##### 



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

FORM 10-QSB

(Mark One)

[x]        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934



| |                                             
| | --------------------------------------------
| | For the quarterly period ended June 30, 2002

[  ]         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT



| |                            
| | ---------------------------
| | For the transition periodto

ANTEX BIOLOGICS INC.

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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 52-1563899                       
|                                                               |  |                                  
|(State or other jurisdiction of incorporation
or organization) |  | (IRS Employer Identification No.)

300 Professional Drive, Gaithersburg, MD 20879

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(301) 590-0129

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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [  ]

APPLICABLE ONLY TO CORPORATE USERS

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.

12,407,795 shares of Antex Biologics Inc. Common Stock, $.01 par value, were
outstanding as of July 25, 2002

Transitional Small Business Disclosure Format (check one):

Yes    No X





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##### 



PART I.   FINANCIAL INFORMATION

ITEM 1.  Financial Statements

Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Balance Sheets

|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |             |           |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ----------------- | -------------------------- | ----------- | ----------- | --------- | ------------ | ----------- | --------- | --------- | 
|                                                                                                                                             |                                                                                                                   |                   |                            |             | June 30,    |           | December 31,
|                                                                                                                                             |                                                                                                                   |                   |                            |             | 2002        |           | 2001        
|                                                                                                                                             |                                                                                                                   |                   |                            |             | (unaudited) |           |             
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |             
|Assets                                                                                                                                       |                                                                                                                   |                   |                            |             |             |           |              |            
|Current assets:                                                                                                                              |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             | Cash and cash equivalents                                                                                         |                   | $                          | 3,390,934   |             |           | $            | 7,119,354   |          
|                                                                                                                                             | Accounts and other receivables                                                                                    |                   |                            | 62,200      |             |           |              | 587,384     |          
|                                                                                                                                             | Prepaid expenses                                                                                                  |                   |                            | 130,122     |             |           |              | 109,659     |          
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|Total current assets                                                                                                                         |                                                                                                                   |                   | 3,583,256                  |             |             |           | 7,816,397    |            
|Property and equipment, net                                                                                                                  |                                                                                                                   |                   | 633,191                    |             |             |           | 706,741      |            
|Restricted cash and other assets                                                                                                             |                                                                                                                   |                   | 175,891                    |             |             |           | 173,891      |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   | Total assets      |                            | $           | 4,392,338   |           |              | $           | 8,697,029 |          
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |             |           |           | 
|Liabilities and Stockholders Equity                                                                                                         |                                                                                                                   |                   |                            |             |             |           |              |            
|Current liabilities:                                                                                                                         |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             | Accounts payable and accrued expenses                                                                             |                   | $                          | 1,060,125   |             |           | $            | 813,039     |          
|                                                                                                                                             | Deferred revenue                                                                                                  |                   |                            | 762,675     |             |           |              | 839,567     |          
|                                                                                                                                             | Deferred gain on sale of equipment                                                                                |                   |                            | 29,033      |             |           |              | 49,590      |          
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|Total current liabilities                                                                                                                    |                                                                                                                   |                   | 1,851,833                  |             |             |           | 1,702,196    |            
|Accrued rent obligation and other liabilities                                                                                                |                                                                                                                   |                   | 157,113                    |             |             |           | 150,245      |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   | Total liabilities |                            |             | 2,008,946   |           |              |             | 1,852,441 |          
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |             |           |           | 
|Commitments and contingencies                                                                                                                |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |             |           |           | 
|Series B convertible preferred stock, $.01 par value,
$1,000 liquidation value; 8,000 shares authorized;
3,000 shares issued and outstanding |                                                                                                                   |                   | 1,111,742                  |             |             |           | 639,679      |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |             |           |           | 
|Stockholders equity:                                                                                                                        |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             | Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding                    |                   |                            |            |             |           |              |            |          
|                                                                                                                                             | Common stock, $.01 par value; 95,000,000 shares
authorized; 12,307,676 issued and outstanding;
12,234,680 in 2001 |                   |                            | 123,076     |             |           |              | 122,346     |          
|                                                                                                                                             | Additional paid-in capital                                                                                        |                   |                            | 37,109,038  |             |           |              | 37,515,898  |          
|                                                                                                                                             | Deficit accumulated during the development stage                                                                  |                   |                            | (35,960,464 | )           |           |              | (31,433,335 | )        
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   |                   | Total stockholders equity |             |             | 1,271,650 |              |             |           | 6,204,909 | 
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            
|                                                                                                                                             |                                                                                                                   | $                 | 4,392,338                  |             |             | $         | 8,697,029    |            
|                                                                                                                                             |                                                                                                                   |                   |                            |             |             |           |              |            

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

2



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Operations
(Unaudited)

|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |   | 
|-------------------------------------------------------------------------------------------------- | --------------------------- | - | -------------- | ---------- | -------------- | - | ------------- | ---------- | - | - | ----------- | - | 
|                                                                                                   |                             |   | Three Months   |            | August 3, 1991
|                                                                                                   |                             |   | Ended June 30, |            | (inception)   
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   | to         
|                                                                                                   |                             |   | 2002           |            | 2001           |   | June 30, 2002
|                                                                                                   |                             |   |                |            |                |   |              
|Contract revenues                                                                                  |                             | $ | 84,868         |            |                | $ | 72,094        |            |   | $ | 18,011,754  |  
|                                                                                                  
|Research and development expenses                                                                  |                             |   | 1,768,972      |            |                |   | 1,112,541     |            |   |   | 35,468,438  |  
|Selling, general and administrative expenses                                                       |                             |   | 766,702        |            |                |   | 779,814       |            |   |   | 18,604,898  |  
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Loss from operations                                                                               |                             |   | (2,450,806     | )          |                |   | (1,820,261    | )          |   |   | (36,061,582 | )
|Interest income                                                                                    |                             |   | 14,381         |            |                |   | 98,384        |            |   |   | 2,528,026   |  
|Interest expense                                                                                   |                             |   |               |            |                |   |              |            |   |   | (708,357    | )
|Other                                                                                              |                             |   | (6,737         | )          |                |   |              |            |   |   | (1,718,551  | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss                                                                                           |                             |   | (2,443,162     | )          |                |   | (1,721,877    | )          |   |   | (35,960,464 | )
|Dividend accretion attributable to
beneficial conversion feature, and
dividends on preferred stock |                             |   | (288,532       | )          |                |   |              |            |   |   | (4,094,128  | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss applicable to common stockholders                                                         |                             | $ | (2,731,694     | )          |                | $ | (1,721,877    | )          |   | $ | (40,054,592 | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss per common share:                                                                         |                             |   |                |            |                |   |               |            |   |   |             |  
|                                                                                                   | Basic and assuming dilution |   | $              | (0.22      | )              |   | $             | (0.14      | ) |   |             |   | 
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Weighted average common shares outstanding:                                                        |                             |   |                |            |                |   |               |            |   |   |             |  
|                                                                                                   | Basic and assuming dilution |   |                | 12,306,498 |                |   |               | 12,207,774 |   |   |             |   | 
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  

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

3



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Operations
(Unaudited)

|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |   | 
|-------------------------------------------------------------------------------------------------- | --------------------------- | - | -------------- | ---------- | -------------- | - | ------------- | ---------- | - | - | ----------- | - | 
|                                                                                                   |                             |   | Six Months     |            | August 3, 1991
|                                                                                                   |                             |   | Ended June 30, |            | (inception)   
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   | to         
|                                                                                                   |                             |   | 2002           |            | 2001           |   | June 30, 2002
|                                                                                                   |                             |   |                |            |                |   |              
|Contract revenues                                                                                  |                             | $ | 215,293        |            |                | $ | 119,959       |            |   | $ | 18,011,754  |  
|                                                                                                  
|Research and development expenses                                                                  |                             |   | 3,282,120      |            |                |   | 2,258,059     |            |   |   | 35,468,438  |  
|Selling, general and administrative expenses                                                       |                             |   | 1,498,267      |            |                |   | 1,410,808     |            |   |   | 18,604,898  |  
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Loss from operations                                                                               |                             |   | (4,565,094     | )          |                |   | (3,548,908    | )          |   |   | (36,061,582 | )
|Interest income                                                                                    |                             |   | 44,702         |            |                |   | 244,067       |            |   |   | 2,528,026   |  
|Interest expense                                                                                   |                             |   |               |            |                |   |              |            |   |   | (708,357    | )
|Other                                                                                              |                             |   | (6,737         | )          |                |   |              |            |   |   | (1,718,551  | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss                                                                                           |                             |   | (4,527,129     | )          |                |   | (3,304,841    | )          |   |   | (35,960,464 | )
|Dividend accretion attributable to
beneficial conversion feature, and
dividends on preferred stock |                             |   | (577,064       | )          |                |   | (612,500      | )          |   |   | (4,094,128  | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss applicable to common stockholders                                                         |                             | $ | (5,104,193     | )          |                | $ | (3,917,341    | )          |   | $ | (40,054,592 | )
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Net loss per common share:                                                                         |                             |   |                |            |                |   |               |            |   |   |             |  
|                                                                                                   | Basic and assuming dilution |   | $              | (0.42      | )              |   | $             | (0.34      | ) |   |             |   | 
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  
|Weighted average common shares outstanding:                                                        |                             |   |                |            |                |   |               |            |   |   |             |  
|                                                                                                   | Basic and assuming dilution |   |                | 12,299,866 |                |   |               | 11,610,827 |   |   |             |   | 
|                                                                                                   |                             |   |                |            |                |   |               |            |   |   |             |  

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

5



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             |             |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------------------------------- | ---------- | -------------- | ------- | -------------- | ---------- | ------------- | ------- | - | ----------- | ----------- | ------- | -
|                                                                            |                                                              |                                              |            | Six Months     |         | August 3, 1991
|                                                                            |                                                              |                                              |            | Ended June 30, |         | (inception)   
|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             | to         
|                                                                            |                                                              |                                              |            | 2002           |         | 2001           |            | June 30, 2002
|                                                                            |                                                              |                                              |            |                |         |                |            |              
|Operating activities                                                        |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|Net loss                                                                    |                                                              | $                                            | (4,527,129 | )              |         | $              | (3,304,841 | )             |         | $ | (35,960,464 | )          
|Adjustments to reconcile net loss to net
cash used in operating activities: |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|                                                                            | Depreciation and amortization of
property and equipment, net |                                              |            | 124,988        |         |                |            | 111,769       |         |   |             | 986,091     |        
|                                                                            | Amortization of deferred credits                             |                                              |            |               |         |                |            | (16,465       | )       |   |             | (488,352    | )      
|                                                                            | Other expenses                                               |                                              |            | 6,737          |         |                |            |              |         |   |             | 1,718,551   |        
|                                                                            | Write-down of construction in progress                       |                                              |            |               |         |                |            |              |         |   |             | 174,400     |        
|                                                                            | Stock-based compensation                                     |                                              |            | 62,895         |         |                |            | 62,890        |         |   |             | 1,564,825   |        
|                                                                            | Changes in operating assets and liabilities:                 |                                              |            |                |         |                |            |               |         |   |             |             |        
|                                                                            |                                                              | Accounts and other receivables               |            |                | 525,184 |                |            |               | (78,663 | ) |             |             | (62,200 | )
|                                                                            |                                                              | Prepaid expenses and other                   |            |                | (20,739 | )              |            |               | (80,564 | ) |             |             | (41,447 | )
|                                                                            |                                                              | Accounts payable, accrued expenses and other |            |                | 258,192 |                |            |               | 77,687  |   |             |             | 810,230 |  
|                                                                            |                                                              | Deferred revenue                             |            |                | (76,892 | )              |            |               | 93,656  |   |             |             | 762,675 |  
|                                                                            |                                                              | Due from affiliate                           |            |                |        |                |            |               |        |   |             |             | 420,448 |  
|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|                                                                            | Net cash used in operating activities                        |                                              |            | (3,646,764     | )       |                |            | (3,134,531    | )       |   |             | (30,115,243 | )      
|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|Investing activities                                                        |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|Purchase of property and equipment                                          |                                                              |                                              | (84,672    | )              |         |                | (154,931   | )             |         |   | (1,773,088  | )          
|Increase in restricted cash                                                 |                                                              |                                              |           |                |         |                |           |               |         |   | (146,600    | )          
|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             |            
|Net cash used in investing activities                                       |                                                              |                                              | (84,672    | )              |         |                | (154,931   | )             |         |   | (1,919,688  | )          
|                                                                            |                                                              |                                              |            |                |         |                |            |               |         |   |             |            

|                                                                           |            
|-------------------------------------------------------------------------- | -----------
|The accompanying notes are an integral part of these financial statements. | (Continued)

6



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)

|                                                                |                                                                 |   |                |   |                |   |               |   |  |   |            |           | 
|--------------------------------------------------------------- | --------------------------------------------------------------- | - | -------------- | - | -------------- | - | ------------- | - |  | - | ---------- | --------- | 
|                                                                |                                                                 |   | Six Months     |   | August 3, 1991
|                                                                |                                                                 |   | Ended June 30, |   | (inception)   
|                                                                |                                                                 |   |                |   |                |   |               |   |  |   | to        
|                                                                |                                                                 |   | 2002           |   | 2001           |   | June 30, 2002
|                                                                |                                                                 |   |                |   |                |   |              
|Financing activities                                            |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|Net proceeds from sales of common stock,
warrants and options   |                                                                 | $ |               |   |                | $ | (62,424       | ) |  | $ | 26,525,084 |          
|Net proceeds from exercise of common stock
warrants and options |                                                                 |   | 3,016          |   |                |   | 39,302        |   |  |   | 4,975,359  |          
|Proceeds from sale and leaseback agreement                      |                                                                 |   |               |   |                |   |              |   |  |   | 2,164,792  |          
|Principal repayments on sale and leaseback
agreement            |                                                                 |   |               |   |                |   |              |   |  |   | (2,164,792 | )        
|Proceeds from issuance of notes payable                         |                                                                 |   |               |   |                |   |              |   |  |   | 500,000    |          
|Net proceeds from sale of preferred stock                       |                                                                 |   |               |   |                |   |              |   |  |   | 2,988,750  |          
|Deferred financing costs                                        |                                                                 |   |               |   |                |   | (115,000      | ) |  |   |           |          
|                                                                |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|Net cash provided by (used in) financing activities             |                                                                 |   | 3,016          |   |                |   | (138,122      | ) |  |   | 34,989,193 |          
|                                                                |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|Net increase (decrease) in cash and cash
equivalents            |                                                                 |   | (3,728,420     | ) |                |   | (3,427,584    | ) |  |   | 2,954,262  |          
|Cash and cash equivalents at beginning
of period                |                                                                 |   | 7,119,354      |   |                |   | 10,876,186    |   |  |   | 436,672    |          
|                                                                |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|Cash and cash equivalents at end of period                      |                                                                 | $ | 3,390,934      |   |                | $ | 7,448,602     |   |  | $ | 3,390,934  |          
|                                                                |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|Supplemental cash flows disclosures:                            |                                                                 |   |                |   |                |   |               |   |  |   |            |          
|                                                                | Cashless exercise of common stock
options and warrants          |   | $              |  |                |   | $             |  |  |   | $          | 4,426,000 | 
|                                                                | Notes payable and accrued interest
converted to preferred stock |   |                |  |                |   |               |  |  |   |            | 509,109   | 
|                                                                | Conversion of convertible preferred stock
into common stock     |   |                |  |                |   |               |  |  |   |            | 612,500   | 
|                                                                | Sale and leaseback of property and
equipment                    |   |                |  |                |   |               |  |  |   |            | 2,099,175 | 
|                                                                | Capitalized equipment                                           |   |                |  |                |   |               |  |  |   |            | 247,957   | 
|                                                                | Interest paid                                                   |   |                |  |                |   |               |  |  |   |            | 699,248   | 

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

7



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Notes to Condensed Consolidated Financial Statements
June 30, 2002
(Unaudited)

1.  Business

Antex Biologics Inc. (the Company) is a biopharmaceutical company
committed to improving human health by developing new vaccines and antibiotics
to prevent and treat chronic bacterial infections and related diseases. With
respect to its research and product development, the Company currently has
strategic alliances with GlaxoSmithKline, Aventis Pasteur and the U.S.
Department of Defense. Since its inception, the Companys revenues have been
generated solely from contracts in support of its research and development
activities and, as of June 30, 2002, the Companys products are not
sufficiently developed to enable the Company to generate sales on an ongoing
basis. As a result, the Company is considered to be in the development stage.

To date, the Company has raised funds primarily from equity
financings and from strategic alliances. The Company has no bank lines of
credit or other credit facilities. The Companys operating cash
requirements expected for the remainder of 2002, including approximately
$1,000,000 for clinical trials, will require additional funding by the end of the third quarter of 2002.

The Company continues to examine a range of possible funding sources,
including additional strategic alliances, additional equity or debt public
offerings and private placements, the sale and leaseback of existing assets,
and additional grants and contracts. To this end, the Company retained the
services of an investment bank in February 2002 to undertake a private
placement of the Companys equity securities. The Company was advised on June
25, 2002 that the investment bank would not be able to complete the placement
and the engagement was terminated. Since then, the Company has continued to
pursue potential public and private equity funding opportunities. However,
there can be no assurance that the Company will be able to raise sufficient
funds from these or other sources. The Company may also seek to enter into one
or more business transactions that could involve the merger or sale of the
Company and/or selected Company assets in an effort to preserve shareholder
value. If the Company is unsuccessful in these efforts, the Company will be
required to curtail its ongoing operations, including discontinuation of
ongoing and planned clinical trials, or cease operations completely.

2. Preparation of Condensed Consolidated Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Certain
reclassifications have been made to the 2001 financial statements to conform
them to the 2002 presentation.

8



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##### 



The accompanying Condensed Consolidated Balance Sheet as of June 30, 2002,
the Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 2002 and 2001 and for the period August 3, 1991
(inception) to June 30, 2002, and the Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 2002 and 2001 and for the period August
3, 1991 (inception) to June 30, 2002, are unaudited. In the opinion of
management, the accompanying financial statements reflect all adjustments
(consisting of normal recurring adjustments) that are necessary for a fair
presentation of the consolidated financial position of Antex Biologics Inc. and
its subsidiary at June 30, 2002, and the consolidated results of their
operations and their cash flows for the periods referred to above. The results
of operations for the three and six months ended June 30, 2002 are not
necessarily indicative of the operating results anticipated for the fiscal year
ending December 31, 2002. Additionally, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to rules and regulations promulgated by
the Securities and Exchange Commission. These financial statements should be
read in conjunction with the financial statements and notes thereto for the
fiscal year ended December 31, 2001 included in the Companys Annual Report on
Form 10-KSB.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
continuity of operations, realization of assets and satisfaction of liabilities
in the ordinary course of business. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of the carrying amount of recorded assets or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.

3. Capital Stock

In July 2001, the Company completed a private placement of securities
resulting in gross proceeds to the Company of $3,000,000. At June 30, 2002 the
preferred stock is convertible into 1,500,000 shares of common stock, and
1,175,000 shares of common stock were reserved for the potential exercise of
the stock purchase warrants. In July 2002, the Company paid the semi-annual
dividend associated with the preferred stock, in shares of unregistered common
stock.

4. Property and Equipment

The Company adopted the provisions of the Financial Accounting Standards
Boards Statement of Financial Accounting Standards No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets in the first quarter of 2002. The
adoption of this standard did not materially impact the Companys financial
position or results of operations.

The Companys policy is to review its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The amount of the impairment is measured as the difference between the
assets estimated fair value and its book value. Given the inherent risks
within the biotechnology and biopharmaceutical industries, it is possible that
the Companys current expectation that it will recover the carrying amount of
its long-lived assets from future operations or alternative uses could change.

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##### 



5. Disaggregated Financial Information

The Company has two reportable operating segments based on product lines,
vaccines (or biologics) and antibiotics (or pharmaceuticals). Corporate
includes certain patent costs and reimbursements of patent costs, general and
administrative costs, and the acquisition of assets used to support
administrative functions. The 2001 amounts included a transfer of completed
construction in process from Corporate to the Vaccines segment. The following
tables summarize information regarding the two segments for the three- and
six-month periods ended June 30, 2002 and 2001:

|                                  |  |          |          |                                  |  |           |          |       |  |   |          |   |  |   |            |  
|--------------------------------- |  | -------- | -------- | -------------------------------- |  | --------- | -------- | ----- |  | - | -------- | - |  | - | ---------- | -
|                                  |  |          |          | Three Months Ended June 30, 2002
|                                  |  |          |          |                                  |  |          
|                                  |  | Vaccines |          | Antibiotics                      |  | Corporate |          | Total
|                                  |  |          |          |                                  |  |           |          |      
|Contract revenues                 |  | $        | 16,908   |                                  |  | $         |         |       |  | $ | 67,960   |   |  | $ | 84,868     |  
|Research and development
expenses |  | $        | 932,312  |                                  |  | $         | 768,700  |       |  |   | 67,960   |   |  | $ | 1,768,972  |  
|Loss from operations              |  | $        | (915,404 | )                                |  | $         | (768,700 | )     |  | $ | (766,702 | ) |  | $ | (2,450,806 | )
|Fixed asset acquisitions          |  | $        | 31,218   |                                  |  | $         | 4,094    |       |  | $ | 4,531    |   |  | $ | 39,843     |  

|                                  |  |          |          |                                  |  |           |          |       |  |   |          |   |  |   |            |  
|--------------------------------- |  | -------- | -------- | -------------------------------- |  | --------- | -------- | ----- |  | - | -------- | - |  | - | ---------- | -
|                                  |  |          |          | Three Months Ended June 30, 2001
|                                  |  |          |          |                                  |  |          
|                                  |  | Vaccines |          | Antibiotics                      |  | Corporate |          | Total
|                                  |  |          |          |                                  |  |           |          |      
|Contract revenues                 |  | $        |         |                                  |  | $         |         |       |  | $ | 72,094   |   |  | $ | 72,094     |  
|Research and development
expenses |  | $        | 714,061  |                                  |  | $         | 398,480  |       |  | $ |         |   |  | $ | 1,112,541  |  
|Loss from operations              |  | $        | (714,061 | )                                |  | $         | (398,480 | )     |  | $ | (707,720 | ) |  | $ | (1,820,261 | )
|Fixed asset acquisitions          |  | $        |         |                                  |  | $         |         |       |  | $ | 36,772   |   |  | $ | 36,772     |  

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|                                  |  |          |            |             |  |                                |            |       |  |   |            |   |  |   |            |  
|--------------------------------- |  | -------- | ---------- | ----------- |  | ------------------------------ | ---------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                                  |  |          |            |             |  | Six Months Ended June 30, 2002 |            |       |  |  
|                                  |  |          |            |             |  |                                |            |       |  |  
|                                  |  | Vaccines |            | Antibiotics |  | Corporate                      |            | Total
|                                  |  |          |            |             |  |                                |            |      
|Contract revenues                 |  | $        | 76,891     |             |  | $                              |           |       |  | $ | 138,402    |   |  | $ | 215,293    |  
|Research and development
expenses |  | $        | 1,752,466  |             |  | $                              | 1,391,252  |       |  | $ | 138,402    |   |  | $ | 3,282,120  |  
|Loss from operations              |  | $        | (1,675,575 | )           |  | $                              | (1,391,252 | )     |  | $ | (1,498,267 | ) |  | $ | (4,565,094 | )
|Fixed asset acquisitions          |  | $        | 47,364     |             |  | $                              | 8,499      |       |  | $ | 28,809     |   |  | $ | 84,672     |  

|                                  |  |          |            |             |  |                                |          |       |  |   |            |   |  |   |            |  
|--------------------------------- |  | -------- | ---------- | ----------- |  | ------------------------------ | -------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                                  |  |          |            |             |  | Six Months Ended June 30, 2001 |          |       |  |  
|                                  |  |          |            |             |  |                                |          |       |  |  
|                                  |  | Vaccines |            | Antibiotics |  | Corporate                      |          | Total
|                                  |  |          |            |             |  |                                |          |      
|Contract revenues                 |  | $        | 17,000     |             |  | $                              |         |       |  | $ | 102,959    |   |  | $ | 119,959    |  
|Research and development
expenses |  | $        | 1,580,916  |             |  | $                              | 677,143  |       |  | $ |           |   |  | $ | 2,258,059  |  
|Loss from operations              |  | $        | (1,563,916 | )           |  | $                              | (677,143 | )     |  | $ | (1,307,849 | ) |  | $ | (3,548,908 | )
|Fixed asset acquisitions          |  | $        |           |             |  | $                              |         |       |  | $ | 154,931    |   |  | $ | 154,931    |  

6. Earnings (Loss) Per Share

Earnings (loss) per common share is computed by dividing net income
(loss) applicable to common stockholders by the weighted average number of
common shares outstanding during the period. Earnings (loss) per share
assuming dilution is computed by dividing net income (loss) applicable to
common stockholders by the weighted average number of common shares and
potentially dilutive shares outstanding during the period.

The Company excluded the following potentially dilutive shares from its
diluted earnings per share calculation because they are anti-dilutive:

|                                                |  |          |           |          |  |  |           | 
|----------------------------------------------- |  | -------- | --------- | -------- |  |  | --------- | 
|                                                |  | June 30, |           | June 30,
|Common Stock Issuable Upon:                     |  | 2002     |           | 2001    
|                                                |  |          |           |         
|Conversion of convertible preferred stock       |  |          | 1,500,000 |          |  |  |          | 
|Exercise of stock purchase warrants             |  |          | 5,091,512 |          |  |  | 3,816,512 | 
|Exercise of employee and director stock options |  |          | 2,908,175 |          |  |  | 1,834,299 | 

During the first quarter of 2002, the 1992 Directors Stock Option Plan
was amended to extend its term for an additional five years.

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

The Company is developing new vaccines and antibiotics to prevent and
treat chronic bacterial infections and related diseases. The Company currently
has two products in human clinical trials, and currently expects to have four
additional products in human clinical trials by the end of the year. Since its
inception, the Companys revenues have been generated solely from contracts in
support of its research and development activities and, as of June 30, 2002,
the Companys products are not sufficiently developed to enable the Company to
generate sales on an ongoing basis. As a result, the Company is considered to
be in the development stage.

Results of Operations

Contract revenues for the first half of 2002 consisted of $138,402 of
reimbursable patent expenses pursuant to the Companys strategic alliance with
GlaxoSmithKline (GSK) and $76,891 related to work performed under a research
contract from the U.S. Department of Defense. Contract revenues for the second
quarter of 2002 consisted of $67,960 of reimbursable patent expenses pursuant
to the Companys strategic alliance with GlaxoSmithKline (GSK) and $16,908
related to work performed under a research contract from the U.S. Department of
Defense. Contract revenues for the first half of 2001 consisted of $102,959 of
reimbursable expenses and $17,000 from research contracts. Contract revenues
for the second quarter of 2001 consisted of $72,094 of reimbursable expenses.

Research and development expenses increased 45% to $3,282,120 for the
first half of 2002 as compared to $2,258,059 for the comparable period in 2001.
Research and development expenses increased 59% to $1,768,972 for the second
quarter of 2002 as compared to $1,112,541 for the comparable period in 2001.
The increase in research and development costs in 2002 was related primarily to
ongoing human clinical trials for two vaccine products and the production of
clinical material for the Companys lead antibiotic product AP 158. There were
no clinical trials in process during the first half of 2001.

General and administrative expenses in the first half of 2002 increased 6%
to $1,498,267 as compared to $1,410,808 for the 2001 half. General and
administrative expenses in the second quarter of 2002 decreased 2% to $766,702
as compared to $779,814 for the 2001 second quarter. Increased expenditures in
2002 relate in part to an increase in legal costs.

Interest income decreased in the three- and six-month periods ended June
30, 2002 as compared to the same periods last year due to decreasing cash and
investment balances.

12



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Liquidity and Capital Resources

As a development stage company, the Companys activities have been limited
primarily to research and development, pre-clinical and clinical trials of its
various vaccine and antibiotic products. The Company currently has two
products in human clinical trials, and currently expects to have four
additional products in human clinical trials by the end of the year. The
Company has no material non-cancelable commitments for the remainder of 2002
other than operating lease obligations of approximately $365,000, and does not
expect significant revenues in the second half of 2002.

To date, the Company has raised funds primarily from equity
financings and from strategic alliances. The Company has no bank lines of
credit or other credit facilities. The Companys operating cash
requirements expected for the remainder of 2002, including approximately $1,000,000 for
clinical trials, will require additional funding by the end of the third
quarter of 2002.

The Company continues to examine a range of possible funding sources,
including additional strategic alliances, additional equity or debt public
offerings and private placements, the sale and leaseback of existing assets,
and additional grants and contracts. To this end, the Company retained the
services of an investment bank in February 2002 to undertake a private
placement of the Companys equity securities. The Company was advised on June
25, 2002 that the investment bank would not be able to complete the placement
and the engagement was terminated. Since then, the Company has continued to
pursue potential public and private equity funding opportunities. However,
there can be no assurance that the Company will be able to raise sufficient
funds from these or other sources. The Company may also seek to enter into one
or more business transactions that could involve the merger or sale of the
Company and/or selected Company assets in an effort to preserve shareholder
value. If the Company is unsuccessful in these efforts, the Company will be
required to curtail its ongoing operations, including discontinuation of
ongoing and planned clinical trials, or cease operations completely.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This quarterly report on Form 10-QSB contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Any statements contained herein that relate to future events or
results are forward-looking statements. Without limiting the foregoing, the
words may, will, should, intends, estimates, predicts,
potential, continue, believe, anticipates, plans, expects, the
negative of these terms or other comparable terminology are intended to
identify forward-looking statements. These statements are only predictions. A
number of factors could cause actual results to differ materially from those
indicated by forward-looking statements. In evaluating forward-looking
statements, you should consider: (i) the Companys ability to fund its future
operations; (ii) the Companys ability to successfully complete product research and
development, including preclinical and clinical studies and commercialization;
(iii) the Companys ability to obtain required governmental approvals; (iv) the
Companys ability to attract and/or maintain manufacturing, sales, distribution
and marketing partners; and (v) the Companys ability to develop and
commercialize its products before its competitors. Further information
concerning these and other risks and uncertainties is contained from time to
time in our filings with the Securities and Exchange Commission. Although the
Company believes that the expectations reflected in forward-looking statements
are reasonable, the Company cannot guarantee future results, events or
conditions, levels of activity, performance or achievements. Given these risks
and uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results. We undertake no obligation to
update or revise publicly any forward-looking statements, whether as a results
of new information, future events or otherwise.

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS

On June 18, 2002, the Company held its Annual Meeting of Stockholders.
The following matters were submitted to a vote of the stockholders and were
adopted by the votes specified below.

Election to the Board of Directors of the Companys nominee  Robert L. Curry:

|          |          
|--------- | ---------
|For       | 6,609,442
|Against   | 75,465   
|Abstained |         

The directors not elected at the Annual Meeting whose tenure continued after
the Annual Meeting are Charles J. Coulter, V.M. Esposito and Donald G. Stark.

14



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Ratification of the appointment of Richard A. Eisner & Company, LLP as the
independent accountants to audit the Companys accounts for the fiscal year
ending December 31, 2002:

|          |          
|--------- | ---------
|For       | 6,616,020
|Against   | 61,366   
|Abstained | 7,521    

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

| |              |  |                                                                                                                         | 
| | ------------ |  | ----------------------------------------------------------------------------------------------------------------------- | 
| | Exhibit 99.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 
|
| | Exhibit 99.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 

Reports on Form 8-K

None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

ANTEX BIOLOGICS INC.

|      |  |                |  |     |  |                             
|----- |  | -------------- |  | --- |  | ----------------------------
|Date: |  | August 5, 2002 |  | By: |  | /s/Jeffrey V. Pirone        
|      |  |                |  |     |  |                             
|      |  |                |  |     |  | Jeffrey V. Pirone           
|      |  |                |  |     |  | Executive Vice President and
|      |  |                |  |     |  | Chief Financial Officer     

15