UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

      For the quarter ended September 30, 2002

                                          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:   0-10379


                            INTERFERON SCIENCES, INC.
             (Exact Name of Registrant as Specified in its Charter)


Delaware                                                           22-2313648
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification No.)


783 Jersey Avenue, New Brunswick, New Jersey                            08901
(Address of principal executive offices)                           (Zip code)


(732) 249-3250
(Registrant's 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 [ ]


Number of shares outstanding of each of issuer's classes of common stock as of
October 28, 2002.

                   Common Stock               20,780,750 shares



<PAGE>






                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS




Part I.  Financial Information:

   Consolidated Condensed Balance Sheets--
     September 30, 2002 and December 31, 2001. . .. . . . . . . . . . . . . . .1

   Consolidated Condensed Statements of Operations--
     Three Months and Nine Months Ended September 30, 2002 and 2001 . . . . .2-3

   Consolidated Condensed Statement of Changes in
     Stockholders' Equity (Deficiency)--
     Nine Months Ended September 30, 2002 . . . . . . . . . . . . . . . . . . .4

   Consolidated Condensed Statements of Cash Flows--
     Nine Months Ended September 30, 2002 and 2001. . . . . . . . . . . . . . .5

   Notes to Consolidated Condensed Financial Statements. . . . . . . . . . .6-12

   Management's Discussion and Analysis of Financial
     Condition and Results of Operations . . . . . . . . . . . . . . . . . 13-19

Part II.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 20

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21



<PAGE>



                                        3

                    INTERFERON SCIENCES, INC. AND SUBSIDIARY
                          PART I. FINANCIAL INFORMATION

KPMG LLP resigned as the Company's independent accountants on November 6, 2002.
They were not engaged to and did not perform a review of this Quarterly Report
on Form 10-Q in accordance with Statement on Auditing Standards No. 71, "Interim
Financial Information", although such a review is required, as the Company lacks
sufficient funds to pay for this review.

<TABLE>
<CAPTION>


                      CONSOLIDATED CONDENSED BALANCE SHEETS

                           September 30, December 31,
                                                         2002             2001
                                                     (Unaudited)
ASSETS                                              ------------------------------
<S>                                                 <C>               <C>
Current assets
  Cash and cash equivalents                         $    343,894      $ 1,184,889
  Accounts and other receivables                          41,924          123,389
  Inventories, net of reserves of
   $4,807,296 and $5,286,011, respectively                19,972          252,402
  Prepaid expenses and other current assets               28,479           17,608
                                                   -------------    -------------
Total current assets                                     434,269        1,578,288
                                                   -------------    -------------
Property, plant and equipment, at cost                12,854,834       12,854,834
Less accumulated depreciation                        (11,074,034)     (10,776,342)
                                                   -------------    -------------
                                                       1,780,800        2,078,492
                                                   -------------    -------------
Patent costs, net of accumulated amortization            139,217          160,342
Other assets                                                 100           10,100
                                                   -------------    -------------
Total assets                                       $   2,354,386    $   3,827,222
                                                   =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
  Accounts payable and accrued expenses            $   3,033,176    $   2,653,209
  Guaranteed value of ISI stock and
   in-kind services due Metacine                       1,700,000        1,700,000
  Note payable and amount due GP Strategies              409,245          495,745
  Convertible notes payable                              250,000
                                                   -------------    -------------
Total current liabilities                              5,392,421        4,848,954
                                                   -------------    -------------
Convertible notes payable                                250,000
                                                   -------------    -------------
Equity in losses in excess of
  investment in Metacine                                 565,840          290,994
                                                   -------------    -------------
Commitments and contingencies

Stockholders' equity (deficiency)
Preferred stock, par value $.01 per share;
 authorized-5,000,000 shares; none issued
 and outstanding
Common stock, par value $.01 per share;
 authorized-55,000,000 shares; issued
 and outstanding-20,704,376 and
 20,308,031 shares, respectively                         207,044          203,080
Capital in excess of par value                       138,468,476      138,407,621
Accumulated deficit                                 (142,417,395)    (139,043,427)
Consideration shares subject to guaranteed value         (80,000)        (520,000)
Settlement shares                                        (32,000)        (360,000)
                                                   -------------     ------------
Total stockholders' equity (deficiency)               (3,853,875)      (1,312,726)
                                                   -------------     ------------
Total liabilities and stockholders'
  equity (deficiency)                               $  2,354,386    $   3,827,222
                                                   =============    =============
The accompanying notes are an integral part of these consolidated condensed
financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                      Three Months Ended
                                                         September 30,
                                                  -----------------------------
                                                       2002           2001
                                                  -------------   -------------
<S>                                                 <C>            <C>
Revenues
  Alferon N Injection                              $    687,197    $    458,746
                                                  -------------   -------------
Total revenues                                          687,197         458,746
                                                  -------------   -------------
Costs and expenses
Cost of goods sold and excess/idle
  production costs                                      423,937         725,786
Research and development                                308,912         500,030
General and administrative                              441,054         559,111
Other expenses                                          100,000         240,000
                                                  -------------   -------------
Total costs and expenses                              1,273,903       2,024,927
                                                  -------------   -------------
Loss from operations                                   (586,706)     (1,566,181)

Interest income (expense), net                          (30,087)         (5,504)

Equity in loss of Metacine                              (38,668)        (92,955)
                                                  -------------   -------------
Net loss                                           $   (655,461)    $(1,664,640)
                                                  =============   =============

Basic and diluted net loss per share               $       (.03)    $      (.08)
                                                  =============   =============
Weighted average number of shares outstanding        20,628,306      20,171,563
                                                  =============   =============



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

</TABLE>


<TABLE>
<CAPTION>




                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)


                                                        Nine Months Ended
                                                          September 30,
                                                  -----------------------------
                                                       2002           2001
                                                  -------------   -------------
<S>                                                <C>             <C>
Revenues
  Alferon N Injection                              $  1,647,279    $  1,173,208
                                                  -------------   -------------
Total revenues                                        1,647,279       1,173,208
                                                  -------------   -------------
Costs and expenses
Cost of goods sold and excess/idle
  production costs                                    1,664,633       1,765,571
Research and development                              1,154,289       1,677,559
General and administrative                            1,423,568       1,960,399
Acquisition of in-process technology                                  2,341,418
Other expenses                                          440,000         240,000
                                                  -------------   -------------
Total costs and expenses                              4,682,490       7,984,947
                                                  -------------   -------------
Loss from operations                                 (3,035,211)     (6,811,739)

Interest income (expense), net                          (63,911)         33,214

Equity in loss of Metacine                             (274,846)       (120,400)
                                                  -------------   -------------
Net loss                                           $ (3,373,968)    $(6,898,925)
                                                  =============   =============

Basic and diluted net loss per share               $       (.16)    $      (.36)
                                                  =============   =============
Weighted average number of shares outstanding        20,475,507      19,341,419
                                                  =============   =============



The accompanying notes are an integral part of these consolidated condensed
financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                                                   INTERFERON SCIENCES, INC. AND SUBSIDIARY
                                                 CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN
                                                       STOCKHOLDERS' EQUITY (DEFICIENCY)
                                                      NINE MONTHS ENDED SEPTEMBER 30, 2002
                                                                  (Unaudited)

                                                                            Consideration                      Total
                                             Capital                        shares subject                  stockholders'
                       Common Stock         in excess       Accumulated     to guaranteed     Settlement       equity
                     Shares      Amount    of par value      deficit            value           shares      (deficiency)
                     ------------------    ------------    -------------    --------------    ----------    -------------
<S>   <C> <C>     <C>          <C>         <C>             <C>                <C>             <C>            <C>
Balance at
 Dec. 31, 2001    20,308,031   $203,080    $138,407,621    $(139,043,427)     $ (520,000)     $ (360,000)    $(1,312,726)

Common stock
 issued under
 Company 401(k)
 Plan                396,345      3,964          60,855                                                           64,819

Market value
 adjustment                                                                      440,000         328,000         768,000

Net loss                                                      (3,373,968)                                     (3,373,968)
                 --------------------------------------------------------------------------------------------------------
Balance at
 Sept. 30, 2002   20,704,376   $207,044    $138,468,476    $(142,417,395)     $  (80,000)     $  (32,000)    $(3,853,875)




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

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                Nine Months Ended
                                  September 30,
                                                         --------------------------
                                                           2002         2001
                                                         ------------  ------------
<S>                                                      <C>           <C>
Cash flows from operating activities:
  Net loss                                               $(3,373,968)  $(6,898,925)
  Adjustments to reconcile net loss to net
   cash used for operating activities:
    Depreciation and amortization                            318,817       380,542
    Acquisition of in-process research and development                   2,341,418
    Equity in loss of Metacine                               274,846       120,400
    Noncash compensation expense                              64,819       103,013
    Reduction of inventory reserve                          (478,715)
    Provision for notes receivable                                          87,500
    Market value adjustment                                  768,000       422,287
    Change in operating assets and liabilities:
     Inventories                                             711,145       467,447
     Accounts and other receivables                           81,465     1,447,225
     Prepaid expenses and other current assets               (10,871)        8,416
     Accounts payable and accrued expenses                   379,967       (30,352)
     Amount due to GP Strategies                              13,500        23,106
                                                         ------------  ------------
    Net cash used for operating activities                (1,250,995)   (1,527,923)
                                                         ------------  ------------
Cash flows from investing activities:
  Additions to property, plant and equipment                               (46,994)
  Reduction of (investments in) other assets                  10,000      (387,500)
                                                         ------------  ------------
  Net cash provided by (used for) investing activities        10,000      (434,494)
                                                         ------------  ------------
Cash flows from financing activities:
  Proceeds from convertible notes payable                    500,000
  Repayment of note payable to GP Strategies                (100,000)     (100,000)
  Proceeds from exercise of common stock options                               561
                                                         ------------  ------------
Net cash provided by (used for) financing activities         400,000       (99,439)
                                                         ------------  ------------
Net decrease in cash and cash equivalents                   (840,995)   (2,061,856)

Cash and cash equivalents at beginning of period           1,184,889     3,658,805
                                                         ------------  ------------
Cash and cash equivalents at end of period               $   343,894   $ 1,596,949
                                                         ============  ============
Noncash items:
 Guaranteed value of common stock issued to
   and in-kind services due Metacine                     $             $ 2,100,000
                                                         ============  ============
 Settlement shares sold                                  $             $    21,463
                                                         ============  ============



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

</TABLE>

<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1.  Basis of Presentation

     The financial  information included herein is unaudited.  Such information,
however,  reflects  all  adjustments  (consisting  solely  of  normal  recurring
adjustments)  that are,  in the  opinion  of  management,  necessary  for a fair
presentation  of the financial  position and  operating  results for the interim
periods.   The  operating  results  for  interim  periods  are  not  necessarily
indicative of operating results to be expected for the year.

Note 2. Operations and Liquidity

     The  Company  has  experienced   significant  operating  losses  since  its
inception in 1980.  As of September  30,  2002,  the Company had an  accumulated
deficit of approximately $142.4 million. For the nine months ended September 30,
2002 and the years  ended  December  31,  2001,  2000 and 1999,  the Company had
losses from operations of approximately $3.0 million, $7.8 million, $4.5 million
and $5.4 million, respectively.  Also, the Company has limited liquid resources.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated  condensed financial statements do not include
any adjustments that might result from the outcome of this uncertainty. Although
the Company  received FDA approval in 1989 to market  ALFERON N Injection in the
United States for the  treatment of certain  genital  warts,  it has had limited
revenues  from the sale of  ALFERON N  Injection  to date.  For the  Company  to
operate  profitably,   the  Company  must  sell  significantly  more  ALFERON  N
Injection.  Increased sales will depend primarily upon the expansion of existing
markets  and/or  successful  attainment  of FDA  approval  to  market  ALFERON N
Injection for additional indications,  of which there can be no assurance. There
can be no assurance  that  sufficient  quantities of ALFERON N Injection will be
sold to allow the Company to operate profitably.

     At September 30, 2002, the Company had  approximately  $344,000 of cash and
cash  equivalents,  with which to support  future  operating  activities  and to
satisfy its financial obligations as they become payable.

     Based on the  Company's  estimates  of  revenues,  expenses,  the timing of
repayment of creditors,  and levels of production,  management believes that the
Company has  sufficient  resources to enable the Company to continue  operations
until the end of November 2002. However, actual results, especially with respect
to revenues,  may differ materially from such estimate,  and no assurance can be
given that additional  funding will not be required  sooner than  anticipated or
that such additional funding, whether from financial markets or collaborative or
other  arrangements  with  corporate  partners  or from other  sources,  will be
available when needed or on terms acceptable to the Company.

     Management plans to pursue raising additional capital by either (i) issuing
securities in a private or public equity  offering or (ii)  licensing the rights
to its injectable,  topical or oral  formulations  of natural alpha  interferon.
Management  is  seeking  to  enter  into  mergers,   joint   ventures  or  other
collaborations that could provide the additional  resources necessary to advance
the Company's most valuable programs. There can be no assurances,  however, that
the Company will be successful in obtaining an adequate  level of financing,  on
terms that are acceptable to the Company, needed to continue operations.

     Insufficient  funds will require the Company to further delay,  scale back,
or eliminate  certain or all of its  activities  or to license  third parties to
commercialize  products or technologies that the Company would otherwise seek to
develop itself.

     In addition,  the Company is  continuing  its efforts to sell the ALFERON N
Injection business or license the rights to sell ALFERON N Injection. Due to the
Company's  precarious  financial  position,  if  such a  transaction  cannot  be
completed in a reasonably short period of time, the Company would reevaluate its
options which would include a  substantial  curtailing or complete  cessation of
the ALFERON N Injection business.

 Note 3.  Inventories

      Inventories consist of the following:

                                             September 30,      December 31,
                                                 2002               2001
                                            --------------     --------------
     Finished goods                         $   442,638         $ 1,153,783
     Work in process                          3,052,070           3,052,070
     Raw materials                            1,332,560           1,332,560
     Less reserve for excess inventory       (4,807,296)         (5,286,011)
                                           ---------------     --------------
                                            $    19,972         $   252,402
                                           ================     ===============


     Finished  goods  inventory  consists  of  vials  of  ALFERON  N  Injection,
available  for  commercial  and  clinical use either  immediately  or upon final
release by quality assurance.

     In light of the results to date of the Company's phase 3 studies of ALFERON
N Injection in HIV and HCV-infected patients, the Company has recorded a reserve
against its  inventory  of ALFERON N  Injection  to reflect  its  estimated  net
realizable  value.  The  reserve  was a result of the  Company's  assessment  of
anticipated  near-term projections of product to be sold or utilized in clinical
trials,   giving   consideration  to  historical  sales  levels.  As  a  result,
inventories  at September 30, 2002 and December 31, 2001,  reflect a reserve for
excess inventory of $4,807,296 and $5,286,011, respectively.

     During the nine months ended  September  30, 2002, a portion of the reserve
for excess inventory was reduced in the amount of $478,715.

Note 4. Agreement with GP Strategies Corporation

     Pursuant to an agreement  dated March 25, 1999, GP  Strategies  Corporation
("GP  Strategies")  loaned the Company $500,000 (the "GP Strategies  Debt").  In
return,  the Company granted GP Strategies (i) a first mortgage on the Company's
real  estate,  (ii) a  two-year  option  (which has  expired)  to  purchase  the
Company's  real estate,  provided that the Company has terminated its operations
and a certain  liability  to the  American  Red Cross (the "Red Cross") has been
repaid,  and (iii) a two-year  right of first refusal (which has expired) in the
event the Company  desires to sell its real  estate.  In  addition,  the Company
issued GP  Strategies  500,000  shares  (the "GP  Shares")  of common  stock and
five-year  warrant (the "GP Warrant") to purchase 500,000 shares of common stock
at a price of $1 per share. The GP Shares and GP Warrant were valued at $500,000
and recorded as a financing cost and amortized  over the original  period of the
GP Strategies Debt in 1999. Pursuant to the agreement,  the Company has issued a
note to GP  Strategies  representing  the GP  Strategies  Debt,  which  note was
originally  due on September  30, 1999 (but extended to June 30, 2001) and bears
interest, payable at maturity, at the rate of 6% per annum. In addition, at that
time,  the  Company  negotiated  a  subordination  agreement  with the Red Cross
pursuant  to which  the Red Cross  agreed  that its lien on the  Company's  real
estate is subordinate to GP Strategies' lien. On March 27, 2000, the Company and
GP Strategies  entered into an agreement pursuant to which (i) the GP Strategies
Debt was extended until June 30, 2001 and (ii) the Management  Agreement between
the Company and GP  Strategies  was  terminated  and all  intercompany  accounts
between the Company and GP Strategies (other than the GP Strategies Debt) in the
amount of approximately  $130,000 were discharged which was recorded as a credit
to capital  in excess of par  value.  On August 23,  2001,  the  Company  and GP
Strategies  entered into an agreement  pursuant to which the GP Strategies  Debt
was extended to March 15,  2002.  During  2001,  the Company paid GP  Strategies
$100,000 to reduce the GP  Strategies  Debt. In addition,  in January 2002,  the
Company paid GP Strategies  $100,000 to further  reduce the GP Strategies  Debt.
The Company and GP Strategies are currently discussing restructuring the balance
of the GP Strategies  Debt.  Under the terms of such agreement GP Strategies has
the right to sell the Company's real estate,  but has not commenced action to do
so.

     In July 2002,  the Company was sued in action  seeking  foreclosure  of the
Company's  property due to non-payment of  approximately  $450,000 in taxes. The
plaintiff  has the right to seek an order giving the Company,  GP  Strategies or
the  American  Red Cross 30 days to pay the unpaid  taxes.  If the taxes  remain
unpaid,  the  court  may make  the  plaintiff  the  owner  of the  property  and
extinguish  the liens of GP Strategies  and the American Red Cross.  The Company
would hope to be able to enter into a lease with the new owner,  although  there
can be no assurance  that this would occur.  GP  Strategies  or the American Red
Cross may also pay the unpaid taxes and have the amount of the payment  added to
their liens,  although there can be no assurance they will do so. The Company is
currently  attempting  to refinance  the property to pay the taxes and repay the
current lienholders. There can be no assurance the Company will be successful in
refinancing the property.

Note 5.  Agreement with the Red Cross

     The Company  obtained  human white blood cells used in the  manufacture  of
ALFERON N Injection from several sources,  including the Red Cross pursuant to a
supply agreement dated April 1, 1997 (the "Supply Agreement").  The Company will
not need to purchase  more human white blood cells until such time as production
of crude alpha interferon is resumed.  Under the terms of the Supply  Agreement,
the Company  was  obligated  to  purchase a minimum  amount of human white blood
cells each month through March 1999 (the "Minimum Purchase Commitment"), with an
aggregate Minimum Purchase  Commitment during the period from April 1998 through
March 1999 in excess of  $3,000,000.  As of November 23, 1998,  the Company owed
the Red Cross  approximately  $1.46  million plus interest at the rate of 6% per
annum  accruing from April 1, 1998 (the "Red Cross  Liability")  for white blood
cells purchased pursuant to the Supply Agreement.

     Pursuant to an agreement  dated November 23, 1998, the Company  granted the
Red  Cross a  security  interest  in  certain  assets  to  secure  the Red Cross
Liability,  issued to the Red Cross 300,000 shares of common stock and agreed to
issue  additional  shares at some future date as  requested  by the Red Cross to
satisfy any remaining  amount of the Red Cross  Liability.  The Red Cross agreed
that any net  proceeds  received by it upon sale of such shares would be applied
against the Red Cross Liability and that at such time as the Red Cross Liability
was paid in full, the Minimum  Purchase  Commitment  would be deleted  effective
April 1,1998 and any then existing  breaches of the Minimum Purchase  Commitment
would be waived.  In January  1999 the Company  granted the Red Cross a security
interest (the "Security  Interest")  in, among other things,  the Company's real
estate,  equipment  inventory,  receivables,  and New Jersey net operating  loss
carryovers  to secure  repayment of the Red Cross  Liability,  and the Red Cross
agreed to  forbear  from  exercising  its  rights  under the  Supply  Agreement,
including with respect to collecting the Red Cross Liability until June 30, 1999
(which was subsequently extended until December 31, 1999). On December 29, 1999,
the Company, the Red Cross and GP Strategies entered in an agreement pursuant to
which the Red Cross agreed that until  September  30, 2000 it would forbear from
exercising its rights under (i) the Supply Agreement,  including with respect to
collecting the Red Cross Liability,  and (ii) the Security  Interest.  As of the
date  hereof,  the Red Cross has not given the  Company  notice of its intent to
exercise its rights to collect the Red Cross Liability.  Under the terms of such
agreement, the Red Cross has the right to sell the Company's real estate. In the
event the Red Cross is  successful  in selling the  Company's  real estate,  the
Company would hope to be able to enter into a lease with the new owner, although
there can be no assurance that this would occur.

     As the liability to the Red Cross remains  unsettled until such time as the
Red Cross sells the shares they have already  received and could  receive in the
future,  the Company  recorded any shares issued to the Red Cross as "Settlement
Shares" within stockholders' equity (deficiency). Any decreases, or increases up
to the amount of any previous decreases,  in the market value at issuance of the
Company's common stock issued to the Red Cross, until such time as the Red Cross
sells its shares, would impact the value of the shares held by the Red Cross and
accordingly require an adjustment to "Settlement  Shares".  During 1999, the Red
Cross sold 27,000 of the  Settlement  Shares and sold the balance of such shares
(273,000 shares) during the first quarter of 2000. As a result, the net proceeds
from the sales of the Settlement  Shares,  $33,000 in 1999 and $368,000 in 2000,
were applied against the liability to the Red Cross. The remaining  liability to
the Red Cross included in accounts payable on the consolidated condensed balance
sheet at September 30, 2002 and December 31, 2001 was  approximately  $1,387,000
and  $1,339,000,  respectively.  On October  30,  2000,  the  Company  issued an
additional  800,000  shares to the Red Cross (with a market value of $824,000 on
such date).  Due to the  decline in the  Company's  stock price  during the nine
months  ended  September  30, 2002 and 2001,  an  adjustment  for  $328,000  and
$182,287,  respectively,  was recorded  with a  corresponding  charge to cost of
goods sold.  The net proceeds from the sale of such shares by the Red Cross will
be applied against the remaining  liability of $1,387,000 owed to the Red Cross.
However,  there can be no assurance  that the net proceeds from the sale of such
shares will be  sufficient to extinguish  the remaining  liability  owed the Red
Cross.

Note 6.  Agreement with Metacine, Inc.

     On July 28, 2000,  the Company  acquired for $100,000 an option to purchase
certain securities of Metacine, Inc. ("Metacine"), a company engaged in research
using dendritic cell technology, on the terms set forth below. The $100,000 paid
for the option was recorded as investment in Metacine and other assets in 2000.

     On April 9, 2001, the Company exercised its option to acquire an 86% equity
interest  in  Metacine.  Pursuant  to the  agreement,  as  amended,  the Company
received  700,000  shares of Metacine  common  stock and a five-year  warrant to
purchase,  at a price of $12.48 per share,  282,794  shares of  Metacine  common
stock in exchange for  $300,000 in cash,  $250,000 of services to be rendered by
the Company by June 30, 2002 and 2,000,000 shares of the Company's common stock.
The agreement  contains certain  restrictions on the ability of Metacine to sell
the Company's shares and provides for cash payments  ("Deficiency  Payments") by
the Company to Metacine to the extent Metacine has not received from the sale of
the Company's  common stock,  cumulative net proceeds of $1,850,000 by September
30, 2002 or  $400,000 of net  proceeds  per  quarter  beginning  with the period
ending  September  30, 2001 and $250,000 for the quarter  ending  September  30,
2002. On October 4, 2001,  the Company made a Deficiency  Payment to Metacine in
the amount of $400,000 for the quarter  ending  September 30, 2001.  The Company
has not, as yet, made the remainder of the Deficiency  Payments in the aggregate
amount of  $1,450,000.  The  Company is  currently  discussing  various  options
regarding  the balance of the  Deficiency  Payments with  Metacine.  If Metacine
sells all of the 2,000,000 shares received and the cumulative  proceeds from the
sales and any  Deficiency  Payments  are less than  $1,850,000,  the Company may
issue to  Metacine  additional  shares of  common  stock at the  Company's  full
discretion.  These additional  shares would be treated in the same manner as the
original 2,000,000 shares. In the event that cumulative net proceeds to Metacine
from the sale of the Company's  common stock exceed  $1,850,000,  any Deficiency
Payments  previously  made by the Company  would be repaid to the Company to the
extent these proceeds  exceed  $1,850,000.  All additional  proceeds  beyond the
$1,850,000  and  repayment  of  Deficiency  Payments,  if any,  would be for the
benefit of Metacine.  The Company was required to put in escrow 100,000 Metacine
shares to secure its  obligations to render $250,000 of services to Metacine and
462,500  Metacine shares to secure its potential  obligations to make Deficiency
Payments.  Since the Company has not made $1,450,000 in Deficiency  Payments and
has not  rendered  $250,000 of  services to  Metacine,  Metacine  could  request
462,500  Metacine shares  currently held in escrow to satisfy the Company's past
due obligations.

     While the Company is the majority owner of Metacine,  the Company must cast
its  votes  on many  matters  in the  same  proportion  as  votes  cast by other
stockholders of Metacine,  except for certain matters with respect for which the
Company  has  protective  rights.  In  accordance  with EITF  Issue  No.  96-16,
Investor's  Accounting  for an Investee  When the Investor has a Majority of the
Voting  Interest  but the  Minority  Shareholder  or  Shareholders  have Certain
Approval or Veto Rights,  the minority  holders have  substantive  participating
rights  including   controlling  the  selection,   termination  and  setting  of
compensation for Metacine management, making operating and capital decisions for
Metacine and most other ordinary operating matters,  and therefore,  the Company
does not control Metacine.  Accordingly,  the acquisition is being accounted for
under the equity method.

     Of the  $2.5  million  consideration  paid  for  Metacine,  $2,341,418  was
recorded as a charge for the acquisition of in-process  research and development
("IPR&D") in 2001,  in order to reduce the  Company's  investment in Metacine to
the  Company's  proportionate  share of  Metacine's  net assets.  The charge was
recorded as the  acquisition of IPR&D as Metacine's  primary asset is technology
that has not reached technological  feasibility and has no alternative uses. The
in-process  research  and  development  expenses  relate to  research  utilizing
dendritic cells for the treatment of various diseases. The $1,850,000 guaranteed
value of the  2,000,000  shares of common  stock  issued to  Metacine,  less the
$400,000 Deficiency Payment made in October 2001, has been recorded as a current
liability at September 30, 2002 and December 31, 2001.  The $250,000 of services
to be provided has also been recorded as a current liability.  Services rendered
to  Metacine  to date  were  immaterial  and as  such,  the  liability  remained
unchanged at September 30, 2002 and December 31, 2001.  The  investment has been
further  reduced to $(565,840) and $(290,994) at September 30, 2002 and December
31, 2001, respectively,  by the Company's equity in the loss of Metacine for the
periods  from April 9, 2001  through  September  30, 2002 and from April 9, 2001
through  December  31,  2001,   respectively,   and  is  recorded  in  long-term
liabilities.  As the liability to Metacine remains  unsettled until such time as
Metacine  sells the  shares,  the  Company  has  recorded  the shares  issued to
Metacine as a debit ("Consideration  shares subject to guaranteed value") within
stockholders'  equity.  Any  decreases,  or  increases  up to the  amount of any
previous  decreases,  in the market  value at issuance of the  Company's  common
stock issued to Metacine,  until such time as Metacine  sells its shares,  would
impact the value of the  shares  held by  Metacine  and  accordingly  require an
adjustment  to  Consideration  shares  subject to guaranteed  value.  Due to the
decline in the Company's  stock price during the nine months ended September 30,
2002, an adjustment  for $440,000 was recorded  with a  corresponding  charge to
other  expenses.  Due to the decline in the  Company's  stock  price  during the
period from April 9, 2001 through September 30, 2001, an adjustment for $240,000
was  recorded  with  a  corresponding  charge  to  other  expenses.   Pro  forma
information  as if the investment in Metacine had occurred as of January 1, 2000
has not been  presented as the  inclusion of such amounts would be immaterial to
the results of operations  of the Company for the years ended  December 31, 2001
and 2000. As  substantially  all of Metacine's  funding is being provided by the
Company,  100% of the  losses of  Metacine  are  reflected  in the  accompanying
statement of operations as equity in loss of Metacine.

Note 7.  Convertible Notes Payable

     In August 2002, the Company  completed a private  placement of $ 500,000 of
convertible  notes to accredited  investors.  Each note is convertible  into the
Company's  common stock at a price of $.05 per share  (subject to  adjustment to
70%  of  the  market  price  of  the   Company's   common  stock  under  certain
circumstances) and bears interest at the rate of 10% per annum. $ 250,000 of the
convertible  notes are due  January  31,  2003 and the  other $  250,000  of the
convertible notes are due December 31, 2003. For each $100,000  principal amount
of notes issued,  the investors received warrants to purchase an additional 10.2
million shares of the Company's common stock  exercisable at $.01 per share. The
transaction is subject to approval by the shareholders of the Company.

Note 8.           Recently Issued Accounting Standards

     In June 2001, the FASB issued SFAS No. 141, Business  Combinations,  ("SFAS
No. 141") and SFAS No. 142,  Goodwill  and Other  Intangible  Assets  ("SFAS No.
142").  SFAS No. 141 requires that the purchase method of accounting be used for
all business  combinations.  SFAS No. 141  specifies  criteria  that  intangible
assets  acquired  in a  business  combination  must  meet to be  recognized  and
reported  separately  from  goodwill.  SFAS No. 142 requires  that  goodwill and
intangible  assets with  indefinite  useful  lives no longer be  amortized,  but
instead  tested  for  impairment  at  least  annually  in  accordance  with  the
provisions of SFAS No. 142. SFAS No. 142 also  requires that  intangible  assets
with estimable useful lives be amortized over their respective  estimated useful
lives to their  estimated  residual  values,  and  reviewed  for  impairment  in
accordance with SFAS No. 121 and subsequently, SFAS No. 144 after its adoption.

     The Company  adopted the provisions of SFAS No. 141 as of July 1, 2001, and
SFAS No. 142 as of January 1, 2002.

     Upon  adoption of SFAS No. 142,  the Company was  required to reassess  the
useful lives and residual values of all intangible assets acquired, and make any
necessary amortization period adjustments by the end of the first interim period
after  adoption.  If an intangible  asset was identified as having an indefinite
useful  life,  the Company  would be required to test the  intangible  asset for
impairment  in accordance  with the  provisions of SFAS No. 142 within the first
interim period.  Impairment is measured as the excess of carrying value over the
fair value of an intangible  asset with an indefinite  life. Any impairment loss
would be measured as of the date of adoption and  recognized  as the  cumulative
effect of a change in accounting principle in the first interim period.

     As of the date of adoption of SFAS No. 142,  the Company  does not have any
goodwill and has unamortized  identifiable  intangible  assets of  approximately
$160,000,  all of which is subject to the transition provisions of SFAS No. 142.
In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived Assets ("SFAS No. 144"). SFAS No. 144 addresses financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
This  Statement  requires  that  long-lived  assets be reviewed  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison  of the carrying  amount of an asset to future net cash
flows expected to be generated by the asset.  If the carrying amount of an asset
exceeds its estimated  future cash flows, an impairment  charge is recognized by
the amount by which the carrying  amount of the asset  exceeds the fair value of
the asset.  SFAS No. 144 requires  companies to separately  report  discontinued
operations  and extends  that  reporting to a component of an entity that either
has been disposed of (by sale,  abandonment,  or in a distribution to owners) or
is  classified  as held for sale.  Assets to be disposed of are  reported at the
lower of the  carrying  amount or fair  value less  costs to sell.  The  Company
adopted SFAS No. 144 on January 1, 2002.


<PAGE>



                    INTERFERON SCIENCES, INC. AND SUBSIDIARY
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


     Since 1981,  the Company has been  primarily  engaged in the  research  and
development of pharmaceutical products containing Natural Alpha Interferon.  The
Company has experienced  significant  operating losses since its inception.  The
Company  received  FDA  approval in 1989 to market  ALFERON N  Injection  in the
United States for the treatment of certain types of genital warts.  However, the
Company has had limited  revenues  from the sale of ALFERON N Injection to date.
For the Company to operate profitably,  the Company must sell significantly more
ALFERON N Injection. Increased sales will depend primarily upon the expansion of
existing markets and/or successful  attainment of FDA approval to market ALFERON
N Injection for additional  indications.  The future revenues and  profitability
of, and availability of capital for, biotechnology  companies may be affected by
the continuing  efforts of  governmental  and  third-party  payors to contain or
reduce the costs of health care through various means. The Company has primarily
financed its operations to date through private placements,  public offerings of
the  Company's  securities,  and the sale of the  Company's  New Jersey tax loss
carryovers.

     Management is continuing to pursue raising additional capital by either (i)
issuing  securities in a private or public equity offering or (ii) licensing the
rights to its injectable  Natural Alpha Interferon for one or more  indications.
This may be more difficult in the future in light of the FDA's  requirement  for
the Company to conduct  additional Phase 3 studies of ALFERON N Injection in the
treatment  of  patients  infected  with the  human  immunodeficiency  virus  and
hepatitis  C virus.  Management  also is seeking to enter  into  mergers,  joint
ventures or other collaborations in the areas of cancer, infectious diseases and
immunology that could provide the additional  resources necessary to advance the
Company's  most  valuable  programs.  The  Company's  strategy is to utilize its
expertise in regulatory affairs,  clinical trials,  manufacturing,  and research
and development to acquire equity participations in early stage companies. There
can be no assurances,  however, that the Company will be successful in obtaining
an adequate  level of  financing,  on terms that are  acceptable to the Company,
needed to continue operations.

     In addition,  the Company is  continuing  its efforts to sell the ALFERON N
Injection business or license the rights to sell ALFERON N Injection. Due to the
Company's  precarious  financial  position,  if  such a  transaction  cannot  be
completed in a reasonably short period of time, the Company would reevaluate its
options which would include a  substantial  curtailing or complete  cessation of
the ALFERON N Injection business.

Liquidity and Capital Resources

     In August 2002,  the Company  completed a private  placement of $500,000 of
convertible  notes to accredited  investors.  Each note is convertible  into the
Company's  common stock at a price of $.05 per share  (subject to  adjustment to
70%  of  the  market  price  of  the   Company's   common  stock  under  certain
circumstances) and bears interest at the rate of 10% per annum.  $250,000 of the
convertible  notes  are due  January  31,  2003 and the  other  $250,000  of the
convertible notes are due December 31, 2003. For each $100,000  principal amount
of notes issued,  the investors received warrants to purchase an additional 10.2
million shares of the Company's common stock  exercisable at $.01 per share. The
transaction  is subject to approval by the  shareholders  of the Company.  As of
October  29,  2002,  the  Company  had  approximately  $125,000 in cash and cash
equivalents.  Until utilized,  such cash and cash equivalents are being invested
principally in short-term interest-bearing investments.

     The  Company's  future  capital  requirements  will depend on many factors,
including:  continued scientific progress in its drug development programs;  the
magnitude of these  programs;  progress with  pre-clinical  testing and clinical
trials; the time and costs involved in obtaining regulatory approvals; the costs
involved  in  filing,  prosecuting,   and  enforcing  patent  claims;  competing
technologies  and  market   developments;   changes  in  its  existing  research
relationships;  and  the  ability  of the  Company  to  establish  collaborative
arrangements and effective commercialization activities and arrangements.

     Based on the  Company's  estimates  of  revenues,  expenses,  the timing of
repayment of creditors,  and levels of production,  management believes that the
cash  presently  available  will be sufficient to enable the Company to continue
operations until the end of November 2002. However,  actual results,  especially
with respect to  revenues,  may differ  materially  from such  estimate,  and no
assurance can be given that additional  funding will not be required sooner than
anticipated or that such additional  funding,  whether from financial markets or
collaborative  or other  arrangements  with  corporate  partners  or from  other
sources,  will be available  when needed or on terms  acceptable to the Company.
Insufficient  funds will require the Company to further  delay,  scale back,  or
eliminate certain or all of its research and development  programs or to license
third parties to commercialize  products or technologies  that the Company would
otherwise  seek to develop  itself.  The  independent  auditors'  report,  dated
February 20, 2002, on the Company's  consolidated financial statements as of and
for the year ended  December 31, 2001  includes an  explanatory  paragraph  that
states that the Company has suffered  recurring losses from  operations,  has an
accumulated  deficit,  a working  capital  deficiency,  and has  limited  liquid
resources that raise  substantial doubt about its ability to continue as a going
concern.

     On April 9, 2001, the Company exercised its option to acquire a substantial
equity interest in Metacine,  Inc.  Pursuant to the agreement,  as amended,  the
Company received 700,000 shares of Metacine common stock and a five-year warrant
to purchase,  at a price of $12.48 per share,  282,794 shares of Metacine common
stock in exchange for  $300,000 in cash,  $250,000 of services to be rendered by
the Company by June 30, 2002 and 2,000,000 shares of the Company's common stock.
The agreement  contains certain  restrictions on the ability of Metacine to sell
the Company's shares and provides for cash payments  ("Deficiency  Payments") by
the Company to Metacine to the extent  Metacine has not received,  from the sale
of the  Company's  common  stock,  cumulative  net  proceeds  of  $1,850,000  by
September  30, 2002 or $400,000 of net proceeds per quarter  beginning  with the
period ending  September 30, 2001 and $250,000 for the quarter ending  September
30, 2002. In October 2001, the Company made a Deficiency  Payment to Metacine in
the amount of $400,000 for the quarter  ending  September 30, 2001.  The Company
has not, as yet, made the remainder of the Deficiency  Payments in the aggregate
amount of  $1,450,000.  The  Company is  currently  discussing  various  options
regarding the balance of the Deficiency Payments with Metacine.

     The Company  participates in the State of New Jersey's corporation business
tax benefit certificate  transfer program (the "Program"),  which allows certain
high  technology and  biotechnology  companies to transfer unused New Jersey net
operating loss carryovers to other New Jersey  corporation  business  taxpayers.
During 1999, the Company  submitted an  application  to the New Jersey  Economic
Development  Authority  (the  "EDA")  to  participate  in the  Program  and  the
application  was  approved.  The EDA then issued a  certificate  certifying  the
Company's eligibility to participate in the Program and the amount of New Jersey
net operating loss  carryovers the Company has available to transfer.  Since New
Jersey law  provides  that net  operating  losses can be carried  over for up to
seven years,  the Company may be able to transfer  its New Jersey net  operating
losses from the last seven years.  The Company  estimated that, as of January 1,
1999, it had  approximately  $85 million of unused New Jersey net operating loss
carryovers available for transfer under the Program. The Program requires that a
purchaser pay at least 75% of the amount of the surrendered tax benefit.

     During  December  2001,  2000 and 1999,  the Company  completed the sale of
approximately  $12  million,  $19  million and $32 million of its New Jersey tax
loss  carryovers and received  $0.97  million,  $1.48 million and $2.35 million,
which was recorded as a gain on sale of state net operating  loss  carryovers on
the  Company's  Consolidated  Statement of  Operations  in 2001,  2000 and 1999,
respectively.  In June 2002,  the Company  submitted an  application  to sell an
additional approximately $2.6 million of tax benefits (calculated by multiplying
the Company's  unused New Jersey net operating loss carryovers  through December
31,  2000 of  approximately  $29 million by 9%).  The actual  amount of such tax
benefits the Company may sell will depend upon the allocation  among  qualifying
companies  of an  annual  pool  established  by the  State  of New  Jersey.  The
allocated pool for fiscal year 2002 and future years is $40 million per year.

     The Company  obtained  human white blood cells used in the  manufacture  of
ALFERON N Injection from several sources,  including the Red Cross pursuant to a
supply agreement dated April 1, 1997 (the "Supply Agreement").  The Company will
not need to purchase  more human white blood cells until such time as production
of crude alpha interferon is resumed.  Under the terms of the Supply  Agreement,
the Company  was  obligated  to  purchase a minimum  amount of human white blood
cells each month through March 1999 (the "Minimum Purchase Commitment"), with an
aggregate Minimum Purchase  Commitment during the period from April 1998 through
March 1999 in excess of  $3,000,000.  As of November 23, 1998,  the Company owed
the Red Cross  approximately  $1.46  million plus interest at the rate of 6% per
annum  accruing from April 1, 1998 (the "Red Cross  Liability")  for white blood
cells purchased pursuant to the Supply Agreement.

     Pursuant to an agreement  dated November 23, 1998, the Company  granted the
Red  Cross a  security  interest  in  certain  assets  to  secure  the Red Cross
Liability,  issued to the Red Cross 300,000 shares of common stock and agreed to
issue  additional  shares at some future date as  requested  by the Red Cross to
satisfy any remaining  amount of the Red Cross  Liability.  The Red Cross agreed
that any net  proceeds  received by it upon sale of such shares would be applied
against the Red Cross Liability and that at such time as the Red Cross Liability
was paid in full, the Minimum  Purchase  Commitment  would be deleted  effective
April 1,1998 and any then existing  breaches of the Minimum Purchase  Commitment
would be waived.  In January  1999 the Company  granted the Red Cross a security
interest (the "Security  Interest")  in, among other things,  the Company's real
estate,  equipment  inventory,  receivables,  and New Jersey net operating  loss
carryovers  to secure  repayment of the Red Cross  Liability,  and the Red Cross
agreed to  forbear  from  exercising  its  rights  under the  Supply  Agreement,
including with respect to collecting the Red Cross Liability until June 30, 1999
(which was subsequently extended until December 31, 1999). On December 29, 1999,
the Company, the Red Cross and GP Strategies entered in an agreement pursuant to
which the Red Cross agreed that until  September  30, 2000 it would forbear from
exercising its rights under (i) the Supply Agreement,  including with respect to
collecting the Red Cross Liability,  and (ii) the Security  Interest.  As of the
date  hereof,  the Red Cross has not given the  Company  notice of its intent to
exercise its rights to collect the Red Cross Liability.  Under the terms of such
agreement, the Red Cross has the right to sell the Company's real estate. In the
event the Red Cross is  successful  in selling the  Company's  real estate,  the
Company would hope to be able to enter into a lease with the new owner, although
there can be no assurance that this would occur.

     As the liability to the Red Cross remains  unsettled until such time as the
Red Cross sells the shares they have already  received and could  receive in the
future,  the Company  recorded any shares issued to the Red Cross as "Settlement
Shares" within stockholders' equity (deficiency). Any decreases, or increases up
to the amount of any previous decreases,  in the market value at issuance of the
Company's common stock issued to the Red Cross, until such time as the Red Cross
sells its shares, would impact the value of the shares held by the Red Cross and
accordingly require an adjustment to "Settlement  Shares".  During 1999, the Red
Cross sold 27,000 of the  Settlement  Shares and sold the balance of such shares
(273,000 shares) during the first quarter of 2000. As a result, the net proceeds
from the sales of the Settlement  Shares,  $33,000 in 1999 and $368,000 in 2000,
were applied against the liability to the Red Cross. The remaining  liability to
the Red Cross included in accounts payable on the consolidated condensed balance
sheet at September 30, 2002 and December 31, 2001 was  approximately  $1,387,000
and  $1,339,000,  respectively.  On October  30,  2000,  the  Company  issued an
additional  800,000  shares to the Red Cross (with a market value of $824,000 on
such date).  Due to the  decline in the  Company's  stock price  during the nine
months  ended  September  30, 2002 and 2001,  an  adjustment  for  $328,000  and
$182,287,  respectively,  was recorded  with a  corresponding  charge to cost of
goods sold.  The net proceeds from the sale of such shares by the Red Cross will
be applied against the remaining  liability of $1,387,000 owed to the Red Cross.
However,  there can be no assurance  that the net proceeds from the sale of such
shares will be  sufficient to extinguish  the remaining  liability  owed the Red
Cross.

     Pursuant to an agreement  dated March 25, 1999,  GP  Strategies  loaned the
Company $500,000 (the "GP Strategies  Debt").  In return,  the Company agreed to
grant GP Strategies (i) a first  mortgage on the Company's  real estate,  (ii) a
two-year  option  (which has  expired) to purchase  the  Company's  real estate,
provided  that the  Company  has  terminated  its  operations  and the Red Cross
Liability has been repaid,  and (iii) a two-year  right of first refusal  (which
has  expired)  in the event the  Company  desires  to sell its real  estate.  In
addition,  the Company  agreed to issue GP Strategies  500,000  shares of Common
Stock (the "GP Shares") and a five-year  warrant (the "GP  Warrant") to purchase
500,000 shares of Common Stock at a price of $1 per share.  The common stock and
warrants  issued to GP  Strategies  were  valued at $500,000  and  recorded as a
financing cost and amortized over the original  period of the GP Strategies Debt
in 1999.  Pursuant to the agreement,  the Company issued a note to GP Strategies
representing  the GP Strategies  Debt,  which note was due on September 30, 1999
and  bears  interest,  payable  at  maturity,  at the rate of 6% per  annum.  In
addition, at that time the Company negotiated a subordination agreement with the
Red Cross  pursuant to which the Red Cross agreed that its lien on the Company's
real estate is  subordinate  to GP  Strategies'  lien.  On March 27,  2000,  the
Company and GP Strategies entered into an agreement pursuant to which (i) the GP
Strategies  Debt was  extended  until  June 30,  2001,  and (ii) the  Management
Agreement  between  the  Company  and  GP  Strategies  was  terminated  and  all
intercompany  accounts between the Company and GP Strategies  (other than the GP
Strategies Debt) in the amount of  approximately  $130,000 were discharged which
was recorded as a credit to capital in excess of par value.  On August 23, 2001,
the Company and GP Strategies entered into an agreement pursuant to which the GP
Strategies Debt was extended to March 15, 2002. During 2001, the Company paid GP
Strategies  $100,000 to reduce the GP Strategies  Debt. In addition,  in January
2002,  the  Company  paid  GP  Strategies  $100,000  to  further  reduce  the GP
Strategies  Debt.  The  Company  and  GP  Strategies  are  currently  discussing
restructuring  the balance of the GP Strategies Debt. As of the date hereof,  GP
Strategies has not given the Company notice of its intent to exercise its rights
to  collect  the GP  Strategies  Debt.  Under  the terms of such  agreement,  GP
Strategies  has the right to sell the  Company's  real  estate.  In the event GP
Strategies is successful in selling the Company's real estate, the Company would
hope to be able to enter into a lease with the new owner,  although there can be
no assurance that this would occur.

     In January 2002,  the Company was notified that if past due property  taxes
on its  facility  (which  have not yet been paid) were not paid  within 30 days,
that a complaint  may be filed to foreclose on the property.  In July 2002,  the
Company was sued in action seeking  foreclosure of the Company's property due to
non-payment of  approximately  $450,000 in taxes. The plaintiff has the right to
seek an order giving the  Company,  GP  Strategies  or the American Red Cross 30
days to pay the unpaid taxes. If the taxes remain unpaid, the court may make the
plaintiff  the owner of the property and  extinguish  the liens of GP Strategies
and the  American Red Cross.  The Company  would hope to be able to enter into a
lease with the new owner,  although  there can be no  assurance  that this would
occur. GP Strategies or the American Red Cross may also pay the unpaid taxes and
have the amount of the payment  added to their liens,  although  there can be no
assurance they will do so. The Company is currently  attempting to refinance the
property  to pay the taxes and repay the  current  lienholders.  There can be no
assurance the Company will be successful in refinancing the property.

     The Company's Common Stock now trades on the OTC Bulletin Board,  which may
have a material  adverse  effect on the  ability of the  Company to finance  its
operations and on the liquidity of the Common Stock.

Results of Operations

     Nine Months Ended September 30, 2002 Versus Nine Months Ended September 30,
2001

     For the nine months  ended  September  30,  2002 and 2001,  the Company had
revenues  from the sale of ALFERON N Injection  of  $1,647,279  and  $1,173,208,
respectively.  During  the first  quarter  of 2002,  the  Company  notified  its
customers  of a price  increase for ALFERON N  Injection.  As a result,  several
wholesalers  purchased  above normal  quantities of ALFERON N Injection ahead of
the price increase.  In addition,  during the third quarter of 2002, the Company
offered price  concessions to its largest  customers in an attempt to raise cash
from the sale of ALFERON N  Injection,  which  resulted  in greater  than normal
sales in the nine months ended September 30, 2002.

     In the nine months ended September 30, 2002, the Company sold,  through its
distributor,  to  wholesalers  and other  customers in the United  States 12,679
vials of ALFERON N Injection, compared to 8,819 vials sold by the Company during
the nine months ended September 30, 2001. In addition,  foreign sales of ALFERON
N Injection were zero and 61 vials for the nine months ended  September 30, 2002
and 2001, respectively.

     Cost of goods sold and excess/idle  production costs totaled $1,664,633 and
$1,765,571 for the nine months ended September 30, 2002 and 2001,  respectively.
Excess/idle  production  costs in the nine months ended  September  30, 2002 and
2001 represented fixed production costs, which were incurred after production of
ALFERON N Injection was discontinued in April 1998. Excess/idle production costs
were slightly lower during the nine months ended  September 30, 2002 as compared
to the nine months  ended  September  30,  2001.  Cost of goods sold in the nine
months ended  September 30, 2002 was lower then the nine months ended  September
30, 2001 since  $478,715 of inventory  sold was applied  against the reserve for
excess  inventory.  However,  based on  changes  in the value of the  Settlement
Shares,  for the nine months ended  September  30, 2002,  cost of goods sold was
charged for $328,000 as compared to $182,287 for the nine months ended September
30, 2001.

     Research and  development  expenses  during the nine months ended September
30, 2002 of $1,154,289 decreased by $523,270 from $1,677,559 for the same period
in 2001,  due to  decreases  in both  external  research  payments  and internal
research costs.

     General and administrative expenses for the nine months ended September 30,
2002 were  $1,423,568 as compared to $1,960,399 for the same period in 2001. The
decrease of $536,831 was principally due to decreases in payroll, consulting and
public relations expenses.

     The Company recorded  $2,341,418 as acquisition of in-process  research and
development  expense  related to its  investment in Metacine for the nine months
ended September 30, 2001 as Metacine's primary asset is technology which has not
reached technological feasibility and has no alternative uses.

     Based on  changes  in the  value of the  Consideration  Shares  subject  to
guaranteed  value,  for the nine months ended September 30, 2002 and 2001, other
expenses were charged for $440,000 and $240,000, respectively.

     Interest  expense,  net, for the nine months ended  September  30, 2002 was
$63,911 and primarily  represented  interest accrued on the Red Cross Liability,
GP  Strategies  Debt and the  convertible  notes  payable  partially  offset  by
interest income.  Interest income,  net, for the nine months ended September 30,
2001 was  $33,214 and  primarily  represented  interest  income on cash and cash
equivalents  partially  offset  by  interest  expense  accrued  on the Red Cross
Liability and GP Strategies Debt.

     Equity in loss of Metacine for the nine months ended September 30, 2002 was
$274,846  and  represents  the  Company's  equity in loss of  Metacine  for such
period.  Equity in loss of Metacine for the nine months ended September 30, 2001
was $120,400 and  represents  the  Company's  equity in loss of Metacine for the
period from April 9, 2001 to September 30, 2001.

     As a result of the foregoing, the Company incurred net losses of $3,373,968
and  $6,898,925  for  the  nine  months  ended  September  30,  2002  and  2001,
respectively.

     Three Months Ended  September 30, 2002 Versus Three Months Ended  September
30, 2001

     For the three months  ended  September  30, 2002 and 2001,  the Company had
revenues  from the  sale of  ALFERON  N  Injection  of  $687,197  and  $458,746,
respectively.  During  the third  quarter of 2002,  the  Company  offered  price
concessions  to its largest  customers in an attempt to raise cash from the sale
of ALFERON N Injection, which resulted in greater than normal sales in the three
months ended September 30, 2002.

     In the three months ended September 30, 2002, the Company sold, through its
distributor, to wholesalers and other customers in the United States 5,408 vials
of ALFERON N Injection,  compared to 3,394 vials sold by the Company  during the
three months ended  September 30, 2001. In addition,  foreign sales of ALFERON N
Injection  were zero and 36 vials for the three months ended  September 30, 2002
and 2001, respectively.

     Cost of goods sold and excess/idle  production  costs totaled  $423,937 and
$725,786 for the three months ended  September 30, 2002 and 2001,  respectively.
Excess/idle  production  costs in the three months ended  September 30, 2002 and
2001 represented fixed production costs, which were incurred after production of
ALFERON N Injection was discontinued in April 1998. Excess/idle production costs
were  slightly  higher  during the three  months  ended  September  30,  2002 as
compared to the three months ended  September 30, 2001.  However,  cost of goods
sold in the three  months  ended  September  30,  2002 was lower  then the three
months ended  September  30, 2001 since  $301,497 of inventory  sold was applied
against the reserve for excess inventory.  In addition,  based on changes in the
value of the Settlement  Shares,  for the three months ended September 30, 2002,
cost of goods sold was charged for $40,000 as compared to $192,000 for the three
months ended September 30, 2001.

     Research and  development  expenses during the three months ended September
30, 2002 of $308,912  decreased by $191,118 from $500,030 for the same period in
2001, due to decreases in internal research costs.

     General and  administrative  expenses for the three months ended  September
30, 2002 were $441,054 as compared to $559,111 for the same period in 2001.  The
decrease of $118,057 was principally due to decreases in payroll expense.

     Based on  changes  in the  value of the  Consideration  Shares  subject  to
guaranteed  value, for the three months ended September 30, 2002 and 2001, other
expenses were charged for $100,000 and $240,000, respectively.

     Interest  expense,  net, for the three months ended  September 30, 2002 was
$30,087 and primarily  represented  interest accrued on the Red Cross Liability,
GP  Strategies  Debt and the  convertible  notes  payable  partially  offset  by
interest income. Interest expense, net, for the three months ended September 30,
2001 was  $5,504 and  primarily  represented  interest  accrued on the Red Cross
Liability and GP Strategies Debt partially offset by interest income on cash and
cash equivalents.

     Equity in loss of Metacine for the three months  ended  September  30, 2002
and 2001 was $38,668 and $92,955,  respectively,  and  represents  the Company's
equity in loss of Metacine for such periods.

     As a result of the foregoing,  the Company  incurred net losses of $655,461
and  $1,664,640  for the  three  months  ended  September  30,  2002  and  2001,
respectively.

Forward-Looking Statements

     This  report  contains  certain   forward-looking   statements   reflecting
management's   current  views  with  respect  to  future  events  and  financial
performance.  These forward-looking  statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements, including, but not limited to, the risk that the
Company will run out of cash;  uncertainty of obtaining  additional  funding for
the Company; uncertainty of obtaining United States regulatory approvals for the
additional  uses under  development for the Company's  FDA-approved  product and
foreign  regulatory  approvals,  if sought,  and if such approvals are obtained,
uncertainty   of  the  successful   commercial   development  of  such  product;
substantial competition from companies with substantially greater resources than
the Company in the  Company's  present and potential  businesses;  no guaranteed
source of required  materials for the Company's  product;  dependence on certain
contractors  to  manufacture  or  distribute  the Company's  product;  potential
adverse side effects from the use of the  Company's  product;  potential  patent
infringement  claims against the Company;  possible  inability of the Company to
protect its technology;  limited production  experience of the Company;  risk of
product liability;  and risk of loss of key management  personnel,  all of which
are  difficult  to  predict  and many of which are  beyond  the  control  of the
Company.



<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                           PART II. OTHER INFORMATION



Item 6.    Exhibits and Reports on Form 8-K

                (b) Reports on Form 8-K

               There were no reports on Form 8-K filed during the three months
               ended September 30, 2002.



<PAGE>


                            INTERFERON SCIENCES, INC.

                               September 30, 2002




                                   SIGNATURES

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



                                        INTERFERON SCIENCES, INC.




DATE:  November 18, 2002       By:  /s/ Lawrence M. Gordon
                                        Lawrence M. Gordon
                                        Chief Executive Officer




DATE:  November 18, 2002                         By:  /s/ Donald W. Anderson
                               Donald W. Anderson
                                                          Controller