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, 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)

(Registrant's telephone number, including area code)     (732) 249 - 3250

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 20, 1999:

Common Stock                                                  4,767,116  shares


<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----

Part I.  Financial Information:

   Consolidated Condensed Balance Sheets--September 30, 1999
     and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . .  1

   Consolidated Condensed Statements of Operations--Three Months and Nine
     Months Ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . 2-3

   Consolidated Condensed Statement of Changes in
     Stockholders' Equity--Nine Months Ended

     September 30, 1999  . . . . . . . . . . . . . . . . . . . . . . . . . .  4

   Consolidated Condensed Statements of Cash Flows--Nine

     Months Ended September 30, 1999 and 1998. . . . . . . . . . . . . . . .  5

   Notes to Consolidated Condensed Financial Statements  . . . . . . . . . .6-8

   Management's Discussion and Analysis of Financial

     Condition and Results of Operations . . . . . . . . . . . . . . . . . 9-15

 Part II.  Other Information . . . . . . . . . . . . . . . . . . . . . . .   16

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   17



<PAGE>





<TABLE>

                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                          PART I. FINANCIAL INFORMATION

                      CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>

                                             September 30,      December 31,
                                                 1999              1998

                                              (Unaudited)            *

                                             --------------    --------------
<S>                                           <C>               <C>
ASSETS

Current assets


  Cash and cash equivalents                   $     88,256      $   1,170,861
  Accounts and other receivables                   335,020            689,511
  Inventories, net of reserves
    of $7,154,458 and $10,344,551                                     709,784
  Prepaid expenses and other
    current assets                                 180,062             36,511
                                              -------------     --------------
Total current assets                               603,338          2,606,667
                                              -------------     --------------
Property, plant and equipment,
 at cost                                       12,759,273         12,771,773
Less accumulated depreciation                   (9,655,361)        (9,130,248)
                                              -------------     --------------
                                                 3,103,912          3,641,525
                                              -------------     --------------
Patent costs, net of accumulated
  amortization                                     227,431            250,305
Other assets                                        10,100            100,150
                                              -------------     --------------
Total assets                                  $  3,944,781      $   6,598,647
                                             ==============     ==============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Accounts payable and
    accrued expenses                          $  4,800,206      $   4,386,307
  Amount due GP Strategies                         721,412            108,943
                                             --------------     --------------
Total current liabilities                        5,521,618          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-4,767,096 and
 4,360,808 shares                                   47,671             43,608
Capital in excess of par value                 128,547,625        127,933,885
Accumulated deficit                           (129,508,133)      (125,210,096)
Settlement shares                                 (664,000)          (664,000)
                                             --------------    ---------------
Total stockholders' equity                      (1,576,837)         2,103,397
                                             --------------    ---------------
Total liabilities and stockholders'
  equity                                      $  3,944,781     $    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
<CAPTION>

                                   (Unaudited)

                                                     Three Months Ended
                                                        September 30,

                                                ------------------------------
                                                   1999               1998
                                                ------------      ------------
<S>                                            <C>                <C>
Revenues


    Alferon N Injection                        $   998,275        $   634,612
    Research products and other revenues                                4,022
                                               -------------     -------------
Total revenues                                     998,275            638,634
                                               -------------     -------------
Costs and expenses
Cost of goods sold and idle
  production costs                                 518,686          1,165,238
Research and development                           513,776          1,943,198
General and administrative                         414,770          1,065,389
                                               -------------     -------------
Total costs and expenses                         1,447,232          4,173,825
                                               -------------     -------------
Loss from operations                              (448,957)        (3,535,191)

 Interest income                                                       29,433
                                                -------------     -------------
Net loss                                       $  (448,957)      $ (3,505,758)
                                               =============     =============

Basic and diluted loss per share               $      (.09)      $      (1.12)
                                               =============     =============
Weighted average number of

shares outstanding                               4,746,342          3,125,355
</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 OPERATIONS
<CAPTION>

                                   (Unaudited)

                                                       Nine Months Ended
                                                         September 30,

                                                ------------------------------
                                                   1999               1998
                                                ------------      ------------
<S>                                            <C>                <C>
Revenues


    Alferon N Injection                        $ 1,984,185        $ 1,093,578
    Research products and other revenues               277             93,148
                                               -------------     -------------
Total revenues                                   1,984,462          1,186,726
                                               -------------     -------------
Costs and expenses
Cost of goods sold and idle
  production costs                               2,155,265          3,945,041
Provision for excess inventory                                      3,089,841
Research and development                         2,456,765          6,161,208
General and administrative                       1,675,846          3,615,977
                                               -------------     -------------
Total costs and expenses                         6,287,876         16,812,067
                                               -------------     -------------
Loss from operations                            (4,303,414)       (15,625,341)

 Interest income                                     5,377            240,278

 Loss on repurchase of
  preferred stock                                                    (737,037)
                                               -------------     -------------
Net loss                                       $(4,298,037)      $(16,122,100)
                                               =============     =============

Basic and diluted loss per share               $      (.92)      $      (5.24)
                                               =============     =============
Weighted average number of

shares outstanding                               4,671,691          3,077,943
</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

                                              NINE MONTHS ENDED SEPTEMBER 30, 1999
<CAPTION>
                                                           (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,
 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                121,288       1,213          82,215                                        83,428

Net loss                                                      (4,298,037)                   (4,298,037)
                   ------------------------------------------------------------------------------------
Balance at
 September 30,
 1999              4,767,096   $  47,671   $ 128,547,625   $(129,508,133)   $ (664,000)    $(1,576,837)
</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>

                                                        Nine Months Ended
                                                           September 30,

                                                     -----------------------
                                                       1999           1998
                                                     -----------------------
<S>                                               <C>            <C>
Cash flows from operations:


 Net loss                                         $(4,298,037)   $(16,122,100)
 Adjustments to reconcile net loss to net
  cash used for operating activities:
   Depreciation and amortization                      560,487         670,141
   Accounts payable, compensation and
    benefits paid with common stock                   617,803         254,795
   Provision for excess inventory                                   3,089,841
   Change in operating assets and liabilities:
   Inventories                                        709,784        (979,273)
   Payables to GP Strategies                          612,469          78,931
   Accounts and other receivables                     354,491         687,636
   Prepaid expenses and other current
     assets                                          (143,551)        (14,278)
   Accounts payable and accrued expenses              413,899        (211,227)
   Loss on repurchase of preferred stock                              737,037
                                                  ------------    ------------
   Net cash used for operations                    (1,172,655)    (11,808,497)
                                                  ------------    ------------
Cash flows from investing activities:
 Additions to property, plant and equipment                          (206,697)
 Reductions to other assets                            90,050          35,000
                                                  ------------    ------------
Net cash provided by (used for)
   investing activities                                90,050        (171,697)
                                                  ------------    ------------
Cash flows from financing activities:
 Net proceeds from sale of common stock                               454,500
 Net proceeds from preferred stock
   offering                                                         7,179,000
 Repurchase of preferred stock                                     (7,916,037)
                                                  ------------    ------------
 Net cash used for financing activities                              (282,537)
                                                  ------------    ------------
Net decrease in cash and cash equivalents          (1,082,605)    (12,262,731)
Cash and cash equivalents at beginning
 of period                                          1,170,861      14,059,283
                                                  ------------    ------------
Cash and cash equivalents at end of period        $    88,256    $  1,796,552
                                                  ============    ============
</TABLE>



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

                    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:
<TABLE>
<CAPTION>

                                September 30,      December 31,
                                    1999               1998

                                --------------     --------------

<S>                            <C>                <C>
       Finished goods          $     574,875      $   3,443,786
       Work in process             5,435,948          6,466,914
       Raw materials               1,143,635          1,143,635
       Less reserve for
        excess inventory          (7,154,458)       (10,344,551)
                               ---------------    ---------------
                               $          --      $     709,784
                               ===============    ===============
</TABLE>

         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 of the  Company's  phase 3 studies of ALFERON N
Injection in HIV and  HCV-infected  patients,  the Company had  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,  inventories  at December 31,
1998, reflect a reserve for excess inventory of $10,344,551.  As of December 31,
1998,  the Company  estimated  that the remaining  inventory  value  represented
product to be sold within a one-year  period.  As of  September  30,  1999,  the
remaining  inventory  value at  December  31, 1998 had been fully  utilized  and
therefore all remaining inventory is fully reserved.

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  September  30,  1999 and
December 31, 1998, as well as the loss per share and average  outstanding shares
for the three months and nine months  ended  September  30, 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.
To date,  the  Company  has  made no  payments  on the GP  Strategies  Debt.  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 September  30,  1999,  the Company had an  accumulated
deficit of approximately $129.5 million. For the nine months ended September 30,
1999 and the years  ended  December  31,  1998,  1997 and 1996,  the Company had
losses from  operations of  approximately  $4.3 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 September  30, 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 and expenses,  management
believes  that the cash  presently  available  will be  sufficient to enable the
Company to continue operations through  approximately  November 30, 1999. If the
Company  is  unable  to obtain  additional  funding,  it will be forced to cease
operations.  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.

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

FINANCIAL CONDITION AND LIQUIDITY

         As of October 25,  1999,  the Company had an  aggregate  of $100,000 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.

       On May 25, 1999, the Company announced that based upon a meeting with the
Food and Drug  Administration  regarding  its Phase 3 clinical  trial  comparing
ALFERON N Injection against Schering  Plough's  Intron(R) A for the treatment of
previously  untreated  patients  infected  with  hepatitis C virus,  it would be
required to conduct an  additional  clinical  study prior to filing for approval
with the FDA.  The FDA advised  the Company  that the results of this trial were
insufficient  to file for approval  because the  designed  endpoint of the trial
(which  required a showing of  superiority in sustained  normalization  of liver
enzymes at the end of treatment  and after six months of follow up) was not met.
At the  present  time,  the Company  does not have the  resources  necessary  to
conduct an additional study.

         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  would 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  September 30, 1999.  To date,  the Company has made no
payments on 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 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. To date, the Company has made
no payments on the GP Strategies Debt. 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 and expenses,  management believes that the cash presently
available  will be  sufficient  to enable  the  Company to  continue  operations
through  approximately  November  30,  1999.  If the Company is unable to obtain
additional  funding,  it will be forced  to cease  operations.  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,  NASDAQ  advised the Company 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

NINE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1998

         For the nine months ended September 30, 1999, the Company's revenues of
$1,984,462  included  $1,984,185  from the sale of ALFERON N  Injection  and the
balance from sales of research  products.  Revenues of  $1,186,726  for the nine
months ended  September 30, 1998 included  $1,093,578 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  $2,155,265 and $3,945,041
for the nine  months  ended  September  30,  1999 and 1998,  respectively.  Idle
production  costs  in the  nine  months  ended  September  30,  1999  and  1998,
represented  fixed  production  costs,  which were incurred after  production of
ALFERON N Injection was discontinued in April 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,
the Company  recognizes  revenues.  In the nine months ended September 30, 1999,
the Company sold to wholesalers  and other customers in the United States 16,088
vials of ALFERON N Injection, compared to 7,489 vials sold by the Company during
the nine months ended September 30, 1998. In addition,  foreign sales of ALFERON
N Injection were 1,374 vials and 2,000 vials for the nine months ended
September30, 1999 and 1998, respectively.

     In light of the  results  of the  Company's  Phase 3 studies  of  ALFERON N
Injection in HIV- and  HCV-infected  patients,  the Company had 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  estimated  that the  remaining
inventory value  represented  product to be sold within a one-year period. As of
September 30, 1999, the remaining  inventory value at December 31, 1998 had been
fully utilized and therefore all remaining inventory is fully reserved.

         Research  and  development   expenses  during  the  nine  months  ended
September 30, 1999 of $2,456,765 decreased by $3,704,443 from $6,161,208 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 nine months ended September
30, 1999 were  $1,675,846 as compared to $3,615,977 for the same period in 1998.
The decrease of $1,940,131 was principally due to decreases in payroll and other
operating expenses. GP Strategies provides certain  administrative  services for
which the Company paid GP Strategies  $90,000 for each of the nine-month periods
ended September 30, 1999 and 1998. For the nine months ended September 30, 1998,
receipts  from GP Strategies  for services  provided to GP Strategies by Company
personnel amounted to $18,750.

         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 nine months ended September 30, 1999 was $5,377
as compared to $240,278  for the same period in 1998.  The  decrease of $234,901
was due to less funds available for investment in the current period.

         As a result  of the  foregoing,  the  Company  incurred  net  losses of
$4,298,037  and  $16,122,100  for the nine months ended  September  30, 1999 and
1998, respectively.

                     THREE MONTHS ENDED SEPTEMBER 30, 1999
                                     VERSUS
                     THREE MONTHS ENDED SEPTEMBER 30, 1998

         For the three months ended  September 30, 1999, the Company's  revenues
of $998,275  were  entirely  from the sale of ALFERON N  Injection.  Revenues of
$638,634 for the three months ended  September 30, 1998  included  $634,612 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
$518,686 and $1,165,238 for the three months ended  September 30, 1999 and 1998,
respectively. Idle production costs in the three months ended September 30, 1999
and  1998,  represented  fixed  production  costs,  which  were  incurred  after
production of ALFERON N Injection was discontinued in April 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,
the Company recognizes  revenues.  In the three months ended September 30, 1999,
the Company sold to wholesalers  and other  customers in the United States 8,191
vials of ALFERON N Injection, compared to 4,902 vials sold by the Company during
the three months ended September 30, 1998. In addition, foreign sales of ALFERON
N Injection were 1,020 vials and zero vials for the three months ended September
30, 1999 and 1998, respectively.

         Research  and  development  expenses  during  the  three  months  ended
September 30, 1999 of $513,776  decreased by $1,429,422  from $1,943,198 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.

         General  and  administrative   expenses  for  the  three  months  ended
September 30, 1999 were  $414,770 as compared to $1,065,389  for the same period
in 1998.  The decrease of $650,619 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  September  30, 1999 and 1998.  For the three months
ended September 30, 1998,  receipts from GP Strategies for services  provided to
GP Strategies by Company personnel amounted to $6,250.

         Interest  income for the three months ended September 30, 1999 was zero
as compared to $29,433 for the same period in 1998.

         As a result  of the  foregoing,  the  Company  incurred  net  losses of
$448,957 and $3,505,758 for the three months ended  September 30, 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 a 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 has completed,  remediated or replaced  critical IT and non-IT
systems  that  were  non-compliant  or  not  compatible  and  then  tested  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 completed its assessment of the reasonably likely worst
case  scenario  of  Non-IT  Systems  and/or  IT  Systems  failures  and  related
consequences.  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 are based in part on the assessment of the
magnitude  and  probability  of  potential  risks,  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.

         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.
The  Company has  initiated  communications  with third party  vendors 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  continues  the
development  of contingency  plans to address  potential  business  disruptions,
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
         September 30, 1999.


<PAGE>


                            INTERFERON SCIENCES, INC.

                               September 30, 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:   November  12, 1999                    By:     /s/ Lawrence M. Gordon
                                                      ----------------------
                                                          Lawrence M. Gordon
                                                       Chief Executive Officer

DATE:   November  12, 1999                    By:     /s/ Donald W. Anderson
                                                      ----------------------
                                                          Donald W. Anderson
                                                              Controller