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, 2000

                                          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 31, 2000:

           Common Stock                                      17,949,897  shares


<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

                                                                            Page

Part I.  Financial Information:

   Consolidated  Condensed Balance  Sheets--September  30, 2000
   and December 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . .1

   Consolidated Condensed Statements of Operations--Three Months
     and Nine Months Ended September 30, 2000 and 1999. . . . . . . . .  . .2-3

   Consolidated Condensed Statement of Changes in

     Stockholders' Equity--Nine Months Ended September 30, 2000. . . . . . . .4

   Consolidated Condensed Statements of Cash Flows--Nine

     Months Ended September 30, 2000 and 1999. . . . .  . . .. . . . . . . . .5

   Notes to Consolidated Condensed Financial Statements. . . . . . . . . . 6-11
   Management's Discussion and Analysis of Financial

     Condition and Results of Operations . . . . . . . . . . . . . . . . .12-18

Part II.  Other Information . . . . . . . . . . . . . . . . . . . . . . . . .19

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20


<PAGE>



<TABLE>
<CAPTION>



                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                              September 30,       December 31,
                                                   2000              1999
                                               (Unaudited)
ASSETS
                                               -------------------------------
<S>                                               <C>                 <C>
Current assets

  Cash and cash equivalents                   $  4,787,144        $ 2,273,242
  Accounts and other receivables                   217,505             35,561
  Inventories, net of reserves
    of $5,763,422 and $6,225,185,
    respectively                                   585,389            766,000
  Prepaid expenses and other
    current assets                                   9,403             27,018
                                             -------------      -------------
Total current assets                             5,599,441          3,101,821
                                             -------------      -------------
Property, plant and equipment,
  at cost                                       12,759,273         12,759,273
Less accumulated depreciation                  (10,190,236)        (9,834,558)
                                             -------------      -------------
                                                 2,569,037          2,924,715
                                             -------------      -------------
Patent costs, net of accumulated
  amortization                                     197,270            219,822
Other assets                                       180,100             10,100
                                             -------------      -------------
Total assets                                 $   8,545,848      $   6,256,458
                                             =============      =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities

  Accounts payable and accrued expenses      $   2,905,238      $   4,915,466
  Note payable and amount due
   GP Strategies                                   543,750            283,637
                                             -------------      -------------
Total current liabilities                        3,448,988          5,199,103
                                             -------------      -------------
Note payable to GP Strategies                                         500,000
                                             -------------      -------------
Commitments and contingencies

Stockholders' equity

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-17,045,171 and
 5,327,473 shares, respectively                    170,452            53,275
Capital in excess of par value                 136,643,985       129,397,259
Accumulated deficit                           (131,717,577)     (128,812,179)
Settlement shares                                                    (81,000)
                                             -------------      ------------
Total stockholders' equity                       5,096,860           557,355
                                             -------------      ------------
Total liabilities and stockholders'
  equity                                     $   8,545,848     $   6,256,458
                                             =============     =============


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,
                                                  -----------------------------
                                                       2000           1999
                                                                  (as restated)
                                                  -------------   -------------
<S>                                                   <C>            <C>
Revenues

  Alferon N Injection                              $    324,399    $    998,275
                                                  -------------   -------------
Total revenues                                          324,399         998,275
                                                  -------------   -------------
Costs and expenses
Cost of goods sold and idle

  production costs                                      555,550         518,686
Reversal of reserve for
  excess inventory                                                     (125,350)
Research and development                                502,206         513,776
General and administrative                              582,354         489,472
                                                  -------------   -------------
Total costs and expenses                              1,640,110       1,396,584
                                                  -------------   -------------
Loss from operations                                 (1,315,711)       (398,309)

 Interest income (expense), net                          43,695        (250,000)
                                                  -------------   -------------
Net loss                                           $ (1,272,016)    $  (648,309)
                                                  =============   =============

Basic and diluted loss per share                   $       (.08)   $       (.12)
                                                  =============   =============
Weighted average number of
 shares outstanding                                  15,735,454       5,246,342
                                                  =============   =============



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)

                                                        Nine Months Ended
                                                          September 30,
                                                  -----------------------------
                                                       2000           1999
                                                                  (as restated)
                                                  -------------   -------------
<S>                                                      <C>            <C>
Revenues

  Alferon N Injection                              $    645,471    $  1,984,185
  Research products                                                         277
                                                  -------------   -------------
Total revenues                                          645,471       1,984,462
                                                  -------------   -------------
Costs and expenses
Cost of goods sold and idle

  production costs                                    1,210,880       2,742,526
Reversal of reserve for
  excess inventory                                     (135,271)       (708,000)
Research and development (net of $456,998
  for settlements of various liabilities
  during the nine months ended
  September 30, 2000)                                   960,025       2,456,765
General and administrative                            1,548,531       1,774,495
                                                  -------------   -------------
Total costs and expenses                              3,584,165       6,265,786
                                                  -------------   -------------
Loss from operations                                 (2,938,694)     (4,281,324)

 Interest income (expense), net                          33,296        (494,623)
                                                  -------------   -------------
Net loss                                           $ (2,905,398)    $(4,775,947)
                                                  =============   =============

Basic and diluted loss per share                   $       (.28)   $       (.95)
                                                  =============   =============
Weighted average number of
 shares outstanding                                  10,342,756       5,021,691
                                                  =============   =============



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

                      NINE MONTHS ENDED SEPTEMBER 30, 2000
                                   (Unaudited)

                                             Capital                                           Total
                       Common Stock         in excess       Accummulated     Settlement     stockholders'
                     Shares      Amount    of par value      deficit          shares          equity
                     ------------------    ------------    --------------    ----------     -------------
<S>                   <C>       <C>             <C>              <C>            <C>             <C>
Balance at
 Dec. 31,
 1999              5,327,473    $53,275   $129,397,259     $(128,812,179)    $(81,000)       $557,355

Net proceeds
 from sale of
 common stock     11,635,451    116,355       7,023,594                                     7,139,949

Common stock
 issued as
 compensation         20,000        200          23,550                                        23,750

Common stock
 issued under
 Company 401(k)
 Plan                 62,247        622           62,265                                       62,887

Employee stock
 option compensation                               7,431                                        7,431

Forgiveness of
 amount due GP
 Strategies                                      129,886                                      129,886

Settlement shares
 sold                                                                          368,341        368,341

Market value

 adjustment                                                                   (287,341)      (287,341)

Net loss                                                      (2,905,398)                  (2,905,398)
                 --------------------------------------------------------------------------------------
Balance at
 September 30,
 2000             17,045,171   $170,452     $136,643,985   $(131,717,577)   $   ---        $5,096,860


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,
                                                         --------------------------
                                                             2000         1999
                                                                      (as restated)
                                                         ------------  ------------
<S>                                                           <C>         <C>
Cash flows from operations:

  Net loss                                               $(2,905,398)  $(4,775,947)
  Adjustments to reconcile net loss to net
   cash used for operating activities:
    Depreciation and amortization                            378,230       560,487
    Amortization of deferred financing costs                               500,000
    Gain on settlements of research-related liabilities     (456,998)
    Compensation and
     benefits paid with common stock                          86,637        83,428
    Employee stock option compensation                         7,431
    Reversal of reserve for
     excess inventory                                       (135,271)     (708,000)
    Market value adjustment                                 (287,341)      587,261
    Loss on sale of other assets                                            51,392
    Change in operating assets and liabilities:
     Inventories                                             315,882       709,784
     Amount due to GP Strategies                            (110,001)      112,469
     Accounts and other receivables                         (181,944)      354,491
     Prepaid expenses and other current
      assets                                                  17,615      (143,551)
     Accounts payable and accrued expenses                (1,184,889)    1,046,923
                                                         ------------  ------------
    Net cash used for operations                          (4,456,047)   (1,621,263)
                                                         ------------  ------------
Cash flows from investing activities:
  Increase in other assets                                  (170,000)
  Proceeds from sale of other assets                                        38,658
                                                         ------------  ------------
  Net cash (used for) provided by                           (170,000)       38,658
    investing activities                                 ------------  ------------

Cash flows from financing activities:
  Net proceeds from sale of common stock                   7,139,949
  Proceeds from note payable to
  GP Strategies                                                            500,000
                                                         ------------  ------------
Net cash provided by financing activities                  7,139,949       500,000
                                                         ------------  ------------
Net increase (decrease) in cash and cash equivalents       2,513,902    (1,082,605)

Cash and cash equivalents at beginning
 of period                                                 2,273,242     1,170,861
                                                         ------------  ------------
Cash and cash equivalents at end of period               $ 4,787,144   $    88,256
                                                         ============  ============
Noncash items:
 Forgiveness of amount due GP Strategies                 $   129,886   $
                                                         ===========   ============

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.  Inventories

       Inventories are classified as follows:

                            September 30,      December 31,
                                 2000              1999
                           --------------     --------------

   Finished goods          $   1,257,723      $     361,809
   Work in process             3,758,528          5,296,816
   Raw materials               1,332,560          1,332,560
   Less reserve for
    excess inventory          (5,763,422)        (6,225,185)
                           ---------------     --------------
                           $     585,389      $     766,000
                             ===============      ==============


       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.

       During the nine months ended September 30, 2000, the Company  converted a
portion  of its  interferon  intermediates  (work  in  process  inventory)  into
finished goods inventory.

       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, 2000 and December 31, 1999,  reflect a reserve for
excess inventory of $5,763,422 and $6,225,185, respectively.

       During the nine months  ended  September  30, 2000 and 1999, a portion of
the  reserve for excess  inventory  was  reversed in the amount of $135,271  and
$708,000,  respectively,  to reflect  inventory at its estimated net  realizable
value.  In addition,  during the nine months ended September 30, 2000, a portion
of the reserve for excess inventory was used in the amount of $326,492.

Note 3. 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 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 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.  Contemporaneous with the agreement with
GP Strategies,  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  accordingly is classified as a current  liability and a long-term
liability on the accompanying consolidated condensed balance sheets at September
30, 2000 and December 31, 1999, respectively), and (ii) the Management Agreement
between the Company and GP  Strategies  (whereby  certain  legal,  financial and
administrative  services  were  provided by GP  Strategies  to the  Company) was
terminated and all  intercompany  accounts between the Company and GP Strategies
(other than the GP Strategies Debt) were discharged.  The amount of intercompany
accounts that were discharged was approximately $130,000,  which was recorded in
the quarter  ended March 31, 2000 as a  contribution  to capital.  The agreement
also provides that (i) commencing on May 1, 2001 and ending on June 30, 2001, on
any day ISI may require GP  Strategies  to exercise  the GP Warrant and sell the
underlying  shares,  if the market price of ISI common stock  exceeds  $1.00 per
share  on each of the 10  trading  days  prior  to any  such  day,  and (ii) any
proceeds from the sale of the shares issuable upon exercise of the GP Warrant in
excess of the  aggregate  amount paid by GP  Strategies to purchase such shares,
would be deemed to reduce the then outstanding  amount of principal and interest
of the GP Strategies Debt until such amount is reduced to zero.

Note 4.  Agreement with the Red Cross

       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. The
Red Cross agreed that any net  proceeds  received by it upon sale of such shares
would be applied  against the Red Cross  Liability.

       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.  Any decreases in the market
value of the Company's  common stock below $1.2 million,  until such time as the
Red Cross were to sell its shares,  would impact the value of the shares held by
the Red Cross and accordingly require an adjustment to "Settlement  Shares". Due
to the  decline  in the  Company's  stock  price  during the nine  months  ended
September 30, 1999, an adjustment for $587,261 was recorded with a corresponding
charge to cost of goods sold.  Due to the increase in the Company's  stock price
during the three  months  ended March 31, 2000 up to the date of sale by the Red
Cross of all  remaining  Settlement  Shares,  an  adjustment  for  $287,341  was
recorded with a corresponding credit to cost of goods sold. 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 at  September  30, 2000 and  December  31, 1999 was  approximately
$1,260,000 and $1,579,000, respectively. On October 30, 2000, the Company issued
an additional 800,000 shares to the Red Cross. The net proceeds from the sale of
such shares by the Red Cross will be applied against the remaining  liability of
$1,260,000  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 5. Operations and Liquidity

       The  Company  has  experienced  significant  operating  losses  since its
inception in 1980.  As of September  30,  2000,  the Company had an  accumulated
deficit of approximately $131.7 million. For the nine months ended September 30,
2000 and the years  ended  December  31,  1999,  1998 and 1997,  the Company had
losses from  operations  of  approximately  $2.9 million,  $5.4  million,  $20.8
million and $22.4  million,  respectively.  Although  the Company  received  FDA
approval  in 1989 to market  ALFERON N  Injection  in the United  States for the
treatment of certain genital warts and ALFERON N Injection currently is marketed
and  sold  in  the  United  States  by  the  Company,  in  Mexico  by  Industria
Farmaceutica  Andromaco,  S.A. De C.V.  and in Germany by Cell Pharm GmbH ("Cell
Pharm"),  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,  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.

       During the second and third  quarters of 2000,  the Company  received net
proceeds of $7,139,949 from the sale in a private placement of 11,635,451 shares
of common stock at a price of $0.66 per share and  warrants,  exercisable  until
April 2005 to purchase 11,635,451 shares of common stock at a price of $1.50 per
share.  In  addition,  the  Company  issued to finders and  placement  agents in
connection with the private  placement,  warrants to purchase  1,467,059  units,
exercisable  at a price of $.66 per unit.  Each unit is  comprised of a share of
common  stock and a warrant to purchase  an  additional  share of common  stock,
exercisable  until April 2005, at a price of $1.50 per share.  The proceeds from
this  private  placement  will be used to fund new  initiatives,  in addition to
funding  certain  projects  within  the  Company's  existing  interferon-related
operations.

       During the second quarter of 2000, the Company was able to settle certain
amounts owed on various research-related liabilities at a savings to the Company
of  approximately  $457,000.  Such  amount was  credited  against  research  and
development  expenses.  At November 8, 2000, the Company has approximately  $4.3
million 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 cash
presently  available  will be  sufficient  to enable  the  Company  to  continue
operations  for  approximately  the next 12  months.  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  activities  or to license  third parties to
commercialize  products or technologies that the Company would otherwise seek to
develop itself.

Note 6.  Restatement of the September 30, 1999 Financial Statements (unaudited)

       The Company has restated its consolidated  condensed financial statements
for the three months ended March 31, 1999,  June 30, 1999 and September 30, 1999
because of errors  discovered  subsequent  to the issuance of such  consolidated
condensed financial statements.  The consolidated condensed financial statements
required  restatement  to correct  the  reporting  for  inventories,  Settlement
Shares, deferred compensation,  cost of sales, financing costs and certain other
expenses.

       The impact of the  restatement  on the Company's  consolidated  condensed
statements  of operations  for the three months and nine months ended  September
30,  1999 and cash  flows  for the  nine  months  ended  September  30,  1999 is
summarized as follows:

<TABLE>

                                                       Three Months Ended
                                                       September 30, 1999
<S>                                                     <C>             <C>

   Operations:                                     As Reported        Restated
   ----------                                      -----------        --------

   Revenues

    Alferon N Injection                           $    998,275    $    998,275
                                                  -------------   -------------
   Total revenues                                      998,275         998,275
                                                  -------------   -------------
   Costs and expenses

   Cost of goods sold and idle production costs        518,686         518,686
   Reversal of reserve for excess inventory                           (125,350)
   Research and development                            513,776         513,776
   General and administrative                          414,770         489,472
                                                   -------------   -------------
   Total costs and expenses                          1,447,232       1,396,584
                                                  -------------   -------------
   Loss from operations                               (448,957)       (398,309)

    Interest expense and

      financing costs                                                  250,000
                                                  -------------   -------------
   Net loss                                       $   (448,957)   $   (648,309)
                                                  =============   =============

   Basic and diluted loss per share               $       (.09)   $       (.12)
                                                  =============   =============
   Weighted average number of
    shares outstanding                               4,746,342       5,246,342
                                                  =============   =============


                                                        Nine Months Ended
                                                       September 30, 1999

   Operations:                                     As Reported        Restated
   ----------                                      -----------        --------

   Revenues

    Alferon N Injection                           $  1,984,185    $  1,984,185
    Research products                                      277             277
                                                  -------------   -------------
   Total revenues                                    1,984,462       1,984,462
                                                  -------------   -------------
   Costs and expenses

   Cost of goods sold and idle production costs      2,155,265       2,742,526
   Reversal of reserve for excess inventory                           (708,000)
   Research and development                          2,456,765       2,456,765
   General and administrative                        1,675,846       1,774,495
                                                   -------------   -------------
   Total costs and expenses                          6,287,876       6,265,786
                                                  -------------   -------------
   Loss from operations                             (4,303,414)     (4,281,324)

    Interest income (expense and
      financing costs)                                   5,377        (494,623)
                                                  -------------   -------------
   Net loss                                       $ (4,298,037)   $ (4,775,947)
                                                  =============   =============

   Basic and diluted loss per share               $       (.92)   $       (.95)
                                                  =============   =============
   Weighted average number of
    shares outstanding                               4,671,691       5,021,691
                                                  =============   =============


                                                               Nine Months Ended
                                                              September 30, 1999

   Cash flows:                                       As Reported        Restated
   ----------                                        -----------        --------

   Cash flows from operations:

       Net loss                                      $ (4,298,037)   $ (4,775,947)
      Adjustments to reconcile net loss to net
       cash used for operating activities:
        Depreciation and amortization                     560,487         560,487
        Amortization of deferred financing costs                          500,000
        Accounts payable and benefits paid with
         common stock                                     617,803          83,428
        Reversal of reserve for excess inventory                         (708,000)
        Market value adjustment                                           587,261
        Loss on sale of other assets                                       51,392
        Change in operating assets and liabilities:
        Inventories                                       709,784         709,784
        Amount due to GP Strategies                       612,469         112,469
        Accounts and other receivables                    354,491         354,491
        Prepaid expenses and other current assets        (143,551)       (143,551)
        Accounts payable and accrued expenses             413,899       1,046,923
                                                      ------------    ------------
        Net cash used for operations                   (1,172,655)     (1,621,263)
                                                      ------------    ------------
       Cash flows from investing activities:

        Proceeds from sale of other assets                 90,050          38,658
                                                      ------------    ------------
        Net cash provided by investing activities          90,050          38,658
                                                      ------------    ------------
       Cash flows from financing activities:

        Proceeds from note payable to GP Strategies                       500,000
                                                      ------------    ------------
       Net cash provided by financing activities                          500,000
                                                      ------------    ------------
       Net decrease in cash and cash equivalents       (1,082,605)     (1,082,605)

       Cash and cash equivalents at beginning of
        period                                          1,170,861       1,170,861
                                                      ------------    ------------
       Cash and cash equivalents at end of period    $     88,256     $    88,256
                                                      ============    ============
</TABLE>


Note 7.  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. Metacine will use
such  funds to  retain a third  party  to  conduct  a  review  and  analysis  of
Metacine's  intellectual  property.  The option may be  exercised by the Company
during the 60-day  period  following  the  Company's  receipt of such review and
analysis, which is required to be delivered to the Company by December 15, 2000.

      If the option is  exercised,  Metacine is required to issue to the Company
700,000 shares of Metacine common stock and a warrant to purchase, at a price of
$12.48 per share,  178,056  shares of  Metacine  common  stock in  exchange  for
$150,000  in cash,  $250,000  of  services  to be  rendered  by the  Company  to
Metacine,  and shares of the  Company's  common  stock  having a market value of
$2,000,000.  The Company is also required to pay Metacine the amount, if any, by
which the net proceeds  from the sale by Metacine of the shares of the Company's
common stock is less than $2,000,000.

      Metacine presently has outstanding  150,000 shares of common stock and has
issued  warrants to purchase,  at a price of $.01 per share,  752,500  shares of
Metacine common stock.

      The Company and the other  stockholders  of Metacine  have  entered into a
stockholders' agreement providing for rights of first refusal, tag-along rights,
and  preemptive  rights.  The agreement also provides that the Company will have
one  representative  on  Metacine's  board and will vote its  shares in the same
proportion as Metacine's other stockholders,  and that certain corporate actions
will not be taken without the Company's consent.


<PAGE>



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

Financial Condition and Liquidity

     During the second and third  quarters  of 2000,  the Company  received  net
proceeds of  $7,139,949  from the sale,  in a private  placement,  of 11,635,451
shares of common stock at a price of $0.66 per share and  warrants,  exercisable
until April 2005 to  purchase  11,635,451  shares of common  stock at a price of
$1.50 per share. In addition, the Company issued to finders and placement agents
in connection with the private placement,  warrants to purchase 1,467,059 units,
exercisable  at a price of $.66 per unit.  Each unit is  comprised of a share of
common  stock and a warrant to purchase  an  additional  share of common  stock,
exercisable  until April 2005, at a price of $1.50 per share.  The proceeds from
this  private  placement  will be used to fund new  initiatives,  in addition to
funding  certain  projects  within  the  Company's  existing  interferon-related
operations.  The Company is seeking to enter into  collaborations with companies
in the areas of cancer, infectious diseases, and immunology.  Our strategy is to
utilize their expertise in regulatory affairs,  clinical trials,  manufacturing,
and research and  development  to acquire equity  participations  in early stage
companies.

     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. Metacine will use
such  funds to  retain a third  party  to  conduct  a  review  and  analysis  of
Metacine's  intellectual  property.  The option may be  exercised by the Company
during the 60-day  period  following  the  Company's  receipt of such review and
analysis, which is required to be delivered to the Company by December 15, 2000.

      If the option is  exercised,  Metacine is required to issue to the Company
700,000 shares of Metacine common stock and a warrant to purchase, at a price of
$12.48 per share,  178,056  shares of  Metacine  common  stock in  exchange  for
$150,000  in cash,  $250,000  of  services  to be  rendered  by the  Company  to
Metacine,  and shares of the  Company's  common  stock  having a market value of
$2,000,000.  The Company is also required to pay Metacine the amount, if any, by
which the net proceeds  from the sale by Metacine of the shares of the Company's
common stock is less than $2,000,000.

      Metacine presently has outstanding  150,000 shares of common stock and has
issued  warrants to purchase,  at a price of $.01 per share,  752,500  shares of
Metacine common stock.

      The Company and the other  stockholders  of Metacine  have  entered into a
stockholders' agreement providing for rights of first refusal, tag-along rights,
and  preemptive  rights.  The agreement also provides that the Company will have
one  representative  on  Metacine's  board and will vote its  shares in the same
proportion as Metacine's other stockholders,  and that certain corporate actions
will not be taken without the Company's consent.

       As of November 8, 2000,  the Company had an  aggregate  of  approximately
$4.3 million 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  for  approximately  the next 12  months.  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
April 10, 2000, on the Company's consolidated financial statements as of and for
the year ended December 31, 1999 included an  explanatory  paragraph that states
that the Company  has  suffered  recurring  losses  from  operations  and has an
accumulated  deficit that raise  substantial doubt about its ability to continue
as a going concern.

Certificate Transfer Program

       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.

       As of January 1, 1999,  the  Company  had  approximately  $85  million of
unused  New  Jersey  net  operating  loss  carryovers  (which  have a  value  of
approximately  $7.65  million)  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 1999, the Company completed the sale of approximately $32
million of its New Jersey tax loss  carryovers and received  $2.35  million.  In
June 2000,  the Company  submitted  an  application  to sell an  additional  $53
million of tax benefits  (with a value of  approximately  $4.8  million) and the
application  was approved.  However,  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
2000 is $40 million.

Agreements 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,  and has not purchased any since April 1,
1998.  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% 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. 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 Company is allowing the Red
Cross  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.

       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.  Any decreases in the market
value of the Company's  common stock below $1.2 million,  until such time as the
Red Cross were to sell its shares,  would impact the value of the shares held by
the Red Cross and accordingly require an adjustment to "Settlement  Shares". Due
to the  decline  in the  Company's  stock  price  during the nine  months  ended
September 30, 1999, an adjustment for $587,261 was recorded with a corresponding
charge to cost of goods sold.  Due to the increase in the Company's  stock price
during the three  months  ended March 31, 2000 up to the date of sale by the Red
Cross of all  remaining  Settlement  Shares,  an  adjustment  for  $287,341  was
recorded with a corresponding credit to cost of goods sold. 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 at  September  30, 2000 and  December  31, 1999 was  approximately
$1,260,000 and $1,579,000, respectively. On October 30, 2000, the Company issued
an additional 800,000 shares to the Red Cross. The net proceeds from the sale of
such shares by the Red Cross will be applied against the remaining  liability of
$1,260,000  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.

Agreement with GP Strategies

       Pursuant to an agreement  dated March 25, 1999, GP Strategies  loaned the
Company  $500,000.  In return,  the Company  granted GP  Strategies  (i) a first
mortgage on the Company's  real estate,  (ii) a two-year  option 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 in the event the Company  desires to sell its real estate.  In addition,
the Company issued GP Strategies  500,000 shares of Common Stock and a five-year
warrant to purchase  500,000  shares of Common Stock at a price of $1 per share.
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. The agreement also provides that (i) commencing on May
1, 2001 and ending on June 30, 2001, on any day ISI may require GP Strategies to
exercise the GP Warrant and sell the underlying  shares,  if the market price of
ISI Common Stock exceeds $1.00 per share on each of the 10 trading days prior to
any such day, and (ii) any proceeds  from the sale of the shares  issuable  upon
exercise  of the GP  Warrant  in  excess  of the  aggregate  amount  paid  by GP
Strategies  to  purchase  such  shares,  would  be  deemed  to  reduce  the then
outstanding  amount of principal  and interest of the GP  Strategies  Debt until
such amount is reduced to zero.

Results of Operations

Nine Months Ended September 30, 2000 Versus Nine Months Ended September 30, 1999
(as restated)

       For the nine months ended  September  30, 2000 and 1999,  the Company had
revenues  from the sale of  ALFERON N  Injection  of  $645,471  and  $1,984,185,
respectively.  In the third and fourth  quarters of 1999,  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 substantially higher than normal
sales in the  second  half of 1999 and in lower  than  normal  sales in the nine
months ended  September 30, 2000.  This was due to the fact that such  customers
were  selling  out of their  inventory  of  Alferon  N  Injection  (rather  than
purchasing Alferon N Injection from the Company).

         In the nine months ended September 30, 2000, the Company sold,  through
its  distributor,  to wholesalers and other customers in the United States 4,882
vials of ALFERON N  Injection,  compared  to 16,088  vials  sold by the  Company
during the nine months ended  September 30, 1999. In addition,  foreign sales of
ALFERON N Injection  were 132 vials and 1,374  vials for the nine  months  ended
September 30, 2000 and 1999, respectively.

         Cost of goods sold and idle  production  costs totaled  $1,210,880  and
$2,742,526 for nine months ended September 30, 2000 and 1999, respectively. Idle
production  costs  in  the  nine  months  ended  September  30,  2000  and  1999
represented  fixed  production  costs,  which were incurred after  production of
ALFERON N Injection was  discontinued  in April 1998. Such costs were greater in
the 1999 period due to higher levels of payroll costs, supplies and depreciation
expense.  In addition,  lower unit sales in the nine months ended  September 30,
2000 as compared to the nine months  ended  September  30, 1999  contributed  to
lower  cost of goods  sold.  In  addition,  based on changes in the value of the
Settlement  Shares,  for the nine months ended September 30, 2000, cost of goods
sold was  credited  for  $287,341 as compared to a charge of $587,261 to cost of
goods sold for the nine months ended September 30, 1999.

       During the nine months  ended  September  30, 2000 and 1999, a portion of
the  reserve for excess  inventory  was  reversed in the amount of $135,271  and
$708,000,  respectively,  in order to reflect the inventory at its estimated net
realizable value.

       Research and development  expenses during the nine months ended September
30, 2000 of $960,025 decreased by $1,496,740 from $2,456,765 for the same period
in 1999,  principally  because  the  Company  has had a  reduction  in  research
personnel which has reduced its payroll and research costs. In addition,  during
the second quarter of 2000, the Company settled amounts owed on various research
related liabilities at a savings to the Company of approximately  $457,000. Such
amount was credited against research and development expenses.

       General and  administrative  expenses for the nine months ended September
30, 2000 were  $1,548,531 as compared to $1,774,495 for the same period in 1999.
The decrease of $225,964  was  principally  due to  decreases in  administrative
fees,  distribution  costs  and other  operating  expenses  partially  offset by
increases in payroll and certain other operating costs.

       Interest  income,  net, for the nine months ended  September 30, 2000 was
$33,296 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. Interest expense,  net, for the nine months ended September 30,
1999 was $494,623 and primarily  represented financing costs partially offset by
interest income.

       As a  result  of the  foregoing,  the  Company  incurred  net  losses  of
$2,905,398 and $4,775,947 for the nine months ended September 30, 2000 and 1999,
respectively.

Three Months Ended September 30, 2000 Versus Three Months Ended
September 30, 1999 (as restated)

       For the three months ended  September 30, 2000 and 1999,  the Company had
revenues  from the  sale of  ALFERON  N  Injection  of  $324,399  and  $998,275,
respectively.  In the third and fourth  quarters of 1999,  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 substantially higher than normal
sales in the  second  half of 1999 and in lower than  normal  sales in the three
months ended  September 30, 2000.  This was due to the fact that such  customers
were  selling  out of their  inventory  of  Alferon  N  Injection  (rather  than
purchasing Alferon N Injection from the Company).

       In the three months ended  September 30, 2000, the Company sold,  through
its  distributor,  to wholesalers and other customers in the United States 2,246
vials of ALFERON N Injection, compared to 8,191 vials sold by the Company during
the three months ended September 30, 1999. In addition, foreign sales of ALFERON
N Injection were 132 vials and 1,020 vials for the three months ended  September
30, 2000 and 1999, respectively.

       Cost of  goods  sold and  idle  production  costs  totaled  $555,550  and
$518,686 for the three months ended  September 30, 2000 and 1999,  respectively.
Idle  production  costs in the three  months ended  September  30, 2000 and 1999
represented  fixed  production  costs,  which were incurred after  production of
ALFERON N  Injection  was  discontinued  in April  1998.  Such costs were higher
during the three months ended  September 30, 2000, due to the Company  incurring
expenses to convert,  formulate and package  interferon  intermediates  (work in
process inventory) into finished goods inventory. In addition,  during the three
months ended  September 30, 1999, a portion of the reserve for excess  inventory
was used in the amount of $387,390  representing  a portion of the cost of vials
sold during such period.

       During  the three  months  ended  September  30,  1999,  a portion of the
reserve for excess  inventory was reversed in the amount of $125,350 in order to
reflect the inventory at its estimated net realizable value.

       Research and development expenses during the three months ended September
30, 2000 of $502,206  decreased by $11,570 from  $513,776 for the same period in
1999,  which  reflects  the net  effect  of minor  changes  within  the  various
components making up research and development costs.

       General and administrative  expenses for the three months ended September
30, 2000 were $582,354 as compared to $489,472 for the same period in 1999.  The
increase  of $92,882  was  principally  due to  increases  in payroll  and other
operating expenses.

       Interest  income,  net, for the three months ended September 30, 2000 was
$43,695 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.  Interest expense for the three months ended September 30, 1999
was $250,000 and represented financing costs.

       As a  result  of the  foregoing,  the  Company  incurred  net  losses  of
$1,272,016 and $648,309 for the three months ended  September 30, 2000 and 1999,
respectively.

 Recent Accounting Developments

       In June 1998, the Financial  Accounting  Standards  Board ("FASB") issued
Statement of Financial  Accounting Standard No. 133 (SFAS 133),  "Accounting for
Derivative  Instruments  and Hedging  Activities".  This  Statement  establishes
accounting and reporting standards for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This Statement,  as amended by SFAS 137 and 138, is effective for
all fiscal  quarters of fiscal years  beginning after June 15, 2000. The Company
does not  believe  that  implementation  of SFAS 133,  as  amended,  will have a
material effect on its results of operations or financial position.

       On December 3, 1999, the Securities and Exchange  Commission issued Staff
Accounting  Bulletin No. 101 - "Revenue  Recognition  in  Financial  Statements"
("SAB No. 101").  SAB No. 101 provides the SEC staff's views on the  recognition
of  revenue   including   nonrefundable   technology  access  fees  received  by
biotechnology  companies in connection with research  collaborations  with third
parties. SAB No. 101 states that in certain circumstances the SEC staff believes
that up-front  fees,  even if  nonrefundable,  should be deferred and recognized
systematically over the term of the research arrangement.  On June 26, 2000, the
SEC issued SAB No. 101B which postponed the  implementation of SAB No. 101 until
the  quarter  beginning  October 1, 2000.  The  Company  does not  believe  that
implementation  of SAB No.  101 will have a  material  effect  on its  financial
position or results of operations.

       FASB Interpretation No. 44 provides guidance for applying APB Opinion No.
25,   "Accounting  for  Stock  Issued  to  Employees"  ("FIN  44").  It  applies
prospectively  to new  awards,  exchanges  of awards in a business  combination,
modifications to outstanding  awards,  and changes in grantee status on or after
July 1, 2000, except for provisions  related to repricings and the definition of
an employee  which apply to awards issued after  December 15, 1998.  The Company
has  evaluated  the  financial  impact  of FIN 44 and has  determined  that  the
repricing  of  employee  stock  options on  October  27,  1999 falls  within the
guidance of FIN 44. On October 27,  1999,  the Company  repriced  429,475  stock
options to $.25 per share. On July 1, 2000, the  implementation  date of FIN 44,
352,823  shares of the 429,475  shares were fully vested  (exercisable)  and the
closing  price of the  Company's  common stock on such date was $1.63 per share.
Beginning  on and  after  July 1,  2000,  the  Company  is  required  to  record
compensation  expense on the repriced  vested options only when the market price
exceeds $1.63 per share and only on the amount in excess of $1.63 per share. For
the repriced unvested stock options, the intrinsic value measured at the July 1,
2000 effective date that is attributable to the remaining vesting period will be
recognized  over that future period.  The unvested stock options at July 1, 2000
(76,652) will fully vest on January 1, 2001. On September 30, 2000,  the closing
price of the Company's common stock was $1.16 per share and  accordingly,  under
FIN 44, no compensation  expense was recorded on the repriced fully vested stock
options.  However,  under FIN 44, for the repriced  unvested stock options,  the
Company calculated and recorded compensation expense of $7,431.

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
Company's  products under development and foreign  regulatory  approvals for the
Company's  FDA-approved  product and  products  under  development  and, if such
approvals are obtained,  uncertainty of the successful commercial development of
such products; 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  products;  dependence
on certain distributors to market the Company's products; potential adverse side
effects from the use of the Company's  products;  potential patent  infringement
claims  against the  Company;  possible  inability of the Company to protect its
technology;   uncertainty  of  pharmaceutical   pricing;   substantial   royalty
obligations  payable  by  the  Company;  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

(a) Exhibits

                       27.0 Financial Data Schedule - September 30, 2000.

(b) Reports on Form 8-K

                       There were no reports on Form 8-K filed  during the three
                       months ended September 30, 2000.


<PAGE>


                            INTERFERON SCIENCES, INC.

                               September 30, 2000

                                   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 14, 2000                    By:     /s/ Lawrence M. Gordon
                                                             Lawrence M. Gordon
                                                         Chief Executive Officer

DATE:       November 14, 2000                     By:     /s/ Donald W. Anderson
                                                              Donald W. Anderson
                                                              Controller