that we can sell.
 
     The U.S. 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 healthcare spending, including through the Medicare and Medicaid programs. 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 of our products profitably in the U.S. At present, we do not foresee any change in FDA regulatory policies that would adversely affect our development programs.
 
Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain product candidates outside of the United States and require us to develop and implement costly compliance programs.
 
     As we continue to expand our operations outside of the United States, we must comply with numerous laws and regulations relating to international business operations. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.
 
     The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice. The SEC is involved with enforcement of the books and records provisions of the FCPA.
 
     Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical studies and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
 
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     Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. Our expanding presence outside of the United States will require us to dedicate additional resources to compliance with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.
 
     The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment from government contracting. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can result in long term disqualification as a government contractor. The termination of a government contract or relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading securities on United States exchanges for violations of the FCPA’s accounting provisions.
 
Risks Related to Manufacturing and Manufacturing Facilities
 
Problems related to large-scale commercial manufacturing could cause us to delay product launches or experience shortages of products.
 
     Our drug candidates require several manufacturing steps, and may involve complex techniques to assure quality and sufficient quantity, especially as the manufacturing scale increases. Our products must be made consistently and in compliance with a clearly defined manufacturing process. Accordingly, it is essential to be able to validate and control the manufacturing process to assure that it is reproducible. Slight deviations anywhere in the manufacturing process, including obtaining materials, filling, labeling, packaging, storage and shipping and quality control and testing, some of which all pharmaceutical companies, including SIGA, experience from time to time, may result in lot failures, delay in the release of lots, product recalls or spoilage. We will not be able to sell any lot that fails to satisfy release testing specifications.
 
If third parties do not manufacture our drug candidates or products in sufficient quantities and at an acceptable cost or in compliance with regulatory requirements and specifications, the development and commercialization of our drug candidates could be delayed, prevented or impaired.
 
     We currently rely on third parties to manufacture drug candidates that we require for pre-clinical and clinical development. In addition, we indicated in our response to the BARDA Smallpox RFP that we intend to manufacture ST-246® using contract manufacturers. Any significant delay in obtaining adequate supplies of our drug candidates could adversely affect our ability to develop or commercialize these drug candidates. We expect that we will rely on third parties for a portion of the manufacturing process for commercial supplies of drug candidates that we successfully develop. If our contract manufacturers are unable to scale-up production to generate enough materials for commercial launch, the success of those products may be jeopardized. Our current and anticipated future dependence upon others for the manufacture of our drug candidates may adversely affect our ability to develop drug candidates and commercialize any product that receives regulatory approval on a timely and competitive basis.
 
     We currently rely on third parties to demonstrate regulatory compliance and for quality assurance with respect to the drug candidates manufactured for us. We intend to continue to rely on these third parties for these purposes with respect to production of commercial supplies of drugs that we successfully develop. Manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and foreign agencies or their designees to ensure strict compliance with applicable regulations.
 
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     We cannot be certain that our present or future manufacturers will be able to comply with these regulations and other FDA regulatory requirements or similar regulatory requirements outside the U.S. While our contracts call for compliance with all applicable regulatory requirements, we do not control compliance by these manufacturers with these regulations and standards. If we or these third parties fail to comply with applicable regulations, sanctions could be imposed on us, which could significantly and adversely affect supplies of our drug candidates.
 
Our activities may involve hazardous materials, use of which may subject us to environmental regulatory liabilities.
 
     Our biopharmaceutical research and development sometimes 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 radioactive isotopes commonly used in pharmaceutical research, which are stored, used and disposed of in accordance with Nuclear Regulatory Commission regulations. We maintain liability insurance in the amount of approximately $5,000,000 and we believe this should be sufficient to cover any contingent loss.
 
     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.
 
Risks Related to Sales of Biodefense Products to the U.S. Government
 
Our business could be adversely affected by a negative audit by the U.S. government.
 
     U.S. government agencies such as the Defense Contract Audit Agency (the “DCAA”), routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.
 
     The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:
     In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.
 
We may be subject to sanction for past non-compliance with certain regulatory audit requirements.
 
     In June 2009 we became aware that we did not comply with certain Department of Health and Human Services (“DHHS”) regulations requiring the submission of yearly audited statements to the Office of the Inspector General (“OIG”) Office of Audit Services. On September 30, 2009, we submitted the required audits and related statements to the OIG Office of Audit Services. We have asked that the OIG not take any enforcement action in this matter. There can be no assurance that no enforcement action will be taken in this matter and, if taken, whether such enforcement action would have a material adverse impact on our operations.
 
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Laws and regulations affecting government contracts might make it more costly and difficult for us to successfully conduct our business.
 
     We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under these contracts. These laws and regulations affect how we do business with federal, state and local government agencies. Among the most significant government contracting regulations that affect our business are:
Risks Related to Regulatory Approvals
 
If we are not able to obtain required regulatory approvals, we will not be able to commercialize our drug candidates, and our ability to generate revenue will be materially impaired.
 
     Our drug candidates and the activities associated with their development and commercialization, including their testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain regulatory approval for a drug candidate will prevent us from commercializing the drug candidate. We have limited experience in preparing, filing and prosecuting the applications necessary to gain regulatory approvals and expect to rely on third party contract research organizations and consultants to assist us in this process. Securing FDA approval requires the submission to the FDA of extensive pre-clinical and clinical data, information about product manufacturing processes and inspection of facilities and supporting information in order to establish the drug candidate’s safety and efficacy. Our future products may not be effective, may be only moderately effective, or may prove to have significant side effects, toxicities, or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.
 
Failure to obtain regulatory approval in international jurisdictions could prevent us from marketing our products abroad.
 
     We intend to have our products marketed outside the United States. To market our products in the European Union and many other foreign jurisdictions, we may need to obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ from that required to obtain FDA approval.
 
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     The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA. We and our potential future collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.
 
The Fast Track designation for ST-246® may not actually lead to a faster development or regulatory review or approval process.
 
     We have obtained a “Fast Track” designation from the FDA for ST-246®. However, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw our Fast Track designation if the FDA believes that the designation is no longer supported by data from our clinical development program. Our Fast Track designation does not guarantee that we will qualify for or be able to take advantage of the FDA’s expedited review procedures or that any application that we may submit to the FDA for regulatory approval will be accepted for filing or ultimately approved.
 
Risks Related to Our Dependence on Third Parties
 
If third parties on whom we rely for clinical trials or certain animal trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business may suffer.
 
     We do not have the ability to independently conduct the clinical trials, and certain animal trials, required to obtain regulatory approval for our products. We depend on independent investigators, contract research organizations and other third party service providers to conduct trials of our drug candidates and expect to continue to do so. We rely heavily on these third parties for successful execution of our trials, but do not exercise day-to-day control over their activities. We are responsible for ensuring that each of our trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, for conducting and recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.
 
     Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule, or may not conduct our trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our drug candidates.
 
Risks Related to Our Intellectual Property
 
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 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 a nonexclusive license from Washington University with respect to one issued U.S. patent. We are also exclusive owner of six U.S. patents and eleven U.S. patent applications. We are also the exclusive owner of two U.S. provisional patent applications. The issued patents have varying lives.
 
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     We included a summary of our patent positions as of December 31, 2009 in Part I, Item 1 of this document.
 
     We also rely on 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.
 
If our technologies are alleged or found to infringe the patents or proprietary rights of others, we may be sued, we may have to pay damages or be barred from pursuing a technology, or we may have to license those rights to or from others on unfavorable terms. Even if we prevail, such litigation may be costly.
 
     Our commercial success will depend significantly on our ability to operate without infringing the patents or proprietary rights of third parties. Our technologies, or the technologies of third parties on which we may depend, may infringe the patents or proprietary rights of others. If there is an adverse outcome in any dispute concerning rights to these technologies, then we could be subject to significant liability, required to license disputed rights from or to other parties and/or required to cease using a technology necessary to carry out our research, development and commercialization activities. At present, we are unaware of any patent infringement claim relating to any of our products that is likely to be asserted.
 
     The costs to establish or defend against claims of infringement or interference with patents or other proprietary rights can be expensive and time-consuming, even if the outcome is favorable. An outcome of any patent or proprietary rights administrative proceeding or litigation that is unfavorable to us may have a material adverse effect on us. We could incur substantial costs if we are required to defend ourselves in suits brought by third parties 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 dispute resulting from claims based on patents and proprietary rights could result in a significant reduction in the coverage of the patents or proprietary rights owned, optioned by or licensed to us and limit our ability to obtain meaningful protection for our rights. If patents are issued to third parties that contain competitive or conflicting claims, we may be legally prohibited from researching, developing or commercializing potential products or be required to obtain licenses to these patents or to develop or obtain alternative technology. We may be legally prohibited from using technology owned by others, may not be able to obtain any license to the patents or technologies of third parties on acceptable terms, if at all, or may not be able to obtain or develop alternative technologies.
 
     In December 2006, PharmAthene, Inc. (“PharmAthene”) filed an action against us in the Delaware Court of Chancery captioned PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its amended complaint, PharmAthene asks the Court to order us to enter into a license agreement with PharmAthene with respect to ST-246®, as well as issue a declaration that we are obliged to execute such a license agreement, and award damages resulting from our supposed breach of that obligation. PharmAthene also alleges that we breached an obligation to negotiate such a license agreement in good faith, as well as seeks damages for promissory estoppel and unjust enrichment based on supposed information, capital and assistance that PharmAthene allegedly provided to us during the negotiation process. In January 2008, the Court of Chancery denied our motion to dismiss the original complaint, and discovery proceeded. In May 2009, PharmAthene amended its complaint with respect to its claim for breach of an obligation to negotiate in good faith, and we filed our answer to the amended complaint and counterclaim denying the new claim and asserting defenses.
 
     PharmAthene has submitted an expert report asserting several alternative theories of damages, including amounts in a wide range of up to one billion dollars. We believe that the expert’s damages analyses are flawed and methodologically unsound. We also continue to believe that we have meritorious defenses to the claims. No trial date has been set. It is not currently possible to estimate a range of loss, if any.
 
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     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. It is possible that 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.
 
Other Risks
 
We may have difficulty managing our growth.
 
     We might experience growth in the number of our employees and the scope of our operations. This potential future growth could place a significant strain on our management and operations. Our ability to manage this potential 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.
 
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Item 1B. Unresolved Staff Comments
 
     None.
 
Item 2. Properties
 
     Our headquarters are located in New York City and our research and development facilities are located in Corvallis, Oregon. In New York, we occupy approximately 1,800 square feet under an Office Service Agreement with an affiliate of a shareholder, that is cancelable upon 60 days notice. In Corvallis, we lease approximately 18,100 square feet under an amended lease agreement signed in January 2007, which expires in December 2011. Our facility in Oregon has been improved to meet the special requirements necessary for the operation of our research and development activities. In January 2010 we entered into a sublease agreement for 5,700 square feet of additional research facility in Corvallis, Oregon. In the opinion of the management, these facilities are sufficient to meet the current and anticipated future requirements of SIGA.
 
Item 3. Legal Proceedings
 
     In December 2006, PharmAthene, Inc. (“PharmAthene”) filed an action against us in the Delaware Court of Chancery captioned PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its amended complaint, PharmAthene asks the Court to order us to enter into a license agreement with PharmAthene with respect to ST-246®, as well as issue a declaration that we are obliged to execute such a license agreement, and award damages resulting from our supposed breach of that obligation. PharmAthene also alleges that we breached an obligation to negotiate such a license agreement in good faith, as well as seeks damages for promissory estoppel and unjust enrichment based on supposed information, capital and assistance that PharmAthene allegedly provided to us during the negotiation process. In January 2008, the Court of Chancery denied our motion to dismiss the original complaint, and discovery proceeded. In May 2009, PharmAthene amended its complaint with respect to its claim for breach of an obligation to negotiate in good faith, and we filed our answer to the amended complaint and counterclaim denying the new claim and asserting defenses.
 
     PharmAthene has submitted an expert report asserting several alternative theories of damages, including amounts in a wide range of up to one billion dollars. We believe that the expert’s damages analyses are flawed and methodologically unsound. We also continue to believe that we have meritorious defenses to the claims. No trial date has been set. It is not currently possible to estimate a range of loss, if any.
 
Item 4. Reserved
 
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PART II
 
Item 5. 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Price Range of Common Stock
 
     Our common stock trades under the symbol “SIGA”. Our common stock has been traded on the Nasdaq Global Market since September 3, 2009 and, prior to such date, had been traded on the Nasdaq Capital Market since September 9, 1997. Prior to that time there was no public market for our common stock. The following table sets forth, for the periods indicated, the high and low sales prices for the common stock, as reported on the Nasdaq Capital Market or Nasdaq Global Market, as applicable.
 
Price Range
2008 High       Low
First Quarter $ 3.27 $ 1.78
Second Quarter $ 3.91 $ 2.12
Third Quarter $ 4.19 $ 2.29
Fourth Quarter $ 3.80 $ 1.94
 
2009 High Low
First Quarter $ 5.86 $ 3.15
Second Quarter $ 8.88 $ 4.73
Third Quarter $ 8.63   $ 6.25
Fourth Quarter $     10.09 $      4.83

     The following line graph compares the cumulative total stockholder return through December 31, 2009, assuming reinvestment of dividends, by an investor who invested $100 on December 31, 2004 in each of (i) our common stock, (ii) the Nasdaq National Market-US; and (iii) the Nasdaq Pharmaceutical Index.
 
 
Value of Initial Investment       12/31/04       12/31/05       12/31/06       12/31/07       12/31/08       12/31/09
SIGA Technologies, Inc. $ 100.00 $ 57.23 $ 225.90 $ 185.54   $ 196.99   $ 349.40
NASDAQ Composite Index   $ 100.00   $ 101.37   $ 111.03   $ 121.92 $ 72.49 $ 104.31
NASDAQ Biotech Composite Index   $     100.00 $     102.84 $     103.89 $     108.65 $     94.93 $     109.77

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     As of February 23, 2010, the closing bid price of our common stock was $6.36 per share. There were 54 holders of record as of February 23, 2010. We believe that the number of beneficial owners of our common stock is substantially greater than the number of record holders, because a large portion of common stock is held in broker “street names”.
 
     We have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We are not under any restriction as to our present or future ability to pay dividends. We currently intend to retain any future earnings to finance the growth and development of our business.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
     The information required by this item concerning securities authorized for issuance under equity compensation plans is set forth in Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”.
 
Item 6. Selected Financial Data (in thousands, except share and per share data)
 
     The following table sets forth selected financial information derived from our audited consolidated financial statements as of and for the years ended December 31, 2009, 2008, 2007, 2006, and 2005.
 
The year
ended Selling, general Research and Patent
December 31,       Revenues       & administrative       development       preparation fees
2009 $        13,812 $        7,533 $        17,423 $        734
2008 $ 8,066 $ 4,608 $ 11,613 $ 582
2007 $ 6,699 $ 3,704 $ 9,943 $ 515
2006 $ 7,258 $ 4,624 $ 9,149 $ 295
2005 $ 8,477 $ 2,481 $ 8,295 $ 232

The year Weighted average
ended Net loss per share: shares outstanding:
December 31,       Operating loss       Net loss       basic & diluted       basic and diluted
2009 $        (11,879 ) $        (17,618 ) $ (0.47 ) 37,463,255
2008 $ (8,737 ) $ (8,599 ) $ (0.25 ) 34,732,625
2007 $ (7,463 ) $ (5,639 ) $ (0.17 ) 33,330,814
2006 $ (6,810 ) $ (9,899 ) $ (0.35 ) 28,200,130
2005 $ (2,532 ) $ (2,288 ) $ (0.09 ) 24,824,824

As of and for Total
the year ended Cash & cash Long term stockholders' Net cash used in
December 31,       Total assets       equivalents       obligations       equity       operating activities
2009 $ 25,915 $ 14,496 $ 6,398 $ 10,488 $                    (8,471 )
2008 $ 8,797 $ 2,322 $ 2,924 $ 1,555 $ (7,198 )
2007 $ 10,589 $ 6,832 $ 3,243 $ 5,228 $ (5,448 )
2006 $ 14,028 $ 10,640 $ 4,696 $ 7,282 $ (4,438 )
2005 $ 6,132 $ 1,772 $ 642 $ 3,231 $ (1,392 )

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
     The following discussion should be read in conjunction with our consolidated financial statements and notes to those statements and other financial information appearing elsewhere in this Annual Report. In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking information that involves risks and uncertainties.
 
Overview
 
     Since our inception on December 28, 1995, SIGA has pursued the research, development and commercialization of novel products for the prevention and treatment of serious infectious diseases, including products for use in defense against biological warfare agents such as smallpox and Arenaviruses. Our lead product, ST-246®, is an orally administered antiviral drug that targets orthopox viruses. In December 2006 the FDA granted Orphan Drug designation to ST-246® for the prevention and treatment of smallpox. In September 1, 2008, we were awarded a five-year, $55.0 million contract from the NIAID, to support the development of additional formulations and orthopox-related indications for ST-246, our lead orthopox drug candidate. In September 2008, we were awarded $20.0 million from the NIAID in supplemental funding to our existing $16.5 million contract, to accelerate process development related to large-scale manufacturing and packaging of ST-246® and commercial-scale validation. The term of the contract was extended through September 28, 2011. In May 2009, we submitted the BARDA Smallpox RFP, and, in June 2009, BARDA informed us that our response to the BARDA Smallpox RFP was deemed technically acceptable and in the competitive range. There can be no assurance that SIGA or any other company will receive an award pursuant to this RFP. Further, any award on this RFP would be subject to negotiation of final contract terms and specifications; thus, the final terms under any contract with BARDA may be materially different than those indicated in the RFP.
 
     Our anti-viral programs are designed to prevent or limit the replication of the viral pathogen. As a result of the success of our efforts to develop products for use against agents of biological warfare, we have not spent significant resources to further the development of our anti-infective technologies.
 
Critical Accounting Estimates
 
     The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our consolidated financial statements, which we discuss under the heading “Results of Operations” following this section of our Management’s Discussion and Analysis. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our most critical accounting estimates include the assessment of recoverability of goodwill, which could affect goodwill impairments; and the assessment of recoverability of long-lived assets, which primarily would affect operating income if  an impairment exists. Below, we discuss these policies further, as well as the estimates and judgments involved. Other key accounting policies, including revenue recognition, are less subjective and involve a lower degree of estimates and judgment.
 
Significant Accounting Policies
 
     The following is a brief discussion of the more significant accounting policies and methods used by us in the preparation of our consolidated financial statements. Note 2 of the Notes to the Consolidated Financial Statements includes a summary of all of the significant accounting policies.
 
Share-based Compensation
     The Company accounts for its stock-based compensation programs under the provisions Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 718 Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan (“employee stock purchases”) based on estimated fair values. ASC 718 requires companies to estimate the fair value of share-based awards on the grant date using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recorded as expense over the requisite periods in the Company’s consolidated statement of operations. SIGA calculates the fair value of options awarded under its Employee Stock Purchase Plan using the Black-Scholes model with weighted average assumptions for the expected volatility, risk-free interest rate, expected holding period, and dividend yield. It is reasonably likely that future assumptions may change, in which case the fair value of future option awards may exceed or fall short of historical calculated fair values.
 
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Fair value of financial instruments
     The carrying value of cash and cash equivalents, accounts receivables, short-term investments, accounts payable and accrued expenses approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilities under the provisions of FASB ASC 815 Derivatives and Hedging (“ASC 815”), are recorded at their fair market value as of each reporting period.
 
     The Company applies FASB ASC 820 Fair value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities that are required to be measured at fair value, and non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis.
 
     ASC 820 provides that the measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
     SIGA uses model-derived valuations where inputs are observable in active markets to determine the fair value of certain common stock warrants on a recurring basis and classify such warrants in Level 2. At December 31, 2009 and December 31, 2008, the fair value of such warrants was as follows:
 
December 31, December 31,
      2009       2008
Common stock warrants classified as current liabilities $        3,260,000 $ -
Common stock warrants classified as long term liabilities 6,398,216 2,923,532
       Total $ 9,658,216 $        2,923,532

     ASC 820-10 applies to non-financial assets and non-financial liabilities measured on a nonrecurring basis and was effective January 1, 2009. The adoption of this standard had no impact on the Company in 2009.
 
     As of December 31, 2009 the Company held approximately $5.0 million in United States Treasury Bills, classified as a Level 1 security. SIGA does not hold any Level 3 securities.
 
Revenue Recognition
     The Company recognizes revenue from contract research and development and research progress payments in accordance FASB ASC 605 Revenue Recognition, (“ASC 605”). In accordance with ASC 605, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is reasonably assured, contractual obligations have been satisfied and title and risk of loss have been transferred to the customer. The Company recognizes revenue from non-refundable up-front payments, not tied to achieving a specific performance milestone, over the period which the Company is obligated to perform services or based on the percentage of costs incurred to date, estimated costs to complete and total expected contract revenue. Payments for development activities are recognized as revenue is earned, over the period of effort. Substantive at-risk milestone payments, which are based on achieving a specific performance milestone, are recognized as revenue when the milestone is achieved and the related payment is due, providing there is no future service obligation associated with that milestone. In situations where the Company receives payment in advance of the performance of services, such amounts are deferred and recognized as revenue as the related services are performed.
 
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Goodwill
     Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.
 
     The Company evaluates goodwill for impairment annually, in the fourth quarter of each year. In addition, the Company would test goodwill for recoverability between annual evaluations whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Examples of such events could include a significant adverse change in legal matters, liquidity or in the business climate, an adverse action or assessment by a regulator or government organization, loss of key personnel, or new circumstances that would cause an expectation that it is more likely than not that we would sell or otherwise dispose of a reporting unit. Goodwill impairment is determined using a two-step approach in accordance with FASB ASC 350-20 Intangibles - Goodwill and Other – Goodwill. The impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. In 2009, the Company operated as one business and one reporting unit. Therefore, the goodwill impairment analysis was performed on the basis of the Company as a whole using the market capitalization of the Company as an estimate of its fair value. In the past, our market capitalization has been significantly in excess of the Company’s carrying value. It is reasonably likely that the future market capitalization of SIGA may exceed or fall short of our current market capitalization, in which case a different amount for potential impairment would result. The use of the discounted expected future cash flows to evaluate the fair value of the Company as a whole is will possibly produce different results than the Company’s market capitalization.
 
Cumulative Effect of Changes in Accounting Principles
     On January 1, 2009, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). In accordance with ASC 815-40, the cumulative effect of the change in accounting principle recorded by SIGA in connection with certain warrants to acquire shares of the Company’s common stock (see Note 3), was recognized by SIGA as an adjustment to the opening balance of retained earnings as summarized in the following table:
 
As reported on As adjusted on Effect of change in
      December 31, 2008       January 1, 2009       accounting principle
Common stock warrants $ - $ 2,710,000 $ 2,710,000
Accumulated deficit $ (70,605,553 ) $        (73,315,553 ) $               (2,710,000 )

Recent accounting pronouncements
     In September 2009, the FASB issued ASU 2009-13, Multiple Element Arrangements (“ASU 2009-13”). ASU 2009-13 addresses the determination of when the individual deliverables included in a multiple arrangement may be treated as separate units of accounting. ASU 2009-13 also modifies the manner in which the transaction consideration is allocated across separately identified deliverables and establishes definitions for determining fair value of elements in an arrangement. This standard must be adopted by us for new arrangements and material modifications to existing arrangements no later than January 1, 2011 with earlier adoption permitted. We are currently evaluating the impact, if any, that this standard update will have on our consolidated financial statements.
 
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Results of Operations
 
     The following table sets forth certain consolidated statements of income data as a percentage of net revenue for the periods indicated:
 
      2009       2008       2007
Revenue        100% 100% 100%
Selling, general and administrative 55% 57% 55%
Research and development 126% 144% 148%
Patent preparation fees 5% 7% 8%
Operating loss        86%        108%        111%

Years ended December 31, 2009, 2008, and 2007.
 
     Revenues from research and development contracts and grants for the years ended December 31, 2009 and 2008, were $13.8 million and $8.1 million, respectively. The increase of $5.7 million, or 71.2%, is mainly due to an increase of $4.2 million in revenue recognized from our existing program for the large-scale manufacturing and packaging of ST-246®. Revenue recognized from our $55 million contract with the NIH to support the development of additional formulations and orthopox-related indications of ST-246® increased by $1.5 million.
 
     Revenues from research and development contracts and grants for the years ended December 31, 2008 and 2007, were $8.1 million and $6.7 million, respectively. The increase of $1.4 million or 20.4% in revenue recorded for the year ended December 31, 2008 reflects an increase of $3.0 million in revenues recognized from grants and contracts with the NIH supporting our lead programs. Revenue recognized from our programs with the USAF was $38,000 and $1.9 million for the years ended December 31, 2008 and 2007, respectively. In 2008, we completed our two, one-year programs with the USAF.
 
     Selling, General and Administrative expenses (“SG&A”) for the years ended December 31, 2009 and 2008 were $7.5 million and $4.6 million, respectively, reflecting an increase of approximately $2.9 million or 63.5%. Higher SG&A expenses were mainly due to an increase of $204,000 in accounting services resulting from additional governmental audits, an increase of $998,000 in stock based compensation charges, a $71,000 increase in insurance premiums, an increase of $133,000 in foreign and public relations consulting, and an increase of $1.3 million in general corporate and litigation legal support.
 
     Selling, General and Administrative expenses for the years ended December 31, 2008 and 2007 were $4.6 million and $3.7 million, respectively. The increase of $900,000 or 24% is due to an increase of $456,000 in legal fees attributed to litigation support, an increase of $83,000 in insurance costs, an increase of $230,000 in non-cash compensation recorded in accordance with ASC 718, and an increase of $71,000 in business development costs incurred in the current period.
 
     Research and development (“R&D”) expenses were $17.4 million for the year ended December 31, 2009, an increase of $5.8 million or 50% from the $11.6 million incurred during the year ended December 31, 2008. Expenditures related to the manufacturing, packaging, and stability of ST-246® increased $3.3 million. Other costs related ST-246® as well as the development of our other lead drug candidates increased $1.2 million from the prior year. Employee compensation expenses increased $978,000 mainly due to the hiring of additional expert R&D and support personnel. As of December 31, 2009 and 2008, the Company had 49 and 36 full time R&D employees, respectively.
 
     Research and development (“R&D”) expenses for the years ended December 31, 2008 and 2007 were $11.6 million and $9.9 million, respectively. The increase of $1.7 million or 17% is mainly due to higher expenditures related to clinical and pre-clinical testing of our lead drug candidates, which increased $1.7 million from the prior year. Employee related expenses for the year ended December 31, 2008 increased $674,000 from the prior year, reflecting a transition to highly specialized workforce and an increase in non-cash stock based compensation expense. Travel expenses for the year ended December 31, 2008 increased $148,000 from the prior year. These increases were offset by a decline of $790,000 in depreciation and amortization mainly related to fully depreciated leasehold improvements and fully amortized intangible assets; and a decline of $324,000 in expenditures related to our agreements with the USAF, which were completed during 2008.
 
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     During the years ended December 31, 2009, 2008, and 2007, we spent $10.9 million, $5.4 million, and $3.2 million, respectively, on the development of ST-246®. During the year ended December 31, 2009, we spent $1.5 million on internal human resources dedicated to the drug’s development and $9.4 million mainly on packaging and manufacturing. During the year ended December 31, 2008, we spent $1.2 million on internal human resources dedicated to the drug’s development and $4.2 million mainly on clinical trials and manufacturing. For the year ended December 31, 2007, we spent $924,000 on internal human resources and $2.24 million mainly on manufacturing and clinical testing. From inception of the ST-246® development program to-date, we invested a total of $26.0 million in the program, of which $5.2 million supported internal human resources, and $20.8 million were used mainly for manufacturing, clinical and pre-clinical work. These resources reflect SIGA’s research and development expenses directly related to the program. They exclude additional expenditures such as the cost to acquire the program, patent costs, allocation of indirect expenses, and the value of other services received from the NIH and the DoD.
 
     During the years ended December 31, 2009, 2008, and 2007, we spent $384,000, $930,000, and $1.3 million, respectively, to support the development of ST-193, a drug candidate for Lassa fever virus, ST-294, a drug candidate for certain arenavirus pathogens, and other drug candidates for hemorrhagic fevers. During the year ended December 31, 2009, we invested $155,000 in internal human resources dedicated to the development of these drugs, and $228,000 mainly to support the testing of chemical compounds. During the year ended December 31, 2008, we invested $254,000 in internal human resources dedicated to the development of these drugs, and $676,000 mainly to support pre-clinical testing. For the year ended December 31, 2007, we spent $227,000 on internal human resources and $1.1 million mainly on pre-clinical testing. From inception of our programs to develop ST-193, ST-294, and other drug candidates for hemorrhagic fevers, to-date, we spent a total of $5.9 million related to the programs, of which $2.2 million and $3.7 million were expended on internal human resources and pre-clinical work, respectively. These resources reflect SIGA’s research and development expenses directly related to the programs. They exclude additional expenditures such as the cost to acquire the programs, patent costs, allocation of indirect expenses, and the value of other services received from the NIH and the DoD.
 
     The agreements with the USAF and US Army ended in the second quarter of 2008. For the years ended December 31, 2008, and 2007, we spent $102,000, and $1.3 million, respectively, in expenses related to our USAF and US Army Agreements. For the year ended December 31, 2008, we spent $77,000 on internal human resources and $26,000 for external R&D services. During the year ended December 31, 2007, we spent $910,000 on internal human resources and $372,000 for external R&D services. Costs related to our work on the USAF Agreements from September 2005 to date were $3.4 million, of which we spent $1.8 million and $1.6 million on internal human resources and external R&D services, respectively. These resources reflect SIGA’s research and development expenses directly related to these agreements. They exclude additional expenditures such as patent costs and allocation of indirect expenses.
 
     The majority of our product programs are in the early stage of development. As a result, we cannot make reasonable estimates of the potential cost for most of our programs to be completed or the time it will take to complete the programs. Our lead product, ST-246, is an orally administered anti-viral drug that targets the smallpox virus. In December 2005, the FDA accepted our IND application for ST-246® and granted it Fast-Track status. In December 2006, the FDA granted Orphan Drug designation to ST-246, for the prevention as well as the treatment of smallpox. We expect that costs to complete the development of ST-246® for adult therapeutic use will approximate $20 million to $25 million, that the development could be completed in 18 months to 36 months, and that a New Drug Application could be filed as the development process is completed. There is a high risk of non-completion of any program, including ST-246, because of the lead time to program completion, scientific issues that may arise and uncertainty of the costs. Net cash inflow from any product developed from our programs is at least one to three years away. However, we could receive additional grants, contracts or technology licenses in the short-term. The potential cash and timing is not known and we cannot be certain if they will ever occur.
 
     The risk of failure to complete any program is high, as each, other than our smallpox program, is in the relatively early stage of development. Products for the biological warfare defense market, such as the ST-246® smallpox anti-viral, could generate revenues in one to three years. We believe the products directed toward this market are on schedule. We expect the future research and development cost of our biological warfare defense programs to increase as potential products enter animal studies and safety testing, including human safety trials. Funds for future development will be partially paid for by NIH contracts and grants, additional government funding and from future financing. If we are unable to obtain additional federal grants and contracts or funding in the required amounts, the development timeline for these products would slow or possibly be suspended. Delay or suspension of any of our programs could have an adverse impact on our ability to raise funds in the future, enter into collaborations with corporate partners or obtain additional federal funding from contracts or grants.
 
34
 

     Patent preparation expenses for the years ended December 31, 2009 and 2008 were $734,000 and $582,000, respectively. The increase of $153,000 or 26.2% is mainly related to our efforts to protect our lead drug candidates in expanded geographic territories.
 
     Patent preparation expenses for the years ended December 31, 2008 and 2007 were $582,000 and $515,000, respectively. The increase of $66,000 or $12.9% is mainly due to additional filings related to our lead drug candidates.
 
     Total operating loss for the years ended December 31, 2009 and 2008 was $11.9 million and $8.7 million, respectively. The increase of $3.2 million or 36.0% in net operating loss is a result of the continued expansion of SIGA’s R&D and specialized personnel, the increase of $1.1 million in non-cash stock based compensation, and an increase of $1.3 million in general corporate and litigation related legal fees.
 
     Total operating loss for the years ended December 31, 2008 and 2007 was $8.7 million and $7.5 million, respectively. The increase of $1.2 million or 17% in net operating loss relates mainly to the growth in SIGA’s operations, including the transition to highly specialized R&D workforce, manufacturing of our lead drug candidate for testing, and clinical and pre-clinical testing of our leading programs. Our net operating loss also increased as a result of additional general corporate and litigation related legal fees.
 
     Changes in the fair value of certain warrants to acquire common stock are recorded as gains or losses. For the years ended December 31, 2009, 2008, and 2007, we recorded a loss of $5.7 million, a gain of $43,000, and a gain of $1.4 million, respectively, reflecting changes in the fair market value of warrants and rights to purchase common stock during the respective years. The warrants and rights to purchase common stock of SIGA were recorded at fair market value and classified as liabilities.
 
     Other income for the years ended December 31, 2009, 2008, and 2007, was $1,000, $94,000, and $394,000, respectively. Other income in 2009, 2008, and 2007 represented interest income on our cash and cash equivalents. Interest income declined as a result of lower cash balances and a decline in interest rates.
 
Liquidity and Capital Resources
 
     On December 31, 2009, we had $14.5 million in cash and cash equivalents and $5.0 million in short-term investments. During the year ended December 31, 2009, we received net proceeds of $7.4 million from exercises of warrants and options to purchase shares of the Company’s Common stock and net proceeds of $18.6 million, after offering related expenses, from the sale of 2,725,339 shares of common stock at $7.35 per share.
 
     On September 23, 2009, the Company was awarded a two-year, $1.7 million grant from the NIAID of the NIH, to support the development of broad spectrum, small-molecule inhibitors of bunyaviruses. The grant was awarded under the Recovery Act.
 
     In September 2009, SIGA received a three-year, $3.0 million Phase II grant from the NIH to fund the continued development of ST-246® treatment of smallpox vaccine-related adverse events.
 
     Operating activities
     Net cash used in operations during the years ended December 31, 2009, 2008, and 2007 was $8.5 million, $7.2 million and $5.4 million, respectively. The increase in net cash used in operations is mainly due to the use of additional cash to support the growth in SIGA’s operations, including the transition to a highly specialized R&D workforce, funds used to support general corporate and litigation related legal fees, the stability, packaging, and manufacturing of ST-246®, and clinical and pre-clinical testing of our leading programs.
 
35
 

     On December 31, 2009 and 2008, our accounts receivable balance was $2.4 million and $2.0 million, respectively. The increase in our account receivable balances reflects the expanded work performed during November and December of 2009 under our two contracts with the NIAID. Funds outstanding under these contracts were collected during January and February, 2010. Our accounts payable and accrued expenses balance was $4.2 million and $3.0 million on December 31, 2009 and 2008, respectively. The increase of $1.2 million in our accounts payable and accrued expenses balance mainly reflects the expanded work performed under our two contracts with the NIAID in November and December, 2009.
 
     Investing activities
     Capital expenditures during the years ended December 31, 2009, 2008, and 2007 were approximately $340,000 for each of 2009 and 2008, and $1.2 million in 2007. During the year ended December 31, 2009, we invested $5.0 million in U.S. Treasury bills that mature in April 2010.
 
     Financing activities
     Cash provided by financing activities was $26.0 million, $3.0 million, and $2.9 million during the years ended December 31, 2009, 2008, and 2007, respectively. During the years ended December 31, 2009 and 2008, we received net proceeds of $7.4 and $3.2 million, respectively, from exercises of options and warrants to purchase common stock.
 
           In December 2009 we received net proceeds of $18.6 million from the sale of 2,725,339 shares of common stock, par value $0.0001 per share, for $7.35 per share, pursuant to subscription agreements with the investors who participated in the offering.
 
     Other
     On June 19, 2008, we entered into a letter agreement (the “Letter Agreement”), with MacAndrews & Forbes, LLC (“M&F”), a related party, for M&F’s commitment to invest (“the Investment Commitment”), at SIGA’s discretion, up to $8 million over a one-year period (the “Investment Period”) in exchange for (i) SIGA common stock at per share price equal to the lesser of (A) $3.06 or (B) the average of the volume-weighted average price per share for the 5 trading days immediately preceding each funding date, and (ii) warrants to purchase 40% of the number of SIGA shares acquired by M&F, exercisable at 115% of the common stock purchase price on such funding date (the “Consideration Warrants”). The Consideration Warrants will be exercisable for up to four years following the issuance of such warrants. M&F has the option, during the Investment Period, to invest in the Company under the same investment terms (the “Investment Option”).
 
     On April 29, 2009, SIGA and M&F entered into a letter agreement (the "Extension Agreement") extending the Investment Period of the Company’s Letter Agreement with M&F through June 19, 2010 and increasing the number of draws pursuant to the Investment Commitment and the Investment Option to no more than six. On April 30, 2009, we issued M&F 490,196 shares of common stock and 196,078 warrants to acquire common stock in exchange for total proceeds of $1.5 million. The warrants are exercisable until April 30, 2013, for an exercise price of $3.519 per share. On September 17, 2009 the Company issued M&F 326,797 shares of common stock and 130,719 warrants to acquire common stock in exchange for total proceeds of $1.0 million. The warrants are exercisable until September 17, 2013, for an exercise price of $3.519 per share. As of December 31, 2009, $5.5 million of the commitment remains outstanding.
 
     We have incurred cumulative net losses and expect to incur additional losses to perform further research and development activities. We do not have commercial products and have limited capital resources. We will need additional funds to complete the development of our products. Our plans with regard to these matters include continued development of our products as well as seeking additional capital through a combination of collaborative agreements, strategic alliances, research grants, and future equity and debt financing. Although we continue to pursue these plans, there is no assurance that we will be successful in obtaining future financing on commercially reasonable terms or that we will be able to secure funding from anticipated government contracts and grants.
 
36
 

     We believe that our existing funds combined with cash flows primarily from continuing government grants and contracts will be sufficient to support our operations for at least the next 12 months. The success of the Company is dependent upon commercializing its research and development programs and the Company’s ability to obtain adequate future financing. If the Company is unable to raise adequate capital and/or achieve profitable operations, future operations might need to be scaled back or discontinued. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets and liabilities that might result from the outcome of these uncertainties.
 
     Our technical operations are based in our research facility in Corvallis, Oregon. We continue to seek to fund a major portion of our ongoing antiviral, antibiotic and vaccine programs through a combination of government grants, contracts and strategic alliances. While we have had success in obtaining strategic alliances, contracts and grants, there is no assurance that we will continue to be successful in obtaining funds from these sources. Until additional relationships are established, we expect to continue to incur significant research and development costs and costs associated with the manufacturing of product for use in clinical trials and pre-clinical testing. It is expected that general and administrative costs, including patent and regulatory costs, necessary to support clinical trials and research and development will continue to be significant in the future. We expect to incur operating losses for the foreseeable future and there can be no assurance that we will ever achieve profitable operations.
 
37
 

Contractual Obligations, Commercial Commitments and Purchase Obligations
 
     As of December 31, 2009, our purchase obligations are not material. We lease certain facilities and office space under operating leases. Our obligations under such leases do not extend past December 31, 2011. Minimum future rental commitments under operating leases having non-cancelable lease terms in excess of one year are as follows:
 
Year ended December 31,       Lease obligations
              2010 562,808
              2011     573,077
Total $ 1,135,885

Off-Balance Sheet Arrangements
 
     SIGA does not have any off-balance sheet arrangements.
 
Subsequent Events
 
     The Company implemented FASB ASC 855 Subsequent Events (“ASC 855”) on June 15, 2009. This standard establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The adoption of ASC 855 did not impact the Company’s financial position or results of operations. The Company evaluated all events and transactions that occurred after December 31, 2009. During this period, the Company did not have any material recognizable or reportable subsequent events.
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 
     Our investment portfolio includes cash, cash equivalents and short-term investments. Our main investment objectives are the preservation of investment capital and the maximization of after-tax returns on our investment portfolio. We believe that our investment policy is conservative, both in the duration of our investments and the credit quality of the investments we hold. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposure to interest rate changes. Accordingly, we believe that, while the securities we hold are subject to changes in the financial standing of the issuer of such securities and our interest income is sensitive to changes in the general level of U.S. interest rates, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.
 
38
 

Item 8. Financial Statements and Supplementary Data
 
Index to the Consolidated Financial Statements
 
Report of Independent Registered Public Accounting Firm       40
 
Consolidated Balance Sheets as of December 31, 2009 and 2008 41
 
Consolidated Statements of Operations for the years ended December 31, 2009, 2008, and 2007 42
 
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2009, 2008 and 2007 43
 
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007 44
 
Notes to Consolidated Financial Statements 45

39
 

Report of Independent Registered Public Accounting Firm
 
To the Board of Directors and Stockholders of SIGA Technologies, Inc.:
 
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of SIGA Technologies, Inc. and its subsidiary at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
 
As discussed in Note 2 to the consolidated financial statements, effective January 1, 2009, the Company changed the way certain financial instruments that are settled in the Company's common stock are accounted for.
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
/s/PRICEWATERHOUSECOOPERS LLP
 
New York, New York
March 09, 2010
 
40
 

SIGA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2009 and 2008
 
December 31, December 31,
      2009       2008
ASSETS
Current assets
       Cash and cash equivalents $ 14,496,313 $ 2,321,519
       Short term investments 4,999,300 -
       Accounts receivable 2,405,861 1,959,608
       Deferred transaction costs - 581,358
       Prepaid expenses 1,585,072 1,392,607
              Total current assets 23,486,546 6,255,092
 
       Property, plant and equipment, net 1,225,656 1,360,018
       Goodwill 898,334 898,334
       Other assets 304,751 283,856
       Total assets $ 25,915,287 $ 8,797,300
 
LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities
       Accounts payable $ 3,458,013 $ 1,806,073
       Accrued expenses and other 740,333 1,210,496
       Deferred revenue 1,570,234 1,302,600
       Common stock warrants 3,260,000 -
              Total current liabilities 9,028,580 4,319,169
 
Common stock warrants 6,398,216 2,923,532
              Total liabilities 15,426,796 7,242,701
 
Stockholders' equity
       Common stock ($.0001 par value, 100,000,000 shares authorized,
       43,061,635 and 35,383,720 issued and outstanding at December 31, 2009
              and December 31, 2008, respectively) 4,306 3,538
       Additional paid-in capital 101,417,677 72,156,614
       Accumulated deficit (See Note 2)        (90,933,492 )        (70,605,553 )
              Total stockholders' equity 10,488,491 1,554,599
              Total liabilities and stockholders' equity $ 25,915,287 $ 8,797,300

The accompanying notes are an integral part of these financial statements.
 
41
 

SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2009, 2008 and 2007
 
      2009       2008       2007
Revenues
       Research and development $ 13,811,858 $ 8,065,618 $ 6,698,717
 
Operating expenses
       Selling, general and administrative 7,533,167 4,608,089 3,704,058
       Research and development 17,423,453 11,612,892 9,942,503
       Patent preparation fees 734,165 581,548 515,263
              Total operating expenses 25,690,785 16,802,529 14,161,824
 
              Operating loss        (11,878,927 )        (8,736,911 )        (7,463,107 )
 
Decrease (increase) in fair value of common
       stock rights and common stock warrants (5,740,449 ) 43,482 1,430,301
Other income (expense), net 1,437 94,052 394,249
              Net loss $ (17,617,939 ) $ (8,599,377 ) $ (5,638,557 )
 
Weighted average shares outstanding: basic and diluted 37,463,255 34,732,625 33,330,814
Net loss per share: basic and diluted $ (0.47 ) $ (0.25 ) $ (0.17 )

The accompanying notes are an integral part of these financial statements.
 
42
 

SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2009, 2008 and 2007
 
Total
Common Stock Additional Accumulated Stockholders'
    Shares     Amount     Paid-in Capital     Deficit     Equity
       Balance at January 1, 2007 32,452,210 $ 3,245 $ 63,646,224 $ (56,367,619 ) $ 7,281,850
 
Issuance of common stock upon exercise of stock
       options and warrants 1,485,339 149 3,013,841 3,013,990
Stock based compensation 570,922 570,922
Net loss (5,638,557 ) (5,638,557 )
       Balance at December 31, 2007 33,937,549 $ 3,394 $ 67,230,987 $ (62,006,176 ) $ 5,228,205
Issuance of common stock upon exercise of stock
       options and warrants 1,446,171 144 3,186,220 3,186,364
Stock based compensation 1,041,293 1,041,293
Fair value of warrants issued for financing commitment 422,331 422,331
Fair value of exercised common stock warrants 275,783 275,783
Net loss (8,599,377 ) (8,599,377 )
       Balance at December 31, 2008 35,383,720 $ 3,538 $ 72,156,614 $ (70,605,553 ) $ 1,554,599
Issuance of common stock upon exercise of stock
       options and warrants 4,952,576 495 7,419,737 7,420,232
Net proceeds from the issuance of 2,725,339 shares -
       of common stock ($7.35 per share) 2,725,339 273 18,565,147 18,565,420
Stock based compensation 2,141,772 2,141,772
Fair value of exercised common stock warrants 1,715,765 1,715,765
 
Recognition of deferred transaction costs (581,358 ) (581,358 )
Cumulative Effect of Accounting Change (2,710,000 ) (2,710,000 )
Net loss (17,617,939 )      (17,617,939 )
       Balance at December 31, 2009 43,061,635      4,306      101,417,677      (90,933,492 ) 10,488,491
                                   
The accompanying notes are an integral part of these financial statements.
 
43
 

SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2009, 2008 and 2007
 
2009          2008          2007
Cash flows from operating activities:
Net loss $         (17,617,939 ) $         (8,599,377 ) $         (5,638,557 )
Adjustments to reconcile net loss to net
cash used in operating activities:
         Depreciation 475,091 459,882 1,083,705
         Amortization of intangible assets - - 165,243
         (Increase) decrease in fair value of rights and warrants 5,740,449 (43,482 ) (1,430,301 )
         Stock based compensation 2,141,772 1,041,293 570,922
         Changes in assets and liabilities:
                  Accounts receivable (446,253 ) (973,119 ) (369,457 )
                  Prepaid expenses (192,465 ) (1,262,492 ) 10,917
                  Other assets (20,895 ) (22,090 ) (15,565 )
                  Deferred revenue 267,634 1,302,600 -
                  Accounts payable and accrued expenses 1,181,777 898,899 175,260  
                  Net cash used in operating activities (8,470,829 ) (7,197,886 ) (5,447,833 )
Cash flows from investing activities:
         Capital expenditures (340,729 ) (340,222 ) (1,243,068 )
         Purchases of short term investments (4,999,300 ) - -
                  Net cash used in investing activities (5,340,029 ) (340,222 ) (1,243,068 )
Cash flows from financing activities:  
         Net proceeds from exercise of warrants and options 7,420,232 3,186,364 3,013,990
         Net proceeds from the sale of 2,725,339 shares
                  of common stock ($7.35 per share) 18,565,420 -   -
         Deferred transaction costs - (159,027 ) -
         Repayment of notes payable - -   (130,329 )
                  Net cash provided by financing activities   25,985,652   3,027,337 2,883,661
Net (decrease) increase in cash and cash equivalents 12,174,794 (4,510,771 ) (3,807,240 )
Cash and cash equivalents at beginning of period 2,321,519   6,832,290 10,639,530
Cash and cash equivalents at end of period $ 14,496,313   $ 2,321,519 $ 6,832,290
  
Cash paid for interest on notes payable $  - $ - $ 10,192  

The accompanying notes are an integral part of these financial statements.
 
44
 

SIGA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1. Organization and Basis of Presentation
 
Organization
     SIGA Technologies, Inc. (“SIGA” or the “Company”) is a bio-defense company engaged in the discovery, development and commercialization of products for use in defense against biological warfare agents such as smallpox and arenaviruses. The Company is also engaged in the discovery and development of other novel anti-infectives, vaccines, and antibiotics for the prevention and treatment of serious infectious diseases. The Company’s anti-viral programs are designed to prevent or limit the replication of viral pathogens. SIGA’s anti-infectives programs target the increasingly serious problem of drug resistant bacteria and emerging pathogens.
 
Basis of presentation
     The accompanying consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred cumulative net losses and expects to incur additional losses to perform further research and development activities. The Company does not have commercial products and has limited capital resources. Management’s plans with regard to these matters include continued development of its products as well as seeking additional capital through a combination of collaborative agreements, strategic alliances, research grants, and future equity and debt financing. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining future financing on commercially reasonable terms or that the Company will be able to secure funding from anticipated government contracts and grants.
 
     Management believes that existing funds combined with cash flows primarily from continuing government grants and contracts will be sufficient to support its operations for at least 12 months. The success of the Company is dependent upon commercializing its research and development programs and the Company’s ability to obtain adequate future financing. If the Company is unable to raise adequate capital and/or achieve profitable operations, future operations might need to be scaled back or discontinued. The financial statements do not include any adjustments relating to the recoverability of the carrying amount of recorded assets and liabilities that might result from the outcome of these uncertainties.
 
2. Summary of Significant Accounting Policies
 
Use of Estimates 
     The consolidated financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the United States of America. Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the period reported. These estimates include the realization of deferred tax assets, useful lives and impairment of goodwill, and tangible and intangible assets, and the value of options and warrants granted or issued by the Company. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary. Actual results could differ from these estimates.
 
Cumulative Effect of Changes in Accounting Principles 
     On January 1, 2009, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”). In accordance with ASC 815-40, the cumulative effect of the change in accounting principle recorded by SIGA in connection with certain warrants to acquire shares of the Company’s common stock (see Note 3), was recognized by SIGA as an adjustment to the opening balance of accumulated deficit as summarized in the following table:
 
As reported on As adjusted on Effect of change in
December 31, 2008        January 1, 2009        accounting principle
Common stock warrants $       -   $       2,710,000 $       2,710,000
Accumulated deficit $ (70,605,553 ) $ (73,315,553 )   $       (2,710,000 )
 
45
 

Cash equivalents and short-term investments
     Cash and cash equivalents consist primarily of cash in banks and highly liquid investments with original maturities of 90 days or less.
 
     Highly liquid investments with maturities greater than 90 days and less than one year are classified as short-term investments. Such investments are generally money market funds, bank certificates of deposit, and U.S. Treasury bills.
 
     As of December 31, 2009 the Company’s short-term investments consisted of approximately $5.0 million invested in United States Treasury Bills with a maturity date of April 1, 2010. The Company classified this investment as available for sale. As of December 31, 2009 the unrealized gain relating to this investment was immaterial.
 
Concentration of credit risk
     The Company has cash in bank accounts that exceed the Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses on its cash accounts. No allowance has been provided for potential credit losses because management believes that any such losses would be minimal. The Company’s accounts payable consist of trade payables due to creditors.
 
Property, Plant and Equipment
     Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line method over the estimated useful lives of the various asset classes. Estimated lives are 5 years for laboratory equipment; 3 years for computer equipment; 7 years for furniture and fixtures; and the life of the lease for leasehold improvements. Maintenance, repairs and minor replacements are charged to expense as incurred. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the Balance Sheet and any gain or loss is reflected in the Statement of Operations. For the years ended December 31, 2009 and 2008 accumulated depreciation was $4.5 million and $4.1 million, respectively.
 
Revenue Recognition
     The Company recognizes revenue from contract research and development and research payments in accordance with FASB ASC 605 Revenue Recognition (“ASC 605”). In accordance with ASC 605, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, collectability is reasonably assured, contractual obligations have been satisfied and title and risk of loss have been transferred to the customer. The Company recognizes revenue from non-refundable up-front payments, not tied to achieving a specific performance milestone, over the period which the Company is obligated to perform services or based on the percentage of costs incurred to date, estimated costs to complete and total expected contract revenue. Payments for development activities are recognized as revenue as earned, over the period of effort. Substantive at-risk milestone payments, which are based on achieving a specific performance milestone, are recognized as revenue when the milestone is achieved and the related payment is due, providing there is no future service obligation associated with that milestone. In situations in which the Company receives payment in advance of the performance of services, such amounts are deferred and recognized as revenue as the related services are performed.
 
     For the years ended December 31, 2009, 2008, and 2007, revenues from National Institutes of Health (“NIH”) contracts and grants was 100%, 99.5%, and 71%, respectively, of total revenues recognized by the Company.
 
Accounts Receivable
     Accounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2009 and 2008, 100% and 92%, respectively, of accounts receivables represented receivables from NIH. An allowance for doubtful accounts is based on specific analysis of the receivables. At December 31, 2009, 2008, and 2007, the Company had no allowance for doubtful accounts.
 
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Research and development
     Research and development expenses include costs directly attributable to the conduct of research and development programs, including employee related costs, materials, supplies, depreciation on and maintenance of research equipment, the cost of services provided by outside contractors, and facility costs, such as rent, utilities, and general support services. All costs associated with research and development are expensed as incurred. Costs related to the acquisition of technology rights, for which development work is still in process, and that have no alternative future uses, are expensed as incurred.
 
Goodwill
     Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired.
 
     The Company evaluates goodwill for impairment annually, in the fourth quarter of each year. In addition, the Company would test goodwill for recoverability between annual evaluations whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Examples of such events could include a significant adverse change in legal matters, liquidity or in the business climate, an adverse action or assessment by a regulator or government organization, loss of key personnel, or new circumstances that would cause an expectation that it is more likely than not that we would sell or otherwise dispose of a reporting unit. Goodwill impairment is determined using a two-step approach in accordance with FASB ASC 350-20 Intangibles - Goodwill and Other – Goodwill. The impairment review process compares the fair value of the reporting unit in which goodwill resides to its carrying value. The Company operates as one business and one reporting unit. Therefore, the goodwill impairment analysis was performed on the basis of the Company as a whole using the market capitalization of the Company as an estimate of its fair value.
 
Income taxes
     Income taxes are accounted for under the asset and liability method prescribed by FASB ASC 740 Income Taxes (“ASC 740”). Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or the entire deferred tax asset will not be realized.
 
     The Company applies the provisions of ASC 740 which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return.
 
     The Company has no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2009. As of December 31, 2009, the only tax jurisdiction to which the Company is subject is the United States. Open tax years relate to years in which unused net operating losses were generated. Thus, the Company’s open tax years extend back to 1995. In the event that the Company concludes that it is subject to interest and/or penalties arising from uncertain tax positions, the Company will present interest and penalties as a component of income taxes. No amounts of interest or penalties were recognized in the Company’s Consolidated Financial Statements as of December 31, 2009 and 2008, and for each of the years in the three year period ended December 31, 2009.
 
Net loss per common share
     The Company computes, presents and discloses earnings per share in accordance with ASC 260 Earnings Per Share (“EPS”) which specifies the computation, presentation and disclosure requirements for earnings per share of entities with publicly held common stock or potential common stock. The statement defines two earnings per share calculations, basic and diluted. The objective of basic EPS is to measure the performance of an entity over the reporting period by dividing income (loss) by the weighted average shares outstanding. The objective of diluted EPS is consistent with that of basic EPS, that is to measure the performance of an entity over the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period. The calculation of diluted EPS is similar to basic EPS except the denominator is increased for the conversion of potential common shares unless the impact of such common shares is anti-dilutive.
 
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     The Company incurred losses for the years ended December 31, 2009, 2008, and 2007, and as a result, certain equity instruments are excluded from the calculation of diluted loss per share. At December 31, 2009, 2008, and 2007, outstanding options to purchase 6,249,917, 7,696,054, and 8,159,768, shares, respectively, of the Company’s common stock with exercise prices ranging from $0.94 to $9.32 have been excluded from the computation of diluted loss per share as the effect of such shares is anti-dilutive. At December 31, 2009, 2008, and 2007, outstanding warrants to purchase 4,301,752, 6,825,567, and 8,262,377, shares, respectively, of the Company’s common stock, with exercise prices ranging from $1.18 to $4.99 have been excluded from the computation of diluted loss per share as they are anti-dilutive.
 
Fair value of financial instruments
 
     The carrying value of cash and cash equivalents, accounts payable and accrued expenses approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilities under the provisions of FASB ASC 815 Derivatives and Hedging (“ASC 815”), are recorded at their fair market value as of each reporting period.
 
     The Company applies FASB ASC 820 Fair value Measurements and Disclosures (“ASC 820”) for financial assets and liabilities that are required to be measured at fair value, and non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis.
 
     ASC 820 provides that the measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
     SIGA uses model-derived valuations where inputs are observable in active markets to determine the fair value of certain common stock warrants on a recurring basis and classify such warrants in Level 2. At December 31, 2009 and December 31, 2008, the fair value of such warrants was as follows:
 
  December 31,          December 31,
  2009 2008
Common stock warrants classified as current liabilities $         3,260,000   $         -
Common stock warrants classified as long term liabilities   6,398,216 2,923,532
         Total $ 9,658,216 $ 2,923,532

     ASC 820 applies to non-financial assets and non-financial liabilities measured on a nonrecurring basis and was effective January 1, 2009. The adoption of this standard had no impact on the Company in 2009.
 
     As of December 31, 2009, the Company held approximately $5.0 million in United States Treasury Bills, classified as a Level 1 security. SIGA does not hold any Level 3 securities.
 
Share-based Compensation
     The Company accounts for its stock-based compensation programs under the provisions of FASB ASC 718 Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to the Employee Stock Purchase Plan (“employee stock purchases”) based on estimated fair values. ASC 718 requires companies to estimate the fair value of share-based awards on the grant date using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recorded as expense over the requisite service periods in the Company’s consolidated statement of operations.
 
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Segment information
     The Company is managed and operated as one business. The entire business is managed by a single management team that reports to the chief executive officer. The Company does not operate separate lines of business or separate business entities with respect to any of its product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product areas or by location and only has one reportable segment as defined by ASC 280 - Segment Reporting.
 
Recent accounting pronouncements
     In September 2009, the FASB issued ASU 2009-13, Multiple Element Arrangements (“ASU 2009-13”). ASU 2009-13 addresses the determination of when the individual deliverables included in a multiple arrangement may be treated as separate units of accounting. ASU 2009-13 also modifies the manner in which the transaction consideration is allocated across separately identified deliverables and establishes definitions for determining fair value of elements in an arrangement. This standard must be adopted by us for new arrangements and material modifications to existing arrangements no later than January 1, 2011 with earlier adoption permitted. We are currently evaluating the impact, if any, that this standard update will have on our consolidated financial statements.
 
3. Research Agreements
 
     On September 23, 2009, the Company was awarded a two-year, $1.7 million grant from the National Institute of Allergy and Infectious Diseases (“NIAID”) of the NIH, to support the development of broad spectrum, small-molecule inhibitors of bunyaviruses. The grant was awarded under the American Recovery and Reinvestment Act of 2009.
 
     In September 2009, SIGA received a three-year, $3.0 million Phase II grant from the NIH to fund the continued development of ST-246® treatment of smallpox vaccine-related adverse events.
 
     Effective September 1, 2008, the Company was awarded a five-year, $55.0 million contract from the NIAID to support the development of additional formulations and smallpox-related indications for ST-246, the Company’s lead smallpox drug candidate.
 
     In September 2008, SIGA was awarded $20.0 million from the NIAID in supplemental funding to the Company’s existing $16.5 million contract, to accelerate process development related to large-scale manufacturing and packaging of ST-246® and commercial-scale validation. The term of the contract was extended through September 28, 2011. On December 31, 2008, the Company’s prepaid expenses included a deposit of $1.25 million paid to a third party for the manufacturing of ST-246® for testing. In connection with the deposit, and the receipt of reimbursement from the NIAID for such deposit, the Company also recorded the corresponding deferred revenue. The amount recorded as prepaid expense will be recognized as operating expense as the related manufacturing takes place, and revenue will be recognized over the same period.
 
     In September 2008, SIGA received a two-year, $1.0 million Phase I grant from the NIH to fund lead optimization and animal efficacy trials for the Company’s Dengue antiviral program.
 
     In September 2007, we received a two-year grant for a total of approximately $600,000 supporting our development of ST-246® treatment of smallpox vaccine-related adverse events. In July 2007, we were awarded a two-year grant for a total of $530,000 to support our Strep program.
 
4. Stockholders’ Equity
 
     On December 31, 2009, the Company's authorized share capital consisted of 110,000,000 shares, of which 100,000,000 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.
 
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2009 Financing
     On December 9, 2009, the Company entered into Subscription Agreements for the sale of 2,725,339 shares of the Company’s common stock, par value $0.0001 per share, at a purchase price of $7.35 per share. Net proceeds to the Company were approximately $18.6 million.
 
2008 Financing
     On June 19, 2008, SIGA entered into a letter agreement (the “Letter Agreement”), with MacAndrews & Forbes, LLC (“M&F”), a related party, for M&F’s commitment to invest (the “Investment Commitment”), at SIGA’s discretion, up to $8 million over a one-year period (the “Investment Period”) in exchange for (i) SIGA common stock at per share price equal to the lesser of (A) $3.06 or (B) the average of the volume-weighted average price per share for the 5 trading days immediately preceding each funding date, and (ii) warrants to purchase 40% of the number of SIGA shares acquired by M&F, exercisable at 115% of the common stock purchase price on such funding date (the “Consideration Warrants”). The Consideration Warrants will be exercisable for up to 4 years following the issuance of such warrants. M&F has the option, during the Investment Period, to invest in the Company under the same investment terms (the “Investment Option”).
 
     On April 29, 2009, SIGA and M&F entered into a letter agreement (the “Extension Agreement”) extending the Investment Period of the Company’s Letter Agreement with M&F through June 19, 2010 and increasing the number of draws pursuant to the Investment Commitment and the Investment Option to no more than six. On April 30, 2009 the Company issued M&F 490,196 shares of common stock and 196,078 warrants to acquire common stock in exchange for total proceeds of $1.5 million. The warrants are exercisable until April 30, 2013, for an exercise price of $3.519 per share. On September 17, 2009 the Company issued M&F 326,797 shares of common stock and 130,719 warrants to acquire common stock in exchange for total proceeds of $1.0 million. The warrants are exercisable until September 17, 2013, for an exercise price of $3.519 per share. As of December 31, 2009, $5.5 million of the commitment remains outstanding.
 
     In addition and in consideration for the commitment of M&F, on June 19, 2008, M&F received warrants to purchase 238,000 shares of SIGA common stock, exercisable at $3.06 (the “Commitment Warrants”). The Commitment Warrants are exercisable until June 19, 2012. The Company initially recorded all costs related to the Letter Agreement, including the fair value of the Commitment Warrants, as deferred transaction costs. Upon the issuance of common stock and warrants to purchase shares of common stock on April 30, 2009, the Company recorded a reduction in its additional paid-in capital for the effect of the related transaction costs.
 
     On January 1, 2009, the Company adopted ASC 815. In accordance with the provisions ASC 815, the warrants issuable to M&F under the Letter Agreement, which if issued, could be exercised either by payment of cash or cashless exercise, would no longer be considered “indexed to the Company’s own stock” and therefore would be subject to the scope of ASC 815. As a result, such warrants meet the definition of a derivative and must be recorded on the Company's balance sheet. The Company applied the Black-Scholes model to calculate the fair value of the respective derivative instruments using the Monte Carlo simulation to estimate the price of the Company’s common stock on the derivative’s expiration date. The expected volatility was estimated using the Company’s historical volatility. On January 1, 2009, the Company recorded the fair value of the warrants, or $2.7 million, as an adjustment to the opening balance of accumulated deficit. The Company recorded a loss of $2.3 million, or $.05 per share, for the year ended December 31, 2009 representing the increase in the fair value of the warrants from January 1, 2009 through December 31, 2009.
 
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     The following table summarizes the changes in the warrant liability:
 
Balance on December 31, 2008 $       -
       Cumulative effect of the change in accounting principle recorded on January 1, 2009 2,710,000
       The fair value of warrants issued to M&F in the fiscal year 2009   (1,715,765 )
       Increase in the fair value of the common stock warrants 2,265,765  
Balance on December 31, 2009 $ 3,260,000  
 
2006 and 2005 Placements
     In 2006 and 2005 the Company sold shares of SIGA common stock and warrants to purchase shares of common stock. As of December 31, 2009, 1,000,000 warrants issued in 2006 with an initial exercise price of $4.99 per share and 579,192 warrants issued in 2005 with an initial exercise price of $1.18 per share were outstanding. These warrants may be exercised through and including the seventh anniversary of their respective closing date.
 
     The Company accounted for the transactions under the provisions of ASC 815 which requires that free-standing derivative financial instruments that require net cash settlement be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. ASC 815 also requires that any changes in the fair value of the derivative instruments be reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities. At December 31, 2009, the fair market value of the warrants issued in 2006 and 2005 was $3.6 million and $2.8 million, respectively. The Company applied the Black-Scholes model to calculate the fair values of the respective derivative instruments using the contracted term of the warrants. Management estimates the expected volatility using a combination of the Company’s historical volatility and the volatility of a group of comparable companies. For the year ended December 31, 2009, SIGA recorded a loss of $3.4 million as a result of a net increase in the 2005 and 2006 placement warrants’ fair value.
 
5. Stock option plan and warrants
 
Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan
     In January 1996, the Company implemented its 1996 Incentive and Non-Qualified Stock Option Plan (the “Plan”). The Plan as amended provides for the granting of up to 11,000,000 shares of the Company’s common stock to employees, consultants and outside directors of the Company. The exercise period for options granted under the Plan, except those granted to outside directors, is determined by a committee of the Board of Directors. Stock options granted to outside directors pursuant to the Plan must have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant.
 
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     For the years ended December 31, 2009, 2008, and 2007 the Company recorded compensation expense of $2.1 million, $1.0 million, and $571,000 respectively, related to stock options. The total fair value of options vested during each year was $1.4 million, $595,000, and $315,000 for 2009, 2008, and 2007, respectively. The total compensation cost not yet recognized related to non-vested awards at December 31, 2009 is $1.9 million. The weighted average period over which total compensation cost is expected to be recognized is 1.67 years.
 
     SIGA calculated the fair value of options awarded during the three years ended December 31, 2009, 2008, and 2007 using the Black-Scholes model with the following weighted average assumptions:
 
Weighted Average Assumptions          2009          2008          2007
       Expected volatility   81.40%   68.50%   66.00%
       Dividend Yield 0.00%   0.00%   0.00%
       Risk-free interest rate 2.21% 2.79%   4.61% - 4.83%
       Expected holding period 5 Yrs   5 Yrs   5 Yrs

     The Company calculates the expected volatility using a combination of SIGA’s historical volatility and the volatility of a group of comparable companies. The risk-free interest rate assumption is based upon observed interest rate appropriate for the term of the Company’s employee stock options. The dividend yield assumption is based on the Company’s intent not to issue a dividend in the foreseeable future. The expected holding period assumption was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms of the award.
 
     Stock options activity under the Plan is summarized as follows:
 
Options outstanding at January 1, 2007          7,546,145              2.07
       Granted 935,000 3.17
       Forfeited   (92,086 )     2.29
       Expired (50,393 ) 5.04
       Exercised   (368,898 )     1.71
Options outstanding at December 31, 2007 7,969,768 $       2.28
       Granted   900,000       2.93
       Forfeited (26,167 ) 3.20
       Expired   (190,834 )     4.34
       Exercised (1,146,713 )   2.45
Options outstanding at December 31, 2008   7,506,054     $ 2.28
       Granted 568,500   6.48
       Forfeited   (290,001 )     3.25
       Expired -   -
       Exercised          (1,659,636 )     1.76
Options outstanding at December 31, 2009 6,124,917 $ 2.76

     As of December 31, 2009, options awarded outside of the plan included 125,000 options granted in May 2000 to the Company’s Chief Scientific Officer, with an exercise price of $2.00 per share. These options expire on June 16, 2010. 65,000 options that were awarded outside of the plan to a consultant in July 2000, were exercised in 2009 for total proceeds of $107,000 to the Company.
 
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              Weighted
Average
Number of Intrinsic Value
Shares ($)
Nonvested options at December 31, 2008 1,452,291 0.41
Nonvested options at December 31, 2009 1,180,165 2.22
Options vested during 2009 340,627 2.88
Options available for future grant at December 31, 2009 584,464
Weighted average fair value of options granted during 2009 $       4.29
Weighted average fair value of options granted during 2008 $ 1.72
Weighted average fair value of options granted during 2007 $ 1.87
Weighted average fair value of options forfeited during 2009 $ 3.25
Weighted average fair value of options forfeited during 2008 $ 1.70
Weighted average fair value of options forfeited during 2007 $ 1.33
Total intrinsic value of options exercised during 2009 $ 6,959,180
Total intrinsic value of options exercised during 2008 $ 937,630
Total intrinsic value of options exercised during 2007 $ 506,000  

     The following table summarizes information about options outstanding at December 31, 2009:
 
         Number of          Weighted                   Number Fully          Number of                  
Options Average Vested & Options Weighted Aggregate
Range of Outstanding at Remaining   Weighted Exercisable at   Expected to Vest Average Intrinsic Value at
Exercise December 31,   Contractual Average Exercise December 31, at December 31, Exercise   December 31,
Price($)   2009   Life (Years)   Price ($)   2009   2009   Price ($) 2009
0.94 - 1.85 1,298,750   4.59   1.36   1,298,750 - 1.36   $         5,764,740
2.00 - 2.73 3,181,000   2.75 2.47 2,747,667 414,894   2.47   9,146,952
3.10 - 5.95 1,311,667 7.84 3.66 788,336 501,063   3.74 1,635,577
6.10 - 9.32 333,500 9.52 7.35 110,000 213,990 6.17 -
6,124,917 4,944,753 1,129,947 $ 16,547,269

     On December 31, 2009 and 2008, 500,000 and 600,000 of the Company’s outstanding options, respectively, were subject to specific performance conditions which included revenue thresholds and regulatory approval of our lead drug candidate. None of these options were vested on December 31, 2009.
 
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     The following tables summarize information about warrants outstanding at December 31, 2009:
 
              Weighted Average
Number of Warrants Exercise Price
Outstanding at January 1, 2007 9,441,915 $       2.52
       Granted - -
       Exercised (1,179,538 ) 2.26
       Canceled / Expired - -
Outstanding at December 31, 2007 8,262,377   $ 2.55
       Granted 238,000 3.06
       Exercised (595,624 )   2.62
       Canceled / Expired (1,079,186 ) 3.34
Outstanding at December 31, 2008 6,825,567   $ 2.44
       Granted 326,797   3.52
       Exercised                     (2,850,612 ) 1.87
       Canceled / Expired -   -
Outstanding at December 31, 2009 4,301,752 $ 2.59

Number of
 Warrants        Exercise Price
Outstanding $
2,469,554   1.18 - 1.90
564,797 3.06 - 3.52
1,267,401   4.99
        4,301,752  

     In November 2009, a holder exercised warrants to acquire 1,824,412 shares of the Company’s common stock that were settled in a cashless transaction in exchange for 1,379,747 shares of SIGA common stock. This exercise is included in the summary above.
 
6. Related Parties
 
     On June 19, 2008, SIGA entered into a Letter Agreement with M&F, a related party investor, for M&F’s commitment to invest, at SIGA’s discretion, up to $8 million over a one-year period in exchange for (i) SIGA common stock, and (ii) warrants to purchase 40% of the number of SIGA shares acquired by the Investor. M&F has the option, during the Investment Period, to invest in the Company under the same investment terms (see Note 4).
 
     On December 1, 2009 the Company entered into an Office Service Agreement with an affiliate of M&F to occupy office space for approximately $8,000 per month. The agreement is cancelable upon 60 days notice by SIGA or the affiliate.
 
     Additionally, a member of the Company’s Board of Directors is a member of the Company’s outside counsel. During the years ended December 31, 2009, 2008, and 2007, the Company incurred costs of $1.8 million, $1.0 million, and $409,000, respectively, related to services provided by the outside counsel. On December 31, 2009, the Company’s outstanding payables included $612,000 payable to the outside counsel.
 
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7. Property, Plant and Equipment
 
     Property, plant and equipment consisted of the following at December 31, 2009 and 2008:
 
2009        2008
Laboratory equipment $       2,301,312 $       2,104,673
Leasehold improvements   2,868,849 2,868,848
Computer equipment 229,209 136,540
Furniture and fixtures 310,898     310,899
5,710,268   5,420,960  
       Less - accumulated depreciation (4,484,612 ) (4,060,942 )
Property, plant and equipment, net $ 1,225,656 $ 1,360,018  

8. Accrued Expenses and Other
 
     Accrued expenses and other consisted of the following at December 31, 2009 and 2008:
 
2009        2008
       Vacation $       159,591 $       158,000
       Bonuses   194,700 292,000
       Legal 55,000   360,000
       Other 331,042   400,496
 
Total Accrued Expenses and Other $ 740,333 $ 1,210,496

9. Income Taxes
 
     The Company has incurred losses since inception, which have generated net operating loss carryforwards of approximately $52.0 million at December 31, 2009 for federal and state income tax purposes. These carryforwards are available to offset future taxable income and begin expiring in 2010 for federal income tax purposes. As a result of a previous change in stock ownership, the annual utilization of the net operating loss carryforwards is subject to limitation. The net operating loss carryforwards and temporary differences, arising primarily from deferred research and development expenses and differences in the treatment of intangible assets, result in a noncurrent deferred tax asset at December 31, 2009 and 2008 of approximately $28.3 and $24.5 million, respectively. In consideration of the Company’s accumulated losses and the uncertainty of its ability to utilize this deferred tax asset in the future, the Company has recorded a valuation allowance of an equal amount on such date to fully offset the deferred tax asset.
 
     At December 31, 2009 and 2008, the Company’s deferred tax assets (in thousands) are comprised of the following:
 
2009        2008
Net Operating Losses 20,286 17,271
Deferred Research and Development Costs 6,613 5,607
Amortization of Acquired Assets   571       683
Stock Based Compensation - -
Depreciation of Property Plant and Equipment 866 984  
Total Deferred Tax Asset 28,336 24,545
Valuation Allowance (28,336 ) (24,545 )
Net Deferred Tax Assets $       - $       -  
 

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     Following is a summary of changes in our valuation allowance for deferred tax assets as of and for the years ended December 31, 2009, 2008, and 2007 (in thousands):
 
              Additions Charged              
Balance at to Costs and Balance at End of
December 31, Beginning of Year Expenses Deductions Year
2009 $       24,545   $       3,903   $       112   $       28,336
2008   $ 21,621 $ 3,020 $ 96 $ 24,545
2007 $ 19,057 $ 2,603 $ 39 $ 21,621

     For the years ended December 31, 2009 and 2008, the Company’s effective tax rate differs from the federal statutory rate principally due to net operating losses and other temporary differences for which no benefit was recorded, state taxes and other permanent differences.
 
     The Company’s effective tax rate differs from the U.S. Federal Statutory income tax rate of 34% as follows:
 
2009        2008
Statutory federal income tax rate               -34.00 %                 -34.00 %
State tax benefit, net of federal taxes -2.77 % -4.84 %
Other 15.21 % 3.95 %
Valuation allowance on deferred tax assets 21.56 % 34.89 %
       Effective tax rate 0.00 % 0.00 %

10. Commitments and Contingencies
 
Operating lease commitments
     As of December 31, 2009, our purchase obligations are not material. The Company leases certain facilities and office space under operating leases. Minimum future rental commitments under operating leases having non-cancelable lease terms in excess of one year and future minimum payments under notes payable are as follows:
 
              Year ended December 31,               Lease obligations
2010 562,808
2011 573,077
Total $       1,135,885

Other
     In December 2006, PharmAthene, Inc. (“PharmAthene”) filed an action against us in the Delaware Court of Chancery, captioned PharmAthene, Inc. v. SIGA Technologies, Inc., C.A. No. 2627-N. In its amended complaint, PharmAthene asks the Court to order us to enter into a license agreement with PharmAthene with respect to ST-246®, as well as issue a declaration that we are obliged to execute such a license agreement, and award damages resulting from our supposed breach of that obligation. PharmAthene also alleges that we breached an obligation to negotiate such a license agreement in good faith, as well as seeks damages for promissory estoppel and unjust enrichment based on supposed information, capital and assistance that PharmAthene allegedly provided to us during the negotiation process. In January 2008, the Court of Chancery denied our motion to dismiss the original complaint and discovery proceeded. In May 2009, PharmAthene amended its complaint with respect to its claim for breach of an obligation to negotiate in good faith, and we filed our answer to the amended complaint and counterclaim denying the new claim and asserting defenses.
 
     PharmAthene has submitted an expert report asserting several alternative theories of damages, including amounts in a wide range of up to one billion dollars. We believe that the expert’s damages analyses are flawed and methodologically unsound. We also continue to believe that we have meritorious defenses to the claims. No trial date has been set. It is not currently possible to estimate a range of loss, if any.
 
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     From time to time, the Company is involved in disputes or legal proceedings arising in the ordinary course of business. The Company believes that there is no other dispute or litigation pending that could have, individually or in the aggregate, a material adverse effect on its financial position, results of operations or cash flows.
 
11. Financial Information By Quarter (Unaudited) (in thousands, except for per share data)
 
2009 For The Quarter Ended          March 31,          June 30,          September 30,          December 31,          Total
Revenues $         1,926 $         4,009 $         3,922 $         3,955 $         13,812
Selling, general & administrative $ 2,060 $ 1,802 $ 1,522 $ 2,149 $ 7,533
Research and development $ 2,697 $ 4,713 $ 4,828 $ 5,185 $ 17,423
Patent preparation fees $ 109 $ 84 $ 191 $ 350 $ 734
Operating loss $ (2,940 ) $ (2,590 ) $ (2,619 ) $ (3,730 ) $ (11,879 )
Net income (loss) $ (6,885 ) $ (10,353 ) $ (1,429 ) $ 1,049 $ (17,618 )
Net loss per share: basic and diluted $ (0.19 ) $ (0.28 ) $ (0.04 ) $ 0.02 $ (0.47 )
Market price range for common stock
         High $ 5.86 $ 8.88 $ 8.63 $ 10.09 $ 10.09
         Low $ 3.15 $ 4.73 $ 6.25 $ 4.83 $ 3.15
 
2008 For The Quarter Ended March 31, June 30, September 30, December 31, Total
Revenues $ 1,983 $ 1,732 $ 1,863 $ 2,488 $ 8,066
Selling, general & administrative $ 1,005 $ 1,165 $ 945 $ 1,493 $ 4,608
Research and development $ 2,836 $ 2,500 $ 2,853 $ 3,424 $ 11,613  
Patent preparation fees $ 130 $ 134 $ 198 $ 120 $ 582
Operating loss $ (1,988 ) $ (2,067 ) $ (2,134 ) $ (2,548 )   $ (8,737 )
Net income (loss) $ (858 )   $ (3,141 ) $ (3,029 ) $ (1,571 ) $ (8,599 )
Net loss per share: basic and diluted $ (0.03 ) $ (0.09 ) $ (0.09 )   $ (0.04 ) $ (0.25 )
Market price range for common stock    
         High $ 3.06 $ 3.80 $ 4.00 $ 3.57 $ 4.00
         Low $ 1.93 $ 2.18 $ 2.36 $ 2.19 $ 1.93  

57
 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
     None.
 
Item 9A. Controls and Procedures
 
     Management’s Responsibility for Financial Statements 
     Our management is responsible for the integrity and objectivity of all information presented in this annual report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations.
 
     Disclosure Controls and Procedures 
     We have established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors. Based on their evaluation as of December 31, 2009, our chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its chief executive office and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
     Management’s Report on Internal Control over Financial Reporting 
     Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) or Rule 15d-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
 
     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
     Management conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2009 based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2009.
 
     The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included in this Form 10-K.
 
58
 

     Changes in Internal Control over Financial Reporting
     There were no changes in our internal control over financial reporting during the quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
 
Item 9B. Other Information
 
     None.
 
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PART III
 
Item 10. Directors, Executive Officers, and Corporate Governance of the Registrant
 
     Information required by this item is incorporated by reference from our Proxy Statement for the 2010 Annual Meeting of Shareholders.
 
Item 11. Executive Compensation
 
     Information required by this item is incorporated by reference from our Proxy Statement for the 2010 Annual Meeting of Shareholders.
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
     Information required by this item is incorporated by reference from our Proxy Statement for the 2010 Annual Meeting of Shareholders.
 
     Equity Compensation Plan Information
     The following table sets forth certain compensation plan information with respect to both equity compensation plans approved by security holders and equity compensation plans not approved by security holders as of December 31, 2009:
 
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
Plan Category warrants and rights warrants and rights column (a))
      (a)       (b)       (c)
Equity compensation plans
approved by security holders (1) 6,124,917 $ 2.76 584,464
 
Equity compensation plans not
approved by security holders 125,000 $ 2.00 -
 
Total 6,249,917 $ 2.74 584,464
____________________
 
(1)      
SIGA Technologies, Inc., Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan.
 
     As of December 31, 2009, options awarded outside of the Company’s equity compensation plan included 125,000 options awarded to an employee. In May 2000, the Company awarded its Chief Scientific Officer options to acquire 125,000 shares of the Company’s common stock at an exercise price of $2.00 per share. In July 2000, the Company entered into an agreement with a consultant to serve as the Company’s public relations agent and awarded the consultant options to acquire 65,000 shares of the Company’s common stock. All of the 65,000 consultant options were exercised in 2009.
 
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Item 13. Certain Relationships and Related Transactions, and Director Independence
 
     Information required by this item is incorporated by reference from our Proxy Statement for the 2010 Annual Meeting of Shareholders.
 
Item 14. Principal Accountant Fees and Services
 
     Information required by this item is incorporated by reference from our Proxy Statement for the 2010 Annual Meeting of Shareholders.
 
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PART IV
 
Item 15. Exhibits and Financial Statement Schedules
 
(a) (1) and (2). Financial Statements and Financial Statements Schedule.
 
     See Index to Financial Statements under Item 8 in Part II hereof where these documents are listed.
 
(a) (3). Exhibits.
 
     The following is a list of exhibits:
 
Exhibit
No.       Description  
3(a)   Restated Articles of Incorporation of the Company (incorporated by reference to the Form S-3 Registration Statement of the Company dated May 10, 2000 (No. 333-36682)).
 
3(b)   Form of Certificate of Amendment of the Restated Certificate of Incorporation of SIGA Technologies, Inc. (incorporated by reference to the Proxy Statement on Schedule 14A of the Company dated June 15, 2007).
 
3(c)   Amended and Restated Bylaws of the Company (incorporated by reference to the Annual Report on Form 10-K of the Company for the year ended December 31, 2008), as amended by the Amendment to the Bylaws of the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed March 12, 2009).
 
4(a)   Form of Common Stock Certificate (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
4(b)   Warrant Agreement dated as of September 15, 1996 between the Company and Vincent A. Fischetti (1) (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
4(c)   Warrant Agreement dated as of November 18, 1996 between the Company and David de Weese (1) (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
4(d)   Warrant Agreement between the Company and Stefan Capital, dated September 9, 1999 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1999).
 
4(e)   Registration Rights Agreement, dated as of May 23, 2003, between the Company and Plexus Vaccine Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 9, 2003).
 
4(f)   Registration Rights Agreement, dated as of August 13, 2003, between the Company and MacAndrews & Forbes Holdings Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 18, 2003).
 
4(g)   Form of Warrant to purchase shares of common stock of the Company, issued to MacAndrews & Forbes, LLC on June 19, 2008 (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 23, 2008).

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10(a)          License and Research Support Agreement between the Company and The Rockefeller University, dated as of January 31, 1996; and Amendment to License and Research Support Agreement between the Company and The Rockefeller University, dated as of October 1, 1996(2) (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
10(b)   Research Agreement between the Company and Emory University, dated as of January 31, 1996(2) (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
10(c)   Research Support Agreement between the Company and Oregon State University, dated as of January 31, 1996(2) (incorporated by reference to the Form SB-2 Registration Statement of the Company dated March 10, 1997 (No. 333-23037)).
 
10(d)   Letter Agreement dated as of March 5, 1999 to continue the Research Support Agreement (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1999).
 
10(e)   Option Agreement between the Company and Oregon State University, dated as of November 30, 1999 and related Amendments to the Agreement (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1999).
 
10(f)   Clinical Trials Agreement between the Company and National Institute of Allergy and Infectious Diseases, dated as of July 1, 1997 (incorporated by reference to Amendment No. 1 to the Form SB-2 Registration Statement of the Company dated July 11, 1997 (No. 333-23037)).
 
10(g)   Research Agreement between the Company and The Research Foundation of State University of New York, dated as of July 1, 1997(2) (incorporated by reference to Amendment No. 1 to the Form SB-2 Registration Statement of the Company dated July 11, 1997 (No. 333-23037)).
 
10(h)   Collaborative Research and License Agreement between the Company and Wyeth, dated as of July 1, 1997(2) (incorporated by reference to Amendment No. 3 to the Form SB-2 Registration Statement of the Company dated September 2, 1997 (No. 333-23037)).
 
10(i)   Research Collaboration and License Agreement between the Company and The Washington University, dated as of February 6, 1998 (2) (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1997).
 
10(j)   Settlement Agreement and Mutual Release between the Company and The Washington University, dated as of February 17, 2000 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1999).
 
10(k)   Technology Transfer Agreement between the Company and MedImmune, Inc., dated as of February 10, 1998 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1997).
 
10(l)   Option Agreement between the Company and Ross Products Division of Abbott Laboratories, dated February 28, 2000 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 1999).
 
10(m)   Agreement between the Company and Oregon State University for the Company to provide contract research services to the University dated September 24, 2000 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2000).

63
 

10(n)          License and Research Agreements between the Company and the Regents of the University of California dated December 6, 2000 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2000).
 
10(o)   Amended and Restated 1996 Incentive and Non-Qualified Stock Option Plan dated August 15, 2001 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2001), as amended (as set forth in the Current Report on Form 8-K of the Company filed on May 27, 2005).
 
10(p)   Research and License Agreement between the Company and TransTech Pharma, Inc. dated October 1, 2002 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002).
 
10(q)   Contract between the Company and the Department of the United States Army dated December 12, 2002 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002).
 
10(r)   Contract between the Company and Four Star Group dated February 5, 2003 (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2002).
 
10(s)   Securities Purchase Agreement, dated as of August 13, 2003, between the Company and MacAndrews & Forbes Holdings Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 18, 2003).
 
10(t)   Letter Agreement dated October 8, 2003 among the Company, MacAndrews & Forbes Holdings Inc. and TransTech Pharma, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 18, 2003).
 
10(u)   Non-Employee Director Compensation Summary Sheet (incorporated by reference to the Quarterly Report on Form 10-Q of the Company for the quarter ending March 31, 2005).
 
10(v)   Director Compensation Program, effective April 21, 2005 (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 26, 2005).
 
10(w)   Service Agreement, dated as of April 27, 2005, between the Company and TransTech Pharma, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on May 3, 2005).
 
10(x)   Master Security Agreement, dated as of April 29, 2005, between General Electric Capital Corporation and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on May 3, 2005).
 
10(y)   Agreement, dated as of September 14, 2005, between Saint Louis University and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on September 20, 2005).
 
10(z)   Agreement, dated as of September 22, 2005, between the United States Army Medical Research and Material Command and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on September 27, 2005).

64
 

10(aa)       Securities Purchase Agreement, dated as of November 2, 2005, between Iroquois Master Fund Ltd., Cranshire Capital, L.P., Omicron Master Trust, Smithfield Fiduciary LLC and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on November 4, 2005).
 
10(bb)   Exclusive Finder’s Agreement, dated as of November 1, 2005, between the Shemano Group, Inc. and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on November 4, 2005).
 
10(cc)   Bridge Note Purchase Agreement, dated as of March 20, 2006, between the Company and PharmAthene, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on March 22, 2006).
 
10(dd)   Security Agreement, dated as of March 20, 2006, between the Company and PharmAthene, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on March 22, 2006).
 
10(ee)   Voting Agreement, dated as of June 8, 2006, among the Company, TransTech Pharma, Inc., MacAndrews & Forbes, Inc., Howard Gittis, Donald G. Drapkin, James J. Antal, Thomas E. Constance, Mehmet C. Oz, Eric A. Rose and Paul G. Savas (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 13, 2006).
 
10(ff)   Agreement and Plan of Merger, dated as of June 8, 2006, among the Company, SIGA Acquisition Corp. and PharmAthene, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 13, 2006).
 
10(gg)   8% Note, dated as of June 19, 2006, between the Company and PharmAthene, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 20, 2006).
 
10(hh)   Agreement, dated as of September 29, 2006, between SIGA Technologies, Inc. and the National Institute of Allergy and Infectious Diseases of the National Institutes for Health (incorporated by reference to the Quarterly Report on Form 10-Q/A for the quarter ending September 30, 2006).
 
10(ii)   Securities Purchase Agreement, dated as of October 18, 2006, between the Company, Iroquois Master Fund Ltd., Cranshire Capital, L.P., Omicron Master Trust, Rockmore Investment Master Fund, Ltd., and Smithfield Fiduciary LLC (incorporated by reference to the Current Report on Form 8-K of the Company filed on October 20, 2006).
 
10(jj)   Amended and Restated Employment Agreement, dated as of January 22, 2007, between the Company and Dennis E. Hruby (incorporated by reference to the Current Report on Form 8-K of the Company filed on January 22, 2007).
 
10(kk)   Letter Agreement, dated as of June 19, 2008, between the Company and MacAndrews & Forbes, LLC (incorporated by reference to the Current Report on Form 8-K of the Company filed on June 23, 2008).
 
10(ll)   Contract, dated September 1, 2008, between the Company and the National Institutes of Health, DHHS (incorporated by reference to the Quarterly Report on Form 10-Q of the Company for the quarter ending September 30, 2008).

65
 

10(mm)       Modification of Contract, dated September 17, 2008, between the Company and the National Institute of Allergy and Infectious Diseases of the National Institutes of Health (incorporated by reference to the Quarterly Report on Form 10-Q of the Company for the quarter ending September 30, 2008).
 
10(nn)   Employment Agreement, dated as of January 31, 2007, between the Company and Eric A. Rose (incorporated by reference to the Current Report on Form 8-K of the Company filed on January 31, 2007), as amended and restated (as set forth in the Current Report on Form 8-K of the Company filed on November 17, 2008).
 
10(oo)   Employment Agreement, dated January 22, 2007, between the Company and Ayelet Dugary (incorporated by reference to the Current Report on Form 8-K of the Company filed on March 12, 2009).
 
10(pp)   Amendment to Employment Agreement, dated March 11, 2009, between the Company and Ayelet Dugary (incorporated by reference to the Current Report on Form 8-K of the Company filed on March 12, 2009).
 
10(qq)   Letter Agreement, dated as of April 29, 2009, between the Company and Ayelet Dugary (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 30, 2009).
 
10(rr)   Amendment to Employment Agreement, dated March 11, 2009, between the Company and Dennis E. Hruby (incorporated by reference to the Current Report on Form 8-K of the Company filed on March 12, 2009).
 
10(ss)   Extension Letter Agreement, dated April 29, 2009, between MacAndrews & Forbes LLC and the Company (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 30, 2009).
 
10(tt)   Form of Consideration Warrants (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 30, 2009).
 
10(uu)   Form of Subscription Agreement (incorporated by reference to the Current Report on Form 8-K of the Company filed on December 10, 2009).
 
14   The Company’s Code of Ethics and Business Conduct (incorporated by reference to the Annual Report on Form 10-KSB of the Company for the year ended December 31, 2003).
 
21   Subsidiaries of the Registrant.
 
23.1   Consent of Independent Registered Public Accounting Firm.
 
31.1   Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
 
31.2   Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
 
32.1   Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.

66
 

32.2           Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
____________________
 
(1)       These agreements were entered into prior to the reverse split of the Company’s common stock and, therefore, do not reflect such reverse split.
 
(2) Confidential information is omitted and identified by an * and filed separately with the SEC with a request for Confidential Treatment.
 
67
 

SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
SIGA TECHNOLOGIES, INC.
(Registrant)
 
Date: March 10, 2010 By:       /s/ Eric A. Rose  
Eric A. Rose, M.D.
Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
Signature       Title of Capacities       Date
/s/ Eric A. Rose, M.D.   Chief Executive Officer and   March 10, 2010
Eric A. Rose, M.D. Chairman of the Board
  (Principal Executive Officer)  
 
/s/ Ayelet Dugary Chief Financial Officer March 10, 2010
Ayelet Dugary (Principal Financial Officer and
  Principal Accounting Officer)  
 
/s/ Steven L. Fasman Director March 10, 2010
Steven L. Fasman    
 
/s/ James J. Antal Director March 10, 2010
James J. Antal    
 
/s/ Thomas E. Constance Director March 10, 2010
Thomas E. Constance    
 
/s/ Scott Hammer, M.D. Director March 10, 2010
Scott Hammer, M.D.    
 
/s/ Paul G. Savas Director March 10, 2010
Paul G. Savas    
 
/s/ Michael Weiner, M.D. Director March 10, 2010
Michael Weiner, M.D.    
 
/s/ Michael J. Bayer Director March 10, 2010
Michael J. Bayer    
 
/s/ Bruce Slovin Director March 10, 2010
Bruce Slovin    
 
/s/ Joseph Marshall Director March 10, 2010
Joseph Marshall    

68