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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

For the Fiscal Year Ended                            Commission File No. 0-23047
December 31, 2000

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

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

    420 Lexington Avenue, Suite 620
              New York, NY                                              10170
(Address of principal executive offices)                              (zip code)

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

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

                                      None

                                (Title of Class)

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

                         Common Stock, $.0001 par value
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X| .

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on March 20,
2001 as reported on the Nasdaq SmallCap Market was approximately $15,550,544. As
of March 20, 2001 the registrant had outstanding 7,548,808 shares of Common
Stock.
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                             SIGA Technologies, Inc.

                                   Form 10-KSB

                                Table of Contents

<TABLE>
<CAPTION>
Part I                                                                                 Page No.

<S>         <C>                                                                           <C>
Item 1      Business ..................................................................    3
Item 2      Properties ................................................................   14
Item 3      Legal Proceedings .........................................................   14
Item 4      Submission of Matters to a Vote of Security Holders .......................   15

Part II

Item 5      Market for Registrant's Common Equity and Related Stockholder Matters .....   16
Item 6      Management's Discussion and Analysis for Financial Condition and Results
            of Operations .............................................................   18
Item 7      Financial Statements and Supplementary Data ...............................   27
Item 8      Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure ......................................................   27

Part III

Item 9      Directors and Executive Officers of the Registrant ........................   28
Item 10     Executive Compensation ....................................................   30
Item 11     Security Ownership of Certain Beneficial Owners and Management ............   34
Item 12     Certain Relationships and Related Transactions ............................   36

Part IV

Item 13     Exhibits, Lists and Reports on Form 8-K ...................................   37
Signatures  ...........................................................................   42
</TABLE>


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                                     PART I

Item 1. Business

      Certain statements in this Annual Report on Form 10-KSB, 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, in addition to those risks discussed below
and in Siga's other public filings, press releases and statements by Siga's
management, including (i) the volatile and competitive nature of the
biotechnology industry, (ii) changes in domestic and foreign economic and market
conditions, and (iii) the effect of federal, state and foreign regulation on
Siga's businesses. All such forward-looking statements are current only as of
the date on which such statements were made. Siga does not undertake any
obligation to publicly update any forward-looking statement to reflect events or
circumstances after the date on which any such statement is made or to reflect
the occurrence of unanticipated events.

      SIGA Technologies, Inc. is referred to throughout this report as "Siga,"
"we" or "us."

Introduction

      SIGA Technologies, Inc. is a development stage biotechnology company. Our
focus is on the discovery, development and commercialization of vaccines,
antibiotics and novel anti-infectives for serious infectious diseases. Our lead
vaccine candidate is for the prevention of group A streptococcal pharyngitis or
"strep throat." We are developing a technology for the mucosal delivery of our
vaccines which may allow those vaccines to activate the immune system at the
mucus lined surfaces of the body -- the mouth, the nose, the lungs and the
gastrointestinal and urogenital tracts -- the sites of entry for most infectious
agents. Siga's anti-infectives programs are aimed at the increasingly serious
problem of drug resistance, they are designed to block the ability of bacteria
to attach to human tissue, the first step in the infection process.

Technology

      Vaccine Technologies: Mucosal Immunity and Vaccine Delivery

      Using proprietary technology licensed from The Rockefeller University
("Rockefeller"), Siga is developing certain commensal bacteria ("commensals") as
a means to deliver mucosal vaccines. Commensals are harmless bacteria that
naturally inhabit the body's surfaces with different commensals inhabiting
different surfaces, particularly the mucosal surfaces. Our vaccine candidates
utilize genetically engineered commensals to deliver antigens from a variety of
pathogens to the mucosal immune system. When administered, the genetically
engineered ("recombinant") commensals colonize the mucosal surface and
replicate. By activating a local mucosal immune response, our vaccine candidates
are designed to prevent infection and disease at the earliest possible stage. By
comparison, most conventional vaccines are designed to act after infection has
already occurred.


                                       3
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      Our commensal vaccine candidates utilize gram-positive bacteria, one of
two major classes of bacteria. Rockefeller scientists have identified a protein
region that is used by gram-positive bacteria to anchor proteins to their
surfaces. We are using the proprietary technology licensed from Rockefeller to
combine antigens from a wide range of infectious organisms, both viral and
bacterial, with the surface protein anchor region of a variety of commensal
organisms. By combining a specific antigen with a specific commensal, vaccines
can be tailored to both the target pathogen and its mucosal point of entry.

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

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

We believe that mucosal vaccines developed using our proprietary commensal
delivery technology could provide a number of advantages, including:

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

o     Safety advantage over other live vectors: A number of bacterial pathogens
      have been genetically rendered less infectious, or attenuated, for use as
      live vaccine vectors. Commensals, by virtue of their harmless nature, may
      offer a safer delivery vehicle without fear of genetic reversion to the
      infectious state inherent in attenuated pathogens.

o     Non-injection administration: Oral, nasal, rectal or vaginal
      administration of the vaccine eliminates the need for painful injections
      with their potential adverse reactions.

o     Potential for combined vaccine delivery: The Children's Vaccine Initiative
      has called for the development of combined vaccines, specifically to
      reduce the number of needle sticks per child, by combining several
      vaccines into one injection, thereby increasing compliance and decreasing
      disease. We believe our commensal delivery technology can be an effective
      method of delivery of multi-component vaccines within a single commensal
      organism that address multiple diseases or diseases caused by multiple
      strains of an infectious agent.

o     Eliminating need for refrigeration: One of the problems confronting the
      effective delivery of parenteral vaccines is the need for refrigeration at
      all stages prior to injection. The stability of the commensal organisms in
      a freeze-dried state would, for the most part, eliminate the need for
      special climate conditions, a critical consideration, especially for the
      delivery of vaccines in developing countries.


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o     Low cost production: By using a live bacterial vector, extensive
      downstream processing is eliminated, leading to considerable cost savings
      in the production of the vaccine. The potential for eliminating the need
      for refrigeration would add considerably to these savings by reducing the
      costs inherent in refrigeration for vaccine delivery.

      Anti-Infectives Technology: Prevention of Attachment and Infectivity

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

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

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

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


                                       5
<PAGE>

      Surface Protein Expression System ("SPEX")

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

      To overcome these problems, we have taken advantage of our knowledge of
gram-positive bacterial protein expression and anchoring pathways. This pathway
has evolved to handle the transport of surface proteins that vary widely in
size, structure and function. Modifying the approach used to create commensal
mucosal vaccines, we have developed methods which, instead of anchoring the
foreign protein to the surface of the recombinant gram-positive bacteria, result
in it being secreted into the surrounding medium in a manner which is readily
amenable to simple batch purification. We believe the advantages of this
approach include the ease and lower cost of gram-positive bacterial growth, the
likelihood that secreted recombinant proteins will be folded properly, and the
ability to purify recombinant proteins from the culture medium without having to
disrupt the bacterial cells and liberating cellular contaminants. Gram-positive
bacteria may be grown simply in scales from those required for laboratory
research up to commercial mass production.

Our Product Candidates and Research and Discovery Programs

      Mucosal Vaccines

      Development of our mucosal vaccine candidates involves: (i) identifying a
suitable immunizing antigen from a pathogen; (ii) selecting a commensal that
naturally colonizes the mucosal point of entry for that pathogen; and (iii)
genetically engineering the commensal to express the antigen on its surface for
subsequent delivery to the target population.

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

      No vaccine for strep throat has been developed because of the problems
associated with identifying an antigen that is common to the more than 100
different serotypes of group A streptococcus, the bacterium that causes the
disease. We have licensed from Rockefeller a proprietary antigen which is common
to most types of group A streptococcus, including types that have been
associated with rheumatic fever. When this antigen was orally administered to
animals, it was shown to provide protection against multiple types of group A
streptococcal infection. Utilizing this antigen, we are developing a mucosal
vaccine for strep throat.


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      Our strep throat vaccine candidate expresses the strep throat antigen on
the surface of the commensal S. gordonii, which lives on the surface of the
teeth and gums. Pre-clinical research in mice and rabbits has established the
ability of this vaccine candidate to colonize and induce both a local and
systemic immune response. We are collaborating with the National Institutes of
Health (the "NIH") and the University of Maryland Center for Vaccine Development
on the clinical development of this vaccine candidate. In cooperation with the
NIH we filed an Investigational New Drug Application ("IND") with the United
States Food and Drug Administration (the "FDA") in December 1997. The first
stage of these clinical trials, utilizing the commensal delivery system without
the strep throat antigen, were completed at the University of Maryland in 2000.
The study showed the commensal delivery system to be well-tolerated and that it
spontaneously eradicated or was easily eradicated by conventional antibiotics. A
second clinical trial of the commensal delivery system without the strep throat
antigen was initiated in 2000 at the University of Maryland. In September 1999
we were awarded a Phase I Small Business Innovation Research Grant (SBIR) from
the NIH to help support the research cost of our strep program.

      STD Vaccine Candidates. One of the great challenges in vaccine research
remains the development of effective vaccines to prevent sexually transmitted
diseases (STDs). Two principal pathogens that are transmitted via this route are
chlamydia, the most common bacterial STD, and Neisseria, the causative agent of
gonnorhia. To date, a great deal of effort has been expended, without
appreciable success, to develop effective injectable prophylactic vaccines
versus these pathogens. Given that both of these pathogens enters the host
through the mucosa, we believe that induction of a vigorous mucosal response to
certain bacterial antigens may protect against acquisition of the initial
infection. To test this hypothesis, we have expressed newly discovered antigens
from these pathogens in our proprietary mucosal vaccine delivery system. These
live recombinant vaccines will be delivered to animals and tested for local and
systemic immune response induction, and whether these responses can block
subsequent viral infections. We have licensed technology from Oregon State
University and Washington University in support of our chlamydia and Neisseria
programs. In February 2000 we entered into an option agreement with the Ross
Products Division of Abbott Laboratories (Ross) which will provide funding to
further development of an STD vaccine product. In September 2000 we were awarded
a Phase I SBIR Grant from the NIH to help support the research cost of this
program.

      Mucosal Vaccine Delivery System

      We are developing our proprietary mucosal vaccine delivery system, which
is a component of our vaccine candidates, for license to other vaccine
developers. Our commensal vaccine candidates utilize gram-positive bacteria as
vectors for the presentation of antigens. We are using proprietary technology to
anchor antigens from a wide range of infectious organisms, both viral and
bacterial, to the surface protein anchor region of a variety of commensal
organisms. By combining a specific antigen with a specific commensal, we believe
that vaccines can be tailored to both the target pathogen and its mucosal point
of entry.

      We have developed several genetic methods for recombining foreign
sequences into the genome of gram-positive bacteria at a number of non-essential
sites. Various parameters have been tested and optimized to improve the level of
foreign protein expression and its immunogenicity. In pre-clinical studies,
recombinant commensals have been implanted into the oral cavities of several
animal species with no deleterious effects. The introduced vaccine strains have
taken up residence for prolonged periods of time and induce both a local mucosal
(IgA) as well as a systemic immune response (IgG and T-cell).

      We have completed two early stage clinical evaluations of our mucosal
vaccine delivery system based on the commensal bacteria S. gordonii. These
clinical studies were designed to test the safety of the formulation, to monitor
the extent and duration of colonization of the nasal and oral cavities, and to
determine if the delivery system could be eradicated at the end of the study
with a regimen of conventional antibiotics. A total of 47 volunteers between the
ages of 18 and 40 completed the first study, in which S. gordonii was delivered
to the nasal passage and oral cavity. A total of 60 volunteers completed a
second


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study which was conducted at the University of Maryland as part of our strep
throat vaccine program as described above. The results of the studies indicated
the delivery system was well-tolerated and that the delivery system
spontaneously eradicated or was easily eradicated by conventional antibiotics.
The ongoing clinical studies at the University of Maryland are also designed to
evaluate S. gordonii as a commensal bacterial delivery system for our vaccine
targeting strep throat.

      Anti-Infectives

      Our anti-infectives program is targeted principally toward drug-resistant
bacteria and hospital-acquired infections. According to estimates from the
Centers for Disease Control, approximately two million hospital-acquired
infections occur each year in the United States.

      Our anti-infectives approaches aim to block the ability of bacteria to
attach to and colonize human tissue, thereby blocking infection at the first
stage in the infection process. By comparison, antibiotics available today act
by interfering with either the structure or the metabolism of a bacterial cell,
affecting its ability to survive and to reproduce. No currently available
antibiotics target the attachment of a bacterium to its target tissue. By
preventing attachment, the bacteria should be readily cleared by the body's
immune system.

      Gram-Positive Antibiotic Technology. Our lead anti-infectives program is
based on a novel target for antibiotic therapy. Our founding scientists have
identified an enzyme, a selective protease, utilized by most gram-positive
bacteria to anchor certain proteins to the bacterial cell wall. These surface
proteins are the means by which certain bacteria recognize, adhere to and
colonize specific tissue. Our strategy is to develop protease inhibitors as
novel antibiotics. We believe protease inhibitors will have wide applicability
to gram-positive bacteria in general, including antibiotic resistant
staphlyococcus and a broad range of serious infectious diseases including
meningitis and respiratory tract infections. In 1997, we entered into a
collaborative research and license agreement with the Wyeth-Ayerst Laboratories
Division of American Home Products Corporation ("Wyeth-Ayerst") to identify and
develop protease inhibitors as novel antibiotics. In the first quarter of 2001
we received a milestone payment from Wyeth-Ayerst for delivery of the first
quantities of protease for screening, and high-throughput screening for protease
inhibitors was initiated. In connection with our effort on this program we have
entered into a license with the University of California at Los Angeles (UCLA)
for certain technology that may be incorporated into our development of products
for Wyeth-Ayerst.

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

      Research carried out at Washington University has demonstrated that
assembly of type P pili on gram-negative bacteria requires the participation of
both a periplasmic molecular chaperone and an outer membrane usher. Since the
gram-negative pili are the primary structures by which these organisms adhere to
and colonize host tissue, inhibition of their assembly should effectively
inhibit disease caused by this class of organisms. Detailed structural data is
available on the molecular chaperone and the usher protein. This information has
been used in concert with molecular modeling techniques to identify potential
structures that will bind to the conserved residues of the chaperone and usher
proteins. With identification of these structures, natural and synthetic
molecules that inhibit chaperone/usher function can be screened


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using high throughput assays developed by our scientists. We believe that this
approach is a departure from conventional antibiotics and therefore may afford a
method to circumvent the resistance mechanisms already established in many
gram-negative bacteria.

      Scientists at Washington University have elucidated the role of chaperones
-- a family of periplasmic proteins -- in the formation of pili, which are
essential for the virulence of certain gram-negative bacteria, such as E. coli
or the Enterobacteriaceae (Salmonella, Shigella, Klebsiella, etc.). The
elucidation of this pathway provides several targets for the development of
novel anti-infectives: (i) blocking the interaction between chaperones and pilin
subunits; (ii) interfering with chaperone-dependent folding of pilin subunits;
or (iii) interfering with how pilin subunits exit from the bacteria's outer
membrane (through the "usher" component). The chaperone-pilin complex has been
examined using x-ray crystallography, and assays measuring the chaperone
interactions have been established. We are reviewing potential compounds which
interfere with the chaperone-pilin interaction, as well as seeking alternative
intervention sites in the pilus formation pathway. In July 1999 and August 2000
we were awarded Phase I SBIR grants from the NIH to support our development
efforts in this area.

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

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

      Biological Defense Program. In the U.S. an estimated $177 million will be
spent this year on measures to address bioterrorism. On of the major concerns is
smallpox, although declared extinct in 1980 by the World Health Organization, it
is believed that rogue nations such as Iran, Iraq, Libya and North Korea may
have an illegal inventory of the virus that causes the disease. The only legal
inventory of the virus is held under extremely tight security at the Centers For
Disease Control in Atlanta, and at a laboratory in Russia. As a result of this
threat the U.S. government will be making significant expenditures on finding a
way to counter act the virus if turned loose by terrorist or on a battlefield.
Siga in collaboration with Rockefeller University and Oregon State University is
working on ways to disable the virus' ability to replicate. If the virus can not
replicate, it can not overwhelm the immune system and, theoretically, can not
kill its victims. The parties are also working on developing nasal sprays and
lozenges that could combat toxins such as anthrax. In September 2000 we entered
into a subcontract agreement with Oregon State University. The subcontract
agreement is part of a project targeted towards developing novel antiviral drugs
capable of preventing disease and pathology for smallpox in the event this
pathogen were to be used as an agent of bioterrorism. The project is being
funded by a grant from the NIH to Oregon State University. The basic virology
aspects of the project will be conducted at OSU and the drug development will be
performed by Siga under subcontract.


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      Veterinary Vaccines

      One application of our technology is the development of live vaccines that
are delivered to a specific mucosal niche where they can colonize and thereby
present antigen to the immune system and produce local immunity at the site
where the corresponding pathogen will eventually attempt to enter. Since the
proprietary expression pathway that we use is conserved in essentially all
gram-positive bacteria, this should allow the same strategy to be employed in
the development of veterinary vaccines. A commensal bacterium can be isolated
from the mucosa of the target species, engineered to express a desired antigen
and then reintroduced to the species in order to produce immunity against
subsequent infection by the corresponding pathogen. Examples of potential
targets for this technology in the area of animal health include prevention of
salmonid aquaculture disease problems or canine papilloma virus infections.

      Veterinary Program. We believe our vaccine and anti-infectives
technologies also provide opportunities to develop biopharmaceutical products
for the veterinary health care market. The world wide veterinary market was
reported to have been $8 billion in 1999. In the U.S. alone, there are 120
million cats and dogs, 2 million horses, 100 million cattle, 56 million hogs and
8 million sheep and goats. In December 2000 we entered into a collaborative
agreement with Fort Dodge Animal Health, a division of American Home Products
Corporation, focusing on the design of novel vaccines for the prevention of
veterinary diseases. The research collaboration combines Siga's bacterial
commensal delivery technology with Fort Dodge's proprietary veterinary antigens.
Siga will be responsible for the construction and characterization of candidate
vaccines while Fort Dodge will assess the immunogenicity and protective capacity
of the target animal species.

      Surface Protein Expression System

      Our proprietary SPEX protein expression uses the protein export and
anchoring pathway of gram-positive bacteria as a means to facilitate the
production and purification of biopharmaceutical proteins. We have developed
vectors which allow foreign genes to be inserted into the chromosome of
gram-positive bacteria in a manner such that the encoded protein is synthesized,
transported to the cell surface and secreted into the medium. This system has
been used to produce milligram quantities of soluble antigenically authentic
protein that can be easily purified from the culture medium by affinity
chromatography. We believe this technology can be extended to a variety of
different antigens and enzymes.

      We have commenced yield optimization and process validation of this
system. This program is designed to transfer the method from a laboratory scale
environment to a commercial production facility. Our business strategy is to
license this technology on a non-exclusive basis for a broad range of
applications.

Collaborative Research and Licenses

      We sponsor research and development activities in laboratories at Oregon
State University and at the University of California, Los Angeles. We have a
research and development facility in Corvallis, Oregon. We have entered into the
following license agreements and collaborative research arrangements:

      Rockefeller University. Siga and Rockefeller have entered into an
exclusive worldwide license agreement whereby we have obtained the right and
license to make, use and sell mucosal vaccines based on gram-positive organisms
and products for the therapy, prevention and diagnosis of diseases caused by
streptococcus, staphylococcus and other organisms. The license covers two issued
United States patents and one issued European patent as well as 11 pending
United States patent applications and corresponding foreign patent applications.
The issued United States patents expire in 2005 and 2014, respectively. The
agreement generally requires us to pay royalties on sales of products developed
from the licensed technologies and fees on revenues from sublicensees, where
applicable, and we are responsible for certain milestone payments and for the
costs of filing and prosecuting patent applications.


                                       10
<PAGE>

      Oregon State University. Oregon State is also a party to our license
agreement with Rockefeller whereby we have obtained the right and license to
make, use and sell products for the therapy, prevention and diagnosis of
diseases caused by streptococcus. Pursuant to a separate research support
agreement with Oregon State, we provided funding for sponsored research through
December 31, 1999, with exclusive license rights to all inventions and
discoveries resulting from this research. At this time, no additional funding is
contemplated under this agreement, however we retain the exclusive licensing
rights to the inventions and discoveries that may arise from this collaboration.
During 1999, we acquired an option to enter into a license with the University
in which we will acquire the rights to certain technology pertaining to the
potential development of a chlamydia vaccine. In February 2000 we exercised our
option and pursuant to an exclusive license agreement dated March, 2000, we will
make certain payments to the University as part of our obligation under the
option.

      In September 2000 we entered into a subcontract with Oregon State
University. The contract is for a project which is targeted towards developing
novel antiviral drugs capable of preventing disease and pathology for smallpox
in the event this pathogen were to be used as an agent of bioterrorism. The
project is being funded by a grant from the NIH. The basic virology aspects of
the project will be conducted at OSU and the drug development will be performed
by Siga under the subcontract. The budget for the subcontract work will be
negotiated on a year by year basis with OSU depending on progress of the program
and funding available.

      National Institutes of Health. We have entered into a clinical trials
agreement with the NIH pursuant to which the NIH, with our cooperation, will
conduct a clinical trial of our strep throat vaccine candidate. In addition,
during 2000, we received four Phase I SBIR grants from the NIH to support our
vaccine and anti infectives development programs.

      Wyeth-Ayerst. We have entered into a collaborative research and license
agreement with Wyeth-Ayerst in connection with the discovery and development of
anti-infectives for the treatment of gram-positive bacterial infections.
Pursuant to the agreement, Wyeth-Ayerst provided funding for a joint research
and development program, subject to certain milestones, through September 30,
1999 and is responsible for additional milestone payments.

      Washington University. In February 1998 we entered into a research
collaboration and worldwide license agreement with Washington University
pursuant to which we obtained the right and license to make, use and sell
antibiotic products based on gram-negative technology for all human and
veterinary diagnostic and therapeutic uses. The license covered five pending
United States patent applications and corresponding foreign patent applications.
The agreement generally required us to pay royalties on sales of products
developed from the licensed technologies and fees on revenues from sublicensees,
where applicable, and we were responsible for certain milestone payments and for
the costs of filing and prosecuting patent applications. Pursuant to the
agreement, we agreed to provided funding to Washington University for sponsored
research through February 6, 2001, with exclusive license rights to all
inventions and discoveries resulting from this research. During 1999, a dispute
arose between the parties regarding their respective performance under the
agreement. In February 2000, the parties reached a settlement agreement and
mutual release of their obligations under the research collaboration agreement.
Under the terms of the settlement, we are released from any further payments to
the University and have disclaimed any rights to the patents licensed under the
original agreement. As part of the settlement agreement, we entered into a
non-exclusive license to certain patents covered in the original agreement.


                                       11
<PAGE>

      Abbott Laboratories. In March 2000 we entered into an agreement with the
Ross Products Division of Abbott Laboratories (Ross). The agreement grants Ross
an exclusive option to negotiate an exclusive license to certain Siga technology
and patents in addition to certain research development services. In exchange
for research services and the option, Ross is obligated to pay us $120,000 in
three installments of $40,000. The first payment of $40,000 was received during
the quarter ended March 31, 2000. The remaining installments are contingent upon
certain milestones under the agreement. In the twelve months ended December 31,
2000, we recognized revenue of $80,000.

      Regents of the University of California. In December 2000 we entered into
an exclusive license agreement and a sponsored research agreement with the
Regents of the University of California (the "Regents"). Under the license
agreement Siga obtained rights for the exclusive commercial development, use and
sale of products related to certain inventions in exchange for a non-refundable
license issuance fee of $15,000 and an annual maintenance fee of $10,000. In the
event that the Company sub-leases the license, it shall pay Regents 15% of all
royalty payments made to Siga. Under the agreement, Siga will also pay Regents
15% of all funds received from Wyeth-Ayesrt and a minimum annual amount of
$250,000 for the continued development of the inventions for a period of three
years.

      Under the sponsored research agreement Siga will provide the Regents with
funding in the total amount of $300,000 over a period of two years to support
certain research.

      Maxygen, Inc. In October 2000 we entered into a collaborative agreement
with Maxygen, Inc. to develop a vaccine for biological defense applications. The
collaboration combines Siga's patented vaccine delivery system with Maxygen's
proprietary antigens for generating an immune response.

      American Home Products. In December 2000 we entered into a collaborative
agreement with Fort Dodge Animal Health, a division of American Home Products
Corporation. The collaboration is focused on the design of novel vaccines for
the prevention of veterinary diseases. The research collaboration combines
Siga's bacterial commensal delivery technology with Fort Dodge's proprietary
veterinary antigens. Siga will be responsible for the construction and
characterization of candidate vaccines while Fort Dodge will assess the
immunogenicity and protective capacity of the target animal species.

Intellectual Property and Proprietary Rights

      Protection of our proprietary compounds and technology is essential to our
business. Our policy is to seek, when appropriate, protection for our lead
compounds and certain other proprietary technology by filing patent applications
in the United States and other countries. We have licensed the rights to seven
issued United States patents and one issued European patent. We have also
licensed the rights to one allowed United States patent application, four
pending United States patent applications as well as corresponding foreign
patent applications. We are joint owner with Washington University of one
issued, one allowed application, and seven pending applications as well as
foreign counterparts. We are also exclusive owner of three pending U.S.
applications based on research conducted in our facility in Oregon.

      The patents and patent applications licensed to us relate to all of the
core technology used in the development of our leading product candidates,
including the mucosal vaccine delivery system, the SPEX protein expression
system for producing biopharmaceutical products, the protective streptococcal
antigens and the antibiotic development target, as well as a variety of early
stage research projects. Each of our products represented by each of the patents
is in a very early stage in its development process.

      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.


                                       12
<PAGE>

Government Regulation

      Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
biopharmaceutical products that we may develop. The nature and the extent to
which such regulations may apply to us will vary depending on the nature of any
such products. Virtually all of our potential biopharmaceutical products will
require regulatory approval by governmental agencies prior to commercialization.
In particular, human therapeutic products are subject to rigorous pre-clinical
and clinical testing and other approval procedures by the FDA and similar health
authorities in foreign countries. Various federal statutes and regulations also
govern or influence the manufacturing, safety, labeling, storage, record keeping
and marketing of such products. The process of obtaining these approvals and the
subsequent compliance with appropriate federal and foreign statutes and
regulations requires the expenditure of substantial resources.

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

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

      The FDA 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.


                                       13
<PAGE>

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 Cubist Pharmaceuticals, Inc., Corixa
Corporation, Microcide Pharmaceuticals, Inc., ID Vaccines Ltd., Actinova PLC,
and Antex Biologics, Inc. Academic institutions, governmental agencies and other
public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on their
own or through joint venture. There can be no assurance that our competitors
will not succeed in developing products that are more effective or less costly
than any which are being developed by us or which would render our technology
and future products obsolete and noncompetitive.

Human Resources and Facilities

      As of March 20, 2001 we had 17 full time employees. Our employees are not
covered by a collective bargaining agreement and we consider our employee
relations to be excellent.

Item 2. Properties

      Our headquarters are located in New York, New York and our research and
development facilities are located in Corvallis, Oregon. In New York, we lease
approximately 5,200 square feet under a lease that expires in November 2002. In
Corvallis, we lease approximately 10,000 square feet under a lease that expires
in December 2004.

Item 3. Legal Proceedings - None


                                       14
<PAGE>

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

      At our Annual Meeting of Stockholders held on November 1, 2000, the
following matters were voted upon:

The following nominees were elected to the Board of Directors

Nominee                      For        Number of Votes Against        Abstained
-------                      ---        -----------------------        ---------

Judson A. Cooper          5,925,991             12,840                     0

Eric I. Richman           5,925,991             12,840                     0

Thomas N. Lanier          5,925,991             12,840                     0

Jeffrey Rubin             5,925,991             12,840                     0

Joshua D. Schein          5,925,991             12,840                     0

The Stockholders voted to ratify the selection of Pricewaterhouse Coopers LLP as
independent auditors of SIGA Technologies, Inc. for its fiscal year ending
December 31, 2000.

                             For        Number of Votes Against        Abstained
                             ---        -----------------------        ---------
                          5,928,491              7,340                   3,000

The Stockholders voted to amend our 1996 Incentive and Non-Qualified Stock
Option Plan increasing the number of shares authorized for issuance by 1,000,000
shares from 1,500,000 to 2,500,000.

                             For        Number of Votes Against        Abstained
                             ---        -----------------------        ---------
                          2,290,025             70,130                   1,600


                                       15
<PAGE>

                                     Part II

Item 5. Market For Registrant's Common Equity and Related Stockholder Matters

      Price Range of Common Stock

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

                                   Price Range

1999                                                          High          Low

First Quarter                                                $1.88         $1.03
Second Quarter                                               $1.44         $0.81
Third Quarter                                                $1.41         $0.69
Fourth Quarter                                               $2.09         $0.97

2000                                                          High          Low

First Quarter                                                $9.38         $1.44
Second Quarter                                               $5.50         $3.00
Third Quarter                                                $4.88         $2.59
Fourth Quarter                                               $5.31         $3.00

      As of March 20, 2001, the closing sales price of our common stock was
$2.06 per share. There were 44 holders of record as of March 20, 2001. We
believe that the number of beneficial owners is substantially greater than the
number of record holders, because a large portion of common stock is held in
broker "street names."

      We have paid no dividends on our common stock and we do not expect to pay
cash dividends in the foreseeable future. We are not under any contractual
restriction as to our present or future ability to pay dividends. We currently
intend to retain any future earnings to finance the growth and development of
our business.

Recent Sales of Unregistered Securities

      On January 31, 2000, we completed a private placement of an aggregate
principal amount of $1,500,000 6% convertible debentures and 1,043,478 warrants.
We received net proceeds of $1,499,674 from the total $1,552,174 gross proceeds.
The debentures are convertible into common stock at $1.44 per share. The
warrants have a term of five years and are exercisable at $3.41 per share. Under
certain circumstances, we can redeem the shares.


                                       16
<PAGE>

      On March 28, 2000, we completed a private placement of an aggregate of
600,000 shares of common stock and 450,000 warrants. We received net proceeds of
$2,883,000 from the total gross proceeds of $3,000,000. The warrants have a term
of three years; 210,000 warrants are exercisable at $5.00 per share, 120,000 are
exercisable at $6.375 per share and 120,000 are exercisable at $6.90 per share.

      On July 7, 2000, pursuant to a stock purchase agreement, we exchanged
40,336 shares of our common stock and certain additional consideration, for
12.5% of the outstanding capital stock of Open-i Media, Inc., an Internet
development and multimedia training company.

Recent Developments

      On March, 30, 2001, Joshua D. Schein, our Chief Executive Officer and a
director and Judson A. Cooper, our Chairman of the Board entered into an
agreement with, among others, Donald G. Drapkin, a beneficial owner of more than
5% of our common stock, in which Messrs. Schein and Cooper have agreed to resign
from Siga and use their best efforts to cause each of the current directors of
Siga to resign. Certain provisions of the agreement are subject to the condition
that each current director of Siga resign. Provided that such condition is
satisfied, it is expected that Mr. Drapkin will be appointed Chairman of the
Board and Eric A. Rose, M.D. will be appointed as Interim Chief Executive
Officer. In addition, it is anticipated that Gabriel M. Cerrone, Thomas E.
Constance, Mehmet C. Oz, M.D. and Michael Weiner, M.D. will be appointed as
directors. Each of the parties to the agreement have agreed to lock up their
respective shares of common stock and options of Siga for 24 months subject to
certain conditions and exceptions. Messrs. Schein and Cooper have also each
entered into a separation agreement with Siga. A Schedule 14f-1 is currently
being prepared and will be sent to our stockholders promptly. The resignations
of Messrs. Schein and Cooper are expected to be effective 10 days after the
mailing of Schedule 14f-1.


                                       17
<PAGE>

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
        OF OPERATIONS

      The following discussion should be read in conjunction with our financial
statements and notes to those statements and other financial information
appearing elsewhere in this Annual Report. In addition to historical
information, the following discussion and other parts of this Annual Report
contain forward-looking information that involves risks and uncertainties.

Overview

      We are a development stage, technology company, whose primary focus is in
biopharmaceutical product development. Since inception in December 1995 our
efforts have been principally devoted to research and development, securing
patent protection, obtaining corporate relationships and raising capital. Since
inception through December 31, 2000, we have sustained cumulative net losses of
$22,441,569, including non-cash charges in the amount of $1,457,458 for the
write-off of research and development expenses associated with the acquisition
of certain technology rights acquired from a third party in exchange for our
common stock. In addition, a non-cash charge of $450,450 was incurred for stock
option and warrant compensation expense. Our losses have resulted primarily from
expenditures incurred in connection with research and development, patent
preparation and prosecution and general and administrative expenses. From
inception through December 31, 2000, research and development expenses amounted
to $10,275,888, patent preparation and prosecution expenses totaled $1,237,491,
general and administration expenses amounted to $12,264,156. From inception
through December 31, 2000 revenues from research and development agreements and
government grants totaled $2,127,681.

      Since inception, Siga has had limited resources, has incurred cumulative
net operating losses of $22,198,954 and expects to incur additional losses to
perform further research and development activities. We do not have commercial
biomedical products, and we do not expect to have such for several years, if at
all. We believe that we will need additional funds to complete the development
of our biomedical products. These circumstances raise substantial doubt about
our ability to continue as a going concern. Our plans with regard to these
matters include continued development of our products as well as seeking
additional research support funds and financial arrangements. Although we
continue to pursue these plans, there is no assurance that we will be successful
in obtaining sufficient financing on terms acceptable to us. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

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

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

Results of Operations

Twelve Months ended December 31, 2000 and December 31, 1999.

      Revenues from grants and research and development contracts were $483,120
for the twelve months ended December 31, 2000 compared to $519,561 for the same
period of 1999. The approximate 7% decline in revenue for the period ended
December 31, 2000 is the result of no revenue being recognized from
Wyeth-Ayerst, compared to revenue of $337,500 for the same twelve month period
of 1999. This decline was largely offset by increased revenue from Small
Business Innovation Research (SBIR) Grants and an agreement with the Ross
Products division of Abbott Laboratories. During the twelve month period of 2000
we received $450,000 from Wyeth-Ayerst in continued support for our research
efforts, however, pending completion of a new agreement, the entire amount has
been recorded as deferred revenue.


                                       18
<PAGE>

      General and administrative expenses increased approximately 123% for the
twelve months ended December 31, 2000 to $4,851,100 from $2,284,790 for the
twelve months ended December 31, 1999. The increase in expenditures is the
result of non-cash compensation of approximately $950,000 associated with the
grant of warrants and options to certain consultants and directors, and a charge
of $511,000 to reserve an amount advanced to Hypernix during the twelve months
ended December 31, 2000. Hypernix was an Isreali company we entered into a
letter of intent to acquire in May 2000. We terminated the agreement in August
2000. Also contributing to the increase in expenses were the personnel costs
associated with managing our internet assets and higher legal and accounting
costs incurred as a result of our Internet investment.

      Research and development expenses increased to $2,608,907 for the twelve
months ended December 31, 2000 from $1,672,778 for the same period in 1999. The
approximate 56% increase in spending from 1999 compared to the same twelve month
period ended December 31, 2000, is primarily the result of expenses incurred in
the development of our internet initiative, PeerFinder. In July 2000, we
exchanged our internet assets and 40,336 shares of our common stock for 12.5% of
Open-i Media, Inc. an Internet development and multimedia training company. At
December 31, 2000, we reassessed the value of our investment in Open-i Media. We
reviewed certain events and changes in circumstances indicating that the
carrying amount of the investment in Open-i Media may not be recoverable in its
entirety. As a result, we elected to reduce the carrying amount of our
investment to reflect its recoverable value as of year end and recorded an
impairment charge of $156,000. Research and development expenses incurred in our
biotechnology operation were essentially flat.

      Patent preparation expense of $106,647 for the twelve months ended
December 31, 2000 was approximately 45% lower than the $193,567 incurred for the
twelve months ending December 31, 1999. The decline in spending from the prior
year twelve month period reflects the continuing trend to reduce patent costs by
focusing on our core biopharmaceutical technologies and eliminating programs
that we believe have less commercial value.

      In the twelve months ended December 31, 1999 we incurred expenses of
$97,696 resulting from the settlement of litigation with a university where we
had been sponsoring research. The settlement expenses were for the transfer of
title to the university of certain fixed assets as part of the settlement
agreement. No such expenses were incurred in the twelve months ended December
31, 2000.

      Total operating loss for the twelve months ended December 31, 2000 was
$7,083,534, an approximate 90% increase from the $3,729,543 loss incurred for
the twelve months ended December 31, 1999. The increase in the operating loss
was primarily due to the non-cash general and administration compensation
expense associated with warrants and options granted to certain consultants and
directors and the charge taken to reserve the funds advanced to Hypernix. Also
contributing to the increase in the operating loss were the higher general and
administrative and research and development expenses associated with the
management and development of our internet assets.


                                       19
<PAGE>

      Net interest expense for the twelve months ended December 31, 2000 was
$550,464 compared to income of $26,383 for the twelve months ended December 31,
1999. The increase in interest expense is the result of the accrual of interest
expense associated with our sale of $1,500,000 principal amount of 6%
convertible debentures in January 2000.

      We recorded a net gain of $66,660 for the twelve months ended December 31,
1999 from the sale of certain securities held for investment purposes. No such
income was received in the year ending December 31, 2000.

Quarterly Results of Operations

      The following table sets forth selected unaudited quarterly statements of
operations data, in dollar amounts and as percentages of net revenue, for the
four quarters ended December 31, 1999 and for the four quarters ended December
31, 2000. In our opinion this information has been prepared substantially on the
same basis as the audited financial statements appearing elsewhere in this
annual statement, and all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated below to present
fairly the unaudited quarterly results of operations data. The quarterly data
should be read with our financial statement and then noted to those statements
appearing elsewhere in the annual statement.

1999
     ($ in 000's)                   Q1           Q2           Q3           Q4
                                    --           --           --           --
     Revenue                      $  113       $  113       $  147       $  147
       G&A                        $  525       $  531       $  551       $  678
         % of Revenue                465%         470%         375%         461%
        R&D                       $  554       $  519       $  489       $  111
         % of Revenue                490%         459%         333%          76%
        Patent Prep. Costs        $   62       $   61       $   14       $   56
         % of Revenue                 55%          54%          10%          39%
        Operating Loss            $1,028       $  997       $  907       $  796
         % of Revenue                910%         883%         618%         542%
        Net Loss                  $  947       $  910       $  868       $  911
         % of  Revenue               838%         805%         590%         620%

2000
     ($ in 000's)                   Q1           Q2           Q3           Q4
                                    --           --           --           --
     Revenue                      $   81       $   91       $  193       $  118
       G&A                        $  811       $  966       $1,808       $1,266
         % of Revenue              1,001%       1,062%         937%       1,073%
        R&D                       $  763       $  392       $  876       $  578
         % of Revenue                942%         437%         454%         490%
        Patent Prep. Costs        $   26       $   38       $   20       $   23
         % of Revenue                 32%          42%          10%          18%
        Operating Loss            $1,519       $1,305       $2,511       $1,747
         % of Revenue              1,875%       1,434%        1301%       1,482%
       Net Loss                   $1,638       $1,447       $2,658       $1,891
         % of  Revenue             2,022%       1,590%       1,377%       1,603%


                                       20
<PAGE>

Liquidity and Capital Resources

      As of December 31, 2000 we had $1,707,385 in cash and cash equivalents. In
July of 1997 we entered into a collaborative two year research and license
agreement with Wyeth-Ayerst. Under the terms of the agreement, we have granted
Wyeth-Ayerst an exclusive worldwide license to develop, make, use and sell
products derived from specified technologies. If certain milestones are met, the
agreement requires Wyeth-Ayerst to sponsor further research by us for the
development of the licensed technologies for a period of two years from the
effective date of the agreement, in return for payments to Siga. Through
December 31, 2000 we have recorded a total of $1,800,000 of revenue from
Wyeth-Ayerst. We received an additional $450,000 in payments from Wyeth-Ayerst
during the twelve months ended December 31, 2000 and an additional $350,000 in
the first quarter of 2001. In July and October of 1999 we were awarded SBIR
grants from the NIH. The grant received in July was for a six month program for
a total of $109,072 and the October grant was a twelve month program for a total
of $293,466. As of December 31, 2000 the total amount of the grants had been
received. In May and August 2000 we were awarded two Phase I SBIR grants from
the National Institutes for Health in the amounts of $26,000 and $96,163,
respectively. As of December 31, 2000 the total award of $26,000 from the May
grant had been received and $83,637 has been invoiced from the August grant. The
remaining $12,526 from the August grant was received in February 2001. In
September 2000 we were awarded an additional grant from the NIH for $125,000 to
support certain research activities for a six month period. As of December 31,
2000 we had received $73,056 of the grant, the remaining $51,994 was received in
March 2001.

      In January of 2000 we completed a private placement of 6% convertible
debentures at an aggregate principal amount of $1,500,000 and 1,043,478 warrants
to purchase shares of our common stock with a purchase price of $0.05 per
warrant. We received net proceeds of $1,499,674 from the total $1,552,174 gross
proceeds raised. The debentures are convertible into common stock at $1.4375 per
share. Interest at the rate of 6% per annum is payable on the principal of each
convertible debenture in cash or shares of Siga's common stock, at our
discretion upon conversion or at maturity. In the twelve months ended December
31, 2000, $125,000 principal amount of the debenture and the accrued interest
was converted into our common stock. In January 2001, an additional $25,000
principal amount of the debenture was converted into our common stock. The
warrants have a term of five years and are exercisable at $3.4059 per share. We
have the right to require the holder to exercise the warrants within five days
under the following circumstances: (i) a registration statement is effective;
and (ii) the closing bid price for our common stock, for each of any 15
consecutive trading days is at least 200% of the exercise price of such
warrants. If the holder does not exercise the warrants after notice is given,
the unexercised warrants will expire. In connection with this transaction, we
issued warrants to purchase a total of 275,000 shares of common stock to the
placement agent and the investor's counsel (or their respective designees).
These warrants have a term of five years and are exercisable at $1.45 per share.

      In March 2000 we entered into an agreement with the Ross Products Division
of Abbott Laboratories (Ross). The agreement grants Ross an exclusive option to
negotiate an exclusive license to certain Siga technology and patents in
addition to certain research development services. In exchange for research
services and the option, Ross is obligated to pay us $120,000 in three
installments of $40,000. The first payment of $40,000 was received during the
quarter ended March 31, 2000. The remaining installments are contingent upon
certain milestones under the agreement. In the twelve months ended December 31,
2000, we recognized revenue of $80,000.

      On March 28, 2000 we completed a private placement of an aggregate of
600,000 shares of common stock and 450,000 warrants. We received net proceeds of
$2,883,000 from the total gross proceeds of $3,000,000. The warrants have a term
of three years; 210,000 warrants are exercisable at $5.00 per share, 120,000 are
exercisable at $6.375 per share and 120,000 are exercisable at $6.90 per share.
The warrants are redeemable at $0.01 each, by us upon meeting certain
conditions.


                                       21
<PAGE>

      In May 2000 we entered into a binding letter of intent to acquire
Israel-based Hypernix Technologies, Ltd. Hypernix is the developer of Gooey, an
integrated roving communication platform. If the transaction was consummated, we
would have issued 3 million shares of our common stock to the stockholders and
certain employees of Hypernix and assume all of the disclosed liabilities of
Hypernix (not to exceed $1,250,000), with Hypernix's creditors to be paid half
in cash and half in our common stock. Also, we were to lend Hypernix $250,000
per month for up to five months. This advance was subject to interest at an
annual rate of 10% and was secured by all the assets of Hypernix. We advanced
Hypernix $261,000 and $250,000 in May and July respectively, under the
agreement. In August we terminated the letter of intent. We recorded a charge of
$261,000 for the three months ended June 30, 2000 and $250,000 for the three
months ended September 30, 2000 to reserve the advances made to Hypernix. In
March 2001 we received approximately $84,000 from the liquidation of certain
assets of Hypernix.

      In July 2000 we entered into an agreement with Global Impact
Communications, Inc.(GIC). GIC will serve as our public relations agency. GIC
received options to purchase 75,000 shares of our common stock and they will
receive a monthly retainer of $6,000. Twenty five thousand options are
exercisable at $5.75 per share, 25,000 at $6.50 per share and 25,000 at $7.50
per share.

      In August 2000 we entered into an agreement with The Kriegsman Group for
them to render advice and assistance with respect to financial consulting ,
planning, structuring, business strategy, public relations and raising equity
capital. The term of the agreement was for a period of fifteen months with a
guarantee of a six-month retention from August 1, 2000 through February 1, 2001.
We paid Kriegsman a fee of $40,000 upon signing of the agreement The agreement
also granted Kriegsman a warrant to purchase 500,000 shares of our common stock
with 200,000 warrants vesting upon the date of the agreement with an exercise
price of $3.63 per share. As of December 31, 2000 we had paid them $120,000
under the agreement. In January 2001, the agreement was terminated. As part of
the mutual agreement to terminate, Kriegsman agreed to the cancellation of the
500,000 warrant grant made at the time of the signing of the agreement and
accept a new grant of 50,000 warrants at an exercise price of $3.63 per share.

      In November 2000 we entered into a one year consulting agreement with
Fahnestock and Co., the investment banking firm that provided services
facilitating our sale in January 2000 of the $1.5 million principal amount 6%
convertible debentures, and the March 2000 sale of $3.0 million of our equity.
Under the terms of the agreement, we will receive, marketing, public relations,
acquisitions and strategic planning services. In exchange for such services, we
amended the terms of the warrants Fahnestock received for their efforts in the
two fund raising efforts, changing the exercise price of their warrants to $2.00
per share.

      On December 6, 2000 the Company entered into an exclusive license
agreement and a sponsored research agreement with the Regents of the University
of California (the "Regents"). Under the license agreement Siga obtained rights
for the exclusive commercial development, use and sale of products related to
certain inventions in exchange for a non-refundable license issuance fee of
$15,000 and an annual maintenance fee of $10,00. In the event that the Company
sub-leases the license, it shall; pay Regents 15% of all royalty payments made
to Siga. Under the agreement, Siga will also pay Regents 15% of all funds
received from Wyeth-Avesrt and a minimum annual amount of $250,000 for the
continued development of the inventions for a period of three years.

      Under the sponsored research agreement Siga will provide the Regents with
funding in the total amount of $300,000 over a period of two years to support
certain research.

      In January 2001 we received an additional $112,500 from Wyeth-Ayerst to
further support our research and development programs begun under our July 1997
agreement. In February 2001 we received a $237,500 payment from Wyeth-Ayerst for
achieving a certain research milestone under the July 1997 agreement.

      We anticipate that our current resources will be sufficient to finance our
currently anticipated needs for operating and capital expenditures approximately
through the Fourth quarter of 2001. In addition, we will attempt to generate
additional working capital through a combination of collaborative agreements,
strategic alliances, research grants, equity and debt financing. However, no
assurance can be provided that additional capital will be obtained through these
sources or, if obtained, on commercially reasonable terms. If we are unable to
raise additional capital when needed, we may be forced to curtail certain
activities and programs or possibly cease operations altogether.


                                       22
<PAGE>

      Since inception, Siga has had limited resources, has incurred cumulative
net operating losses of $22,198,954 and expects to incur additional losses to
perform further research and development activities. We do not have commercial
biomedical products, and we do not expect to have such for several years, if at
all. We believe that we will need additional funds to complete the development
of our biomedical products. These circumstances raise substantial doubt about
our ability to continue as a going concern. Our plans with regard to these
matters include continued development of our products as well as seeking
additional research support funds and financial arrangements. Although we
continue to pursue these plans, there is no assurance that we will be successful
in obtaining sufficient financing on terms acceptable to us. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

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

Risk Factors That May Affect Results of Operations and Financial Condition

      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 $6.6 million for the year ended December 31, 1998, $3.6 million for
the year ended December 31, 1999 and $7.8 million for the year ended December
31, 2000. As of December 31, 2000 and December 31, 1999, our accumulated deficit
was $22.4 million and $14.7 million, respectively. We expect to continue to
incur significant operating and capital expenditures and, as a result, 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, our business, results
of operations and financial condition will be materially and adversely affected.
Because our strategy includes acquisitions of other businesses, acquisition
expenses and any cash used to make these acquisitions will reduce our available
cash.

      We are in various stages of product development and there can be no
assurance of successful commercialization. Our research and development programs
are at an early stage of development. The United States Food and Drug
Administration has not approved any of our biopharmaceutical product candidates.
Any drug candidates developed by us will require significant additional research
and development efforts, including extensive pre-clinical and clinical testing
and regulatory approval, prior to commercial sale. We cannot be sure our
approach to drug discovery will be effective or will result in the development
of any drug. We cannot expect that any drugs that do result from our research
and development efforts will be commercially available for many years.

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

      o     be safe, non-toxic and effective;

      o     otherwise meet applicable regulatory standards;

      o     receive the necessary regulatory approvals;

      o     develop into commercially viable drugs;

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

      o     be successfully marketed;

      o     be reimbursed by government or private consumers; and

      o     achieve customer acceptance.


                                       23
<PAGE>

      In addition, third parties may preclude us from marketing our drugs
through enforcement of their proprietary rights, or third parties may succeed in
marketing equivalent or superior drug products. Our failure to develop safe,
commercially viable drugs would have a material adverse effect on our business,
financial condition and results of operations.

      Most of our expected future revenues are contingent upon collaborative and
license agreements and we may not achieve sufficient revenues from these
agreements to attain profitability. Our ability to generate revenues depends on
our ability to enter into additional collaborative and license agreements with
third parties and maintain the agreements we currently have in place. We will
receive little or no revenues under our agreements if our collaborators'
research, development or marketing efforts are unsuccessful, or if our
agreements are terminated early. Additionally, if we do not enter into new
collaborative agreements, we will not receive future revenues from new sources.

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

      We may not find sufficient acquisition candidates to implement our
business strategy. As part of our business strategy we expect to enter into
additional business combinations and acquisitions. We compete for acquisition
candidates with other entities, some of which have greater financial resources
than we have. Increased competition for acquisition candidates may make fewer
acquisition candidates available to us and may cause acquisitions to be made on
less attractive terms, such as higher purchase prices. Acquisition costs may
increase to levels that are beyond our financial capability or that would
adversely affect our results of operations and financial condition. Our ability
to make acquisitions will depend in part on the relative attractiveness of
shares of our common stock as consideration for potential acquisition
candidates. This attractiveness may depend largely on the relative market price,
our ability to register common stock and capital appreciation prospects of our
common stock. If the market price of our common stock were to decline materially
over a prolonged period of time, our acquisition program could be materially
adversely affected.

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

      Because we must obtain regulatory clearance to test and market our
products in the United States and foreign jurisdictions, we cannot predict
whether or when we will be permitted to commercialize our products. The
pharmaceutical industry is subject to stringent regulation by a wide range of
authorities in the geographic areas where we intend to develop and commercialize
products. A pharmaceutical product cannot be marketed in the United States until
it has completed rigorous preclinical testing and clinical trials and an
extensive regulatory clearance process implemented by the FDA. Satisfaction of
regulatory requirements typically takes many years, is dependent upon the type,
complexity and novelty of the product and requires the expenditure of
substantial resources.


                                       24
<PAGE>

      Before commencing clinical trials in humans, we must submit and receive
clearance from the FDA by means of an IND application. Clinical trials are
subject to oversight by institutional review boards and the FDA and:

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

o     must meet requirements for institutional review board oversight;

o     must meet requirements for informed consent;

o     must meet requirements for good clinical and manufacturing practices;

o     are subject to continuing FDA oversight;

o     may require large numbers of test subjects; and

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

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

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

      Outside the United States, our ability to market a product is contingent
upon receiving a marketing authorization from the appropriate regulatory
authorities. This foreign regulatory approval process includes all of the risks
associated with FDA clearance described above.

      If our technologies or those of our collaborators are alleged or found to
infringe the patents or proprietary rights of others, we may be sued or have to
license those rights from others on unfavorable terms. Our commercial success
will depend significantly on our ability to operate without infringing the
patents and proprietary rights of third parties. Our technologies along with our
licensors' and our collaborators' technologies may infringe the patents or
proprietary rights of others. An adverse outcome in litigation or an
interference to determine priority or other proceeding in a court or patent
office could subject us to significant liabilities, require disputed rights to
be licensed from or to other parties or require us, our licensors or our
collaborators to cease using a technology necessary to carry out research,
development and commercialization.

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


                                       25
<PAGE>

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

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

      Our ability to compete may decrease if we do not adequately protect our
intellectual property rights. Our commercial success will depend in part on our
and our collaborators' ability to obtain and maintain patent protection for our
proprietary technologies, drug targets and potential products and to effectively
preserve our trade secrets. Because of the substantial length of time and
expense associated with bringing potential products through the development and
regulatory clearance processes to reach the marketplace, the pharmaceutical
industry places considerable importance on obtaining patent and trade secret
protection. The patent positions of pharmaceutical and biotechnology companies
can be highly uncertain and involve complex legal and factual questions. No
consistent policy regarding the breadth of claims allowed in biotechnology
patents has emerged to date. Accordingly, we cannot predict the type and breadth
of claims allowed in these patents.

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

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

      We depend on key employees in a competitive market for skilled personnel.
We are highly dependent on the principal members of our management, operations
and scientific staff, including Joshua D. Schein, our Chief Executive Officer.
The loss of any of these persons' services would have a material adverse effect
on our business. We have entered into employment agreements with seven
individuals who we consider to be "Key Employees." We do not maintain a key
person life insurance policy on the life of any employee.

      Our future success also will depend in part on the continued service of
our key scientific, software, bioinformatics and management personnel and our
ability to identify, hire and retain additional personnel, including customer
service, marketing and sales staff. We experience intense competition for
qualified personnel. We may not be able to continue to attract and retain
personnel necessary for the development of our business.


                                       26
<PAGE>

      Our activities involve hazardous materials and may subject us to
environmental regulatory liabilities. Our biopharmaceutical research and
development involves the controlled use of hazardous and radioactive materials
and biological waste. We are subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
these materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of these materials comply with legally
prescribed standards, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of an accident, we could
be held liable for damages, and this liability could exceed our resources.

      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.

Item 7. Financial Statements and Supplementary Data

        The financial statements required by Item 7 are included in this Annual
        Report beginning on Page F-1.

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

        None.


                                       27
<PAGE>

                                    PART III

Item 9. Directors and Executive Officers of the Registrant

Name                       Age   Position
----                       ---   --------
Joshua D. Schein, Ph.D.    40    Chief Executive Officer, Secretary and Director
Judson A. Cooper           42    Chairman of the Board, Executive Vice President
Thomas N. Konatich         55    Chief Financial Officer and Treasurer
Dennis E. Hruby, Ph.D.     49    Chief Scientific Officer
Eric Richman               40    Director
Thomas Lanier              41    Director
Jeffrey Rubin              33    Director

      Joshua D. Schein, Ph.D. has served as our Chief Executive Officer since
August 1998 and as acting Chief Executive Officer from April 1998 to August
1998. Dr. Schein has also served as Secretary and a Director since December
1995. Dr. Schein served as Chief Financial Officer from December 1995 until
April 1998. From December 1995 to June 1998, Dr. Schein was a Director of
DepoMed, Inc., a publicly traded biotechnology company. From January 1996 to
August 1998, Dr. Schein was an executive officer and a director of Virologix
Corporation, a private biotechnology company. From June 1996 to September 1998,
Dr. Schein was an executive officer and a director of Callisto Pharmaceuticals,
Inc. From 1994 to 1995, Dr. Schein served as a Vice President of Investment
Banking at Josephthal, Lyon and Ross, Incorporated, an investment banking firm.
From 1991 to 1994, Dr. Schein was a Vice President at D. Blech & Company,
Incorporated, a merchant and investment banking firm focused on the
biopharmaceutical industry. Dr. Schein received a Ph.D. in neuroscience from the
Albert Einstein College of Medicine and an MBA from the Columbia Graduate School
of Business. Dr. Schein is a principal of Prism Ventures LLC ("Prism"), a
privately held limited liability company.

      Judson A. Cooper has served as our Chairman of the Board of Directors
since August 1998 and as acting Chairman of the Board from April 1998 to August
1998. Mr. Cooper has also served as a Director since December 1995 and Executive
Vice President since November 1996. From December 1995 until November 1996 Mr.
Cooper served as President. From August 1995 to June 1998, Mr. Cooper was a
Director of DepoMed, Inc., a publicly traded biotechnology company. From January
1996 to August 1998, Mr. Cooper was an executive officer and a director of
Virologix Corporation, a private biotechnology company. From June 1996 to
September 1998, Mr. Cooper was an executive officer and a director of Callisto
Pharmaceuticals, Inc. Mr. Cooper was a private investor from September 1993 to
December 1995. From 1991 to 1993, Mr. Cooper served as a Vice President of D.
Blech & Company, Incorporated. Mr. Cooper is a graduate of the Kellogg School of
Management. Mr. Cooper is a principal of Prism Ventures LLC ("Prism"), a
privately held limited liability company.

      Thomas N. Konatich has served as Chief Financial Officer and Treasurer
since April 1, 1998. From November 1996 through March 1998, Mr. Konatich served
as Chief Financial Officer and a Director of Innapharma, Inc., a privately held
pharmaceutical development company. From 1993 through November 1996, Mr.
Konatich served as Vice President and Chief Financial Officer of Seragen, Inc.,
a publicly traded biopharmaceutical development company. From 1988 to 1993, he
was Treasurer of Ohmicron Corporation, a venture capital financed environmental
biotechnology firm. Mr. Konatich has an MBA from the Columbia Graduate School of
Business.


                                       28
<PAGE>

      Dennis F. Hruby, Ph.D. has served as Vice-President - Chief Scientific
Officer since June 2000. From April 1,1997 through June 2000 Dr. Hruby was our
Vice President of Research. From January 1996 through March 1997, Dr. Hruby
served as a senior scientific advisor to Siga. Dr. Hruby is a Professor of
Microbiology at Oregon State University, and from 1990 to 1993 was Director of
the Molecular and Cellular Biology Program and Associate Director of the Center
for Gene Research and Biotechnology. Dr. Hruby specializes in virology and cell
biology research, and the use of viral and bacterial vectors to produce
recombinant vaccines. He is a member of the American Society of Virology, the
American Society for Microbiology and a fellow of the American Academy of
Microbiology. Dr. Hruby received a Ph.D. in microbiology from the University of
Colorado Medical Center and a B.S. in microbiology from Oregon State University.

      Eric Richman has been a Director since November 2000. Since June 2000, Mr.
Richman has been Vice President, Corporate Development at OptiMEMS, Inc., a
development stage optical switch company. Prior to thant, from 1998 to 2000, he
was Director, International Commercialization with MedImmune, Inc. From 1993 to
1998, Mr. Richman was MedImmune's Senior Director of Transplantation Products.
Mr. Richman was part of the founding team at MedImmune holding various other
administrative, financial and strategic planning positions since joining
MedImmune in 1988. Mr. Richman was a key member on the launch teams for the
company's biotechnology products, both domestically and internationally. Mr.
Richman received a B.S. degree in Biomedical Science in 1984 from the Sophie
Davis School of Biomedical Education and a Master of International Management in
1987 from the American Graduate School of International Management.

      Thomas Lanier has been a Director since January 2000. Since 1996, Mr.
Lanier has been an International Advisor for the U.S. Department of the Treasury
during which time he co-wrote the U.S. Treasury's guide to external debt
issuance for emerging market borrowers. From 1988 until 1996 Mr. Lanier worked
for Chemical Bank as a U.S. Government Bond Trader (1988-1993), Emerging Markets
Salesperson (1993-1994) and Emerging Markets Debt Trader (1994-1996). In 1981
Mr. Lanier graduated from the United States Military Academy at West Point with
a Bachelor of Science Degree and prior to leaving the Army in 1986, also
graduated from the U.S. Army Airborne School and the U.S. Army Flight School as
well as planning, organizing and controlling logistical operations on an
international project for the Army Chief of Staff. In 1998, Mr. Lanier received
a Masters of Business Administration with an emphasis in finance and marketing
from the Fuqua School of Business, Duke University.

      Jeffrey Rubin has been a director since November 1998. Mr. Rubin is
President and Director of Newtek Capital, Inc., an asset management and
investment banking firm he formed in January 1998. From 1994 to 1997, Mr. Rubin
was founder and a director of the Fastcast Corporation, a company specializing
in optical technologies. From 1989 to 1994, Mr. Rubin was a Vice President of
American European Corporation, an import/export company. Mr. Rubin received a
Bachelor of Arts degree in 1989 from the University of Michigan.


                                       29
<PAGE>

Item 10. Executive Compensation

      The following table sets forth the total compensation paid or accrued for
the years ended December 31, 2000, 1999 and 1998 for Siga's Chief Executive
Officer and its four most highly compensated executive officers, other than its
Chief Executive Officer, whose salary and bonus for the fiscal year ended
December 31, 2000 were in excess of $100,000.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                        Annual Compensation
                                                        -------------------

                                                                                   Long-Term
                                                                                  Compensation
                                                             Other Annual          Securities
                                                             Compensation    Underlying  Options(#)
                                                             ------------    ----------  ----------

Name and Principal Position           Year      Salary ($)       ($)
---------------------------           ----      ----------       ---
<S>                                   <C>         <C>             <C>                <C>
Joshua D. Schein, Ph.D., Chief        2000        250,000         --                 500,000
Executive Officer and Director
                                      1999        225,000         --                 150,000

                                      1998        170,939         --                  16,667

Judson A. Cooper, Executive Vice      2000        250,000         --                 500,000
President and Director
                                      1999        225,000         --                 150,000

                                      1998        170,939         --                  16,667

Dennis E. Hruby, Ph.D., Chief         2000        180,000         --                 125,000
Scientific Officer
                                      1999        170,000         --                      --

                                      1998        167,148         --                  40,000

Thomas N. Konatich, Chief Financial   2000        170,000         --                 100,000
Officer
                                      1999        170,000         --                      --

                                      1998        120,172         --                  95,000
</TABLE>

(1)   Consisting of the value of common stock issued at fair market value.


                                       30
<PAGE>

Option Grants for the Year Ended December 31, 2000

            The following table sets forth grants of stock options to Siga's
Chief Executive Officer and its four most highly compensated executive officers,
other than its Chief Executive Officer, for the year ended December 31, 2000.
The exercise price per share of each option was equal to the fair market value
at the time of the grant, except for the grant to Dr. Hruby. The grants to Dr.
Hruby were non-Plan grants at a discount of approximately 50% to market.

                        Option Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                       Individual Grants
                     ----------------------------------------------------
                                  Percent of
                                     Total
                      Number of     Options
                     Securities   Granted to
                     Underlying    Employees       Exercise
                       Options     in Fiscal      Price per    Expiration
Name                 Granted (#)  Year (%)(1)    Share ($/SH)     Date
----                 -----------  -----------    ------------     ----
<S>                    <C>            <C>            <C>         <C>
Joshua D. Schein       500,000        43.8           2.00        1/19/10
Judson A. Cooper       500,000        43.8           2.00        1/19/10
Dennis E. Hruby        125,000         (2)           2.00        1/19/10
Thomas N. Konatich     100,000         8.7           2.00        1/19/10
</TABLE>

(1)   Based on options to purchase an aggregate of 1,144,000 shares of common
      stock granted under the Amended 1996 Incentive and Non-Qualified Stock
      Option Plan.

(2)   Options were granted outside the Amended 1996 Incentive and Non-Qualified
      Stock Option Plan.

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

            The following table provides certain summary information concerning
stock options held as of December 31, 2000 by Siga's Chief Executive Officer and
its four most highly compensated executive officers, other than its Chief
Executive Officer. No options were exercised during fiscal 1999 by any of the
officers.

<TABLE>
<CAPTION>
                                                                               Value of Unexercised
                            Number of Securities Underlying                    In-The-Money Options
                                  Unexercised Options#                       at Fiscal Year-End($)(1)
                            ---------------------------------            ---------------------------------
Name                        Exercisable         Unexercisable            Exercisable         Unexercisable
----                        -----------         -------------            -----------         -------------
<S>                           <C>                  <C>                      <C>                 <C>
Joshua D. Schein              662,501               37,500                  735,938              70,313
Judson A. Cooper              662,501               37,500                  735,938              70,313
Dennis Hruby                   52,500              122,500                   25,000             100,000
Thomas N. Konatich             85,000              110,000                   37,500              62,500
</TABLE>

            (1) Based upon the closing price on December 31, 2000 as reported on
the Nasdaq SmallCap Market and the exercise price per option.


                                       31
<PAGE>

Stock Option Plan

      As of January 1, 1996, we adopted our 1996 Incentive and Non-Qualified
Stock Option Plan (the "Plan"), pursuant to which stock options may be granted
to key employees, consultants and outside directors.

      The Plan is administered by a committee (the "Committee") comprised of
disinterested directors. The Committee determines persons to be granted stock
options, the amount of stock options to be granted to each such person, and the
terms and conditions of any stock options as permitted under the Plan. The
members of the Committee are Thomas Lanier and Jeffrey Rubin.

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

      The Plan, as amended, provides for the granting of options to purchase
2,500,000 shares of common stock, of which 2,167,061 options were outstanding as
of December 31, 2000.

Employment Contracts and Directors Compensation

      Dr. Joshua Schein, our Chief Executive Officer, was employed under an
agreement through December 31, 1999 which had a base annual salary of $225,000
and granted him 16,667 options per year, exercisable at the fair market value on
the date of the grant. In January 2000 he entered into a new employment
agreement with Siga, which agreement was amended and restated as of October 6,
2000, expires January 2005 and is cancelable by Siga only for cause, as defined
in the agreement. The agreement is renewable for additional one year terms
unless cancelled by either party in writing 180 days prior to cancellation. Dr.
Schein receives an annual base salary of $250,000 and he was granted 500,000
fully vested stock options upon signing the new agreement. The options are
exercisable at $2.00 per share, the fair market value on the date of grant. He
is eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors. Under the amended and restated agreement, in the event
of a change in control, Dr. Schein will be paid his compensation for the
remainder of his employment term and will receive a tax gross-up payment, and
all unvested options held by Dr. Schein will become vested and exercisable. In
addition, Dr. Schein will receive a cash payment equal to 1.5% of the total
consideration received by Siga in a sale of all or substantially all of the
assets or stock of Siga, or a transaction where the holders of the voting
capital stock of Siga immediately prior to the transaction own less than a
majority of the voting capital stock of the acquiring or surviving entity. In
the event of a sale, merger or public spin-out of any subsidiary or material
asset of Siga, Dr. Schein shall receive a fee equal to 1.5% of the value of
Siga's shares of the subsidiary or material asset.

      Judson Cooper, our Chairman of the Board of Directors, was employed under
an employment agreement through December 31, 1999 which had a base annual salary
of $225,000 and granted him 16,667 options per year, exercisable at the fair
market value on the date of the grant. In January 2000 he entered into a new
employment agreement, which agreement was amended and restated as of October 6,
2000, expires January 2005 and is cancelable by Siga only for cause, as defined
in the agreement. The agreement is renewable for additional one year terms
unless cancelled by either party in writing 180 days


                                       32
<PAGE>

prior to cancellation. Mr. Cooper receives an annual base salary of $250,000 and
he was granted 500,000 fully vested stock options upon signing the new
agreement. The options are exercisable at $2.00 per share, the fair market value
on the date of grant. He is eligible to receive additional stock options and
bonuses at the discretion of the Board of Directors. Under the amended and
restated agreement, in the event of a change in control, Mr. Cooper will be paid
his compensation for the remainder of his employment term and will receive a tax
gross-up payment, and all unvested options held by Mr. Cooper will become vested
and exercisable. In addition, Mr. Cooper will receive a cash payment equal to
1.5% of the total consideration received by Siga in a sale of all or
substantially all of the assets or stock of Siga, or a transaction where the
holders of the voting capital stock of Siga immediately prior to the transaction
own less than a majority of the voting capital stock of the acquiring or
surviving entity. In the event of a sale, merger or public spin-out of any
subsidiary or material asset of Siga, Mr. Cooper shall receive a fee equal to
1.5% of the value of Siga's shares of the subsidiary or material asset.

      Thomas Konatich, Chief Financial Officer, is employed by Siga under an
employment agreement that was to expire April 1, 2000. On January 19, 2000 the
employment agreement was amended, and in October, 2000, the agreement was
amended and restated. The amended agreement expires on April 1, 2002 and is
cancelable by Siga only for cause, as defined in the agreement. Mr. Konatich
receives an annual base salary of $170,000. He received options to purchase
95,000 shares of common stock, at $4.44 on April 1, 1998. The options vest on a
pro rata basis on the first, second, third and fourth anniversaries of the
agreement. On January 19, 2000 he received an additional grant to purchase
100,000 shares at an exercise price of $2.00 per share. The options vest on a
pro rata basis each quarter through January 19, 2002. Mr. Konatich is also
eligible to receive additional stock options and bonuses at the discretion of
the Board of Directors. Under the amended and restated agreement, in the event
of a change in control, Mr. Konatich will be paid his compensation for the
remainder of his employment term and will receive a tax gross-up payment, and
all unvested options held by Mr. Konatich will become vested and exercisable.

      Dr. Dennis Hruby, Chief Scientific Officer ("CSO"), is employed by Siga
under an employment agreement that was to expire on December 31, 2000. In May
2000, the employment agreement was amended, extending Mr. Hruby's employment
until December 31, 2002, except that the Company may terminate the agreement
upon 180 days written notice, and changing Mr. Hruby's title from Vice President
of Research to CSO. Dr. Hruby received options to purchase 40,000 shares of
common stock at an exercise price of $4.63 per share on February 1, 1998]. The
options become exercisable on a pro rata basis on the first, second, third and
fourth anniversaries of the agreement. Dr. Hruby is eligible to receive
additional stock options and bonuses at the discretion of the Board of
Directors. Under the amendment, the CSO was granted options to purchase 125,000
shares of the Company's common stock at $2.00 per share. The options vest
ratably over the remaining term of the amendment.


                                       33
<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

            The following table sets forth certain information regarding the
beneficial ownership of the common stock as of December 31, 2000 of (i) each
person known to Siga to beneficially own more than 5% of the common stock, (ii)
each director of Siga, (iii) each executive officer of Siga for whom information
is given in the Summary Compensation Table, and (iv) all directors and executive
officers of Siga as a group.

Name and Address of                      Amount of              Percentage
Beneficial Owner (1)               Beneficial Ownership (2)      of Total
--------------------              ------------------------       --------
Judson Cooper                            1,144,117(3)             13.2%

Joshua D. Schein, Ph.D                   1,141,017(3)             13.2%

Richard B. Stone                           556,615                 6.3%
135 East 57th Street
11th Floor
New York, NY 10022

Jeffrey Rubin (4)                           65,000                   *

Thomas Lanier                                5,000                   *

Eric Richman                                     0                   *

Dennis Hruby                                52,500                   *

Thomas N. Konatich                          97,500                 1.3%

Panetta Partners, Ltd. (5)                 574,700(6)              7.1%
265 E. 66th Street, Suite 16G
New York, NY 10021

Donald G. Drapkin (5)                      784,504(7)(8)           9.99%
35 East 62nd Street
New York, NY 10021

Howard Gittis (5)                          787,590(6)(7)           9.99%
35 East 62nd Street
New York, NY 10021

All Officers and Directors                   2,505,134            25.1%
as a group (seven persons) (9)


                                       34
<PAGE>

*     Less than 1% of the outstanding shares of common stock.

(1)   Unless otherwise indicated the address of each beneficial owner identified
      is 420 Lexington Avenue, Suite 620, New York, NY 10170.

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

(3)   Includes currently exercisable options to purchase 662,501 shares of
      common stock owned directly and 50% beneficial ownership of 12,500
      additional options held by Prism Ventures LLC, an entity jointly owned by
      Mr. Cooper and Dr. Schein.

(4)   Includes currently vested and exercisable options to purchase 15,000
      shares of common stock as well as currently vested and exercisable
      warrants to puchase 50,000 shares of common stock by Stefan Capital, LLC.
      Mr. Rubin is a principal of Stefan. An additional 50,000 vested warrants
      become exercisable in September 2001.

(5)   Share ownership as reported in the most recently filed Schedule 13G.

(6)   Includes 513,200 shares issuable upon exercise of warrants.

(7)   Includes Shares issuable upon conversion of 6% convertible Debentures due
      January 31, 2002, plus accrued interest as of January 31, 2001 and shares
      issuable upon exercise of a warrant.

(8)   The debentures and warrants each provide that except in certain
      circumstances, they are not convertible or exercisable, as the case may
      be, if as a result of such action, the number of shares of common stock
      beneficially owned by such person would exceed 9.99% of the outstanding
      shares of common stock. If not for such 9.99% limitation, Mr. Drapkin
      could be deemed to beneficially own 1,101,672 shares or 13.3% and Mr.
      Gittis could be deemed to beneficially own 823,089 shares or 10.3%.

(9)   Includes an aggregate of 1,490,002 currently exercisable options to
      purchase shares of common stock.


                                       35
<PAGE>

Item 12. Certain Relationships and Related Transactions

      Effective January 15, 1998, we entered into a consulting agreement with
Prism Ventures LLC pursuant to which Prism has agreed to provide certain
business services to Siga, including business development, operations and other
advisory services, licensing, strategic alliances, merger and acquisition
activity, financings and other corporate transactions. Pursuant to the terms of
the agreement, Prism receives an annual fee of $150,000 and 16,667 stock options
per year. The agreement expired on January 15, 2001, and was cancelable by Siga
only for cause as defined in the agreement. Mr. Cooper and Dr. Schein are the
members of Prism. In October of 1998, Siga and Prism agreed to suspend the
agreement for as long as the two principals are employed by Siga under the
provisions of their amended employment agreements. During 2000, Prism received
no payments pursuant to the agreement.

      Effective September 9, 1999 we entered into a consulting agreement with
Stefan Capital, LLC pursuant to which Stefan has agreed to provide certain
business services to Siga. Pursuant to the terms of the agreement, Stefan
received five year warrants to purchase 100,000 shares of our common stock at an
exercise price of $1.00. As of December 31, 2000, 50,000 warrants were
exercisable, the remaining warrants are exercisable on September 9, 2001. Mr.
Jeffrey Rubin, one of our directors, is a principal of Stefan.


                                       36
<PAGE>

                                     PART IV

Item 13. Exhibits, Material Agreements and Reports on Form 8-K

      3(a)  Restated Articles of Incorporation of the Company (Incorporated by
            reference to Form S-3 Registration Statement of the Company dated
            May 10, 2000 (No. 333-36682)).

      3(b)  Bylaws of the Company (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      4(a)  Form of Common Stock Certificate (Incorporated by reference to Form
            SB-2 Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      4(b)  Amended 1996 Incentive and Non-Qualified Stock Option Plan
            (Incorporated by reference to Form S-8 Registration Statement of the
            Company dated February 26, 2001 (No. 333-56216)).

      4(c)  Warrant Agreement dated as of September 15, 1996 between the Company
            and Vincent A. Fischetti (1) (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

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

      4(e)  Stock Purchase Agreement between the Company and MedImmune, Inc.,
            dated as of February 10, 1998. (Incorporated by reference to the
            Company's Annual Report on Form 10-KSB for the year ended December
            31, 1997).

      4(f)  Registration Rights Agreement between the Company and MedImmune,
            Inc., dated as of February 10, 1998. (Incorporated by reference to
            the Company's Annual Report on Form 10-KSB for the year ended
            December 31, 1997).

      10(a) License and Research Support Agreement between the Company and The
            Rockefeller University, dated as of January 31, 1996; and Amendment
            to License and Research Support Agreement between the Company and
            The Rockefeller University, dated as of October 1, 1996(2)
            (Incorporated by reference to Form SB-2 Registration Statement of
            the Company dated March 10, 1997 (No. 333-23037)).

      10(b) Research Agreement between the Company and Emory University, dated
            as of January 31, 1996(2) (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      10(c) Research Support Agreement between the Company and Oregon State
            University, dated as of January 31, 1996(2) (Incorporated by
            reference to Form SB-2 Registration Statement of the Company dated
            March 10, 1997 (No. 333-23037)). Letter Agreement dated as of March
            5, 1999 to continue the Research Support Agreement. (Incorporated by
            reference to the Company's Annual Report on Form 10-KSB for the year
            ended December 31, 1999).


                                       37
<PAGE>

      10(d) Option Agreement between the Company and Oregon State University,
            dated as of November 30, 1999 and related Amendments to the
            Agreement (Incorporated by reference to the Company's Annual Report
            on Form 10- KSB for the year ended December 31, 1999).

      10(e) Amended and Restated Employment Agreement between the Company and
            Dr. Joshua D. Schein, dated as of October 6, 2000

      10(f) Amended and Restated Employment Agreement between the Company and
            Judson A. Cooper, dated as of October 6, 2000.

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

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

      10(i) Consulting Agreement between the Company and CSO Ventures LLC, dated
            as of January 1, 1996 (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      10(j) Consulting Agreement between the Company and Dr. Vincent A.
            Fischetti, dated as of January 1, 1996 (Incorporated by reference to
            Form SB-2 Registration Statement of the Company dated March 10, 1997
            (No. 333-23037)).

      10(k) Consulting Agreement between the Company and Dr. Dennis Hruby, dated
            as of January 1, 1996 (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      10(l) Letter Agreement between the Company and Dr. Vincent A. Fischetti,
            dated as of March 1, 1996 (Incorporated by reference to Form SB-2
            Registration Statement of the Company dated March 10, 1997 (No.
            333-23037)).

      10(m) Employment Agreement between the Company and Dr. Dennis Hruby, dated
            as of April 1, 1997 (Incorporated by reference to Amendment No. 1 to
            Form SB-2 Registration Statement of the Company dated July 11, 1997
            (No. 333-23037)).

      10(n) Clinical Trials Agreement between the Company and National Institute
            of Allergy and Infectious Diseases, dated as of July 1, 1997
            (Incorporated by reference to Amendment No. 1 to Form SB-2
            Registration Statement of the Company dated July 11, 1997 (No.
            333-23037)).

      10(o) Research Agreement between the Company and The Research Foundation
            of State University of New York, dated as of July 1, 1997(2)
            (Incorporated by reference to Amendment No. 1 to Form SB-2
            Registration Statement of the Company dated July 11, 1997 (No.
            333-23037)).

      10(p) Collaborative Research and License Agreement between the Company and
            American Home Products Corporation, dated as of July 1, 1997(2)
            (Incorporated by reference to Amendment No. 3 to Form SB-2
            Registration Statement of the Company dated September 2, 1997 (No.
            333-23037)).


                                       38
<PAGE>

      10(q)    Collaborative Evaluation Agreement between the Company and Chiron
               Corporation, dated as of July 1, 1997 (Incorporated by reference
               to Amendment No. 1 to Form SB-2 Registration Statement of the
               Company dated July 11, 1997 (No. 333-23037)).

      10(r)    Consulting Agreement between the Company and Dr. Scott Hultgren,
               dated as of July 9, 1997 (Incorporated by reference to Amendment
               No. 1 to Form SB-2 Registration Statement of the Company dated
               July 11, 1997 (No. 333-23037)).

      10(s)    Letter of Intent between the Company and MedImmune, Inc., dated
               as of July 10, 1997 (Incorporated by reference to Amendment No. 1
               to Form SB-2 Registration Statement of the Company dated July 11,
               1997 (No. 333-23037)).

      10(t)    Research Collaboration and License Agreement between the Company
               and The Washington University, dated as of February 6, 1998 (2).
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1997).

      10(u)    Settlement Agreement and Mutual Release between the Company and
               The Washington University, dated as of February 17, 2000
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1999).

      10(v)    Technology Transfer Agreement between the Company and MedImmune,
               Inc., dated as of February 10, 1998. (Incorporated by reference
               to the Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1997).

      10(w)    Employment Agreement between the Company and Dr. Dennis Hruby,
               dated as of January 1, 1998. (Incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1997). Amendment to the Agreement, dated as of
               October 15, 1999 (Incorporated by reference to the Company's
               Annual Report on Form 10-KSB for the year ended December 31,
               1999). Amendment to the Agreement dated as of June 12, 2000).

      10(x)    Employment Agreement between the Company and Dr. Walter
               Flamenbaum, dated as of February 1, 1998. (Incorporated by
               reference to the Company's Annual Report on Form 10-KSB for the
               year ended December 31, 1997).

      10(y)    Employment Agreement between the Company and Thomas Konatich,
               dated as of April 1, 1998. (Incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1997). Extension and Amendment of the Agreement,
               dated as of January 19, 2000 (Incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1999). Amended and restated as of October 6, 2000.

      10(z)    Consulting Agreement between the Company and Prism Ventures LLC,
               dated as of January 15, 1998. (Incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1997).

      10(aa)   Small Business Innovation Research Grant to the Company by the
               National Institutes for Health, dated June 21, 1999 (Incorporated
               by reference to the Company's Annual Report on Form 10-KSB for
               the year ended December 31, 1999).

      10(bb)   Small Business Innovation Research Grant to the Company by the
               National Institutes for Health, dated September 27, 1999
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1999).


                                       39
<PAGE>

      10(cc)   Software Application Development Services Agreement between the
               Company and Open-i Media, Inc., dated October 15, 1999
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1999).

      10(dd)   Media Development Agreement Services Agreement between the
               Company and Open-i Media, Inc., dated March 15, 2000
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1999).

      10(ee)   Option Agreement between the Company and Ross Products Division
               of Abbott Laboratories, dated February 28, 2000 (Incorporated by
               reference to the Company's Annual Report on Form 10-KSB for the
               year ended December 31, 1999).

      10(ff)   Consulting Agreement between the Company and Stefan Capital,
               dated September 9, 1999 (Incorporated by reference to the
               Company's Annual Report on Form 10-KSB for the year ended
               December 31, 1999).

      10(gg)   Warrant Agreement between the Company and Stefan Capital, dated
               September 9, 1999 (Incorporated by reference to the Company's
               Annual Report on Form 10-KSB for the year ended December 31,
               1999).

      10(hh)   Small Business Innovation Research Grant to the Company by the
               National Institutes for Health, dated May 3, 2000.

      10(ii)   Small Business Innovation Research Grant to the Company by the
               National Institutes for Health, dated August 1, 2000.

      10(jj)   Small Business Innovation Research Grant to the Company by the
               National Institutes for Health, dated August 21, 2000.

      10(kk)   Stock Purchase Agreement between the Company and Open-i Media,
               Inc. dated July 7, 2000.

      10(ll)   Agreement between the Company and Oregon State University for the
               Company to provide contract research services to the University
               dated September 24, 2000.

      10(mm)   Agreement between the Company and Maxygen, Inc. dated October 17,
               2000.

      10(nn)   License and Research Agreements between the Company and the
               Regents of the University of California dated December 6, 2000.


                                       40
<PAGE>

      10(oo)   Research Agreement between the Company and the University of
               Maryland dated January 3, 2001)

      99(a)    Form of Agreement for Management Restructuring.

      99(b)    Form of Separation Agreement between the Company and Joshua D.
               Schein.

      99(c)    Form of Separation Agreement between the Company and Judson A.
               Cooper.

      27       Financial Data Schedule

----------
(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 a * and filed
      separately with the SEC pursuant to a request for Confidential Treatment.

      (b) Reports on Form 8-K

      No reports on Form 8-K were filed by the registrant during the fourth
quarter of 2000.


                                       41
<PAGE>

                                   SIGNATURES

            Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                        SIGA Technologies, Inc.
                                        (Registrant)


Date: April 4, 2001                     By:  /s/ Joshua D. Schein, Ph.D.
                                             -----------------------------------
                                             Joshua D. Schein, Ph.D.
                                             Chief Executive Officer

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

Signature                      Capacity                       Date

/s/ Joshua D. Schein, Ph.D.
-----------------------------  Chief Executive Officer            April 4, 2001
Joshua D. Schein, Ph.D.           Secretary and Director

/s/ Judson A. Cooper
-----------------------------  Chairman of the Board and          April 4, 2001
Judson A. Cooper                  Executive Vice President

/s/ Thomas N. Konatich
-----------------------------  Chief Financial Officer            April 4, 2001
Thomas N. Konatich

/s/ Jeffrey Rubin
-----------------------------                  Director           April 4, 2001
Jeffrey Rubin

/s/ Thomas Lanier
-----------------------------                  Director           April 4, 2001
Thomas Lanier

/s/ Eric Richman
-----------------------------                  Director           April 4, 2001
Eric Richman


                                       42
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Financial Statements
December 31, 2000 and 1999
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Index to Financial Statements
--------------------------------------------------------------------------------

Report of Independent Accountants                                            F-2

Balance Sheets as of December 31, 2000 and 1999                              F-3

Statement of Operations for the years ended December 31, 2000 and
  1999, and for the period from inception through December 31, 2000          F-4

Statement of Changes in Stockholders' Equity for the period
  from inception through December 31, 2000                                   F-5

Statement of Cash Flows for the years ended December 31, 2000, and
  1999, and for the period from inception through December 31, 2000          F-6

Notes to Financial Statements                                                F-7


                                      F-1
<PAGE>

                        Report of Independent Accountants

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

In our opinion, the accompanying balance sheets and related statements of
operations, of cash flows and of changes in stockholders' equity (deficit)
present fairly, in all material respects, the financial position of SIGA
Technologies, Inc. (a development stage company) at December 31, 2000 and 1999,
and the results of its operations and cash flows for the years ended December
31, 2000 and 1999, and for the period from December 28, 1995 ("Inception")
through December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses from operations since its
inception, has a net stockholders' deficit and expects to incur additional
losses to perform further research and development activities. These
circumstances raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

New York, New York
February 15, 2001, except as to note 14 which is as of March 30, 2001


                                      F-2
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Balance Sheet
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      December 31,
                                                                2000               1999
                                                            ------------       ------------
<S>                                                         <C>                <C>
Assets

Current Assets:
   Cash and cash equivalents                                $  1,707,385       $  1,758,541
   Accounts receivable                                            37,800             47,570
   Prepaid expenses                                                5,644             38,279
                                                            ------------       ------------
        Total current assets                                   1,750,829          1,844,390

   Equipment, net                                              1,027,702          1,366,362
   Investment, net                                               275,106                 --
   Other assets                                                  156,556            147,002
                                                            ------------       ------------

        Total assets                                        $  3,210,193       $  3,357,754
                                                            ============       ============

Liabilities and Stockholders' Equity:

Current liabilities:
   Accounts payable                                         $    209,278       $    248,962
   Accrued expenses                                              305,912            104,096
   Capital lease obligations                                     391,407            280,092
   Deferred Revenue                                              450,000                 --
                                                            ------------       ------------

        Total current liabilities                              1,356,597            633,150

   6% Convertible Debt                                           719,561                 --
   Accrued Debenture Interest                                     80,281                 --
   Non current capital lease obligations                         129,018            520,424
                                                            ------------       ------------

        Total liabilities                                      2,285,457          1,153,574

Commitments and contingencies                                         --                 --

Stockholders' equity:
   Preferred stock ($.0001 par value, 10,000,000
       shares authorized, none issued and outstanding)                --                 --
   Common stock ($.0001 par value, 50,000,000
       shares authorized, 7,471,837 and 6,602,712
       issued and outstanding at December 31,
       2000 and December 31, 1999, respectively)                     747                661
   Additional paid-in capital                                 23,793,983         16,855,499
   Deferred Compensation                                        (428,425)                --
   Deficit accumulated during the development stage          (22,441,569)       (14,651,980)
                                                            ------------       ------------

        Total stockholders' equity                               924,736          2,204,180
                                                            ------------       ------------

        Total liabilities and stockholders' equity          $  3,210,193       $  3,357,754
                                                            ============       ============
</TABLE>

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


                                      F-3
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Statement of Operations
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                                      For the Period
                                                                                                                       December 28,
                                                                                                                      1995 (Date of
                                                                                     Year Ended December 31,          Inception) to
                                                                                  -----------------------------       December 31,
                                                                                      2000              1999               2000
<S>                                                                               <C>               <C>               <C>
 Revenues:
     Research and Development Contracts                                           $   483,120       $   519,561       $  2,127,681
                                                                                  -----------       -----------       ------------

 Operating expenses:
     General and administrative                                                     4,851,100         2,284,790         12,264,156
     Research and development (incuding amounts to related
        parties of $75,000, $75,000 and $384,581 for the years
        ended December 31, 2000 and 1999, and for the period
        from the date of inception of December 31, 2000, respectively)              2,608,907         1,672,778         10,275,888
     Patent preparation fees                                                          106,647           193,567          1,237,491
     Settlement of litigation                                                              --            97,969             97,969
     Stock option and warrant compensation                                                 --                --            450,450
                                                                                  -----------       -----------       ------------

               Total operating expenses                                             7,566,654         4,249,104         24,325,954
                                                                                  -----------       -----------       ------------

               Operating loss                                                      (7,083,534)       (3,729,543)       (22,198,273)

 Interest income/(expense)                                                           (550,464)           26,383           (154,365)
 Loss on impairment of investment                                                     155,591                --            155,591
 Other Income/Gain on sale of securities                                                   --            66,660             66,660
                                                                                  -----------       -----------       ------------

               Net loss                                                           $(7,789,589)      $(3,636,500)      $(22,441,569)
                                                                                  ===========       ===========       ============

 Basic and diluted loss per share                                                 $     (1.08)      $      (0.55)
                                                                                  -----------       ------------

Weighted average common shares outstanding
    used for basic and diluted loss per share                                       7,202,856         6,579,424
                                                                                  ===========       ============

Comprehensive loss:
    Net loss                                                                      $(7,789,589)      $(3,636,500)      $(22,441,569)
    Unrealized gains (losses) on available for sale
       securities                                                                          --            34,816                 --
                                                                                  -----------       -----------       ------------

               Total comprehensive loss                                           $(7,789,589)      $(3,601,684)      $(22,441,569)
                                                                                  ===========       ===========       ============
</TABLE>

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


                                      F-4
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                                                      Additional
                                                                                            Common     Paid-in        Deferred
                                                                                 Shares     Stock      Capital      Compensation
<S>                                                                             <C>         <C>      <C>            <C>
Issuance of common stock at inception                                           2,079,170   $ 208    $     1,040
Net loss                                                                               --      --             --             --
                                                                                ---------   -----    -----------    -----------
              Balances at December 31, 1995                                     2,079,170     208          1,040             --

Net proceeds from issuance and sale of common stock ($1.50 per share)           1,038,008     104      1,551,333
Net proceeds from issuance and sale of common stock ($3.00 per share)             250,004      25        748,985
Receipt of stock subscriptions outstanding                                             --      --             --
Issuance of compensatory options and warrants                                          --      --        367,461
Net loss                                                                               --      --             --             --
                                                                                ---------   -----    -----------    -----------
              Balances at December 31, 1996                                     3,367,182     337      2,668,819             --

Net proceeds from issuance and sale of common stock ($5.00 per share)           2,875,000     287     12,179,322
Issuance of warrants with bridge notes                                                 --      --        133,000
Stock option and warrant compensation                                                  --      --         68,582
Net loss                                                                               --      --             --             --
                                                                                ---------   -----    -----------    -----------
              Balance at December 31, 1997                                      6,242,182     624     15,049,723             --

Issuance of common stock to acquire third party's
    right to certain technology ($4.34 per share)                                 335,530      34      1,457,424
Issuance of compensatory options and warrants                                          --      --        175,870
Stock option and warrant compensation                                                  --      --         14,407
Unrealized losses on available for sale securities                                     --      --             --
Net loss                                                                               --      --             --             --
                                                                                ---------   -----    -----------    -----------
              Balance at December 31, 1998                                      6,577,712     658     16,697,424             --

Issuance of common stock for software development ($1.25 per share)                25,000       3         31,247
Issuance of compensatory common stock, options and warrants                                               51,550
Stock option and warrant compensation                                                                     75,278
Unrealized gains on available for sale securities
Net loss
                                                                                ---------   -----    -----------    -----------
              Balance at December 31, 1999                                      6,602,712     661     16,855,499             --
                                                                                ---------   -----    -----------    -----------

<CAPTION>
                                                                                         Deficit       Unrealized
                                                                                       Accumulated    Gains (Losses)     Total
                                                                           Stock       During the     on Available    Stockholders'
                                                                        Subscriptions  Development     for Sale of       Equity
                                                                         Outstanding      Stage         Securities      (Deficit)
<S>                                                                       <C>          <C>                 <C>        <C>
Issuance of common stock at inception                                     $ (1,248)                             --             --
Net loss                                                                        --     $     (1,000)            --    $    (1,000)
                                                                          --------     ------------        -------    -----------
              Balances at December 31, 1995                                 (1,248)          (1,000)            --         (1,000)

Net proceeds from issuance and sale of common stock ($1.50 per share)           --               --             --      1,551,437
Net proceeds from issuance and sale of common stock ($3.00 per share)           --                              --        749,010
Receipt of stock subscriptions outstanding                                   1,248               --             --          1,248
Issuance of compensatory options and warrants                                   --               --             --        367,461
Net loss                                                                        --       (2,268,176)            --     (2,268,176)
                                                                          --------     ------------        -------    -----------
              Balances at December 31, 1996                                     --       (2,269,176)            --        399,980

Net proceeds from issuance and sale of common stock ($5.00 per share)                                                  12,179,609
Issuance of warrants with bridge notes                                          --               --             --        133,000
Stock option and warrant compensation                                           --               --             --         68,582
Net loss                                                                        --       (2,194,638)            --     (2,194,638)
                                                                          --------     ------------        -------    -----------
              Balance at December 31, 1997                                      --       (4,463,814)            --     10,586,533

Issuance of common stock to acquire third party's
    right to certain technology ($4.34 per share)                                                                       1,457,458
Issuance of compensatory options and warrants                                   --               --             --        175,870
Stock option and warrant compensation                                           --               --             --         14,407
Unrealized losses on available for sale securities                              --               --        (34,816)       (34,816)
Net loss                                                                        --       (6,551,666)            --     (6,551,666)
                                                                          --------     ------------        -------    -----------
              Balance at December 31, 1998                                      --      (11,015,480)       (34,816)     5,647,786

Issuance of common stock for software development ($1.25 per share)                                                        31,250
Issuance of compensatory common stock, options and warrants                                                                51,550
Stock option and warrant compensation                                                                                      75,278
Unrealized gains on available for sale securities                                                           34,816         34,816
Net loss                                                                                 (3,636,500)                   (3,636,500)
                                                                          --------     ------------        -------    -----------
              Balance at December 31, 1999                                      --      (14,651,980)            --      2,204,180
                                                                          --------     ------------        -------    -----------
</TABLE>

                                   (Continued)


                                       F-5
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                                                      Additional
                                                                                            Common     Paid-in        Deferred
                                                                                 Shares     Stock      Capital      Compensation
<S>                                                                             <C>         <C>      <C>            <C>
Net proceeds from exercising of stock options                                      19,875   $   2    $    52,772
Net proceeds from the issuance of common stock ($5.0 per share)                   600,000      60      2,882,940
Issuance of common stock in connection with software development                  102,721      10        500,334
Issuance of common shares in connection with acquisition of 12.5%
    equity interest in a private company                                           40,336       4        179,996
Issuance of common shares upon conversion of debentures                            90,193       9         49,246
Warrants granted in connection with the issuance of debentures                                         1,320,170
Issuance of compensatory options and warrants to non-employees                                         1,218,145    $(1,218,145)
Issuance of compensatory options to employees                                                            278,750       (278,750)
Stock options and warrants compensation related to services received from
    non-employees                                                                                        185,876
Amortization of deferred compensation                                                                                 1,068,470
Issuance of shares in exchange for services                                        16,000       1             (1)
Amendment of warrants issued to a non-employee for services                                              270,256
Net loss
                                                                                ---------   -----    -----------    -----------

              Balance at December 31, 2000                                      7,471,837   $ 747    $23,793,983    $  (428,425)
                                                                                =========   =====    ===========    ===========

<CAPTION>
                                                                                            Deficit      Unrealized
                                                                                         Accumulated   Gains (Losses)     Total
                                                                             Stock       During the    on Available    Stockholders'
                                                                          Subscriptions  Development    for Sale of       Equity
                                                                           Outstanding      Stage        Securities      (Deficit)
<S>                                                                         <C>          <C>                <C>        <C>
Net proceeds from exercising of stock options                                                                             $ 52,774
Net proceeds from the issuance of common stock ($5.0 per share)                                                          2,883,000
Issuance of common stock in connection with software development                                                           500,344
Issuance of common shares in connection with acquisition of 12.5%                                                               --
    equity interest in a private company                                                                                   180,000
Issuance of common shares upon conversion of debentures                                                                     49,255
Warrants granted in connection with the issuance of debentures                                                           1,320,170
Issuance of compensatory options and warrants to non-employees                                                                  --
Issuance of compensatory options to employees                                                                                   --
Stock options and warrants compensation related to services received from
    non-employees                                                                                                          185,876
Amortization of deferred compensation                                                                                    1,068,470
Issuance of shares in exchange for services                                                                                     --
Amendment of warrants issued to a non-employee for services                                                                270,256
Net loss                                                                                 $ (7,789,589)                  (7,789,589)
                                                                            --------     ------------       -------    -----------

              Balance at December 31, 2000                                  $     --     $(22,441,569)      $    --    $   924,736
                                                                            ========     ============       =======    ===========
</TABLE>

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


                                      F-6
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Statement of Cash Flows
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                                For the Period
                                                                                                                 December 28,
                                                                                     Year Ended                 1995 (Date of
                                                                             -----------------------------      Inception) to
                                                                             December 31,      December 31,      December 31,
                                                                                 2000              1999              2000
                                                                             ------------      ------------      ------------
<S>                                                                          <C>               <C>               <C>
Cash flows from operating activities:
  Net loss                                                                   $ (7,789,589)     $ (3,636,500)     $(22,441,569)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
       Depreciation                                                               356,089           366,816           950,886
       Stock, options & warrant compensation                                    1,524,602           158,078         2,309,000
       Loss on impairment of investment                                           155,591                --           155,591
       Loss on write-off of capital equipment                                          --            97,969            97,969
       Amortization of debt discount                                              589,312                --           722,312
       Write-off of in-process research and development                                --                --         1,457,458
       Realized gain on sale of marketable securities                             (66,660)          (66,660)
       Non-cash research and development                                          500,344                --           500,344
       Changes in assets and liabilities:
         Accounts receivable                                                        9,770           (47,570)          (37,800)
         Prepaid expenses and other current assets                                 32,635            96,690            (5,644)
         Other assets                                                              (9,554)               --          (156,556)
         Accounts payable and accrued expenses                                    162,132           (56,677)          515,190
         Deferred Revenue                                                         450,000                --           450,000
         Accrued Interest                                                          80,281                --            80,281
                                                                             ------------      ------------      ------------
               Net cash used in operating activities                           (3,938,387)       (3,087,854)      (15,469,198)
                                                                             ------------      ------------      ------------
Cash flows from investing activities:
  Capital expenditures                                                            (98,126)         (134,743)       (2,157,254)
  Sale (purchase) of investment securities                                                          233,696            66,660
   Investment in Open-I-Media                                                    (170,000)                           (170,000)
                                                                             ------------      ------------      ------------
               Net cash flow used in investing activities                        (268,126)           98,953        (2,260,594)
                                                                             ------------      ------------      ------------
Cash flows from financing activities:
  Net proceeds from issuance of common stock                                    2,883,000                --        17,363,056
  Receipts of stock subscriptions outstanding                                          --                --             1,248
  Gross proceeds from sale of convertible debentures                            1,500,000                --         1,500,000
  Proceeds from exercise of stock options                                          52,774                --            52,774
  Net proceeds from sale of warrants                                               52,174                --            52,174
  Convertible debentures and warrants issuance costs                              (52,500)               --           (52,500)
  Proceeds from bridge notes                                                           --                --         1,000,000
  Repayment of bridge notes                                                            --                --        (1,000,000)
  Proceeds from sale and leaseback of equipment                                        --                --         1,139,085
  Principal payments on capital lease obligations                                (280,091)         (219,431)         (618,660)
                                                                             ------------      ------------      ------------
               Net cash provided from financing activities                      4,155,357          (219,431)       19,437,177
                                                                             ------------      ------------      ------------
Net increase in cash and cash equivalents                                         (51,156)       (3,208,332)        1,707,385
Cash and cash equivalents at beginning of period                                1,758,541         4,966,873                --
                                                                             ------------      ------------      ------------
Cash and cash equivalents at end of period                                   $  1,707,385      $  1,758,541      $  1,707,385
                                                                             ============      ============      ============
Supplemental disclosure of non-cash investing and financing activities:
       Fixed assets exchanged in acquisition                                 $     80,697                --      $     80,697
                                                                             ============      ============      ============
       Fair value of common shares exchanged in acquisition                  $    180,000                --      $    180,000
                                                                             ============      ============      ============
</TABLE>

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


                                      F-7
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

1.    Organization and Basis of Presentation

      Organization

      SIGA Technologies, Inc. ("SIGA" or the "Company") was incorporated in the
      State of Delaware on December 28, 1995 ("Inception") as SIGA
      Pharmaceuticals, Inc. The Company is engaged in the discovery, development
      and commercialization of vaccines, antibiotics, and novel anti-infectives
      for the prevention and treatment of infectious diseases. The Company's
      technologies are licensed from third parties. In 1998 the Company opened
      its research facility in the State of Oregon, reducing the Company's
      dependency on third parties to conduct research on its behalf. In January
      2000, the shareholders of the Company changed its name to SIGA
      Technologies, Inc.

      Basis of presentation

      The Company's activities since inception have consisted primarily of
      sponsoring and performing research and development, performing business
      and financial planning, preparing and filing patent applications and
      raising capital. Accordingly, the Company is considered to be a
      development stage company.

      The accompanying financial statements have been prepared on a basis which
      assumes that the Company will continue as a going concern and which
      contemplates the realization of assets and the satisfaction of liabilities
      and commitments in the normal course of business. Since inception the
      Company has limited resources, has incurred cumulative net operating
      losses of $22,198,273 and expects to incur additional losses to perform
      further research and development activities. The Company does not have
      commercial biomedical products, and does not expect to have such for
      several years, if at all. The Company believes that it will need
      additional funds to complete the development of its biomedical products.
      These circumstances raise substantial doubt about the Company's ability to
      continue as a going concern. Management's plans with regard to these
      matters include continued development of its products as well as seeking
      additional research support funds and financial arrangements. Although,
      management continues to pursue these plans, there is no assurance that the
      Company will be successful in obtaining sufficient financing on terms
      acceptable to the Company. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.

2.    Summary of Significant Accounting Policies

      Cash and cash equivalents

      Cash and cash equivalents consist of short term, highly liquid
      investments, with original maturities of less than three months when
      purchased and are stated at cost. Interest is accrued as earned.

      Investments

      The Company accounts for investments under the provisions of Statement of
      Financial Accounting Standards No. 115, "Accounting for Certain
      Investments in Debt and Equity Securities" ("SFAS 115"). The Company
      classified its investments in marketable securities as available for sale
      and reports them at fair market value, with the unrealized holding gains
      and losses, net of tax effect, reported as a separate component of
      stockholders' equity. Any gains or losses from the sale of these
      securities were recognized using the specific identification method. At
      December 31, 2000 and 1999, the Company did not have investments in
      marketable securities.


                                      F-8
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      Equipment

      Equipment is stated at cost. Depreciation is provided on the straight-line
      method over the estimated useful lives of the respective assets, which are
      as follows:

      Laboratory equipment                                            5 years
      Leasehold improvements                                       Life of lease
      Computer equipment                                              3 years
      Furniture and fixtures                                          7 years

      Revenue recognition

      Effective January 1, 2000, the Company adopted the guidance provided by
      Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
      Statements ("SAB 101"). Under the provisions of SAB 101 the Company
      recognizes revenue from government research grants, contract research and
      development and progress payments as services are performed, provided a
      contractual arrangement exists, the contract price is fixed or
      determinable, and the collection of the resulting receivable is probable.
      In situations where the Company receives payment in advance of the
      performance of services, such amounts are deferred and recognized as
      revenue as the related services are performed. Non-refundable fees are
      recognized as revenue over the term of the arrangement or based on the
      percentage of costs incurs to date, estimated costs to complete and total
      expected contract revenue.

      Research and development

      Research and development costs are expensed as incurred and include costs
      of third parties who conduct research and development, pursuant to
      development and consulting agreements, on behalf of the Company. Costs
      related to the acquisition of technology rights, for which development
      work is still in process, and that have no alternative future uses, are
      expensed as incurred and considered a component of research and
      development costs.

      Income taxes

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

      Net loss per common share

      Effective December 31, 1997 the Company adopted Statement of Financial
      Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which
      requires presentation of basic earnings per share ("Basic EPS") and
      diluted earnings per share ("Diluted EPS") by all entities that have
      publicly traded common stock or potential common stock (options, warrants,
      convertible securities or contingent stock arrangements). Basic EPS is
      computed by dividing income (loss) available to common stockholders by the
      weighted-average number of common shares outstanding during the period.
      Diluted EPS gives effect to all dilutive potential common shares
      outstanding during the period. The computation of Diluted EPS does not
      assume


                                      F-9
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      conversion, exercise or contingent exercise of securities that would have
      an antidilutive effect on earnings.

      At December 31, 2000 and 1999, outstanding options to purchase 2,167,061
      and 1,130,561 shares of common stock, respectively, with exercise prices
      ranging from $1.0 to $5.5 have been excluded from the computation of
      diluted loss per share as they are antidilutive. Outstanding warrants to
      purchase 3,694,202 and 896,724 shares of common stock, at December 31,
      2000 and 1999, respectively, with exercise prices ranging from $1.00 to
      $9.50 were also antidilutive and excluded from the computation of diluted
      loss per share.

      Accounting estimates

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

      Fair value of financial instruments

      The carrying value of cash and cash equivalents, and accounts payable and
      accrued expenses approximates fair value due to the relatively short
      maturity of these instruments.

      Concentration of credit risk

      The Company has cash in bank accounts that exceed the FDIC insured limits.
      The Company has not experienced any losses on its cash accounts. No
      allowance has been provided for potential credit losses because management
      believes that any such losses would be minimal.

      Accounting for stock based compensation

      The Company has adopted Statement of Financial Accounting Standard No.
      123, "Accounting for Stock-Based Compensation" ("SFAS 123"). As provided
      for by SFAS 123, the Company has elected to continue to account for its
      stock-based compensation programs according to the provisions of
      Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
      to Employees." Accordingly, compensation expense has been recognized to
      the extent of employee or director services rendered based on the
      intrinsic value of compensatory options or shares granted under the plans.
      The Company has adopted the disclosure provisions required by SFAS 123.


                                      F-10
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

3.    Equipment

      Equipment consisted of the following at December 31, 2000 and 1999

      Laboratory equipment                      $   862,005         $   785,888
      Leasehold improvements                        618,315             618,315
      Computer equipment                            153,360             225,803
      Furniture and fixtures                        291,637             291,637
                                                -----------         -----------
                                                  1,925,317           1,921,643

          Less - Accumulated depreciation          (897,615)           (555,281)
                                                -----------         -----------

      Equipment, net                            $ 1,027,702         $ 1,366,362
                                                ===========         ===========

      Depreciation expense for the years ended December 31, 2000 and December
      31, 1999 was $356,089 and $366,816, respectively.

      At December 31, 2000 and 1999, laboratory equipment, computer equipment
      and furniture included approximately $730,500, $117,000 and $291,600,
      respectively, of equipment acquired under capital leases. Accumulated
      depreciation related to such equipment approximated $392,200, $105,000 and
      $107,514 respectively, at December 31, 2000, and $246,100, $66,000 and
      $65,857 respectively, at December 31, 1999.

4.    Stockholders' Equity

      In September and October 1997, The Company completed an initial public
      offering of 2,875,000 shares of its common stock at an offering price of
      $5.00 per share. The Company realized gross proceeds of $14,375,000 and
      net proceeds, after deducting underwriting discounts and commissions, and
      other offering expenses payable by the Company, of $12,179,609.

      In January 2000 the shareholders of the Company approved an increase in
      the number of authorized shares from 35,000,000 to 60,000,000, of which
      50,000,000 are designated common shares, and 10,000,000 are designated
      preferred shares. The Company's Board of Directors (the "Board") is
      authorized to issue preferred shares, in series, with rights, privileges
      and qualifications of each series determined by the Board.

      In January 2000 the Company completed a private placement of 6%
      convertible debentures at an aggregate principal amount of $1,500,000 and
      1,043,478 warrants to purchase shares of the Company's common stock with a
      purchase price of $0.05 per warrant (the "January Financing"). The Company
      received net proceeds of $1,499,674 from the total $1,552,174 gross
      proceeds raised. The debentures are convertible into common stock at
      $1.4375 per share. Interest at the rate of 6% per annum is payable on the
      principal of each convertible debenture in cash or shares of the Company's
      common stock, at the discretion of the Company upon conversion or at
      maturity. The warrants have a term of five years and are exercisable at
      $3.4059 per share.

      The Company has the right to require the holder to exercise the warrants
      within five days under the following circumstances: (i) a registration
      statement is effective; and (ii) the closing bid price


                                      F-11
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      for the Company's common stock, for each of any 15 consecutive trading
      days is at least 200% of the exercise price of such warrants. If the
      holder does not exercise the warrants after notice is given, the
      unexercised warrants will expire. The warrants are exercisable for a
      period of five years.

      In connection with the placement of the debentures and warrants, the
      Company recorded debt discount of approximately $1.0 million. Such amount
      represents the value of the warrants calculated using the Black-Scholes
      valuation model. The discount is amortized over the term of the
      debentures. During the year ended December 31, 2000, the Company recorded
      interest expense of $589,312 related to the amortization of such debt
      discount. In August and December 2000, debentures with a principal amount
      of $100,000 and $25,000, respectively, along with accrued interest, were
      converted into 71,901 and 18,292 shares of the Company's common stock,
      respectively.

      In connection with the January Financing, the Company issued warrants to
      purchase a total of 275,000 shares of common stock to the placement agent
      and the investors' counsel (or their respective designees). These warrants
      have a term of five years and are exercisable at $1.45 per share. In
      connection with the issuance of such warrants, the Company recorded a
      deferred charge of $280,653, which is amortized over the term of the
      debentures.

      In March 2000 the Company entered into an agreement to sell 600,000 shares
      of the Company's common stock and 450,000 warrants to acquire shares of
      the Company's common stock (the "March Financing") for gross proceeds of
      $3,000,000. Of the warrants issued, 210,000, 120,000 and 120,000 are
      exercisable at $5.00, $6.38 and $6.90, respectively. The warrants have a
      term of three years and are redeemable at $0.01 each by the Company upon
      meeting certain conditions. Offering expenses of $117,000 were paid in
      April 2000. At December 31, 2000, all 450,000 warrants were outstanding.

      In connection with the March Financing, Siga issued a total of 379,000
      warrants to purchase shares of the Company's common stock to Fahnestock &
      Co. (the"Fahnestock Warrants") in consideration for services related to
      the March Financing. The warrants had an exercise price of $5.00 per share
      and are exercisable at any time until March 28, 2005. In November 2000,
      the Company entered into a one year consulting agreement with Fahnestock
      and Co. under which the Company will receive marketing, public relations
      acquisitions and strategic planning service. In exchange for such
      services, the Company canceled the Fahnestock Warrants and reissued them
      to effectuate an amendment to the exercise price to $2.00 per share. In
      connection with such amendment, the Company recorded a charge of
      approximately $270,000 in the year ended December 31, 2000.

      Stock option plan and warrants

      In January 1996, the Company implemented its 1996 Incentive and
      Non-Qualified Stock Option Plan (the "Plan"). The Plan as amended provided
      for the granting of up to 1,500,000 shares of the Company's common stock
      to employees, consultants and outside directors of the Company. In
      November 2000, the shareholders of the Company approved an increase in the
      number of options to purchase common shares available for grant under the
      plan to 2,500,000. 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


                                      F-12
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      the Company's common stock at the date of grant and become exercisable
      over a period of three years with a third of the grant being exercisable
      at the completion of each year of service subsequent to the grant. The
      fair market value of the Company's common stock before its initial public
      offering in September 1997, was determined by a committee of the Board of
      Directors. The committee was comprised entirely of employees who receive
      stock options under the Plan.

      Transactions under the Plan are summarized as follows:

<TABLE>
<CAPTION>
                                                                                 Weighted
                                                                                  Average
                                                                Number of         Exercise
                                                                  Shares           Price
                                                                ----------       ----------
<S>                                                             <C>              <C>
Outstanding at December 31, 1998                                   540,561       $     3.88
    Granted                                                        612,500             1.12
    Forfeited                                                      (22,500)            1.37
                                                                ----------       ----------
Outstanding at December 31, 1999                                 1,130,561             2.42
    Granted                                                      1,144,000             2.00
    Forfeited                                                     (107,500)            1.19
                                                                ----------       ----------

               Total outstanding at December 31, 2000            2,167,061       $     2.26
                                                                ==========       ==========

Options available for future grant at December 31, 2000            332,939
Weighted average fair value of options granted during 1999      $     0.87
Weighted average fair value of options granted during 2000      $     1.85
</TABLE>


                                      F-13
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      The following table summarizes information about options outstanding under
      the plan at December 31, 2000:

<TABLE>
<CAPTION>
                                         Weighted                         Number
                          Number          Average         Weighted      Exercisable       Weighted
                        Outstanding      Remaining         Average           at            Average
                        December 31,    Contractual       Exercise      December 31,      Exercise
                           2000         Life (Years)        Price           2000            Price
<S>                      <C>                <C>              <C>          <C>                <C>
      $1.00                 15,000          9.22             1.00                --          0.00
       1.13                500,000          8.83             1.13           375,000          1.13
       1.50                 33,334          5.00             1.50            33,334          1.50
       2.00 - 2.50       1,232,500          7.46             2.02         1,093,500          1.78
       4.00 - 7.50         386,227          3.56             4.72           296,227          4.12
                         ---------                                        ---------

                         2,167,061                                        1,798,061
                         =========                                        =========
</TABLE>

      On December 31, 2000, there were a total of 3,694,202 warrants
      outstanding.

      In August 2000 the Company entered into an agreement with a consultant to
      provide the Company with financial consulting, planning, structuring,
      business strategy, and public relations services and raising equity
      capital. The term of the agreement is for a period of fifteen months with
      a guarantee of a six-month retention from August 1, 2000, through February
      1, 2001. The consultant was paid a fee of $40,000 upon signing of the
      agreement, and will be paid an additional $40,000 every two months for the
      term of the agreement unless terminated by the Company at the end of the
      initial six month period. Under the provisions of the agreement, the
      consultant received warrants to purchase 500,000 shares of the Company's
      common stock. 200,000 warrants with an exercise price of $3.63 per share
      vested upon the date of the agreement. Of the remaining 300,000 warrants,
      100,000 warrants will vest on May 1, 2001 with an exercise price of $6.50
      per share, 100,000 vest on August 1, 2001 with an exercise price of $7.50
      per share and 100,000 vest on October 1, 2001 with an exercise price of
      $9.50 per share. The warrants will become exercisable over a period of
      five years. Unvested warrants will terminate in the event the agreement is
      terminated. During the year ended December 31, 2000, the Company recorded
      a non-cash charge associated with such warrants in the amount of $645,786.

      In July 2000 the Company entered into an agreement with a consultant to
      serve as the Company's public relations agent. The consultant is paid a
      monthly retainer of $6,000 and received options to purchase 75,000 shares
      of the Company's common stock: 25,000 are exercisable at $5.75 per share,
      25,000 at $6.50 per share and 25,000 at $7.50 per share. After an initial
      four-month term, the Company may terminate the agreement on thirty days
      notice. During the year ended December 31, 2000, the Company recorded a
      non-cash charge associated with such options in the amount of $160,314.

      In January 2000 the Company entered into a one year consulting agreement
      with a member of its Board of Directors. In exchange for the consulting
      services, the Company granted the member of


                                      F-14
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      the Board warrants to purchase 50,000 shares of common stock at an
      exercise price of $1.00. The warrants vested immediately and will become
      exercisable on January 19, 2001. During the year ended December 31, 2000,
      the Company recorded a non-cash charge associated with such warrants in
      the amount of $134,598.

      In November 1999, 16,000 shares of the Company's common stock were granted
      in exchange for professional services. The Company recognized non-cash
      compensation expense of $21,500 for the year ended December 31, 1999 based
      upon the fair value of the stock on the date of grant. The Company issued
      the shares in 2000.

      In September 1999 the Company entered into a consulting agreement with one
      of its directors under which the director will provide the Company with
      business valuation services in exchange for warrants to purchase 100,000
      shares of the Company's common stock, at an exercise price of $1.00 per
      share. Of these warrants, 50,000 were exercisable on the date of grant and
      the remaining 50,000 on the first anniversary of the consulting agreement.
      The warrants must be exercised on or prior to September 9, 2004. The
      Company recognized non-cash compensation expense of $108,202 and $46,848
      for the years ended December 31, 2000 and 1999, respectively, based upon
      the fair value of such warrants.

      In June 1998 the Company granted a consultant options to purchase 150,000
      shares of the Company's common stock at an exercise price of $5.00 per
      share. 50,000 options vested immediately, and the remaining 100,000 vest
      pro rata over a period of ten quarters. The options have a term of five
      years. The Company recognized non-cash compensation expense of $41,424 and
      $58,480 for the years ended December 31, 2000 and 1999, respectively,
      based upon the fair value of the options on the date of the grant.

      In May 1998, the Company granted a consultant options to purchase 5,000
      shares of the Company's common stock, at an exercise price of $4.25. The
      Company recognized non-cash compensation expense of $15,655 for the year
      ended December 31, 1998 based upon the fair value of such options on the
      date of the grant.

      In January 1998 the Company issued warrants to a third party to purchase
      16,216 shares of the Company's common stock, at an exercise price of $4.60
      per share. The Company recognized non-cash compensation expense of $57,875
      for the year ended December 31, 1998 based upon the fair value of such
      warrants on the date the grant.

      In September 1997, in connection with the Company's IPO, the Company
      issued the underwriters warrants to purchase 225,000 shares of common
      stock at an exercise price of $8.25 per share. All the warrants, which
      have a term of five years, are exercisable at December 31, 1999.

      In November 1996, the Company entered into an employment agreement with
      its former President and Chief Executive Officer. Under the terms of the
      agreement, the employee received warrants to purchase 461,016 shares of
      common stock at $3.00 per share (see Note 6). These warrants expire on
      November 18, 2006. Upon termination of the employment agreement on April
      21, 1998, 230,508 warrants were surrendered to the Company. 230,508 of the
      warrants are still outstanding at December 31, 2000.


                                      F-15
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      The Company applies Accounting Principles Board Opinion No. 25,
      "Accounting for Stock Issued to Employees," and related interpretations in
      accounting for warrants issued to employees and stock options granted
      under the Plan. During the year ended December 31, 1999 compensation
      expense of $14,407 was recognized for warrants issued to employees.
      Compensation expense was calculated based upon the difference between the
      exercise price of the warrant or option and the fair market value of the
      Company's common stock on the date of grant. Had compensation cost for
      warrants issued and stock options granted been determined based upon the
      fair value at the grant date for awards, consistent with the methodology
      prescribed under SFAS 123, the Company's net loss and loss per share would
      have been increased by approximately $1,922,000, or $0.27 per share for
      the year ended December 31, 2000, and approximately $199,000, or $0.03 per
      share for the year ended December 31, 1999.

      The fair value of the options and warrants granted to employees and
      consultants during 2000 and 1999 ranged from $1.55 to $4.71 on the date of
      the respective grant using the Black-Scholes option-pricing model. The
      following weighted-average assumptions were used for 2000: no dividend
      yield, expected volatility of 100%, risk free interest rates of
      5.94%-6.3%, and an expected term of 3 to 5 years. The following
      weighted-average assumptions were used for 1999: no dividend yield,
      expected volatility of 100%, risk free interest rates of 5.78%-5.83%, and
      an expected term of 5 years.

5.    Income Taxes

      The Company has incurred losses since inception which have generated net
      operating loss carryforwards of approximately $13,866,000 and $7,640,030,
      respectively, at December 31, 2000 and 1999 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 result in a
      noncurrent deferred tax asset at December 31, 2000 and December 31, 1999
      of approximately $8,888,000 and $5,631,000, respectively. In consideration
      of the Company's accumulated losses and the uncertainty of its ability to
      utilize this deferred tax asset in the future, the Company has recorded a
      valuation allowance of an equal amount on such date to fully offset the
      deferred tax asset.

      For the years ended December 31, 2000 and December 31, 1999, 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.

6.    Related Parties

      Consulting agreements

      In 1998 the Company entered into a two year consulting agreement, expiring
      January 15, 2000, with Prism Ventures LLC ("Prism") under which Prism was
      to provide the Company business development, operations and other advisory
      services. Pursuant to the agreement Prism was to

                                      F-16
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      receive an annual consulting fee of $150,000 and an annual stock option
      grant to purchase 16,667 of the Company's common shares. The Chief
      Executive Officer and Chairman of the Company are principals of Prism. In
      October 1998 the Company and Prism agreed to suspend the agreement for as
      long as the two principals are employed by the Company under the
      provisions of their amended employment agreements. During the year ended
      December 31, 1998, the Company incurred expense of $112,500 pursuant to
      the agreement.

      In connection with the development of its licensed technologies the
      Company entered into a consulting agreement with the scientist who
      developed such technologies, under which the consultant serves as the
      Company's Chief Scientific Advisor. The scientist, who is a stockholder,
      shall be paid an annual consulting fee of $75,000. The agreement, which
      commenced in January 1996 and is only cancelable by the Company for cause,
      as defined in the agreement, had an initial term of two years and provided
      for automatic renewals of three additional one year periods unless either
      party notifies the other of its intention not to renew. Research and
      development expense incurred under the agreement amounted to $75,000 and
      $75,000 for the years ended December 31, 2000 and 1999, respectively.

      Employment agreements

      In September 1998 the Company and its Chief Executive Officer and Chairman
      ("EVPs") entered into employment agreements commencing October 1, 1998 and
      expiring on December 31, 2000. Under the agreements, the EVPs were each to
      be paid an annual minimum compensation of $225,000, and to be granted a
      minimum of 16,666 options to purchase shares of the Company's common stock
      per annum. In addition, one EVP was appointed as the Company's Chairman
      and the other was appointed as the Chief Executive Officer. The Company
      incurred $450,000 of expense for the year ended December 31, 1999 pursuant
      to these agreements.

      In November 1999, the EVPs were each granted non-qualified stock options
      to purchase 150,000 shares under the Company's 1996 Incentive and
      Non-Qualified Stock Option Plan, at an exercise price of $1.30, to expire
      in ten years. 37,500 options vested immediately. 75,000 will vest in
      November 2000, and the remaining 37,500 will vest in November 2001.

      In January 2000, the Company entered into new employment agreements with
      its EVPs, expiring in January 2005. The new agreements provide for an
      annual salary of $250,000, with annual increases of at least 5%. In
      addition, both of the EVPs were granted fully-vested options to purchase
      500,000 shares of the Corporations' common stock at $2.00 per share. Under
      the provisions of the agreements the EVPs would each receive a cash
      payment equal to 1.5% of the total consideration received by the Company
      in a transaction resulting in a greater than 50% change in ownership of
      the outstanding common stock of the Company.

      In January 2000, the Company and its Chief Financial Officer ("CFO")
      entered into an amendment to the CFO's employment agreement, extending his
      employment until April 2002. Under this amendment, the CFO received
      options to purchase100,000 shares of the Company's common stock at $2.00
      per share. The options vest ratably over two years and expire in January
      2010.


                                      F-17
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      In October 2000, the Company entered into an amended and restated
      employment agreements with its Chief Executive Officer, its Chairman and
      its CFO. Under the amended agreements, in the event of a change in
      control, the EVPs and the CFO will be paid their respective compensation
      for the remainder of their employment terms and will receive a tax
      gross-up payment. In addition, in such event, all unvested options held by
      the EVPs and the CFO will become vested and exercisable. In the event of a
      merger or consolidation where the holders of the voting capital stock of
      the Company immediately prior to the transaction own less than a majority
      of the voting capital stock of the surviving entity, the EVPs will each
      receive a one time cash payment of 1.5% of the total consideration
      received by the Company and a tax gross-up payment. In the event of a
      sale, merger or public spin-out of any subsidiary or material asset of the
      Company, the EVPs shall each receive a fee equal to 1.5% of the value of
      the Company's shares of the subsidiary or material asset and a tax
      gross-up payment.

      In May 2000, the Company and its Vice President for Research entered into
      an amendment of the Vice Presidents employment agreement, extending his
      employment until December 31, 2002, except that the Company may terminate
      the agreement upon 180 days written notice. Under the amendment the
      employee's title was changed to Chief Scientific Officer ("CSO"). The CSO
      was granted options to purchase 125,000 shares of the Company's common
      stock at $2.00 per share. The options vest ratably over the remaining term
      of the amendment. During the year ended December 31, 2000, the company
      recorded non-cash compensation charge of $130,999 related to these
      options.

      In November 1999, the Company entered into two year employment agreements
      with three newly-hired Vice Presidents ("VPs"), of Business Development,
      Investor Relations, and Marketing, at annual salaries of $95,000,
      $100,000, and $120,000, respectively. Each VP was also granted options to
      purchase 100,000 shares of the Company's common stock at an exercise price
      of $1.125 per share, to vest ratably over two years. As of December 31,
      2000, two of the VPs were no longer with the Company, 100,000 unvested
      options at December 31, 2000 were forfeited by the Company.

7.    Technology Purchase Agreement

      In February 1998, the Company entered into an agreement with a third party
      pursuant to which the Company acquired the third party's right to certain
      technology, intellectual property and related rights in the field of gram
      negative antibiotics in exchange for 335,530 shares of the Company's
      common stock. Research and development expense related to this agreement
      amounted to $1,457,458 for the year ended December 31, 1998.


                                      F-18
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

8.    Collaborative Research and License Agreement

      In July 1997, the Company entered into a collaborative research and
      license agreement with Wyeth-Ayerst (the "Collaborator"). Under the terms
      of the agreement, the Company has granted the collaborator an exclusive
      worldwide license to develop, make, use and sell products derived from
      specified technologies. The agreement required the collaborator to sponsor
      further research by the Company for the development of the licensed
      technologies for a period of two years from the effective date of the
      agreement, in return for payments totaling $1,200,000. In consideration of
      the license grant the Company is entitled to receive royalties equal to
      specified percentages of net sales of products incorporating the licensed
      technologies. The royalty percentages increase as certain cumulative and
      annual net sales amounts are attained. The Company could receive milestone
      payments, under the terms of the agreement of up to $13,750,000 for the
      initial product and $3,250,000 for the second product developed from a
      single compound derived from the licensed technologies. Such milestone
      payments are contingent upon the Company making project milestones set
      forth in the agreement, and, accordingly, if the Company is unable to make
      such milestones, the Company will not receive such milestone payments.
      During 1999, the Company recognized $337,500 in revenue related to this
      agreement. In 2000, the Company received $450,000 from the Collaborator.
      The Company recorded the entire amount as deferred revenue on December 31,
      2000.

9.    License and Research Support Agreements

      On December 6, 2000 the company entered into an exclusive license
      agreement and a sponsored research agreement with the Regents of the
      University of California (the "Regents"). Under the license agreement Siga
      obtained rights for the exclusive commercial development, use and sale of
      products related to certain inventions in exchange for a non-refundable
      license issuance fee of $15,000 and an annual maintenance fee of $10,000.
      In the event that the Company sub-leases the license, it shall pay Regents
      15% of all royalty payments made to Siga. Under the agreement, Siga will
      also pay Regents 15% of all funds received from Wyeth-Ayesrt and a minimum
      annual amount of $250,000 for the continued development of the inventions
      for a period of three years. Under the sponsored research agreement Siga
      will additionally provide the Regents with funding in the total amount of
      $300,000 over a period of two years to support certain research. The
      Company recorded total research and development charges in the amount of
      $52,500 for the year ended December 31, 2000, related to the two
      agreements.

      In October 2000, the Company entered into a collaborative agreement with
      Maxygen, Inc. to develop a vaccine for biological defense applications.
      The collaboration combines Siga's patented vaccine delivery system with
      Maxygen's proprietary antigens for generating an immune response.

      In December 2000 Siga entered into a collaborative agreement with Fort
      Dodge Animal Health, a division of America Home Products Corporation. The
      collaboration is focused on the design of novel vaccines for the
      prevention of veterinary diseases. The research collaboration combines
      Siga's bacterial commensal delivery technology with Fort Dodge's
      proprietary veterinary antigens. Siga will be responsible for the
      construction and characterization of candidate vaccines while Fort Dodge
      will assess the immunogenicity and protective capacity of the target
      animal species.


                                      F-19
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      In February 2001, the Company entered into a subcontract agreement with
      the Oregon State University. Under the agreement, the Oregon State
      University subcontracted to Siga certain duties it has under a grant
      received from the national Institute of Health for the development of
      Proxvirus Proteinase Inhibitors. The term of the agreement ends on August
      31, 2001.

      In March 2000 the Company entered into an agreement with the Ross Products
      Division of Abbott Laboratories (Ross), under which the Company granted
      Ross an exclusive option to negotiate an exclusive license to certain
      Company technology and patents, in addition to certain research
      development services. In exchange for the research services and the
      option, Ross is obligated to pay the Company $120,000 in three
      installments of $40,000. The first payment of $40,000 was received during
      the quarter ended March 31, 2000 and is recognized ratably, over the
      expected term of the arrangement. The remaining installments are
      contingent upon meeting certain milestones under the agreement and will be
      recognized as revenue upon completion and acceptance of such milestones.
      The first milestone was met, and payment of $40,000 received, in the
      quarter ended September 30, 2000. In the year ended December 31, 2000, the
      Company recognized revenue in the amount of $80,000.

      In May, August and September 2000 the Company was awarded three Phase I
      Small Business Innovation Research (SBIR) grants from the National
      Institutes for Health in the amounts of $26,000, $96,000 and $125,000
      respectively. The grants are for the periods May 3, 2000 to August 31,
      2000, August 1, 2000 to January31, 2001, and September 15, 2000 to March
      14, 2001 respectively, and will support the Company's antibiotic and
      vaccine development programs.

      In February of 1998, the Company entered into a research collaboration and
      license agreement with Washington University (the "University"). Under the
      terms of the agreement, the Company was granted an exclusive world-wide
      license to make, use and sell products derived from the licensed
      technology, in exchange for royalty payments equal to a certain percentage
      of net sales of products incorporating the licensed technology, and
      certain milestone payments. In 1999, a dispute arose between the Company,
      the University and a consultant of the University regarding, among other
      things, the performance of the parties under the agreements. In February
      of 2000 the parties reached a settlement agreement and mutual release of
      their obligations under the research collaboration and licensing agreement
      entered into in February 1998. Further, all personal consulting agreements
      between the Company and Washington University faculty members and
      employees were terminated. Under the terms of the settlement agreement any
      payments owed by the Company under the research collaboration agreements
      and any consulting agreements with the University faculty members were
      cancelled.

      In July and September, 1999 the Company was awarded two Phase I research
      grants by the Small Business Innovation Research Program (SBIR) of
      $109,072 and $293,446 respectively. The first grant was to help support
      the Company's antibiotic discovery efforts for the period July 1, 1999
      through December 31, 1999. The second grant provides support for the
      Company's effort to develop a vaccine targeting strep throat, in
      collaboration with the National Institutes of Health (NIH). The grant
      award is for a period of twelve months beginning on October 1, 1999. As of
      December 31, 2000 the Company had recognized revenue from the two grants
      of $220,099 and $109,072, respectively.


                                      F-20
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      In January 1996, the Company entered into a license and research support
      agreement with Rockefeller University ("Rockefeller"). The Company agreed
      to sponsor research by Rockefeller for the development of licensed
      technologies for a period of two years from the date of the agreement, in
      return for a payment of $725,000. The agreement expired in January 1998.
      However, the Company has continued its relationship with Rockefeller under
      similar terms. Sponsored research related to this third party amounted to
      $125,000 for the year ended December 31, 1999.

10.   Product Development Agreement

      In October 1999 the Company entered into an agreement with Open-iMedia, a
      software and web development company ("Development Company"). Under the
      terms of the agreement the Company was to acquire and the Development
      Company was to develop, the source code for a client/server chat and
      instant messaging application. In March 2000, the Company entered into an
      agreement with the Development Company for creative and technical
      services, and for business strategy consulting in exchange for $280,000 in
      cash and 13,605 shares of the Company's common stock.

      During the year ended December 31, 2000 the Company recognized charges of
      $180,000 and $500,334 associated with cash paid and 102,721 shares of the
      Company's common stock, respectively, paid and granted under the
      agreements. Costs related to this agreement were recognized as the
      services were performed or upon meeting certain milestones as defined
      under the agreements. The Company recorded all amounts paid under the
      development agreements, including the fair value of shares issued in
      research and development expenses.

      In July 2000 the Company acquired a 12.5% equity position in the
      Development Company. Under the terms of the agreement, the Development
      Company received: (i) $170,000 in cash; (ii) 40,336 shares of the
      Company's common stock; and (iii) certain assets consisting of the instant
      messenger product, PeerFinder and fixed assets with a net book value of
      $80,697. In addition, the Company received the right to appoint one
      director to the Development Company's board of directors. At December 31,
      2000, the Company reassessed the value of its investment in Open-i. The
      Company reviewed certain events and changes in circumstances indicating
      that the carrying amount of the investment in Open-i may not be
      recoverable in its entirety. As a result, management elected to reduce the
      carrying amount of its investment to reflect its recoverable value as of
      the year-end and recorded an impairment charge of $156,000.

11.   Other Agreements

      In May 2000, the Company entered into a binding letter of intent (the
      "Letter") to acquire Hypernix Technologies, Ltd, an Israel-based entity.
      Under the letter, in the event that the transaction was consummated, Siga
      was to issue 3 million shares of its common stock to the stockholders and
      certain employees of Hypernix and assume all of the disclosed liabilities
      of Hypernix (not to exceed $1,250,000),with Hypernix's creditors to be
      paid half in cash and half in common stock of Siga. Also under the letter,
      Siga was to lend Hypernix $250,000 per month for up to five months. This
      advance was subject to interest at an annual rate of 10% and was
      collateralized by all the assets of Hypernix. The Company advanced
      Hypernix $261,000 and $250,000 in May and July 2000,respectively, under
      the agreement. On August 10, 2000, the Company terminated the letter of
      intent. Siga recorded charges of $261,000 and $250,000 for the three
      months ended June 30, 2000 and September 30, 2000 respectively, to reserve
      the amounts advanced to Hypernix.


                                      F-21
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      Subsequent to December 31, 2000, the Company received a settlement payment
      from Hypernix in the amount of $84,375.

12.   Commitments and Contingencies

      Operating lease commitments

      The Company leases certain facilities and office space under operating
      leases. Minimum future rental commitments under operating leases having
      noncancelable lease terms in excess of one year are as follows:

Year ended December 31,
2001                                                                    $234,672
2002                                                                     226,333
2003                                                                     105,002
2004                                                                     108,152
2005 and thereafter                                                           --
                                                                        --------

                                                                        $674,159
                                                                        ========


                                      F-22
<PAGE>

SIGA Technologies, Inc.
(A development stage company)
Notes to Financial Statements
December 31, 2000 and 1999
--------------------------------------------------------------------------------

      Capital lease commitments

      In July, August and September 1998, the Company sold certain laboratory
      equipment, computer equipment and furniture to a third party for $493,329,
      $385,422 and $260,333, respectively, under sale-leaseback agreements. The
      leases have terms of 42 months and require minimum monthly payments of
      $13,171, $10,290 and $6,950, respectively. The Company has an option to
      purchase the equipment at 15% of the original cost at the end of the lease
      term.

      Future minimum lease payments for assets under capital leases at December
      31, 2000 are as follows:

      Year ended December 31,
      2001                                                              $438,931
      2002                                                               131,342
                                                                        --------

          Total Minimum Payments                                         570,273

        Less: amounts representing interest                               49,848
                                                                        --------

      Present value of future minimum lease payments                     520,425

        Less current portion of capital lease obligations                391,407
                                                                        --------

      Capital lease obligations, net current portion                    $129,018
                                                                        ========

13.   Segments

      Since the announcement in September 1999 that the Company intends to
      pursue its Internet initiative, the Company has operated the Internet
      initiative as a separate segment. The Internet segment generated operating
      expenses of approximately $1,018,000 during 2000 and has no identifiable
      assets at December 31, 2000

14.   Subsequent Events

On March, 30, 2001, the Compnay, its EVPs and certain investors (the
"Investors") in the Company entered into an agreement under which the EVP's have
agreed to resign from Siga and use their best efforts to cause each of the
current directors of Siga to resign. Under the agreement, it is expected that
Investors will be appointed as Chairman of the Board and as Chief Executive
Officer. Under the agreement, the amended employment agreement entered into by
the Company and the EVPs in October 2000 (see note 6) will be terminated with
no cost to the Company, the vesting of 37,500 options granted to the EVPs will
be accelerated, excercise terms will be extended and the EVPs will be entitled
to certain benefits until April 2003. In addition, each of the parties of the
agreement have agreed to lock up their respective shares of common stock and
options of Siga for 24 months subject to certain release provisions.


                                      F-23