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 March 31, 1999

                                       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
May 6, 1999:

           Common Stock                             4,677,767  shares



<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----

Part I.  Financial Information:

   Consolidated Condensed Balance Sheets--March 31, 1999
     and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . .  1

   Consolidated Condensed Statements of Operations--Three
     Months Ended March 31, 1999 and 1998  . . . . . . . . . . . . . . . . .  2

   Consolidated Condensed Statement of Changes in
     Stockholders' Equity--Three Months Ended
     March 31, 1999  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

   Consolidated Condensed Statements of Cash Flows--Three
     Months Ended March 31, 1999 and 1998 . . . . . .. . . . . . . . . . . .  4

   Notes to Consolidated Condensed Financial Statements  . . . . . . . . .  5-7

   Management's Discussion and Analysis of Financial
     Condition and Results of Operations . . . . . . . . . . . . . . . .   8-13

 Part II.  Other Information . . . . . . . . . . . . . . . . . . . . . . .   14

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   15




<PAGE>

<TABLE>
                                                         
                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                      CONSOLIDATED CONDENSED BALANCE SHEETS

<CAPTION>

                                                   March 31,     December 31,
                                                     1999           1998
                                                 (Unaudited)          *
                                                --------------  --------------

<S>                                             <C>             <C>       
ASSETS
Current assets
  Cash and cash equivalents                     $     85,650    $   1,170,861
  Accounts and other receivables                     386,416          689,511
  Inventories, net of reserves
    of $10,344,551                                   439,139          709,784
  Prepaid expenses and other
    current assets                                   137,786           36,511
                                                -------------   --------------
Total current assets                               1,048,991        2,606,667
                                                -------------   --------------
Property, plant and equipment,
  at cost                                         12,771,773       12,771,773
Less accumulated depreciation                     (9,309,451)      (9,130,248)
                                                -------------   --------------
                                                   3,462,322        3,641,525
                                                -------------   --------------
Patent costs, net of accumulated
  amortization                                       242,679          250,305
Other assets                                          10,100          100,150
                                                -------------   --------------
Total assets                                    $  4,764,092    $   6,598,647
                                                =============   ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable and
    accrued expenses                            $  4,426,789    $   4,386,307
  Amount due GP Strategies                           278,268          108,943
                                                -------------   --------------
Total current liabilities                          4,705,057        4,495,250
                                                -------------   --------------
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-4,668,064 and
 4,360,808 shares                                     46,681           43,608
Capital in excess of par value                   128,504,321      127,933,885
Accumulated deficit                             (127,827,967)    (125,210,096)
Settlement shares                                   (664,000)        (664,000)
                                                -------------   --------------
Total stockholders' equity                            59,035        2,103,397
                                                -------------   --------------
Total liabilities and stockholders'
  equity                                        $  4,764,092    $   6,598,647
                                               ==============   ==============

</TABLE>


*The  consolidated  condensed  balance  sheet as of  December  31, 1998 has been
summarized from the Company's audited balance sheet as of that date.

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

<PAGE>

<TABLE>

                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<CAPTION>

                                                          Three Months Ended
                                                              March 31,
                                                      --------------------------
                                                        1999             1998
                                                      --------------------------
<S>                                               <C>               <C>    

Revenues
    Alferon N Injection                           $   459,521       $   252,523
    Research products and other revenues                  277            77,025
                                                  ------------      ------------
Total revenues                                        459,798           329,548
                                                  ------------      ------------
Costs and expenses
Cost of goods sold and idle
  production costs                                  1,033,219           203,386
Provision for excess inventory                                        3,089,841
Research and development                            1,246,492         2,055,139
General and administrative                            802,695         1,472,399
                                                  -----------       ------------
Total costs and expenses                            3,082,406         6,820,765
                                                  ------------      ------------
Loss from operations                               (2,622,608)       (6,491,217)

 Interest income                                        4,737           144,720

 Loss on repurchase of
  preferred stock                                                      (737,037)
                                                  ------------      ------------
Net loss                                          $(2,617,871)      $(7,083,534)
                                                  ============      ============

Basic and diluted loss per share                  $      (.57)      $     (2.33)
                                                  ============      ============
Weighted average number of
shares outstanding                                  4,584,265         3,045,263


</TABLE>




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

<PAGE>

<TABLE>

                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN
                              STOCKHOLDERS' EQUITY
                        THREE MONTHS ENDED MARCH 31, 1999
                                   (Unaudited)
<CAPTION>



                                            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,
 1998               4,360,808   $ 43,608    $ 127,933,885   $(125,210,096)   $ (664,000)   $ 2,103,397

Common stock
 issued as
 payment against
 accounts payable     285,000      2,850          531,525                                      534,375

Common stock
 issued under
 Company 401(k)
 Plan                  22,256        223           38,911                                       39,134

Net loss                                                       (2,617,871)                  (2,617,871)
                   -------------------------------------------------------------------------------------
Balance at
 March 31,
 1999               4,668,064   $ 46,681    $ 128,504,321   $(127,827,967)   $ (664,000)   $    59,035


</TABLE>



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


<PAGE>


<TABLE>
                                                        
                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<CAPTION>
                                                        Three Months Ended
                                                              March 31,
                                                      ----------------------
                                                       1999           1998
                                                      ----------------------
<S>                                                 <C>             <C>    

Cash flows from operations:
 Net loss                                           $  (2,617,871)  $(7,083,534)
 Adjustments to reconcile net loss to net
  cash used for operating activities:
   Depreciation and amortization                          186,829       222,879
   Accounts payable, compensation and
    benefits paid with common stock                       573,509       176,115
   Provision for excess inventory                                     3,089,841
   Change in operating assets and liabilities:
   Inventories                                            270,645    (2,738,949)
   Payables to GP Strategies                              169,325       (13,419)
Accounts and other receivables                            303,095       691,333
   Prepaid expenses and other current
     assets                                              (101,275)       (2,713)
   Accounts payable and accrued expenses                   40,482      (427,768)
   Loss on repurchase of preferred stock                                737,037
                                                    --------------  ------------
   Net cash used for operations                        (1,175,261)   (5,349,178)
                                                    --------------  ------------
Cash flows from investing activities:
 Additions to property, plant and equipment                             (89,921)
 Reductions to other assets                                90,050        12,500
                                                    --------------  ------------
Net cash provided by (used for)                            90,050       (77,421)
   investing activities                             --------------  ------------
Cash flows from financing activities:
 Net proceeds from preferred stock
   offering                                                           7,179,000
Repurchase of preferred stock                                        (7,916,037)
                                                    --------------  ------------
Net cash used for financing activities                                 (737,037)
                                                    --------------  ------------
Net decrease in cash and cash equivalents              (1,085,211)   (6,163,636)

Cash and cash equivalents at beginning
 of period                                              1,170,861    14,059,283
                                                    --------------  ------------
Cash and cash equivalents at end of period          $      85,650   $ 7,895,647
                                                    ==============  ============


</TABLE>




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


<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)  which are,  in the  opinion  of  management,  necessary  to a fair
statement  of the  results  for the  interim  periods.  The  results for interim
periods are not necessarily indicative of results to be expected for the year.

Note 2.  Inventories

     Inventories,  consisting of material, labor and overhead, are classified as
follows:

                                  March 31,        December 31,
                                    1999              1998
                               --------------     --------------

       Finished goods          $   3,173,141      $   3,443,786
       Work in process             6,466,914          6,466,914
       Raw materials               1,143,635          1,143,635
       Less reserve for
        excess inventory         (10,344,551)       (10,344,551)
                               --------------     --------------
                               $     439,139      $     709,784
                               ==============     ==============


     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 Injectin in HIV and  HCV-infected  patients,  the Company has written-down the
carrying  value of its  inventory  of ALFERON N Injection to its  estimated  net
realizable  value.  The write-down is a result of the Company's  reassessment of
anticipated  near-term  needs for  product to be sold or  utilized  in  clinical
trials (within  approximately a two-year period,  beginning  January 1, 1998 and
based on historical  sales levels).  As a result,  inventories at March 31, 1999
and December 31, 1998, reflect a reserve for excess inventory of $10,344,551. As
of December 31, 1998, the Company  estimates that the remaining  inventory value
represents product to be sold within a one-year period.

Note 3.  Reverse Stock Split

     On January 6, 1999, the Company's stockholders approved a proposal to amend
the Company's  Restated  Certificate of  Incorporation  to effect a one-for-five
reverse stock split of the Company's Common Stock.

     The balance sheets,  statements of changes in stockholders equity, earnings
per share and all footnote  disclosures at March 31, 1999 and December 31, 1998,
as well as the loss per  share  and  average  outstanding  shares  for the three
months ended March 31, 1999 and 1998,  have been restated to reflect the reverse
split as if it had occurred on January 1, 1998.

Note 4.  Agreement with GP Strategies Corporation

     In an  agreement  dated March 25,  1999,  GP  Strategies  Corporation  ("GP
Strategies") agreed to lend the Company $500,000 at the rate of $250,000 a month
(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 to
purchase the Company's real estate, provided that the Company has terminated its
operations and the Red Cross Debt 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 agreed to allow a designee of GP Strategies to attend any
meeting  with the FDA with  respect to approval  of ALFERON N Injection  for the
treatment of  hepatitis C and to issue GP  Strategies  500,000  shares of Common
Stock and  five-year  options to purchase  500,000  shares of Common  Stock at a
price of $1 per share.  The  Company  also  agreed not to  increase  its payroll
during  the term of the GP  Strategies  Debt  without  the prior  consent  of GP
Strategies.  Pursuant  to the  agreement,  the  Company  has issued a note to GP
Strategies  representing the GP Strategies Debt, which note matures on September
30, 1999 and bears interest,  payable at maturity,  at the rate of 6% per annum.
In addition,  the Company has negotiated a subordination  agreement with the Red
Cross  pursuant to which the Red Cross has agreed that its lien on the Company's
real estate is subordinate to GP Strategies' lien.

Note 5. Operations and Liquidity

     The  Company  has  experienced   significant  operating  losses  since  its
inception in 1980. As of March 31, 1999, the Company had an accumulated  deficit
of approximately  $127.8 million.  For the three months ended March 31, 1999 and
the years ended  December 31, 1998,  1997 and 1996,  the Company had losses from
operations of approximately $2.6 million, $20.8 million, $22.4 million and $12.4
million,  respectively.  Although  the Company  received FDA approval in October
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.

     The Company has limited financial resources as of March 31, 1999 with which
to support future operating activities and to satisfy its financial  obligations
as they become  payable.  Consequently,  management  is  continuing  to actively
pursue raising  additional capital by either (i) issuing securities in a private
equity  offering,  (ii) licensing the rights to its injectable,  topical or oral
formulations  of alpha  interferon,  or (iii) selling 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.

     Based on the  Company's  estimates  of  revenues,  expenses  and  levels of
production,  management  believes  that the  cash  presently  available  will be
sufficient to enable the Company to continue  operations  through  approximately
June 15, 1999. However, actual results, especially with respect to revenues, may
differ  materially  from such  estimates,  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.

<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Financial Condition and Liquidity

     As of May 12,  1999,  the Company had an  aggregate  of 350,000 in cash and
cash  equivalents.  Until  utilized,  such cash and cash  equivalents  are being
invested principally in short-term interest-bearing investments.

     The Company intends to participate in the State of New Jersey's corporation
business tax benefit  certificate  transfer program (the "Program"),  which when
effective  will allow certain high  technology  and  biotechnology  companies to
transfer  unused New Jersey net  operating  loss  carryovers to other New Jersey
corporation business taxpayers.  The Company has submitted an application to the
New Jersey  Economic  Development  Authority  (the "EDA") to  participate in the
Program.  If the Company's  application  is approved,  the EDA will then issue 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 will be able to transfer
its New Jersey net  operating  losses  from the last seven  years.  The  Company
estimates 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.  Applying the maximum New Jersey  corporate  income
tax rate of 9% and the minimum statutory  transfer price of 75%, such unused New
Jersey  net  operating  loss  carryovers  would  have a value of at least  $5.73
million.  This assumes that (i) the EDA certifies the Company's  eligibility  to
participate  in the Program  and that the Company has at least $5.73  million of
available  unused New Jersey net operating loss  carryovers and (ii) the Company
is able to find a  purchaser  for all of its  available  unused  New  Jersey net
operating loss carryovers,  as to which there can be no assurance.  In addition,
the administrative procedures for participation in the Program have not yet been
finalized by the EDA,  and the Company is unable to predict how such  procedures
may affect the amount or timing of any benefit  the  Company  may  receive  from
participating in the Program.

     The Company has obtained human white blood cells used in the manufacture of
ALFERON N Injection from several sources,  including the American Red Cross (the
"Red  Cross")  pursuant to a supply  agreement  dated April 1, 1997 (the "Supply
Agreement"). In addition, the Company will not need more human white blood cells
until such time as  production  of ALFERON N Injection  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 of 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.

     In an agreement  dated  November 23, 1998,  the Company agreed to grant the
Red  Cross a  security  interest  in  certain  assets  to  secure  the Red Cross
Liability and to issue to the Red Cross  300,000  shares of Common Stock (with a
market value of  $1,171,875 at December 4, 1998) and  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  wold be
waived.  In January 1999 the Company  granted the Red Cross a 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.

     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  has  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 from November 23, 1998 to December
31, 1998,  an adjustment  for $525,000 has been  recorded  with a  corresponding
charge to operations.

     In an agreement  dated March 25,  1999,  GP  Strategies  agreed to lend the
Company $500,000 at the rate of $250,000 a month (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 to purchase the Company's  real
estate,  provided that the Company has  terminated  its  operations  and the Red
Cross Debt 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
agreed to allow a designee of GP  Strategies  to attend any meeting with the FDA
with respect to approval of ALFERON N Injection for the treatment of hepatitis C
and to issue GP Strategies  500,000 shares of Common Stock and five-year options
to  purchase  500,000  shares of Common  Stock at a price of $1 per  share.  The
Company  also  agreed  not to  increase  its  payroll  during the term of the GP
Strategies  debt  without the prior  consent of GP  Strategies.  Pursuant to the
agreement,  the Company has issued a note to GP Strategies  representing  the GP
Strategies  Debt,  which note matures on September 30, 1999 and bears  interest,
payable at maturity,  at the rate of 6% per annum. In addition,  the Company has
negotiated a  subordination  agreement  with the Red Cross pursuant to which the
Red Cross has agreed that its lien on the Company's  real estate is  subordinate
to GP Strategies' lien.

     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.

     The  Company  anticipates  that  the  cash  that  will be  utilized  by the
Company's operations in 1999 will be significantly less than in 1998 as a result
of the  discontinuance in 1998 of  manufacturing,  the conclusion in 1998 of the
Company's  Phase 3 studies  of  ALFERON  N  Injection  in HIV- and  HCV-infected
patients,  and certain other cost reductions (including the layoff of 30 people)
instituted  in 1998  and  early  1999 by the  Company.  Based  on the  Company's
estimates of revenues,  expenses, and levels of production,  management believes
that the cash  presently  available  will be sufficient to enable the Company to
continue  operations  through  approximately  June  15,  1999.  However,  actual
results,  especially with respect to revenues,  may differ  materially from such
estimates,  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 15, 1999 on the Company's consolidated financial statements ended December
31, 1998 notes 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.

     On April 13,  1999,  the Company  was advised by NASDAQ that the  Company's
Common  Stock was  being  delisted  for  failure  to  maintain  certain  listing
requirements.  As a result of being  delisted from NASDAQ,  the 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

Three Months Ended March 31, 1999 Versus Three Months Ended March 31, 1998

     For the three  months  ended  March 31,  1999,  the  Company's  revenues of
$459,798  included $459,521 from the sale of ALFERON N Injection and the balance
from sales of research products. Revenues of $329,548 for the three months ended
March 31, 1998  included  $252,523  from the sale of ALFERON N Injection and the
balance from sales of research  products and other revenues.  Cost of goods sold
and idle production  costs totaled  $1,033,219 and $203,386 for the three months
ended March 31, 1999 and 1998, respectively.  Idle production costs in the three
months  ended March 31, 1999  represented  fixed  production  costs,  which were
incurred after production of ALFERON N Injection was discontinued in April 1998.
There were no idle production costs in the three months ended March 31, 1998.

     In May 1997,  the  Company  appointed  Alternate  Site  Distributors,  Inc.
("ASD"),  a wholly owned  subsidiary of Bergen  Brunswig  Corporation,  the sole
United States distributor of ALFERON N Injection.  Under the agreement with ASD,
the Company sold vials to ASD, which then resold them to the  marketplace.  As a
result, the Company  recognized  revenues when it sold vials to ASD, rather than
when ASD resold them to the marketplace.  In June 1998, the Company replaced ASD
with  Integrated  Commercialization  Solutions  ("ICS"),  another  subsidiary of
Bergen  Brunswig  Corporation  better  able to handle  the  Company's  specialty
distribution  requirements.  Under the new agreement, vials are not sold to ICS,
but are instead sold by the Company directly to the  marketplace,  at which time
revenues  are  recognized  by the  Company.  In the three months ended March 31,
1999, the Company sold to wholesalers  and other  customers in the United States
3,708  vials of ALFERON N  Injection,  compared to 994 vials sold by the Company
during the three  months ended March 31, 1998.  In  addition,  foreign  sales of
ALFERON N Injection  were 162 vials and 2,000 vials for the three  months  ended
March 31, 1999 and 1998, respectively.

     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 written-down the
carrying  value of its  inventory  of ALFERON N Injection to its  estimated  net
realizable value. The write-down was the result of the Company's reassessment of
anticipated  near-term  needs for  product to be sold or  utilized  in  clinical
trials (within  approximately  a two-year period  beginning  January 1, 1998 and
based on historical  sales levels).  As a result,  during the three months ended
March 31, 1998,  the Company  recorded an inventory  write-off of  $3,089,841 in
addition to the $7,254,710 inventory write-down,  which was recorded at December
31, 1997.  As of December 31, 1998,  the Company  estimates  that the  remaining
inventory value represents product to be sold within a one-year period.

     Research and  development  expenses during the three months ended March 31,
1999 of $1,246,492  decreased by $808,647 from $2,055,139 for the same period in
1998, principally because the Company has concluded its Phase 3 clinical studies
of ALFERON N Injection in HIV- and HCV-infected  patients.  The Company received
$29,375 in 1998, as rental income from GP Strategies for the use of a portion of
the Company's facilities, which offset research and development expenses.

     General and  administrative  expenses  for the three months ended March 31,
1999 were  $802,695 as compared to $1,472,399  for the same period in 1998.  The
decrease of  $669,704  was  principally  due to  decreases  in payroll and other
operating expenses. GP Strategies provides certain  administrative  services for
which the Company paid GP Strategies $30,000 for each of the three-month periods
ended  March 31,  1999 and 1998.  For the three  months  ended  March 31,  1998,
receipts  from GP Strategies  for services  provided to GP Strategies by Company
personnel amounted to $6,250.

     On February  5, 1998,  the Company  completed  the sale of 7,500  shares of
Series  A  Convertible  Preferred  Stock  to an  institutional  investor  for an
aggregate amount of $7,500,000.  The $7,179,000 of net proceeds were expected to
augment the  Company's  working  capital  while  awaiting the results of the two
Phase 3 clinical trials of ALFERON N Injection for the treatment of HIV-infected
and  hepatitis C  patients.  After  considering  the  reaction of the  Company's
stockholders to the issuance and the negative impact the issuance apparently had
on the Company's  market  capitalization,  the Board of Directors  determined on
February 13, 1998 to exercise an option to repurchase  the shares of Convertible
Preferred  Stock for $7,894,737  (plus accrued  dividends).  The net loss to the
Company on the repurchase of the Preferred Stock amounted to $737,037.

     Interest  income for the three  months  ended  March 31, 1999 was $4,737 as
compared to $144,720  for the same period in 1998.  The decrease of $139,983 was
due to less funds available for investment in the current period.

     As a result of the foregoing, the Company incurred net losses of $2,617,871
and $7,083,534 for the three months ended March 31, 1999 and 1998, respectively.

Recent Accounting Developments

     The  Financial   Accounting  Standards  Board  ("FASB")  issued  Accounting
Standards  (SFAS  130),  "Reporting  Comprehensive  Income",  in June 1997 which
requires a statement  of  comprehensive  income to be included in the  financial
statements for fiscal years  beginning  after December 15, 1997. The Company has
adopted  this  Statement  and  has  no  other  comprehensive  income,  therefore
comprehensive income is the same as net income (loss).

     In addition,  in June 1997,  the FASB issued SFAS 131,  "Disclosures  about
Segments of an Enterprise and Related Information". SFAS 131 requires disclosure
of certain information about operating segments and about products and services,
geographic areas in which a company operates,  and their major customers.  As of
January 1, 1998, the Company adopted SFAS 131, however,  as the Company operates
as one business  segment the adoption of this  Statement  has minimal  impact on
disclosure and has no effect on the Company's  financial  position or results of
operations.

     In June 1998, the 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
derivatives as either assets or liabilities in the 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 is effective for all fiscal  quarters of fiscal years  beginning
after June 15, 1999.  The Company will adopt SFAS 133 by January 1, 2000.  Going
forward, the Company is still evaluating its position with respect to the use of
derivative instruments.

Year 2000

     Many computer  systems ("IT  systems") and equipment and  instruments  with
embedded  microprocessors ("non-IT systems") were designed to only recognize the
last two digits of a calendar  year.  With the  arrival of the Year 2000,  these
systems  and  microprocessors  may  encounter  operating  problems  due to their
inability to distinguish years after 1999 from years preceding 1999.  Failure to
properly  recognize such information  could generate  inaccurate data or cause a
system to fail, resulting in business interruption.

     The Company has developed an informal  plan to address Year 2000  concerns.
The first phase, which the Company has completed was to inventory the IT systems
and non-IT  systems of the Company,  determine  which systems were not Year 2000
compliant  or Year 2000  compatible,  and,  among any systems that were not Year
2000  compliant or Year 2000  compatible,  distinguish  "critical"  systems from
"non-critical"  systems.  Based upon the  results of the tests which the Company
has  conducted,  the  Company  believes  that  the IT  systems  utilized  by its
accounting  department  and the IT systems  and non-IT  systems  utilized in the
production  of Alferon N Injection  are Year 2000  compliant.  The second phase,
which the Company  expects to complete by July 1999,  is to remediate or replace
critical IT and non-IT systems that are non-compliant or not compatible and then
test such remediated or replaced systems.

     Based on current information, the Company believes the Year 2000 issue will
not have a material adverse effect on the Company,  its  consolidated  financial
position,  results of operations or cash flows. The Company  believes,  based on
preliminary  information,  that the costs to  address  the  Company's  Year 2000
issues will not be material,  although  there can be no assurance that this will
be the case,  or that the Company will have  sufficient  financial  resources to
remediate.  There  can be no  assurance  that the Year 2000  remediation  by the
Company or third parties will be properly and timely completed,  and the failure
to do so could have a material  adverse  effect on the  Company,  its  business,
results of operations, and its financial condition.

     The Company has not completed its assessment of the reasonably likely worst
case  scenario  of  Non-IT  Systems  and/or  IT  Systems  failures  and  related
consequences.  However, the Company is in the process of preparing specific Year
2000 contingency  plans to mitigate the potential  impact of such failures.  The
Company's  contingency  plans,  which will be based in part on the assessment of
the magnitude and probability of potential risks,  will primarily focus on steps
to prevent Year 2000 failures from occurring, or if they should occur, to detect
them quickly,  minimize their impact and expedite  their repair.  Development of
the Year 2000 contingency plans is expected to be substantially  complete by the
end of September 1999.

     The  Company's  operations  may also be impacted in the event third parties
with whom the Company conducts significant  business experience  disruptions due
to  Year  2000  problems.  These  third  parties  include  vendors,   suppliers,
distributors,  clinical researchers, contract manufacturers,  research partners,
utility companies, financial institutions, and government agencies. Prior to the
end  of  the  second   quarter  of  1999,   the  Company   intends  to  initiate
communications with these third parties to assess their state of readiness.  The
Company  currently  believes that the most reasonably likely worst case scenario
concerning  the Year 2000 involves  potential  business  disruption  among these
third  parties.  The Company  could be materially  adversely  affected if any of
these third parties experience  business  disruption due to a Year 2000 problem.
While the  Company  intends to develop  contingency  plans to address  potential
business  disruptions at these third parties,  there can be no assurance that it
will be able to do so and it is unlikely that any contingency  plan will be able
to fully mitigate the impact of  significant  business  disruptions  among these
third parties.

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

          (b) Reports on Form 8-K

     There  were no reports  on Form 8-K filed for the  period  ended  March 31,
1999.

<PAGE>


                            INTERFERON SCIENCES, INC.

                                 MARCH 31, 1999




                                   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:       May 17, 1999               By: /s/ Lawrence M. Gordon
                                           -----------------------  
                                               Lawrence M. Gordon
                                               Chief Executive Officer




DATE:       May 17, 1999               By: /s/ Donald W. Anderson
                                           -----------------------  
                                               Donald W. Anderson
                                               Controller