<PAGE>   1
                                                                    Page 1 of 16

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC. 20549

                                    FORM 10-Q

      [X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934

      For the quarterly period ended            June 30, 1998
                                     -----------------------------------

                                       OR

      [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934

      For the transition period from                   to 
                                     -----------------    --------------

                        Commission file number       0-15070
                                               -------------

                            Alpha 1 Biomedicals, Inc.
               --------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                 <C>       
            Delaware                            52-1253406
------------------------------      ---------------------------------------
(State or other jurisdiction of     (I.R.S. Employer Identification Number)
incorporation or organization)
</TABLE>

                            6707 Democracy Boulevard
                                    Suite 111
                             Bethesda, MD 20817-1129
          ------------------------------------------------------------
          (Address of principal executive offices, including zip code)

                                  301-564-4400
                -------------------------------------------------
               (Registrants telephone number, including area code)


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

                  Yes       X             No
                         -------               -------

      As of August 1, 1998, 11,977,429 shares of the registrant's common stock,
par value $.001 per share, were issued and outstanding.


<PAGE>   2
                                                                    Page 2 of 16



                            ALPHA 1 BIOMEDICALS, INC.

                                    FORM 10-Q

                           QUARTER ENDED June 30, 1998

                                      INDEX

<TABLE>
<CAPTION>
                                                                  Page No.
<S>         <C>                                                   <C>    
Part I.     Financial Information

            Item 1.     Financial Statements

                        Balance Sheets at June 30, 1998
                        (unaudited) and December 31, 1997
                        (audited)                                         3

                        Statements of Operations for the three-
                        month and six-month periods ended
                        June 30, 1998 and 1997 (unaudited)                4

                        Statements of Cash Flows for the six-
                        month periods ended June 30, 1998 and
                        1997 (unaudited)                                  5

                        Notes to Financial Statements                  6-10

            Item 2.     Management's Discussion and Analysis of
                        Financial Condition and Results of            11-14
                        Operations


Part II.    Other Information

            Item 4.     Submission of Matters to a Vote of               15
                        Security Holders

            Item 6.     Exhibits and Reports on Form 8-K                 15

Signatures                                                               16
</TABLE>






<PAGE>   3
                                                                    Page 3 of 16

                          Part 1. Financial Information

                            ALPHA 1 BIOMEDICALS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                       June 30,             December 31,
                                                                                         1998                   1997
                                                                                         ----                   ----
                                                                                      (unaudited)

<S>                                                                            <C>                      <C>
ASSETS

Current assets
      Cash and cash equivalents                                                $             9,734      $              21,369
      Prepaid insurance                                                                     20,625                     46,988
                                                                               --------------------     ----------------------

             Total current assets                                                           30,359                     68,357

Fixed assets, net                                                                              966                      1,304
Due from related party, net of allowance                                                     2,197                      2,197
                                                                               --------------------     ----------------------

             Total assets                                                      $            33,522      $              71,858
                                                                               ====================     ======================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities
      Accounts payable                                                         $           345,318      $             276,215
      Accrued expenses                                                                     499,025                    408,801
      Notes payable                                                                        280,000                    110,000
      Letter agreements with vendors                                                     1,290,503                  1,290,503
      Deferred revenue                                                                     130,000                     65,000
                                                                               --------------------     ----------------------

             Total current liabilities                                                   2,544,846                  2,150,519
                                                                               --------------------     ----------------------

Stockholders' equity (deficit)
      Preferred stock, $.001 par value per share,
       1,000,000 authorized; no shares issued                                               -                         -
      Common stock, par value $.001 per share,
       20,000,000 shares authorized; 11,977,429 issued and outstanding                      11,977                     11,977
      Additional paid-in capital                                                        35,965,289                 35,965,289
      Accumulated deficit                                                              (38,488,590)               (38,055,927)
                                                                               --------------------     ----------------------

             Total stockholders' equity (deficit)                                       (2,511,324)                (2,078,661)
                                                                               --------------------     ----------------------

             Total liabilities and stockholders' equity (deficit)              $            33,522      $              71,858
                                                                               ====================     ======================
</TABLE>


<PAGE>   4

                                                                    Page 4 of 16

                            ALPHA 1 BIOMEDICALS, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

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

                                                      1998                1997                1998              1997
                                                      ----                ----                ----              ----
                                                            (unaudited)                           (unaudited)

<S>                                           <C>                 <C>                 <C>                 <C>             
Revenues                                      $        -          $         45,727    $          2,515    $         54,956

Expenses
 Research and product
  development                                           14,405              14,831              28,198              54,167
 General and administrative                            142,492             157,085             338,075             303,010
                                              ------------------   -----------------   -----------------   -----------------

Total expenses                                         156,897             171,916             366,273             357,177
                                              ------------------   -----------------   -----------------   -----------------

Operating loss                                        (156,897)           (126,189)           (363,758)           (302,221)
Interest expense                                       (35,968)            (34,549)            (73,787)            (69,592)
Interest income                                          4,876                 676               4,882                 907
                                              ------------------   -----------------   -----------------   -----------------

Net loss                                      $       (187,989)   $       (160,062)   $       (432,663)   $       (370,906)
                                              ==================   =================   =================   =================

Basic and diluted net loss per common share   $          (0.02)   $          (0.01)   $          (0.04)   $          (0.04)
                                              ==================   =================   =================   =================


Weighted average number
 of common shares outstanding                       11,977,429          11,781,275          11,977,429           9,764,169
                                              ==================   =================   =================   =================
</TABLE>



<PAGE>   5
                                                                    Page 5 of 16


                            ALPHA 1 BIOMEDICALS, INC.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                       Six months ended
                                                                                           June 30,
                                                                         ------------------------------------------------
                                                                                   1998                    1997
                                                                                   ----                    ----
                                                                                          (unaudited)

<S>                                                                       <C>                     <C>
Cash flows from operating activities:
     Net loss                                                             $          (432,663)    $            (370,906)

Adjustments to reconcile net loss to net
     cash used in operating activities:
         Depreciation                                                                     338                     4,062
         Litigation settlement in common stock                                         -                        105,000
         Changes in operating assets and liabilities:
              Decrease in prepaid insurance                                            26,363                    22,419
              Decrease in other current assets                                         -                          3,677
              Decrease in due from related party                                       -                            772
              Decrease in other assets                                                 -                         14,610
              Increase in accounts payable                                             69,103                    25,719
              Increase (decrease) in accrued expenses                                  90,224                  (186,117)
              Increase in deferred revenue                                             65,000                    -
              Decrease in letter agreements with vendors                               -                        (16,765)
                                                                         ----------------------    ----------------------

Net cash used in operating activities                                                (181,635)                 (397,529)
                                                                         ----------------------    ----------------------

Net cash provided by investing activities                                              -                         -
                                                                         ----------------------    ----------------------

Cash flows from financing activities:
     Proceeds from issuance of common stock/warrants                                   -                        250,000
     Proceeds from issuance of notes payable                                          210,000                    -
     Repayment of notes payable                                                       (40,000)                   -
                                                                         ----------------------    ----------------------

Net cash provided by financing activities                                             170,000                   250,000
                                                                         ----------------------    ----------------------

Net decrease in cash and cash equivalents                                             (11,635)                 (147,529)

Cash and cash equivalents at beginning of period                                       21,369                   153,725
                                                                         ----------------------    ----------------------

Cash and cash equivalents at end of period                                $             9,734       $             6,196
                                                                         ======================    ======================
</TABLE>




<PAGE>   6
                                                                    Page 6 of 16


                            ALPHA 1 BIOMEDICALS, INC.

                          NOTES TO FINANCIAL STATEMENTS

Alpha 1 Biomedicals, Inc. (the "Company"), a Delaware corporation, was
incorporated in 1982. The Company operates in a single industry segment, the
biotechnology industry, which consists of researching and developing new
pharmaceutical products for the treatment of diseases or conditions that arise
as a result of immune system disorders, including chronic viral infections,
cancer and autoimmune disease.

Since early 1996, the Company has substantially halted its development program
and all other research and has no products that have received regulatory
approval. During 1997, the Company entered into a Material Transfer Agreement-
Cooperative Research and Development Agreement ("MTA-CRADA") with the National
Institutes of Health ("NIH"), whereby the NIH investigator will use Thymosin
beta 4 material provided by the Company in wound healing experiments. In
exchange, the Company may license from the NIH any patent rights that might
result from the research study that relate to the use of Thymosin beta 4 as a
wound healing treatment. To date, no data from the research has been released
since the study has not been completed. The Company has not generated
significant revenues from operations and does not anticipate generating product
revenues for the foreseeable future. The Company will require substantial
funding in order to undertake further research and development activities and to
manufacture and market the products which the Company intends to develop.
Management plans to continue to pursue strategic alliances or other partnership
arrangements with entities interested in and with resources to develop Thymosin
beta 4, or other business transactions which would allow the Company to generate
resources to permit continuation of the Company's operations.

On December 17, 1997, the Company entered into a Alpha Rights Acquisition
Agreement (the "Acquisition Agreement") with SciClone Pharmaceuticals, Inc.
("SciClone"), pursuant to which the Company agreed to sell to SciClone its right
to receive from SciClone royalties on the future sales of Thymosin alpha 1 in
exchange for a combination of cash and shares of SciClone common stock. The
transaction was approved by the stockholders of the Company at its annual
meeting held July 15, 1998 and was completed on July 28, 1998.

Under the Acquisition Agreement, the Company relinquished its future rights to
royalties from the sale of Thymosin alpha 1. In exchange, the Company received
on the date of the Acquisition Agreement, a cash payment of $65,000 and an
additional cash payment of $65,000 during January 1998. Upon the closing of the
transaction, the Company received 444,115 shares of SciClone common stock (the
"Initial Shares"). The number of shares was calculated based on an average of a
price of $4.053 per share over a period preceding the date of the Acquisition
Agreement (the "Initial Average Price"). In addition, on each of 12 consecutive
monthly Lock-Up Release Dates (as hereinafter defined), the Company will be
entitled to receive additional shares of SciClone common stock (the "Additional
Shares") which, when added to Initial Shares, cannot exceed 600,000 shares, if
the average of the closing sale prices per share of the SciClone common stock on
such Lock-Up Release Date and each prior Lock-Up Release Date is less than the
Initial Average Price.

<PAGE>   7
                                                                    Page 7 of 16

Under the Stock Rights Agreement entered into between the Company and SciClone,
(i) SciClone is obligated to file a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended, that will register
both the Initial Shares and the Additional Shares for resale by the Company and
(ii) the Company is required, commencing with the 30-day period beginning on the
effective date of the Registration Statement and during each of the next eleven
30-day periods thereafter (the first day of each such period being referred to
as a "Lock-Up Release Date"), to limit its resale (A) of Initial Shares to a
number equal to 1/12 of the total number Initial Shares and (B) of Additional
Shares to a number equal to 50,000, minus the number of Initial Shares that may
be sold during the period.

Because the future price of SciClone common stock cannot be known, neither the
number of Additional Shares, if any, received by the Company, nor the proceeds
that the Company would realize from the sale of the Initial Shares and the
Additional Shares, if any, is determinable.

As provided in the Acquisition Agreement, SciClone has made loans to the Company
of (i) $70,000 in February 1998 and (ii) $70,000 in July 1998. SciClone is
further obligated to make loans to the Company of $70,000 on each of August
1998, and September 1998, if the dates on which such loans are to be made
precedes the effective date of the Registration Statement (collectively, with
the loans previously made, the "Advances"). These Advances of up to $280,000 are
non-interest bearing (except to the extent that the Company fails to repay any
principal installment when due, in which case the overdue installment will bear
interest at the rate of 10% per annum). The Advances will be secured by Initial
Shares having a market value equal to the principal amount of the loans. The
Company is required to repay the Advances in monthly installments of $70,000
commencing on the earlier of (i) the ninth Lock-Up Release Date and (ii) the
Lock-Up Release Date following any date on which the Company receives new equity
financing of at least $500,000, and in any event the Advances will be due and
payable in full no later than May 31, 1999.

The Company will account for the SciClone transaction based upon the fair value
of the consideration received, which is more readily determinable than the fair
value of the Company's right to receive royalty payments from the future sales
by SciClone and its licensees of Thymosin alpha 1. The Company will record at
the Closing Date a gain on the SciClone transaction in the amount as the sum of
(i) $130,000 of cash received, (ii) the fair market value of the 444,115 Initial
Shares received, determined by reference to the closing market price per share
of SciClone common stock at the Closing Date as reported by the Nasdaq Stock
Market, and (iii) the intrinsic value of the Company's right to receive
Additional Shares of SciClone common stock, subject to a maximum of 155,885
Additional Shares, if the market value of SciClone common stock is below $4.053
per share during the Lock-Up Periods. The intrinsic value, which approximates
fair market value, of the right to receive Additional Shares of SciClone common
stock will be determined by reference to the closing market price per share of
SciClone common stock at the Closing Date as reported by the Nasdaq Stock
Market. Because the future price of the SciClone common stock cannot be known,
the total gain on the SciClone transaction is indeterminable at this time.

Subsequent to the Closing Date, the Company will classify the SciClone common
stock as available-for-sale for financial reporting purposes. To the extent 

<PAGE>   8
                                                                    Page 8 of 16

that the subsequent market value of the SciClone common stock is above or below
the market value on the Closing Date, the Company will record the SciClone
common stock at fair market value and will record the unrealized gain or loss,
respectively, net of tax, as a component of stockholders' equity until realized.

To the extent that the subsequent market value of the SciClone common stock is
above or below the market value on the Closing Date, the Company will record the
right to receive Additional Shares of SciClone common stock at its intrinsic
value, which approximates fair market value, and will record the unrealized loss
or gain, respectively, net of tax, as a component of Stockholders' equity until
realized. Based upon the terms of the Acquisition Agreement, the maximum
intrinsic value of the Company's right to receive additional shares is $467,655.
On the date the Company receives Additional Shares, if any, the Company will
record the Additional Shares received at the then fair market value and will
reduce the right to receive Additional Shares of SciClone common stock by a
corresponding amount.

Cash and short term investment balances at June 30, 1998 were $9,734. The
Company's sole source of cash, absent a new financing or other business
transactions, will be the sale of the SciClone common stock. Based on its
current cash flow projections, the Company believes that the proceeds from the
SciClone transaction will provide sufficient funds to continue as a going
concern into the fourth quarter of 1998. This projection is dependent upon the
price of the SciClone common stock remaining at or above $3.00 per share. Should
the price of SciClone common stock decline below that price or should unforeseen
financial needs arise, the period for which the Company should be able to
continue in operation using the proceeds of the SciClone transaction would be
shortened.

During 1995, the Company refocused its research efforts to Thymosin beta 4.
Research activities and preclinical studies were initiated and accelerated based
on anticipated cash resources that the Company expected to materialize through a
proposed merger. In anticipation of the merger and the cash that was to become
available, the Company commenced placing orders for the conduct of research
studies and for the purchase of Thymosin beta 4 material totaling $2,704,000. In
January 1996, the Company learned of the issuance of a U.S. patent such that the
commercialization of Thymosin beta 4 as a mucolytic for the treatment for cystic
fibrosis would potentially infringe the claims of this patent. Following an
unsuccessful attempt to obtain a license to this patent, the merger agreement
was terminated by mutual agreement.

As a result of the termination of research and development activities during
1996, the Company canceled research orders with certain vendors. The Company was
able to cancel approximately $1,200,000 of work on outstanding orders of
approximately $2,700,000. Management entered into separate letter agreements
with four vendors, which in the aggregate totaled $1,323,000, to defer payment
in exchange for a commitment to the vendors of revenues received by the Company
in the future under the license agreement with SciClone until the full amounts
of the liabilities have been liquidated. The Agreement provides that in the
event sufficient funding is obtained for the Thymosin beta 4 program, all
amounts then due would become payable immediately.

<PAGE>   9
                                                                    Page 9 of 16

In January and February 1998, the Company entered into amended agreements with
the four vendors, subject to the completion of the transaction with SciClone,
which will accelerate payments due. In consideration for the acceleration of
payments, the vendors have agreed to reduce the Company's aggregate obligation,
including accrued interest, to $902,000, which the Company has agreed to pay
from the proceeds of the sale of the shares of SciClone common stock received
under the Acquisition Agreement.

The Company continues to pursue strategic alliances or other partnership
arrangements with entities interested in and with resources to develop Thymosin
beta 4, or other business transactions which would allow the Company to generate
resources to permit continuation of the Company's operations.

In this regard, on March 4, 1998, the Company entered into an agreement with
Aurora Capital Corporation pursuant to which Aurora will provide the Company
with advisory and investment banking services, including the identification of
potential merger or acquisition candidates and analysis of possible deal
structures. However, there is no assurance that the Company's efforts, or those
on behalf of the Company by Aurora, will be successful.

In transactions separate from the Acquisition Agreement, the Company entered
into loan agreements with SciClone during March and May 1998, whereby the
Company received $70,000 each period to provide operating funds. The terms of
the loan agreement provide, in part, for interest at the rate of 8% per annum
and are payable over one year in twelve equal amounts, the first commencing June
1998 and the second during July 1998. To date, payments have not commenced.

Should the Company obtain substantial additional funding, other factors
including competition, dependence on third parties, uncertainty regarding
patents, protection of proprietary rights, manufacturing of peptides and
technology obsolescence could have a significant impact on the Company and its
operations.

Comprehensive Income

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement requires
that all items recognized under accounting standards as components of
comprehensive income be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
income by their nature in an annual financial statement. The Company has no
other components of comprehensive income other than net income.

Financial Statements

The Balance Sheet as of June 30, 1998, the Statement of Operations for the
three-month and six-month periods ended June 30, 1998 and 1997, and the
Statements of Cash Flows for the six-month periods ended June 30, 1998 and 1997,
have been prepared without audit. In the opinion of the management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position at June 30, 1998 and the results of

<PAGE>   10
                                                                   Page 10 of 16

operations and changes in cash flows for such period have been made. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
December 31, 1997 audited financial statements. The results of operations for
the three-month and six-month periods ended June 30, 1998, are not necessarily
indicative of the operating results for the full year.

Forward Looking Statements

Any statements which are not actual facts contained in this document are forward
looking statements that involve risks and uncertainties, including but not
limited to, those relating to product demand, pricing, market acceptance, the
effect of economic conditions, intellectual property rights and litigation,
clinical trials, governmental regulations, competitive products, risks in
product and technology development, the results of financing efforts, the
ability to complete transactions and other risks identified in the Company's
Securities and Exchange Commission filings.



<PAGE>   11
                                                                   Page 11 of 16


                            ALPHA 1 BIOMEDICALS, INC.
Item 2.

           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

 Results of Operations for the Three-and Six-Month Periods Ended June 30, 1998
         Compared to the Three-and Six-Month Periods Ended June 30, 1997


Revenues. There were no revenues recorded during the three-month period ended
June 30, 1998. During the comparable period a year earlier, revenues were
$45,727, consisting of $20,727 in royalty payments from SciClone
Pharmaceuticals, Inc. ("SciClone") and $25,000 received under a consulting
agreement. Revenues for the six-month period ended June 30, 1998 were $2,515 as
compared to $54,956 during the comparable period a year earlier. The current
six-month period revenue consisted of a royalty payment whereas the comparable
period a year earlier consisted of $29,831 from SciClone in royalty payments and
$25,125 under a consulting agreement. Effective December 17, 1997, the date of
the execution of the Alpha Rights Acquisition Agreement, royalty earnings on
sales of Thymosin alpha 1 by SciClone ceased.

Expenses. Expenses for the three-month period ended June 30, 1998 were $156,897
as compared to $171,916 during the comparable period a year earlier. The current
period decrease reflects the effect of an overall general and administrative
expense reduction. Expenses for the six month period ended June 30, 1998 were
$366,273 as compared to $357,177 during the comparable period a year earlier.
Research and development expenses during the current period totaled $28,198, a
decrease of $24,969, primarily reflecting higher prior period expenses incurred
for the purchase of materials, and costs incurred for the conduct of clinical
studies. General and administrative expenses during the current six-month period
totaled $338,075, an increase of $35,065 over the comparable period a year
earlier. The increase primarily reflects (i) an increase in consulting fees as a
result of the Company entering into an agreement with an advisor to provide
advisory and investment banking services, and (ii) an increase in legal expenses
relating to the Alpha Rights Acquisition Agreement, including securing
shareholder approval.

Capital Resources and Liquidity

Since its inception in 1982, the Company's activities have consisted of
conducting research and development, sponsoring clinical trials of its
proprietary products, the construction and equipping of laboratory and
production facilities, and the manufacture of products for research, testing and
clinical trials. The Company's accumulated deficit of $38,488,590 through June
30, 1998 has been primarily funded by the proceeds from the issuance of equity
securities (and interest earned on such funds), the licensing of technology
developed or acquired by the Company and limited product sales.

The Company has delayed its development program for Thymosin beta 4, and has no
products that have received regulatory approval.

<PAGE>   12
                                                                   Page 12 of 16

On July 28, 1998, the Company completed, following shareholder approval on July
15, 1998, the transaction contemplated by the Alpha Rights Acquisition Agreement
(the "Acquisition Agreement") that it entered into with SciClone on December 17,
1997. Pursuant to the Acquisition Agreement, the right to receive further
royalties on the sale by SciClone of products containing Thymosin alpha 1, the
Company's only source of operating revenues.

In exchange for surrendering its rights to future royalties from sales of
Thymosin alpha 1 products, the Company received (i) $130,000 in cash, which was
paid in December 1997 and January 1998, and (ii) at least 444,135 shares of
SciClone common stock (the "Initial Shares"), which number of shares was
calculated based on a price of $4.053 per share of SciClone common stock (the
"Initial Average Price"). In addition, on each of 12 consecutive Lock-Up Release
Dates (as hereinafter defined), the Company will be entitled to receive
additional shares of SciClone common stock (which, when combined with the
Initial Shares, cannot exceed 600,000 shares), if the average of the closing
sale prices per share of the SciClone common stock on such Lock-Up Release Date
and each prior Lock-Up Release Date is less than the Initial Average Price (the
"Additional Shares").

SciClone is obligated to file a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended, registering both the
Initial Shares and the Additional Shares for resale by the Company. SciClone is
required to file the Registration Statement on or before August 27, 1998, and
use its best efforts to have it declared effective by the Securities and
Exchange Commission (the "SEC") on or prior to November 25, 1998. The Company
has agreed that, commencing with the 30-day period beginning on the effective
date of the Registration Statement and during each of the next eleven 30-day
periods thereafter (the first day of each such period being referred to as a
"Lock-Up Release Date"), it will limit its resale (i) of Initial Shares to a
number equal to 1/12 of the total number of Initial Shares and (ii) of
Additional Shares to a number equal to 50,000, minus the number of Initial
Shares sold during the period.

Because the future price of SciClone common stock cannot be known, neither the
number of Additional Shares, if any, received by the Company, nor the proceeds
that the Company would realize from the sale of the Initial Shares and the      
Additional Shares, if any, is determinable. Nor are there any assurances that
the Registration Statement will be filed by SciClone or be declared effective
by the SEC within the time periods specified.

As provided in the Acquisition Agreement, SciClone has made loans to the Company
of (i) $70,000 in February 1998 and (ii) $70,000 in July 1998. SciClone is
further obligated to make loans to the Company of $70,000 on each of August
1998, and September 1998, if the dates on which such loans are to be made
precedes the effective date of the Registration Statement (collectively, with
the loans previously made, the "Advances"). These Advances of up to $280,000 are
non-interest bearing (except to the extent that the Company fails to repay any
principal installment when due, in which case the overdue installment will bear
interest at the rate of 10% per annum). The Advances will be secured by Initial
Shares having a market value equal to the principal amount of the loans. The
Company is required to repay the Advances in monthly installments of $70,000
commencing on the earlier of (i) the ninth Lock-Up Release Date and (ii) the
Lock-Up Release Date following any date on which the 

<PAGE>   13
                                                                   Page 13 of 16

Company receives new equity financing of at least $500,000, and in any event the
Advances will be due and payable in full no later than May 31, 1999.

Separate from the Acquisition Agreement, the Company has obtained from SciClone
a loan of $70,000 in March 1998 and a second loan of $70,000 in May 1998. These
loans bear interest at the rate of 8% per annum and are payable over 12 months
in equal monthly installments. Although the monthly payments were required to
commence in June and July, respectively, no payment on the loans have been made.

During July 1997, the Company received an unsecured $50,000 loan from an
individual to provide additional operating capital. The terms of the loan
agreement provided for repayment of principal and interest within six months
with interest at the rate of 8% per annum. Additionally, the noteholder received
a warrant to purchase 100,000 shares of the Company's common stock at $.13 per
share, the fair market value of the Company's common stock at the date of the
grant. The warrant has a five-year term. During January 1998, the term note was
extended to provide for payments to be made in five consecutive equal monthly
installments, beginning January 1998. In consideration of the extended payment
term, the noteholder received an additional 41,666 warrants at the same terms as
the original warrants. Through June 30, 1998, the Company had paid $40,000
against principal, and during July, an additional $7,000.

During October 1997, the Company received an unsecured loan of $60,000 from
ViroPro Pharmaceuticals, Inc. ("ViroPro"). The demand note provided for
repayment by April 14, 1998 with interest at the rate of 8%. ViroPro and the
Company had discussions through December 1997 regarding the possibility of a
business combination. There have been no discussions since that time. The loan
has not been repaid.

As a result of the termination of research and development activities during
1996, the Company canceled research orders with certain vendors. The Company was
able to cancel approximately $1,200,000 of work on outstanding orders of
approximately $2,700,000. Management entered into separate letter agreements
with four vendors, which in the aggregate totaled $1,323,000, to defer payment
in exchange for a commitment to the vendors of revenues received by the Company
in the future under the SciClone license agreement until the full amounts of the
liabilities have been liquidated. In the event that sufficient funding is
obtained for the Thymosin beta 4 program, all amounts then due would become
payable immediately.

In January and February 1998, the Company entered into amended agreements with
the four vendors pursuant to which the Company has agreed to pay the amounts due
from the proceeds of the sale of the shares of SciClone common stock received
under the Acquisition Agreement. In consideration for this acceleration of
payments, the vendors have agreed to reduce the Company's aggregate obligation,
including accrued interest, to $902,000.

Cash balances at June 30, 1998 were $9,734. The remaining Advances that the
Company was eligible to receive under the Acquisition Agreement then totaled
$210,000. The Company anticipates that the remaining Advances will provide cash
for operations for July through September 1998, after which time the Company
anticipates that the Registration Statement that SciClone is required to file
with respect to the Initial Shares and the Additional Shares, if any, 

<PAGE>   14
                                                                   Page 14 of 16

will have become effective. The Company intends to use the proceeds from the
sale of the Initial Shares and the Additional Shares, if any, to repay existing
indebtedness. Unless additional capital is obtained by October 1998, the Company
will likely be forced to cease all operations other than the sale of shares of
SciClone common stock to repay indebtedness.

On March 4, 1998, the Company entered into an agreement with Aurora Capital
Corporation pursuant to which Aurora will provide the Company with advisory and
investment banking services, including the identification of potential merger or
acquisition candidates and analysis of possible deal structures. However, there
is no assurance that the Company's efforts, or those on behalf of the Company by
Aurora, will be successful.

The effect of inflation and changing prices on the continuing operations of the
Company is not expected to be significant.

New Accounting Standards

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement is effective for 1998. The
Company does not believe the adoption of this statement will have a significant
impact on its reporting and disclosure requirements.

In July 1996, the Emerging Issues Task Force provided guidance which requires
that internal and external costs specifically associated with modifying software
for the Year 2000 should be expensed as incurred. The Company believes its
computer systems are Year 2000 compliant and, accordingly, does not believe
modifications to its systems will be necessary. The Company does not anticipate
that it will be adversely affected by the failure of any third party to be Year
2000 compliant.



<PAGE>   15
                                                                   Page 15 of 16


                            ALPHA 1 BIOMEDICALS, INC.

                           Part II - Other Information

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

On July 15, 1998, the Company held its Annual Meeting of Stockholders, at which
the following matters were submitted to a vote of stockholders, with the results
indicated.

(1)   Election of Directors

<TABLE>
<CAPTION>
      Nominees                Votes For         Votes Withheld
      --------                ---------         --------------
<S>                           <C>                  <C>    
      Allan L. Goldstein      6,213,218            135,907
      Joseph C. McNay         6,223,302            125,823
      Albert Rosenfeld        6,219,881            129,244
      Michael L. Berman       6,223,595            125,530
</TABLE>

(2)   A proposal to sell the Company's rights to receive royalties from the
      sale of Thymosin alpha 1 to SciClone Pharmaceuticals, Inc. was approved.

<TABLE>
<CAPTION>
            For               Against              Abstain
      -----------------       -------              -------
<S>                           <C>                  <C>   
      6,002,245 (50.12%)      158,793              18,376
</TABLE>

(3)   A proposal to amend the Company's Restated Certificate of Incorporation
      to increase the authorized shares of common stock from 20 million to 75
      million was not approved.

<TABLE>
<CAPTION>
            For               Against              Abstain
      -----------------       -------              -------
<S>                           <C>                  <C>   
      5,832,337 (48.69%)      431,515              85,273
</TABLE>

        Approval required a majority of outstanding shares voted FOR the
        proposal.

(4)   A proposal to ratify the appointment of Price Waterhouse as Independent
      Auditors was approved.

<TABLE>
<CAPTION>
            For               Against              Abstain
      -----------------       -------              -------
<S>                           <C>                  <C>   
      6,298,693 (52.59%)      21,082               29,350
</TABLE>


Item 6.     Exhibits and Reports on Form 8-K

            (a)   Exhibits

                  Exhibit
                  Number
                     27 Financial Data Schedule

            (b)      Reports on Form 8-K - - A current report on Form 8-K was
                     filed May 15, 1998.




<PAGE>   16
                                                                   Page 16 of 16


                                   SIGNATURES




      Pursuant to the requirements 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.



                                          Alpha 1 Biomedicals, Inc.
                                          -------------------------
                                                (Registrant)





Date: August 11, 1998                     By:   /s/  R.J. Lanham
                                             -------------------
                                                R.J. Lanham
                                                Vice President and
                                                Chief Financial Officer