<PAGE>

                                                                    Exhibit 10.1

                      FORBEARANCE AND SETTLEMENT AGREEMENT

      THIS  FORBEARANCE  AND SETTLEMENT  AGREEMENT  ("Agreement")  is made as of
March __, 2003, among Interferon Sciences, Inc., a Delaware corporation, with an
office at 783 Jersey Avenue,  New Brunswick,  New Jersey 08901  ("Debtor"),  The
American  National Red Cross,  a charitable  and nonprofit  corporation  with an
office at 8111 Gatehouse Road, Falls Church,  VA 22042 ("Lender") and Hemispherx
Biopharma,  Inc., a Delaware corporation,  with an office at 1617 JFK Boulevard,
Suite 660, Philadelphia, Pennsylvania 19103 ("HEB").

                                   BACKGROUND:

      A. As of December 28, 1998, Debtor was indebted to Lender in the amount of
One  Million  Four  Hundred  Sixty  Thousand  Eighteen  ($1,460,018.00)  Dollars
pursuant to the provisions of that certain Supply Agreement dated as of April 1,
1997 by and between  Lender and Debtor (the "Supply  Agreement"),  together with
interest thereon at the rate set forth therein (the "Existing Debt");

      B. Subject to the  application  of any payments made on or after  December
28, 1998 and the date of this Agreement,  the Existing Debt is currently due and
owing without offset, deduction or counterclaim whatever.  Lender is entitled to
exercise all rights and remedies  available to it under the Supply Agreement and
in  accordance  with  applicable  law,  without  necessity of further  notice or
demand.

      C. Debtor has (i) granted and  conveyed to Lender a mortgage,  dated as of
January 5, 1999 (the "Mortgage"), upon all of the real property and improvements
thereon  owned by Debtor (the  "Property")  as security for the repayment of the
Existing  Debt,  (ii) entered into a Security  Agreement  dated as of January 5,
1999 and amended on March __, 2003 ("Security  Agreement")  granting to Lender a
security interest in certain of Debtor's receivables,  inventory,  equipment and
net  operating  losses and (iii)  entered into an Assignment of Leases and Rents
dated as of January 5, 1999 (the  "Assignment  of Leases")  assigning to Lender,
Debtor's interest in the rents and leases affecting the Property.  The Mortgage,
the  Security  Agreement  and the  Assignment  of Leases  shall  hereinafter  be
referred to collectively as the "Loan Documents."

      D. Lender has agreed to accept  $500,000 in settlement of all  obligations
of Debtor to Lender,  including  the  Existing  Debt;  and has agreed to provide
Debtor a period of time to raise such  funds,  on the terms and  conditions  set
forth herein.


                                       1
<PAGE>

      NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby agree as follows:

1.    The foregoing recitals are hereby incorporated into this Agreement by this
      reference.

2.    Debtor  acknowledges  that as of the date  hereof,  the  Existing  Debt is
      approximately  $1.3 million,  all of which is due and payable by Debtor to
      Lender without  defense,  setoff or  counterclaim  (to the extent that any
      such defense,  setoff or  counterclaim  now exists or heretofore  existed,
      Debtor  hereby  expressly  waives  and  releases  same).   Debtor  further
      acknowledges that interest will continue to accrue on the Existing Debt in
      accordance with the terms of the Supply Agreement.

3.    During the period (the "Forbearance  Period") from the date hereof through
      the  earlier  of (i) the  date  which is 10 days  prior  to the date  (the
      "Redemption Date") the court in the Case entitled Sass sets for redemption
      of the outstanding tax certificates  (provided;  however,  if ISI receives
      notice of the Redemption Date and prior to the date which is 10 days prior
      to the Redemption Date the case is terminated with prejudice, this Section
      3 (i) shall be of no force of  effect),  (ii) May 31,  2003,  and (iii) an
      Event of Default,  Lender  agrees to forbear in the exercise of the rights
      and remedies  available to Lender as a result of defaults under the Supply
      Agreement or the Loan Agreements.

4.    At any time during the Forbearance Period, (i) Debtor shall have the right
      to pay Lender  $500,000 in full settlement of all obligations of Debtor to
      Lender,  including  the Existing  Debt or (ii) HEB shall have the right to
      pay Lender $500,000 in HEB common stock, par value $.001 per share,  under
      the terms set forth on Exhibit A attached  hereto,  in full  settlement of
      all obligations of Debtor to Lender,  including the Existing Debt.  Debtor
      and  Lender  shall  exchange  general  releases  at the  time of any  such
      payment,  and Lender shall promptly take all actions as shall be necessary
      or desirable to release its liens on the property of Debtor and  terminate
      the Loan Documents. On the date hereof, Debtor is selling its inventory to
      HEB and granting  HEB a license to sell  ALFERON N  Injection.  As partial
      compensation  for the  inventory  and the license,  Debtor  shall  receive
      approximately  487,000 shares (the "ISI Shares") of HEB common stock.  HEB
      is  obligated  to  register  the  resale  of the ISI  Shares on a Form S-3
      Registration  Statement.  For a period commencing on the effective date of
      the  Registration  Statement  and ending on the earlier of (a) the date 90
      days after the effective  date of the  Registration  Statement and (b) the
      date on which the registration statement covering the shares issued to the
      Lender,  described  in Exhibit A hereof,  is  declared  effective,  Debtor
      agrees to pay Lender,  within 10 days of the end of each  calendar  month,
      25% of the net proceeds  Debtor  receives from the sale of the ISI Shares.
      Any proceeds paid by Debtor to Lender shall reduce the amount  required to
      be paid by HEB to Lender  under (ii)  above and HEB shall  issue to Debtor
      the number of the shares of HEB common  stock which  would have  otherwise
      been issued to Lender. Any such shares issued to Debtor shall have all the
      benefits  of and be  subject  to all of the terms  set forth in  Exhibit A
      attached hereto.

5.    Upon the expiration of the Forbearance Period, whether through the passage
      of time or the occurrence of an Event of Default, if Debtor or HEB has not
      made the payment

                                       2
<PAGE>

      contemplated   by  Section  4,  the  Existing  Debt  of  Debtor  shall  be
      immediately  due and payable in full and Lender  shall be free to exercise
      all rights and  remedies  available  to it without  necessity of notice or
      demand to any party. Debtor expressly  acknowledges and agrees that Lender
      (i) has made no legally  binding  commitments  with  regard to the further
      forbearance  in the exercise of its rights and  remedies;  and (ii) is not
      legally  obligated to further  modify or amend the payment  obligations of
      Debtor  under the Loan  Documents.  In  addition,  Debtor  represents  and
      warrants to Lender that the  execution,  delivery and  performance of this
      Agreement  does not  conflict  with any  agreement  to which the Debtor is
      subject.

6.    An "Event of Default" shall exist hereunder (a) if any decree or order for
      relief is entered by a court having  jurisdiction in respect of the Debtor
      in an  involuntary  case  under the  federal  bankruptcy  laws,  as now or
      hereafter  constituted,  or under any other  applicable  federal  or state
      bankruptcy,  insolvency  or other  similar law, or if there is appointed a
      receiver,  liquidator,  assignee,  custodian,  trustee,  sequestrator  (or
      similar  official) of Debtor or for any substantial  part of its property,
      or  ordering  the  winding-up  or  liquidation  of  its  affairs  and  the
      continuance  of any such  decree or order  unstayed  and in  effect  for a
      period  of  sixty  (60)  consecutive  days or (b) if a  voluntary  case is
      commenced  by  the  Debtor  under  the  federal  bankruptcy  laws,  as now
      constituted or hereafter amended, or under any other applicable federal or
      state  bankruptcy,  insolvency or other similar law, or if Debtor consents
      to the  appointment  of or taking  possession  by a receiver,  liquidator,
      assignee, trustee, custodian,  sequestrator (or other similar official) of
      Debtor or of any substantial part of its property,  or if Debtor makes any
      assignment for the benefit of creditors.

7.    Except as expressly set forth herein with respect to Lender's  forbearance
      during  the  Forbearance  Period  and  Lender's  agreement  to settle  all
      obligations  of Debtor to Lender,  including the Existing  Debt,  the Loan
      Documents remain in full force and effect in accordance with their terms.

8.    This Agreement  shall be governed by and construed in accordance  with the
      laws of the State of New Jersey.

9.    This  Agreement  shall be  binding  upon and inure to the  benefit  of the
      parties hereto and their respective successors and assigns.

10.   The rights and  remedies  set forth  herein,  or in any other  document or
      agreement  referenced herein, to be vested in or conferred on Lender shall
      be cumulative and shall be in addition to and not in substitution of or in
      derogation  of the  rights  and  remedies  conferred  upon  Lender  by any
      applicable law.


                                       3
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                   DEBTOR:

                   INTERFERON SCIENCES, INC.

                   By:
                          --------------------------------------
                   Name:
                          --------------------------------------
                   Title:
                          --------------------------------------

                   LENDER:

                   AMERICAN NATIONAL RED CROSS

                   By:
                          --------------------------------------
                   Name:
                          --------------------------------------
                   Title:
                          --------------------------------------

                   HEMISPHERX BIOPHARMA, INC.

                   By:
                          --------------------------------------
                   Name:
                          --------------------------------------
                   Title:
                          --------------------------------------


                                       4
<PAGE>

EXHIBIT A

As set forth in Section 4 of the Forbearance Agreement, HEB shall have the right
to (i) deliver to the Lender,  common stock,  par value $.001 per share,  of HEB
(the "HEB common  stock") with a Market Value (as defined below) of $500,000 and
(ii) a guaranty,  in the manner and for the period hereinafter provided, in full
satisfaction of all of the Debtor's obligations to the Lender. The date on which
HEB  delivers  the HEB common  stock to the Lender  shall be  referred to as the
"Settlement  Date." The  Market  Value per share of HEB  Common  Stock  shall be
$1.59.  The shares of HEB common stock delivered to the Lender on the Settlement
Date shall be referred to as the "Settlement Shares."

1. Within 30 days of the Settlement Date, but not prior to the  effectiveness of
the registration statement covering the shares of HEB common stock issued by HEB
in  connection  with the sale of  Debtor's  inventory  to HEB,  HEB shall file a
registration  statement  (the  "Registration  Statement")  on Form  S-3 with the
Securities and Exchange Commission registering the Settlement Shares for resale,
and use its best efforts to have the Registration  Statement  declared effective
within 90 days after the Settlement  Date.  HEB agrees to keep the  Registration
Statement  effective  until the earlier of the date (i) which is two years after
the Settlement Date and (ii) Lender does not own any Settlement Shares.

2. Commencing on the effective date of the  Registration  Statement  ("Effective
Date"),  Lender  shall  have  the  right  but not  the  obligation  to sell  the
Settlement  Shares.  Without the prior written  consent of HEB,  until the first
anniversary  of  the  Settlement  Agreement,  Lender  agrees  not to  sell  more
Settlement Shares than as provided in the following schedule:

      (a) If the closing  price of HEB common  stock on the ASE the  immediately
      preceding  trading day is less than $ 1.50,  Lender can sell the lesser of
      (i) 2,000  Settlement  Shares and (ii) 6 % of the  current  day's  trading
      volume of HEB common stock.

      (b) If the closing  price of HEB common  stock on the ASE the  immediately
      preceding  trading day is greater than or equal to $ 1.50 but less than or
      equal to $ 1.99,  Lender can sell a number of  Settlement  Shares equal to
      the  greater of (i) 2,000  Settlement  Shares and (ii) the lesser of 6,000
      Settlement  Shares  and 6 % of the  current  day's  trading  volume of HEB
      common stock.

      (c) If the closing  price of HEB common  stock on the ASE the  immediately
      preceding  trading day is greater than or equal to $ 2.00 but less than or
      equal to $ 3.00,  Lender can sell a number of  Settlement  Shares equal to
      the  greater of (i) 2,000  Settlement  Shares and (ii) the lesser of 8,000
      Settlement  Shares  and 6 % of the  current  day's  trading  volume of HEB
      common stock.

      (d) If the closing  price of HEB common  stock on the ASE the  immediately
      preceding  trading day is greater than $ 3.00, Lender can sell a number of
      Settlement  Shares equal to the greater of (i) 2,000 Settlement Shares and
      (ii) the lesser of 12,000  Settlement  Shares and 6 % of the current day's
      trading volume of HEB common stock.


                                       5
<PAGE>

3. If by the first  anniversary of the Settlement  Date, the Lender has not sold
all the Settlement  Shares;  Lender shall, for a period of 30 days commencing on
the first  anniversary of the Settlement  Date, have the right to deliver to HEB
evidence of the number of  Settlement  Shares  which it still owns and a request
for the guaranty ( the "Guaranty Notice").  Within 10 days of the receipt by HEB
of the  Guaranty  Notice,  HEB  shall pay to  Lender  in cash,  an  amount  (the
"Guaranty  Payment") equal to the product received by multiplying (i) the number
of   Settlement   Shares  which  remain   unsold  and  (ii)  the  Market  Value.
Simultaneously with the receipt of the Guaranty Payment,  Lender shall execute a
stock power  transferring the unsold  Settlement Shares to HEB. In the event HEB
does not receive the Guaranty Notice within 30 days of the first  anniversary of
the Settlement Date the Guaranty  Obligation  shall be conclusively  deemed null
and void.

                                       6