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

                                  FORM 10-Q/SB

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

      For the quarter ended September 30, 2004

                                          or

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

       For the transition period from ___________ to ________________

       Commission File Number:   0-10379


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


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


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


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period) that the registrant was
required to file such reports and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]


Number of shares outstanding of each of issuer's classes of common stock as of
October 12, 2004.

                   Common Stock               37,339,286 shares



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                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                                TABLE OF CONTENTS




                                                                            Page
Part I.  Financial Information:

   Consolidated Condensed Balance Sheets--
     September 30, 2004 and December 31, 2003 .  . . . . . . . . . .  . . . . .1

   Consolidated Condensed Statements of Operations--
     Three Months and Nine Months Ended September 30, 2004 and 2003. . .  . .2-3

   Consolidated Condensed Statement of Stockholders' Equity--- Nine Months Ended
     September 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

   Consolidated Condensed Statements of Cash Flows--
     Nine Months Ended September 30, 2004 and 2003. . . . . . . . . . . . . . .5

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

   Management's Discussion and Analysis of Financial
     Condition and Results of Operations  . . . . . . . . . . . . . . .  . 13-15

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

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

Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..18-19

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<CAPTION>




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

                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                                    September 30,     December 31,
                                                        2004               2003
                                                     (Unaudited)
ASSETS                                              ------------------------------
Current assets
<S>                                                 <C>               <C>
  Cash                                              $  2,144,170      $   848,573
  Other receivables                                       78,825           49,700
  Notes receivable, net                                  375,000          371,063
  Prepaid expenses and other current assets               51,677           18,782
                                                   -------------    -------------
Total current assets                                   2,649,672        1,288,118
                                                   -------------    -------------

Property, plant and equipment, at cost                                 12,854,834
Less accumulated depreciation                                         (11,566,022)
                                                                    -------------
                                                                        1,288,812
                                                                    -------------
Patent costs, net of accumulated amortization                             106,057
Other assets                                              11,350           11,350
                                                   -------------    -------------
Total assets                                       $   2,661,022    $   2,694,337
                                                   =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY
  (DEFICIENCY)
Current liabilities
  Accounts payable and accrued expenses                  569,945          580,523
  Obligations subject to closing of sale of assets:
    Due to American Red Cross                                           1,434,636
    Past due real estate taxes                                            643,729
    Note payable and amount due GP Strategies                             422,745
Convertible notes payable                                225,000          285,000
Income tax payable                                        52,470
                                                   -------------    -------------
Total current liabilities                                847,415        3,366,633
                                                   -------------    -------------
Commitments and contingencies

Stockholders' Equity (deficiency)
Preferred stock, par value $.01 per share;
 authorized-5,000,000 shares; none issued
 and outstanding
Common stock, par value $.01 per share;
 authorized-55,000,000 shares; issued
 and outstanding-37,339,286 shares                       373,393          373,393
Capital in excess of par value                       136,970,283      136,970,283
Accumulated deficit                                 (135,530,069)    (138,015,972)
                                                   -------------     ------------
Total stockholders' equity (deficiency)                1,813,607         (672,296)
                                                   -------------     ------------
Total liabilities and stockholders' equity
  (deficiency)                                     $   2,661,022    $   2,694,337
                                                   =============    =============

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

</TABLE>

<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

               CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(1)
                                   (Unaudited)

                                                      Three Months Ended
                                                         September 30,
                                                  -----------------------------
                                                       2004           2003
                                                  -------------   -------------
Revenue
  Royalty income                                    $    16,000     $    14,000
                                                  -------------   -------------
Total revenue                                            16,000          14,000
                                                  -------------   -------------
Costs and expenses
General and administrative                              203,185         369,114
                                                  -------------   -------------
Total costs and expenses                                203,185         369,114
                                                  -------------   -------------
Loss from operations before
  other income (expense)                               (187,185)       (355,114)

Interest income (expense), net                            8,914         (69,986)
Service fee income                                                      156,724
Gain on sale of assets                                      ---             ---
Gain on sale of securities                                  ---             ---
Gain on Metacine settlement                                           1,550,000
                                                  -------------   -------------
Net Income (loss)                                   $  (178,271)    $ 1,281,624
                                                  =============   =============

Basic net income (loss) per share                  $        ---     $       .03
                                                  =============   =============

Diluted net income (loss) per share                $        ---     $       .02
                                                  =============   =============
As if adjusted for authorized shares, diluted net income (loss) per share
(potential common shares notlimited to authorized shares
available)                                         $        ---     $       .02
                                                  =============   =============
Weighted average number of shares
outstanding - basic                                  37,339,286      36,687,112
                                                  =============   ==============
Weighted average number of shares outstanding -
diluted (potential common shares limited to
authorized shares available)                         37,339,286      55,000,000
                                                  ==============  ==============
As if adjusted for authorized shares, weighted average number of shares
outstanding - diluted (potential common shares not limited to authorized
shares available)                                    37,339,286      80,687,112
                                                  =============   =============

(1)On March 11, 2003, the Company sold all its inventory related to its ALFERON
N Injection business. On March 17, 2004, the Company sold all its other assets
related to its ALFERON N Injection business. See Note 8 of Notes to Consolidated
Condensed Financial Statements.

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


<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

               CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(1)
                                   (Unaudited)

                                                       Nine Months Ended
                                                         September 30,
                                                  -----------------------------
                                                       2004           2003
                                                  -------------   -------------
Revenue
  Sales-Alferon N Injection, net                   $              $    241,637
  Bulk sale of remaining Alferon inventory
   and license fee                                                   1,149,112
  Royalty income                                         47,808         14,000
                                                  -------------   -------------
Total revenue                                            47,808      1,404,749
                                                  -------------   -------------
Costs and expenses
Cost of goods sold and excess/idle
  production costs                                                      267,054
Research and development                                                176,091
General and administrative                              673,048         962,714
                                                  -------------   -------------
Total costs and expenses                                673,048       1,405,859
                                                  -------------   -------------
Income (loss) from operations before
  other income (expense)                               (625,240)         (1,110)

Interest income (expense), net                           18,283        (260,449)
Service fee income                                                      450,851
Gain on sale of assets                                2,875,282
Gain on sale of securities                              270,048
Gain on Metacine settlement                                           1,550,000
                                                  -------------   -------------
Income before taxes                                   2,538,373       1,739,292
    Provision for income taxes                           52,470
                                                  -------------   -------------
Net Income                                         $  2,485,903     $ 1,739,292
                                                   ============   =============

Basic net income per share                         $        .07     $       .05
                                                  =============   =============

Diluted net income per share                       $        .05     $       .03
                                                  =============   =============
As if adjusted for authorized shares, diluted
net income per share (potential common shares
not limited to authorized shares available)        $        .03     $       .02
                                                  =============   =============
Weighted average number of shares
outstanding - basic                                  37,339,286      32,523,394
                                                  =============   ==============
Weighted average number of shares outstanding -
diluted (potential common shares limited to
authorized shares available)                         55,000,000      55,000,000
                                                  ==============  ==============
As if adjusted for authorized shares, weighted average number of shares
outstanding - diluted (potential common shares not limited to authorized
shares available)                                    86,839,286      82,423,394
                                                  =============   =============

(1)On March 11, 2003, the Company sold all its inventory related to its ALFERON
N Injection business. On March 17, 2004, the Company sold all its other assets
related to its ALFERON N Injection business. See Note 8 of Notes to Consolidated
Condensed Financial Statements.

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

<PAGE>

<TABLE>
<CAPTION>




                    INTERFERON SCIENCES, INC. AND SUBSIDIARY
                        CONSOLIDATED CONDENSED STATEMENT
                      OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                      NINE MONTHS ENDED SEPTEMBER 30, 2004
                                   (Unaudited)

                                                                                    Total
                                              Capital                           Stockholders'
                        Common Stock         in excess       Accumulated           Equity
                      Shares      Amount    of par value      deficit           (deficiency)
                      ------------------    ------------    -------------      -------------
 Balance at
<S>    <C> <C>     <C>          <C>         <C>             <C>                <C>
  Dec. 31, 2003    37,339,286   $373,393    $136,970,283    $(138,015,972)     $ (672,296)

 Net income                                                     2,485,903       2,485,903

                  ------------------------------------------------------------------------------
 Balance at
  Sept. 30, 2004   37,339,286   $373,393    $136,970,283    $(135,530,069)     $ 1,813,607
                  ==============================================================================




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



<PAGE>

<TABLE>
<CAPTION>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                Nine Months Ended
                                 Septermber 30,
                                                         --------------------------
                                                           2004         2003
                                                         ------------  ------------
Cash flows from operating activities:
<S>                                                      <C>           <C>
  Net income                                             $ 2,485,903   $ 1,739,292
  Adjustments to reconcile net income
    to net cash used for operating activities:
    Gain on sale of assets                                (2,875,282)
    Gain on sale of securities                              (270,048)
    Receipt of shares of Hemispherx Biopharma,
     Inc. for Alferon inventory and assumption
     of certain liabilities                                             (1,149,112)
    Gain on Metacine settlement                                         (1,550,000)
    Depreciation and amortization                             87,156       209,407
    Stock-based compensation expense                                        21,754
    Debt discount                                                          174,020
    Amortization of interest income                           (3,937)       (3,375)
    Change in operating assets and liabilities:
     Accounts and other receivables                          (29,125)       19,414
     Inventories                                                             6,564
     Prepaid expenses and other current assets               (32,895)      (21,713)
     Accounts payable and accrued expenses                    58,142       301,772
     Amount due to GP Strategies                                            13,500
                                                         ------------  ------------
    Net cash used for operating activities                  (580,086)     (238,477)
                                                         ------------  ------------
Cash flows from investing activities:
  Proceeds from sale of investment                         1,935,683
  Additions to notes receivable                                           (375,000)
                                                         ------------  ------------
  Net cash provided by (used for)investing activities      1,935,683      (375,000)
                                                         ------------  ------------
Cash flows from financing activities:
  Repayment of convertible notes payable                     (60,000)      (65,000)
  Proceeds of convertible notes payable                                    100,000
  Proceeds from loans and advances                                         250,000
  Net proceeds from sale of common stock and warrants                      151,000
                                                         ------------  ------------
Net cash (used for) provided by financing activities         (60,000)      436,000
                                                         ------------  ------------
Net increase (decrease) in cash and cash equivalents       1,295,597     (177,477)

Cash and cash equivalents at beginning of period             848,573       378,663
                                                         ------------  ------------
Cash and cash equivalents at end of period               $ 2,144,170   $   201,186
                                                         ============  ============

Supplemental disclosure of cash flow information

    Net assets and liabilities sold to
           Hemispherx Biopharma, Inc.                    $ 1,209,646
    Fair value of Hemispherx Biopharma, Inc.
           common stock received                         $ 1,665,636

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

</TABLE>

<PAGE>


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

Note 1.  Basis of Presentation

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

Note 2. Plan of Operations

                  On March 11, 2003, the Company sold all its inventory related
to ALFERON N Injection and granted a license to sell the product to Hemispherx
Biopharma, Inc. ("HEB"). In exchange for the inventory and license, the Company
received 424,528 shares of HEB common stock with a guaranteed value of $675,000,
an additional 62,500 shares of HEB common stock without a guaranteed value, and
future royalties equal to 6% of the net sales of ALFERON N Injection. In
addition, HEB assumed approximately $408,000 of the Company's payables and
various other commitments. As of December 31, 2003, the Company sold all of the
shares of HEB common stock and received net proceeds of $1,207,337, resulting in
a gain of $ 444,337, which is included in the consolidated statement of
operations for the year ended December 31, 2003.

       On March 11, 2003, the Company and HEB entered into another agreement,
which was consummated on March 17, 2004, pursuant to which the Company sold to
HEB, the Company's real estate property, plant, equipment, furniture and
fixtures, rights to ALFERON N Injection and all of its patents, trademarks and
other intellectual property related to its natural alpha interferon business. In
exchange, the Company received 424,528 shares of HEB common stock with a
guaranteed value of $ 675,000, an additional 62,500 shares of HEB common stock
without a guaranteed value and future royalties equal to 6% of the net sales of
all products sold containing natural alpha interferon. The fair value of HEB
common stock received was approximately $ 1,666,000. In addition, approximately
$2.5 million of the Company's indebtedness which encumbered its assets was
repaid by HEB. The consummation of this agreement resulted in a gain of
$2,875,282, which is included in the consolidated condensed statement of
operations for the nine months ended September 30, 2004. As of June 30, 2004,
the Company sold all of the shares of HEB common stock and received net proceeds
of $1,935,683, resulting in a gain of $270,048, which is included in the
consolidated condensed statement of operations for the nine months ended
September 30, 2004 (See Note 8).

     At September 30, 2004, the Company had approximately $2,144,000 of cash,
with which to support future operating activities and to satisfy its financial
obligations as they become payable.

     The Company has experienced significant operating losses since its
inception in 1980. As of September 30, 2004, the Company had an accumulated
deficit of approximately $136 million. For the nine months ended September 30,
2004, the Company had net income of $2.5 million and for the years ended
December 31, 2003 and 2002, the Company had net income of $2.3 million and
incurred a net loss of approximately $2.7 million, respectively. Based on the
Company's sale to HEB, estimates of revenue, expenses, and the timing of
repayment of creditors, management believes that the cash presently available
will be sufficient to enable the Company to continue operations through 2005.
However, actual results may differ materially from such estimate, and no
assurance can be given that additional funding will not be required sooner than
anticipated or that such additional funding, whether from financial markets or
from other sources, will be available when needed or on terms acceptable to the
Company. Insufficient funds will require the Company to curtail or terminate its
activities.
Note 3.  Earnings (Loss) Per Share

     Basic earnings (loss) per share have been computed using the weighted
average number of shares of common stock of the Company outstanding for each
period presented. For the nine months ended September 30, 2004 and 2003, and the
three months ended September 30, 2003, the dilutive effect of stock options and
other common stock equivalents is included in the calculation of diluted
earnings per share using the treasury stock method. For the three months ended
September 30, 2003, common stock equivalents are not included in the calculation
of loss per share as the effect would be anti-dilutive.

Note 4. Agreement with GP Strategies Corporation

             Pursuant to an agreement dated March 25, 1999, GP Strategies
Corporation ("GP Strategies") loaned the Company $500,000 (the "GP Strategies
Debt"). In return, the Company granted GP Strategies (i) a first mortgage on the
Company's real estate, (ii) a two-year option (which has expired) to purchase
the Company's real estate, provided that the Company has terminated its
operations and a certain liability to the American Red Cross (the "Red Cross")
has been repaid, and (iii) a two-year right of first refusal (which has expired)
in the event the Company desires to sell its real estate. In addition, the
Company issued GP Strategies 500,000 shares (the "GP Shares") of common stock
and five-year warrant (the "GP Warrant") to purchase 500,000 shares of common
stock at a price of $1 per share. The GP Shares and GP Warrant were valued at
$500,000 and recorded as a financing cost and amortized over the original period
of the GP Strategies Debt in 1999. Pursuant to the agreement, the Company has
issued a note to GP Strategies representing the GP Strategies Debt, which note
was originally due on September 30, 1999 (but extended to June 30, 2001) and
bears interest, payable at maturity, at the rate of 6% per annum. In addition,
at that time, the Company negotiated a subordination agreement with the Red
Cross pursuant to which the Red Cross agreed that its lien on the Company's real
estate is subordinate to GP Strategies' lien. On March 27, 2000, the Company and
GP Strategies entered into an agreement pursuant to which (i) the GP Strategies
Debt was extended until June 30, 2001 and (ii) the Management Agreement between
the Company and GP Strategies was terminated and all intercompany accounts
between the Company and GP Strategies (other than the GP Strategies Debt) in the
amount of approximately $130,000 were discharged which was recorded as a credit
to capital in excess of par value. On August 23, 2001, the Company and GP
Strategies entered into an agreement pursuant to which the GP Strategies Debt
was extended to March 15, 2002. During 2001, the Company paid GP Strategies
$100,000 to reduce the GP Strategies Debt. In addition, in January 2002, the
Company paid GP Strategies $100,000 to further reduce the GP Strategies Debt. In
connection with the Asset Sale Transactions (as hereafter defined, see Note 9),
the Company, HEB and GP Strategies entered into an agreement pursuant to which
GP Strategies agreed to forbear from exercising its rights until May 31, 2003
and GP Strategies agreed to accept HEB common stock with a guaranteed value of
$425,000 in full settlement of all the Company's obligations to GP Strategies.
On June 2, 2003, HEB delivered the HEB common stock to GP Strategies in
accordance with HEB's obligation under the terms of the forbearance agreement.
However the forbearance agreement provided that in addition to the issuance by
HEB of the HEB common stock to GP Strategies, HEB was obligated to register the
HEB common stock for resale and any shares of HEB shares received by GP
Strategies which remain unsold after November 30, 2004 may be put to HEB at a
price of $ 1.59 per share.

         The GP Strategies obligations were legally extinguished by HEB on June
2, 2003. The Asset Sale Transaction with HEB closed on March 17, 2004. If the
transaction had not closed, HEB would have had a claim against ISI for the
satisfaction of the GP Strategies obligations. For accounting purposes, these
transactions were treated as integral parts of the Asset Sale Transactions and
accordingly, the obligations remained on the balance sheet until the closing of
the transaction on March 17, 2004, at which time the amount of such obligations
were recognized as extinguished for accounting purposes.




Note 5.  Agreement with the Red Cross

         The Company obtained human white blood cells used in the manufacture of
ALFERON N Injection from several sources, including the Red Cross pursuant to a
supply agreement dated April 1, 1997 (the "Supply Agreement"). As of November
23, 1998, the Company owed the Red Cross approximately $1.46 million plus
interest at the rate of 6% per annum accruing from April 1, 1998 (the "Red Cross
Liability") for white blood cells purchased pursuant to the Supply Agreement.

         Pursuant to an agreement dated November 23, 1998, the Company granted
the Red Cross a security interest in certain assets to secure the Red Cross
Liability, issued to the Red Cross 300,000 shares of common stock and agreed to
issue additional shares at some future date as requested by the Red Cross to
satisfy any remaining amount of the Red Cross Liability. The Red Cross agreed
that any net proceeds received by it upon sale of such shares would be applied
against the Red Cross Liability. In January 1999, the Company granted the Red
Cross a security interest (the "Security Interest") in, among other things, the
Company's real estate, equipment inventory, receivables, and New Jersey net
operating loss carryovers to secure repayment of the Red Cross Liability, and
the Red Cross agreed to forbear from exercising its rights under the Supply
Agreement, including with respect to collecting the Red Cross Liability until
June 30, 1999 (which was subsequently extended until December 31, 1999). On
December 29, 1999, the Company, the Red Cross and GP Strategies entered in an
agreement pursuant to which the Red Cross agreed that until September 30, 2000
it would forbear from exercising its rights under (i) the Supply Agreement,
including with respect to collecting the Red Cross Liability, and (ii) the
Security Interest. In connection with the Asset Sale Transactions (see Note 9),
the Company, HEB and the Red Cross entered into an agreement pursuant to which
the Red Cross agreed to forbear from exercising its rights until May 31, 2003
and the Red Cross agreed to accept HEB common stock with a guaranteed value of
$500,000 in full settlement of all of the Company's obligations to the Red
Cross. On June 2, 2003, HEB delivered the HEB common stock to the Red Cross in
accordance with HEB's obligation under the terms of the forbearance agreement.
However the forbearance agreement provided that in addition to the issuance by
HEB of the HEB common stock to the Red Cross, HEB was obligated to register the
HEB common stock for resale and any shares of HEB shares received by the Red
Cross which remain unsold after May 31, 2004 may be put to HEB at a price of $
1.59 per share.

         The Red Cross Liability was legally extinguished by HEB on June 2,
2003. The Asset Sale Transaction with HEB closed on March 17, 2004. If the
transaction had not closed, HEB would have had a claim against ISI for the
satisfaction of the Red Cross Liability. For accounting purposes, these
transactions were treated as integral parts of the Asset Sale Transactions and
accordingly, the obligations remained on the balance sheet until the closing of
the transaction on March 17, 2004, at which time the amount of such obligations
were recognized as extinguished for accounting purposes.

Note 6.  Agreement with Metacine, Inc.

         On July 28, 2000, the Company acquired an option for $100,000 to
purchase certain securities of Metacine, Inc. ("Metacine"), a company engaged in
research using dendritic cell technology.

         On April 9, 2001, the Company exercised its option to acquire an 82%
equity interest in Metacine. Pursuant to the agreement, as amended, the Company
received 700,000 shares of Metacine common stock and a five-year warrant to
purchase, at a price of $12.48 per share, 282,794 shares of Metacine common
stock in exchange for $300,000 in cash, an obligation to pay Metacine $
1,850,000 and $250,000 of services to be rendered by the Company by June 30,
2002. In addition, the Company issued Metacine 2,000,000 shares of the Company's
common stock.

       On August 29, 2003, the Company and Metacine entered into an agreement
pursuant to which the Company relinquished all rights to the shares and warrants
of Metacine held by the Company and issued Metacine 1,000,000 shares of the
Company's common stock and Metacine relieved the Company of its $1,700,000
obligation to Metacine. In addition, Metacine retained the 2,000,000 shares of
the Company's common stock issued on April 9, 2001. The issuance of the
1,000,000 shares (valued at $.05 per share which was the closing price of the
Company's common stock on August 29, 2003) and the Company's agreement to allow
Metacine to retain the 2,000,000 shares previously issued (valued at $.05 per
share which was the closing price of the Company's common stock on August 29,
2003) was recorded as a credit to the Company's equity of $150,000 which
resulted in a gain of $1,550,000 and is shown on the consolidated statements of
operations for the year ended December 31, 2003 as a gain on Metacine
settlement.

Note 7.           Recently Issued Accounting Standards

        In December 2003, the FASB issued FASB Interpretation No. 46 (revised
December 2003) ("Interpretation 46"), "Consolidation of Variable Interest
Entities." Application of this interpretation is required in the Company's
financial statements for interests in variable interest entities that are
considered to be special-purpose entities for the year ended December 31, 2003.
The Company determined that it does not have any arrangements or relationships
with special-purpose entities. Application of Interpretation 46 for all other
types of variable interest entities became effective on March 31, 2004.

         Interpretation 46 addresses the consolidation of business enterprises
to which the usual condition (ownership of a majority voting interest) of
consolidation does not apply. This interpretation focuses on controlling
financial interests that may be achieved through arrangements that do not
involve voting interests. It concludes that in the absence of clear control
through voting interests, a company's exposure (variable interest) to the
economic risks and potential rewards from the variable interest entity's assets
and activities are the best evidence of control. If an enterprise holds a
majority of the variable interests of an entity, it would be considered the
primary beneficiary. The primary beneficiary is required to include assets,
liabilities and the results of operations of the variable interest entity in its
financial statements. The adoption of FIN 46 did not have an impact on the
financial position or operations of the Company.


Note 8.    Agreement with Hemispherx Biopharma, Inc. ("HEB")

         On March 11, 2003, the Company executed two agreements with HEB to sell
certain assets of the Company (the two asset sale transactions are hereinafter
jointly referred to as the "Asset Sale Transactions" and individually referred
to as the "First Asset Sale" and the "Second Asset Sale") and consummated the
First Asset Sale.

         In the first agreement with HEB (the "First Asset Sale Agreement"), the
Company sold all of its inventory related to ALFERON N Injection(R) (the
"Product") and granted a three-year license for the production, manufacture,
use, marketing and sale of the Product in the United States.

         For these assets, the Company:

     (i)  received  424,528  shares of HEB common stock (the "HEB Common Stock")
          which had a  Guaranteed  Value (as  defined  in the First  Asset  Sale
          Agreement) of $675,000;

     (ii) received an  additional  62,500  shares of HEB Common Stock  without a
          Guaranteed Value; and

     (iii) will receive a royalty equal to 6% of the net sales of the Product.

          In addition, HEB assumed $408,000 of ISI payables and certain other
obligations related to the Product. The consummation of the First Asset Sale
Agreement resulted in a gain of $1,149,112, which is included in the
consolidated statement of operations for the year ended December 31, 2003.

         ISI received a service fee until October 31, 2003 for providing certain
transitional services. Such service fee was $156,724 and $450,851 for the three
months and nine months ended September 30, 2003, respectively, and $560,101 for
the year ended December 31, 2003. As of December 31, 2003, the Company sold all
487,028 shares of HEB Common Stock and realized net proceeds of $1,207,000,
resulting in a gain of $447,337, which is included in the consolidated statement
of operations for the year ended December 31, 2003.

         In the second agreement with the Company (the "Second Asset Sale
Agreement"), which was consummated on March 17, 2004, the Company sold to HEB
all of its rights to the Product and other assets related to the natural alpha
interferon business including, but not limited to, real estate, machinery and
equipment. For these assets, the Company:

     (i)  received  424,528  shares of HEB Common  Stock which has a  Guaranteed
          Value (as defined in the Second Asset Sale Agreement) of $675,000;

     (ii) received an  additional  62,500  shares of HEB Common Stock  without a
          Guaranteed Value; and

     (iii)will  receive a royalty  equal to 6% of the net sales of any  products
          containing  natural  alpha  interferon  sold  by HEB  (or a  Marketing
          Partner, as defined in the Second Asset Sale Agreement).

         The Second Asset Sale Agreement obligates HEB to register the 487,028
shares of HEB Common Stock, sets periodic limits on the number of these shares
that may be sold and requires HEB to pay the Company an amount equal to the
product received by multiplying (i) the number of guaranteed shares remaining
unsold on March 17, 2006, and (ii) $ 1.59. The remaining guaranteed shares will
then be returned to HEB.

         In addition, HEB satisfied the Company's obligations to (i) the
American Red Cross in the amount of $1,435,000, (ii) GP Strategies Corp. in the
amount of $423,000, and (iii) MD Sass in the amount of $660,000 (for unpaid
local property taxes and water and sewer charges). The consummation of the
Second Asset Sale Agreement resulted in a gain of $2,875,282, which is included
in the consolidated condensed statement of operations for the nine months ended
September 30, 2004. As of June 30, 2004, the Company sold all of the shares of
HEB common stock and received net proceeds of $1,935,683, resulting in a gain of
$270,048, which is included in the consolidated condensed statement of
operations for the nine months ended September 30, 2004.

Note 9. Note  Receivable - Agreement  with  Amphioxus  Cell  Technologies,  Inc.
         ("Amphioxus")

         On March 20, 2003, the Company entered into a collaterialized note
agreement, as amended (the "Note") with Amphioxus to advance up to $500,000.
Pursuant to the Note, the Company advanced $375,000 as of December 31, 2003. In
October, 2004, the Company advanced an additional $ 100,000. The Note was
originally due on March 19, 2004 (extended until December 31, 2004) bears
interest at the rate of 10% per annum and is collaterialized by all of the
assets of Amphioxus. In addition, the Company received a warrant, exercisable
until March 2008, to purchase for $100,000, an aggregate of 20% of the common
stock of Amphioxus on a fully diluted basis. The warrant was valued at $15,000,
and such value was prorated based on the amount of monies advanced and was
amortized as interest income over the original term of the Note.

         On October 17, 2003, ISI and Amphioxus Cell Technologies, Inc. entered
into a non-binding letter of intent pursuant to which ISI (or a wholly owned
subsidiary of ISI) will acquire ACT. The shareholders of ACT will receive
preferred stock (the "ACT Preferred Stock") of ISI, convertible into a number of
common shares of ISI equal to 75% of the fully diluted capitalization of ISI.
The ACT Preferred Stock will be convertible at the option of the holder at any
time, and subject to mandatory conversion if, prior to the date which is two
years after the merger, the sum of the proceeds received from (i) the sale of
the assets of ISI at the date of merger, and (ii) common equity capital raised
at a pre-money valuation in excess of $10 million, exceed $2.5 million.

         Certain debt (the "ACT Debt") aggregating approximately $2.9 million
that is currently owed to shareholders of ACT will continue as secured
non-interest bearing debt of ISI, upon completion of the merger. The ACT Debt
will be non-interest bearing and repayable by ISI on the fourth anniversary of
the date of the merger, subject to accelerated payment of 25% of the net after
tax profits of ACT over $1 million on a cumulative basis. The ACT Debt shall be
fully payable upon a change of control of ISI (excluding the transactions
whereby the ACT stockholders convert the ACT Preferred Stock). In addition, the
ACT Debt shall also be repaid to the extent of the net proceeds from the sale of
any equity securities of ISI exceeding $8 million. In addition, certain
additional debt aggregating approximately $200,000 owed to a shareholder of ACT
will be repayable on the fifth anniversary of the date of the merger.

         In addition, preferred stock (the "Junior Preferred Stock") held by a
shareholder of ACT will continue as non-accruing preferred stock in the face
amount of $2 million, senior in right of preference as to dividends and
distributions in liquidation to the ACT Preferred Stock and common stock of ISI.
The Junior Preferred Stock will be repayable by ISI on the fourth anniversary of
the date of the merger, subject to accelerated payment from 25% of the net after
tax profits of ISI available after payment of the ACT Debt. The Junior Preferred
Stock will also be subject to reset upon the following conditions: the
redemption value and liquidation preference of Junior Preferred Stock shall be
increased if either the market capitalization of ISI or the amount to be paid by
any third party for ISI values the common stock and any other equity securities
or debt convertible into equity securities at (i) greater than $25 million, in
which case the Junior Preferred Stock shall be increased to $2.75 million, or
(ii) greater than $35 million, in which case the Junior Preferred Stock shall be
increased to $3.5 million (each a "Reset Event"). If not sooner redeemed and
paid, the Junior Preferred Stock shall be fully redeemed and retired (subject
only to the prior payment of the ACT Debt) at any time upon a change of control
of the surviving company (excluding the transaction whereby the ACT stockholders
convert their ACT Preferred Stock), or to the extent of the net proceeds from
the sale of any equity securities of ISI exceeds $10.9 million.

         In addition, on the merger date, three officers of ISI have agreed to
grant ISI the option to terminate their employment agreements in exchange for
(i) a one-year consulting agreement at the rate of $4,000 per month, (ii) common
stock or options exercisable into approximately 1.25% of ISI and (iii) an amount
by which 10% of the proceeds from the sale of certain assets of ISI exceed
$200,000.

         The Letter of Intent is subject to the execution of definitive
documents and final due diligence.

Note 10.  Notes Payable

         In August 2002, the Company completed a private placement of $500,000
of convertible notes to accredited investors. Each note is convertible into the
Company's common stock at a price of $.05 per share (subject to adjustment to
70% of the market price of the Company's common stock under certain
circumstances) and bears interest at the rate of 10% per annum. A $250,000
convertible note was due January 31, 2003 and the other $250,000 of the
convertible notes were due December 31, 2003. For each $100,000 principal amount
of notes issued, the investors received warrants to purchase an additional 10.2
million shares of the Company's common stock exercisable at $.01 per share. The
warrants were valued at $400,000 and were amortized as interest expense over the
terms of the respective notes. The conversion of the convertible notes and the
exercise of the warrants are subject to approval of a sufficient number of
authorized common shares by the shareholders of the Company. The terms of the
notes, as amended, include the Company obtaining stockholder approval by
September 30, 2004 to increase its authorized shares so that the number of
authorized but unissued common shares is at least 200% of the number of common
shares issuable on conversion of the notes and exercise of the warrants. Failure
to obtain stockholder approval for the increase in the authorized number of
shares and to file with the Delaware Secretary of State an amendment to the
Company's Certificate of Incorporation, on or before September 30, 2004 to
increase its authorized shares, would require the Company to make cash payments
to each warrant holder, for each 30-day period such approval has not been
obtained, equal to the difference between the exercise price and volume weighted
average market price (for that 30-day period) for all warrants not exercisable
because of the failure to obtain the approval. Further the note holders have
registration rights whereby, for the period commencing September 30, 2004 but no
later than August 7, 2005, upon written request from at least 50% of the holders
of the shares issuable upon the exercise of the warrants, the Company is to file
a registration statement within 30 days and have such registration statement
declared effective 90 days thereafter, to register the common shares underlying
the convertible notes and warrants. The Company's failure to file a registration
statement or have one declared effective by the required dates would result in
the Company paying liquidated damages to each of the above note-holders in an
amount equal to 2% per month for each 30 day period or part thereof, a
registration statement was not filed. In addition, these notes are convertible
into common stock at a beneficial rate. The beneficial conversion feature was
valued at $100,000 and accounted for as debt discount and was amortized over the
term of the notes. The $250,000 note due on January 31, 2003 was repaid in full
(including accrued interest) in November 2003. Of the $250,000 notes which were
due December 31, 2003 and still unpaid, $25,000 was repaid (including accrued
interest) in May 2004.

         In June and July 2003, the Company received an aggregate of $100,000
and issued convertible notes payable to private investors. The notes were due
June 30, 2004 and have been repaid in their entirety.




<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

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


         ISI was incorporated in 1980 and until March 11, 2003, ISI was a
biopharmaceutical company which studied, manufactured, and sold ALFERON N
Injection(R), a highly purified, multi-species, natural-source alpha interferon
product (the "Product"). ALFERON N Injection is approved by the FDA for the
treatment of certain types of genital warts and has been studied for its
potential use in the treatment of human immunodeficiency virus ("HIV"),
hepatitis C virus ("HCV"), and certain other indications. ISI has experienced
significant operating losses since its inception.

         On March 11, 2003, ISI executed two agreements with HEB to sell certain
assets of ISI. In the First Asset Sale Agreement, ISI sold all of its inventory
related to ALFERON N Injection(R), ISI's natural alpha interferon product
approved for the treatment of certain types of genital warts (the "Product"),
and granted a limited license for the production, manufacture, use, marketing
and sale of the Product in the United States. In the Second Asset Sale
Agreement, which was consummated on March 17, 2004, ISI sold to HEB all of its
rights to the Product and other assets related to the Product including, but not
limited to, real estate, machinery and equipment.

         On October 17, 2003, ISI and Amphioxus Cell Technologies, Inc. ("ACT")
entered into a letter of intent pursuant to which ISI (or a wholly owned
subsidiary of ISI) will acquire ACT. ACT is a biotechnology company that applies
liver biology solutions to problems in drug discovery and human therapeutics.
The letter of intent is non-binding and subject to the execution of definitive
documents and final due diligence. (See Note 9).

Liquidity and Capital Resources

         For the assets transferred to HEB pursuant to the First Asset Sale
Agreement, ISI received 487,028 shares of HEB common stock and a royalty equal
to 6% of the net sales of the Product. As of December 31, 2003, ISI sold all
487,028 shares of HEB common stock and realized net proceeds of $1,207,000. In
addition, until October 31, 2003, ISI received a service fee for providing
certain transitional services to HEB and HEB assumed $408,000 of ISI payables
and certain other obligations related to the Product.

         For the assets transferred to HEB pursuant to the Second Asset Sale
Agreement, which was consummated on March 17, 2004, ISI:

          (i)  received   424,528  shares  of  HEB  Common  Stock  which  has  a
               Guaranteed  Value (as defined in the Second Asset Sale Agreement)
               of $675,000;

          (ii) received an additional  62,500 shares of HEB Common Stock without
               a Guaranteed Value; and

          (iii)will  receive  a  royalty  equal  to 6% of the net  sales  of any
               products  containing  natural alpha  interferon sold by HEB (or a
               Marketing   Partner,   as  defined  in  the  Second   Asset  Sale
               Agreement).

         As of June 30, 2004, ISI sold all of the 487,028 shares of HEB common
stock and realized net proceeds of approximately $1,936,000. In addition, HEB
satisfied certain obligations relating to the real estate, machinery and
equipment of ISI which aggregated approximately $2,500,000.

         In June and July 2003, the Company received $100,000 and issued
convertible notes payable to private investors. The notes are due June 30, 2004
and bear interest at the rate of 6% per annum. Each note is convertible into the
Company's common stock at a price of $.06 per share. During August and September
2003, and May 2004, the Company had repaid such notes in full.

         At October 12, 2004, the Company had approximately $2,144,000 in cash
and cash equivalents. Until utilized, such cash and cash equivalents are being
invested principally in short-term interest-bearing accounts.

         Based on the Company's sale to HEB, estimates of revenue, expenses, and
the timing of repayment of creditors, management believes that the cash
presently available will be sufficient to enable the Company to continue
operations through 2005. However, actual results may differ materially from such
estimate, and no assurance can be given that additional funding will not be
required sooner than anticipated or that such additional funding will be
available when needed or on terms acceptable to the Company. Insufficient funds
will require the Company to curtail or terminate operations.

         The Company's Common Stock is traded in the over-the-counter market and
quoted on the Pink Sheets, which may have a material adverse effect on the
liquidity of its Common Stock and on its ability to obtain additional financing.

Results of Operations

Nine Months Ended September 30, 2004 Versus Nine Months Ended September 30, 2003

     For the nine months ended September 30, 2004, the Company recorded $47,808
in royalty income from HEB. For the nine months ended September 30, 2003, (i)
the Company had revenues from the sale of ALFERON N Injection of $241,637, (ii)
the Company recorded revenues of $1,149,112 from the bulk sale of the remaining
Alferon inventory to HEB, and (iii) the Company recorded $14,000 in royalty
income from HEB.

     Through March 10, 2003, the Company sold, through its distributor, to
wholesalers and other customers in the United States 1,980 vials of ALFERON N
Injection. After March 10, 2003, HEB took over the distribution of Alferon N
Injection from the Company.

     Cost of goods sold and excess/idle production costs totaled $267,054 for
the nine months ended September 30, 2003. Excess/idle production costs
represented fixed production costs, which were incurred after production of
ALFERON N Injection was discontinued in April 1998. After March 10, 2003, HEB
took over certain operating costs of the Company.

     Research and development expenses during the nine months ended September
30, 2003 were $176,091. After March 10, 2003, HEB took over certain operating
costs of the Company.

     General and administrative expenses for the nine months ended September 30,
2004 were $673,048 as compared to $962,714 for the same period in 2003. The
decrease of $289,666 was principally due to decreases in payroll, business
insurance and other operating expenses.

     Interest income (expense), net, for the nine months ended September 30,
2004 was income of $18,283 as compared to expense of $260,449 for the nine
months ended September 30, 2003. The decrease of interest expense was primarily
due to the interest, including amortization of debt discount, on the convertible
notes payable during the nine months ended September 30, 2003.

     For the nine months ended September 30, 2003, the Company recorded service
fee income from HEB of $450,851.

     For the nine months ended September 30, 2004, the Company recorded a gain
on the sale of assets to HEB of $2,875,282.

     For the nine months ended September 30, 2004, the Company recorded a gain
on the sale of HEB common stock of $270,048.

     The Company recorded a gain on the Metacine settlement of $1,550,000 for
the nine months ended September 20, 2003.

     For the nine months ended September 30, 2004, the Company recorded $52,470
of income tax expense based upon the alternative minimum tax for federal tax
purposes.

     As a result of the foregoing, the Company earned net income of $2,485,903
and $1,739,292 for the nine months ended September 30, 2004 and 2003,
respectively.

Three Months Ended  September  30, 2004 Versus Three Months Ended  September 30,
2003

      For the three months ended September 30, 2004, the Company recorded
$16,000 in royalty income from HEB compared to $14,000 during the three months
ended September 30, 2003.

         General and administrative expenses for the three months ended
September 30, 2004 were $203,185 as compared to $369,114 for the same period in
2003. The decrease of $165,929 was principally due to decreases in payroll,
business insurance and other operating expenses.

         Interest income (expense), net, for the three months ended September
30, 2004 was income of $8,914 as compared to expense of $69,986 for the three
months ended September 30, 2003. The decrease of interest expense was primarily
due to the interest, including amortization of debt discount, on the convertible
notes payable during the three months ended September 30, 2003.

         For the three months ended September 30, 2003, the Company recorded
service fee income from HEB of $156,724.

     For the three months ended September 30, 2004, the Company recorded a gain
on the Metacine settlement of $1,550,000.

     As a result of the foregoing, the Company incurred a net loss of $178,271
and earned net income of $1,281,624 for the three months ended September 30,
2004 and 2003, respectively.

Forward-Looking Statements

     This report contains certain forward-looking statements reflecting
management's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements, including, but not limited to, the risk that the
Company will run out of cash and the uncertainty of obtaining additional funding
for the Company, all of which are difficult to predict and many of which are
beyond the control of the Company.


<PAGE>


                    INTERFERON SCIENCES, INC. AND SUBSIDIARY

                           PART II. OTHER INFORMATION



Item 6.    Exhibits and Reports on Form 8-K

                (b) Reports on Form 8-K

                      There were no reports on Form 8-K filed during the three
                      months ended September 30, 2004.


<PAGE>


                            INTERFERON SCIENCES, INC.

                               September 30, 2004




                                   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 15, 2004                      By:  /s/ Lawrence M. Gordon
                                                       Lawrence M. Gordon
                             Chief Executive Officer




DATE:  November 15, 2004                     By:  /s/ Donald W. Anderson
                                                      Donald W. Anderson
                                                      Controller


<PAGE>


CERTIFICATIONS

I, Lawrence M. Gordon, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q/SB  of  Interferon
     Sciences, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and

         c) presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 15, 2004

/s/ Lawrence M. Gordon
----------------------
    Lawrence M. Gordon
    Chief Executive Officer


<PAGE>


CERTIFICATIONS

I, Donald W. Anderson, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q/SB  of  Interferon
     Sciences, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this quarterly report
         is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
         and procedures as of a date within 90 days prior to the filing date of
         this quarterly report (the "Evaluation Date"); and

         c) presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

         b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 15, 2004

/s/ Donald W. Anderson
----------------------
    Donald W. Anderson
    Controller