##### 



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 September 30, 2001

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

For the transition period  to

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.

12,234,680 shares of Antex Biologics Inc. Common Stock, $.01 par value, were
outstanding as of October 26, 2001

Transitional Small Business Disclosure Format (check one):

Yes              No              X





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##### 



Item 1. Financial Statements

Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Balance Sheets

|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|------------------------------------ | -------------------- | ----------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ------------- | ---------- | ------------ | ----------- | ---------- | ---------- | 
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             | September 30, |            | December 31,
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             | 2001          |            | 2000        
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             | (unaudited)   |            |             
|Assets                               |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      | Current assets:                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |           
|                                     |                      |                                                                                                                   | Cash and cash equivalents                                                                                                                                 |                                            | $           | 8,935,124     |            |              | $           | 10,876,186 |           
|                                     |                      |                                                                                                                   | Accounts and other receivables                                                                                                                            |                                            |             | 77,836        |            |              |             | 53,332     |           
|                                     |                      |                                                                                                                   | Prepaid expenses                                                                                                                                          |                                            |             | 135,668       |            |              |             | 96,015     |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total current assets                       |             |               | 9,148,628  |              |             |            | 11,025,533 | 
|                                     |                      |                                                                                                                   | Property and equipment, net                                                                                                                               |                                            |             | 743,706       |            |              |             | 790,973    |           
|                                     |                      |                                                                                                                   | Restricted cash and other assets                                                                                                                          |                                            |             | 173,891       |            |              |             | 173,891    |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total assets                               |             | $             | 10,066,225 |              |             | $          | 11,990,397 | 
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|Liabilities and Stockholders Equity |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     | Current liabilities: |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |            
|                                     |                      |                                                                                                                   | Accounts payable and accrued expenses                                                                                                                     |                                            | $           | 687,117       |            |              | $           | 453,324    |           
|                                     |                      |                                                                                                                   | Deferred revenue                                                                                                                                          |                                            |             | 862,231       |            |              |             | 621,221    |           
|                                     |                      |                                                                                                                   | Deferred gain on sale of equipment, current portion                                                                                                       |                                            |             | 49,590        |            |              |             | 49,590     |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total current liabilities                  |             |               | 1,598,938  |              |             |            | 1,124,135  | 
|                                     |                      |                                                                                                                   | Deferred gain on sale of equipment and other liabilities                                                                                                  |                                            |             | 16,637        |            |              |             | 53,829     |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total liabilities                          |             |               | 1,615,575  |              |             |            | 1,177,964  | 
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|                                     |                      |                                                                                                                   | Series B convertible preferred stock, $.01 par value,
$1,000 liquidation value; 6,000 shares authorized;
3000 shares issued and outstanding; none in 2000 |                                            |             | 403,647       |            |              |             |           |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|                                     |                      |                                                                                                                   | Commitments and contingencies                                                                                                                             |                                            |             |               |            |              |             |            |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|                                     |                      |                                                                                                                   | Stockholders equity:                                                                                                                                     |                                            |             |               |            |              |             |            |           
|                                     |                      |                                                                                                                   | Series A preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding; 61,212 in 2000                                   |                                            |             |              |            |              |             | 612        |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|                                     |                      | Common stock, $.01 par value; 95,000,000 shares
authorized; 12,234,680 issued and outstanding;
10,992,493 in 2000 |                                                                                                                                                           |                                            | 122,346     |               |            |              | 109,925     |           
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |              |             |            |            | 
|                                     |                      | Additional paid-in capital                                                                                        |                                                                                                                                                           |                                            | 37,720,485  |               |            |              | 35,476,166  |           
|                                     |                      | Deficit accumulated during the development stage                                                                  |                                                                                                                                                           |                                            | (29,795,828 | )             |            |              | (24,774,270 | )         
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total stockholders equity                 |             |               | 8,047,003  |              |             |            | 10,812,433 | 
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             
|                                     |                      |                                                                                                                   |                                                                                                                                                           | Total Liabilities and Stockholders Equity |             | $             | 10,066,225 |              |             | $          | 11,990,397 | 
|                                     |                      |                                                                                                                   |                                                                                                                                                           |                                            |             |               |            |             

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       
|                                                                                                                    |                      |   | Ended September 30,
|                                                                                                                    |                      |   | 2001                |            |   |   | 2000       |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Contract revenues                                                                                                   |                      | $ | 87,945              |            |   | $ | 57,093     |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Research and development expenses                                                                                   |                      |   | 1,160,333           |            |   |   | 1,386,723  |           
|General and administrative expenses                                                                                 |                      |   | 740,345             |            |   |   | 808,361    |           
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|                                                                                                                    | Loss from operations |   |                     | (1,812,733 | ) |   |            | (2,137,991 | )
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Interest income                                                                                                     |                      |   | 96,017              |            |   |   | 216,823    |           
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|                                                                                                                    | Net loss             |   | $                   | (1,716,716 | ) |   | $          | (1,921,168 | )
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Non-cash dividend accretion attributable to
beneficial conversion feature, and dividends
accrued on preferred stock |                      |   | (288,532            | )          |   |   | (735,000   | )         
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Net loss applicable to common stockholders                                                                          |                      | $ | (2,005,248          | )          |   | $ | (2,656,168 | )         
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Loss per basic and diluted common share                                                                             |                      | $ | (0.16               | )          |   | $ | (0.25      | )         
|                                                                                                                    |                      |   |                     |            |   |   |            |           
|                                                                                                                    |                      |   |                     |            |   |   |            |            |  
|Weighted average common shares outstanding                                                                          |                      |   | 12,234,680          |            |   |   | 10,683,660 |           
|                                                                                                                    |                      |   |                     |            |   |   |            |           

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

3



---



##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Operations
(Unaudited)

|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|------------------------------------------------------------------------------------------------------------------- | ----------------------- | - | ------------------- | ------- | -------------- | - | ------------------ | ------- |  | - | ----------- | ---------- | -
|                                                                                                                    |                         |   | Nine Months         |         | August 3, 1991
|                                                                                                                    |                         |   | Ended September 30, |         | (inception) to
|                                                                                                                    |                         |   | 2001                |         | 2000           |   | September 30, 2001
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Contract revenues                                                                                                   |                         | $ | 207,904             |         |                | $ | 213,964            |         |  | $ | 17,139,780  |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Research and development expenses                                                                                   |                         |   | 3,418,393           |         |                |   | 3,694,872          |         |  |   | 30,787,204  |           
|General and administrative expenses                                                                                 |                         |   | 2,151,153           |         |                |   | 1,813,065          |         |  |   | 16,161,472  |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Loss from operations                                                                                                |                         |   | (5,361,642          | )       |                |   | (5,293,973         | )       |  |   | (29,808,896 | )         
|Other income (expense):                                                                                             |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    | Interest income         |   |                     | 340,085 |                |   |                    | 564,828 |  |   |             | 2,433,240  |  
|                                                                                                                    | Interest expense        |   |                     |        |                |   |                    |        |  |   |             | (708,357   | )
|                                                                                                                    | Cost of treasury shares |   |                     |        |                |   |                    |        |  |   |             | (1,711,814 | )
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Net loss                                                                                                            |                         | $ | (5,021,557          | )       |                | $ | (4,729,145         | )       |  | $ | (29,795,827 | )         
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Non-cash dividend accretion attributable to
beneficial conversion feature, and dividends
accrued on preferred stock |                         |   | (901,031            | )       |                |   | (1,592,500         | )       |  |   | (3,228,531  | )         
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Net loss applicable to common stockholders                                                                          |                         | $ | (5,922,588          | )       |                | $ | (6,321,645         | )       |  | $ | (33,024,358 | )         
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Loss per basic and diluted common share                                                                             |                         | $ | (0.50               | )       |                | $ | (0.70              | )       |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |            |  
|Weighted average common shares outstanding                                                                          |                         |   | 11,821,063          |         |                |   | 9,082,525          |         |  |   |             |           
|                                                                                                                    |                         |   |                     |         |                |   |                    |         |  |   |             |           

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

4



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##### 



Antex Biologics Inc.
(a development stage enterprise)

Condensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------- | ---------- | ------------------- | ------- | -------------- | ---------- | ------------------ | ------- | - | ----------- | --------- | ------- | -
|                                                                                    |                                                                                               |                                       |            | Nine Months         |         | August 3, 1991
|                                                                                    |                                                                                               |                                       |            | Ended September 30, |         | (inception) to
|                                                                                    |                                                                                               |                                       |            | 2001                |         | 2000           |            | September 30, 2001
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|Operating activities:                                                               |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|Net loss                                                                            |                                                                                               | $                                     | (5,021,557 | )                   |         | $              | (4,729,145 | )                  |         | $ | (29,795,827 | )        
|Adjustments to reconcile net loss to net
cash used in development stage activities: |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|                                                                                    | Depreciation and amortization of
property and equipment, net of
amortization of deferred gain |                                       |            | 174,303             |         |                |            | 145,081            |         |   |             | 795,673   |        
|                                                                                    | Writedown of construction in progress                                                         |                                       |            |                    |         |                |            |                   |         |   |             | 174,400   |        
|                                                                                    | Amortization of deferred credits                                                              |                                       |            | (16,465             | )       |                |            | (21,177            | )       |   |             | (488,352  | )      
|                                                                                    | Cost of treasury shares                                                                       |                                       |            |                    |         |                |            |                   |         |   |             | 1,711,814 |        
|                                                                                    | Expense on issuance and/or vesting of
common stock options                                    |                                       |            | 94,335              |         |                |            | 292,121            |         |   |             | 1,470,485 |        
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|                                                                                    | Changes in assets and liabilities:                                                            |                                       |            |                     |         |                |            |                    |         |   |             |           |        
|                                                                                    |                                                                                               | Accounts and other receivables        |            |                     | (24,504 | )              |            |                    | 10,890  |   |             |           | (77,836 | )
|                                                                                    |                                                                                               | Prepaid expenses and other            |            |                     | (39,653 | )              |            |                    | (53,851 | ) |             |           | (46,717 | )
|                                                                                    |                                                                                               | Accounts payable and accrued expenses |            |                     | 233,793 |                |            |                    | 71,579  |   |             |           | 280,109 |  
|                                                                                    |                                                                                               | Deferred revenue                      |            |                     | 257,475 |                |            |                    | 76,600  |   |             |           | 862,231 |  
|                                                                                    |                                                                                               | Due from affiliate                    |            |                     |        |                |            |                    |        |   |             |           | 420,448 |  
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|Net cash used in development stage activities                                       |                                                                                               |                                       | (4,342,273 | )                   |         |                | (4,207,902 | )                  |         |   | (24,693,572 | )        
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|Investing activities:                                                               |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|Purchase of property and equipment                                                  |                                                                                               |                                       | (164,228   | )                   |         |                | (270,064   | )                  |         |   | (1,647,553  | )        
|Increase in restricted cash                                                         |                                                                                               |                                       |           |                     |         |                |           |                    |         |   | (146,600    | )        
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |           |         |  
|Net cash used in investing activities                                               |                                                                                               |                                       | (164,228   | )                   |         |                | (270,064   | )                  |         |   | (1,794,153  | )        
|                                                                                    |                                                                                               |                                       |            |                     |         |                |            |                    |         |   |             |          

(Continued)

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 (continued)
(Unaudited)

|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |           | 
|-------------------------------------------------------- | --------------------------------------------------------------- | - | ------------------- | ------ | -------------- | - | ------------------ | --------- |  | - | ---------- | --------- | 
|                                                         |                                                                 |   | Nine Months         |        | August 3, 1991
|                                                         |                                                                 |   | Ended September 30, |        | (inception) to
|                                                         |                                                                 |   | 2001                |        | 2000           |   | September 30, 2001
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |           | 
|Financing activities:                                    |                                                                 |   |                     |        |                |   |                    |           |  |   |            |          
|Net proceeds from sales of common stock
and warrants     |                                                                 | $ | (62,424             | )      |                | $ | 15,081,929         |           |  | $ | 26,525,084 |          
|Net proceeds from sale of preferred stock and
warrants   |                                                                 |   | 2,588,561           |        |                |   |                   |           |  |   | 2,988,750  |          
|Net proceeds from exercise of stock options
and warrants |                                                                 |   | 39,302              |        |                |   | 8,798              |           |  |   | 4,972,343  |          
|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 cash provided by financing activities                |                                                                 |   | 2,565,439           |        |                |   | 15,090,727         |           |  |   | 34,986,177 |          
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |          
|Net increase (decrease) in cash and cash
equivalents     |                                                                 |   | (1,941,062          | )      |                |   | 10,612,761         |           |  |   | 8,498,452  |          
|Cash and cash equivalents at beginning
of period         |                                                                 |   | 10,876,186          |        |                |   | 1,706,275          |           |  |   | 436,672    |          
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |          
|Cash and cash equivalents at end of period               |                                                                 | $ | 8,935,124           |        |                | $ | 12,319,036         |           |  | $ | 8,935,124  |          
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |          
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |           | 
|                                                         |                                                                 |   |                     |        |                |   |                    |           |  |   |            |           | 
|Supplemental cash flows disclosures:                     |                                                                 |   |                     |        |                |   |                    |           |  |   |            |          
|                                                         | Cashless exercise of common stock
options and warrants          |   | $                   |       |                |   |                    | 1,430,335 |  |   | $          | 4,426,009 | 
|                                                         | Conversion of convertible preferred stock                       |   |                     | 12,242 |                |   |                    |          |  |   | $          | 12,242    | 
|                                                         | Notes payable and accrued interest
converted to preferred stock |   | $                   |       |                |   | $                  |          |  |   | $          | 509,109   | 
|                                                         | Preferred stock dividends accrued                               |   | $                   | 52,500 |                |   |                    |          |  |   | $          | 52,500    | 
|                                                         | Sale and leaseback of property and
equipment                    |   | $                   |       |                |   | $                  |          |  |   | $          | 2,099,175 | 
|                                                         | Contributed equipment                                           |   | $                   |       |                |   | $                  |          |  |   | $          | 247,957   | 
|                                                         | Interest and income taxes paid                                  |   | $                   |       |                |   | $                  |          |  |   | $          | 699,248   | 

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

6



---



##### 



Antex Biologics Inc.
(a development stage enterprise)

Notes to Condensed Consolidated Financial Statements
September 30, 2001
(Unaudited)

1. Business

Antex Biologics Inc. (the Company) is a biopharmaceutical company
committed to improving human health by developing new products to prevent and
treat infections and related diseases. With respect to its human bacterial
vaccine research and development, the Company currently has strategic alliances
with GlaxoSmithKline, Aventis Pasteur and the United States Department of
Defense.

Since its inception, the Companys revenues have been generated solely
from contracts in support of its research and development activities. As of
September 30, 2001, the Companys products are not sufficiently developed to
generate sales on an ongoing basis. As a result, the Company is considered to
be in the development stage.

The accompanying unaudited Condensed Consolidated Balance Sheet as of
September 30, 2001, the Condensed Consolidated Statements of Operations for the
three-month and nine-month periods ended September 30, 2001 and 2000 and for
the period from August 3, 1991 (inception) to September 30, 2001, and the
Condensed Consolidated Statements of Cash Flows for the nine-month periods
ended September 30, 2001 and 2000 and for the period from August 3, 1991
(inception) to September 30, 2001, reflect all adjustments (consisting of
normal recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the consolidated financial position of Antex
Biologics Inc. and its subsidiary at September 30, 2001, and the consolidated
results of their operations and their cash flows for the periods referred to
above. The results of operations for the period ended September 30, 2001 are
not necessarily indicative of the operating results anticipated for the fiscal
year ending December 31, 2001.

Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles 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, 2000 included in the
Companys Annual Report on Form 10-KSB.

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 at the date of

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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 2000 financial statements
to conform them to the 2001 presentation.

3. Financing Activities

In March 2000, the Company completed a private placement of equity
securities (consisting of common stock, preferred stock and stock purchase
warrants) resulting in gross proceeds to the Company of approximately
$15,300,000. In April 2001, the preferred stock issued in the private placement
was converted in its entirety into 1,224,242 shares of common stock. At
September 30, 2001, 3,816,512 shares of common stock were reserved for future
issuance for the Class A, Class C and Class D stock purchase warrants related
to the private placement.

In July 2001, the Company raised gross proceeds of approximately
$3,000,000 (the Initial Investment) in a private placement of 3,000 shares of
its Series B convertible preferred stock (the Series B Preferred Stock) to
private investors (the Purchasers). The Series B Preferred Stock is
convertible into the Companys Common Stock at $2.00 per share, subject to
adjustment under certain circumstances, and is redeemable under certain
circumstances. The Company also issued to the Purchasers (i) Class E warrants
for the purchase of up to an aggregate of 750,000 shares of the Companys
Common Stock at an exercise price of $2.50 per share and (ii) Class warrants
for the purchase of up to an aggregate of 375,000 shares of the Companys
Common Stock at an exercise price of $3.00 per share, each subject to
adjustments under certain circumstances. The Class E and Class F warrants
expire on July 3, 2006. The Company and the Purchasers also entered into an
agreement to register the shares of the Companys Common Stock issuable upon
conversion of the Series B Preferred Stock and exercise of the Class E and
Class F warrants. The Company also granted the Purchasers the option at any
time prior to April 2, 2002 to invest an equal amount on substantially the same
terms and conditions as the Initial Investment. The Company may cancel the
option if at any time the average closing bid price of the Companys Common
Stock over a consecutive ten (10) day period equals or exceeds $3.00 per share.

4. Disaggregated Financial Information

The Company has two reportable segments, vaccines and therapeutics. The
following tables present information regarding the two segments for the
three-month and nine-month periods ended September 30, 2001 and 2000:

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Three Months Ended September 30, 2000

|                                  |  |          |            |              |  |       |          |       |  |             |          |   |  |   |            |  
|--------------------------------- |  | -------- | ---------- | ------------ |  | ----- | -------- | ----- |  | ----------- | -------- | - |  | - | ---------- | -
|                                  |  |          |            |              |  |       |          |       |  | Reconciling |          |   |  |  
|Category                          |  | Vaccines |            | Therapeutics |  | Items |          | Total
|                                  |  |          |            |              |  |       |          |       |  |             |          |   |  |   |            |  
|Contract revenues                 |  | $        | 16,000     |              |  | $     |         |       |  | $           | 41,093   |   |  | $ | 57,093     |  
|                                  |  |          |            |              |  |       |          |       |  |             |          |   |  |   |            |  
|Research and development
expenses |  | $        | 1,183,936  |              |  | $     | 202,787  |       |  | $           |         |   |  | $ | 1,386,723  |  
|                                  |  |          |            |              |  |       |          |       |  |             |          |   |  |   |            |  
|Loss from operations              |  | $        | (1,167,936 | )            |  | $     | (202,787 | )     |  | $           | (577,652 | ) |  | $ | (1,948,375 | )
|                                  |  |          |            |              |  |       |          |       |  |             |          |   |  |   |            |  
|Fixed asset acquisitions          |  | $        | 2,190      |              |  | $     | 1,831    |       |  | $           | 26,835   |   |  | $ | 30,856     |  

Reconciling items include reimbursable patent costs of $41,093; general and
administrative expenses, net of reimbursable patent costs, of $577,652; and
corporate fixed asset acquisitions and construction in progress expenditures of
$26,835.

Three Months Ended September 30, 2001

|                                  |  |          |          |              |  |       |          |       |  |             |          |   |  |   |            |  
|--------------------------------- |  | -------- | -------- | ------------ |  | ----- | -------- | ----- |  | ----------- | -------- | - |  | - | ---------- | -
|                                  |  |          |          |              |  |       |          |       |  | Reconciling |          |   |  |  
|Category                          |  | Vaccines |          | Therapeutics |  | Items |          | Total
|                                  |  |          |          |              |  |       |          |       |  |             |          |   |  |   |            |  
|Contract revenues                 |  | $        | 50,385   |              |  | $     |         |       |  | $           | 37,560   |   |  | $ | 87,945     |  
|                                  |  |          |          |              |  |       |          |       |  |             |          |   |  |   |            |  
|Research and development
expenses |  | $        | 822,876  |              |  | $     | 337,458  |       |  | $           |         |   |  | $ | 1,160,334  |  
|                                  |  |          |          |              |  |       |          |       |  |             |          |   |  |   |            |  
|Loss from operations              |  | $        | (772,491 | )            |  | $     | (337,458 | )     |  | $           | (702,785 | ) |  | $ | (1,812,734 | )
|                                  |  |          |          |              |  |       |          |       |  |             |          |   |  |   |            |  
|Fixed asset acquisitions          |  | $        | 3,753    |              |  | $     |         |       |  | $           | 5,544    |   |  | $ | 9,297      |  

Reconciling items include reimbursable patent costs of $37,560; general and
administrative expenses, net of reimbursable patent costs, of $702,785; and
corporate fixed asset acquisitions of $5,544.

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|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|--------------------------------- | ------------------------------------ | -------- | ---------- | ------------ |  | ----- | -------- | ----- |  | ----------- | ---------- | - |  | - | ---------- | -
|                                  | Nine Months Ended September 30, 2000
|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|                                  |                                      |          |            |              |  |       |          |       |  | Reconciling |            |   |  |  
|Category                          |                                      | Vaccines |            | Therapeutics |  | Items |          | Total
|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|Contract revenues                 |                                      | $        | 65,998     |              |  | $     |         |       |  | $           | 147,966    |   |  | $ | 213,964    |  
|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|Research and development
expenses |                                      | $        | 3,063,922  |              |  | $     | 630,950  |       |  | $           |           |   |  | $ | 3,694,872  |  
|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|Loss from operations              |                                      | $        | (2,997,924 | )            |  | $     | (630,950 | )     |  | $           | (1,430,339 | ) |  | $ | (5,059,213 | )
|                                  |                                      |          |            |              |  |       |          |       |  |             |            |   |  |   |            |  
|Fixed asset acquisitions          |                                      | $        | 131,895    |              |  | $     | 39,287   |       |  | $           | 98,882     |   |  | $ | 270,064    |  

Reconciling items include reimbursable patent costs of $147,966; general and
administrative expenses, net of reimbursable patent costs, of $1,430,339; and
corporate fixed asset acquisitions and construction in progress expenditures of
$98,882.

|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|--------------------------------- | ------------------------------------ | -------- | ---------- | ------------ |  | ----- | ---------- | ----- |  | ----------- | ---------- | - |  | - | ---------- | -
|                                  | Nine Months Ended September 30, 2001
|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|                                  |                                      |          |            |              |  |       |            |       |  | Reconciling |            |   |  |  
|Category                          |                                      | Vaccines |            | Therapeutics |  | Items |            | Total
|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|Contract revenues                 |                                      | $        | 67,385     |              |  | $     |           |       |  | $           | 140,519    |   |  | $ | 207,904    |  
|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|Research and development
expenses |                                      | $        | 2,403,792  |              |  | $     | 1,014,601  |       |  | $           |           |   |  | $ | 3,418,393  |  
|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|Loss from operations              |                                      | $        | (2,336,407 | )            |  | $     | (1,014,601 | )     |  | $           | (2,010,633 | ) |  | $ | (5,361,641 | )
|                                  |                                      |          |            |              |  |       |            |       |  |             |            |   |  |   |            |  
|Fixed asset acquisitions          |                                      | $        | 114,505    |              |  | $     |           |       |  | $           | 49,723     |   |  | $ | 164,228    |  

Reconciling items include general and administrative expenses of $2,010,633
(net of reimbursable patent costs of $140,519) and corporate fixed asset
acquisitions of $49,723.

10



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5. Earnings Per Share

Basic earnings per share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is computed by dividing net loss
available to common stockholders by the weighted average number of common
shares outstanding after giving effect to all dilutive potential common shares
that were outstanding during the period; the Company excluded 8,550,811 and
6,610,600 shares for 2001 and 2000, respectively, represented by warrants,
stock options and/or convertible preferred stock from the earnings per share
calculation as they are anti-dilutive. The total number of shares excluded for 2001 does not include shares potentially issuable with
respect to dividends on the Series B preferred stock; the number of such shares is to be determined based
on the fair value of the Companys common stock at the dividend date. Net loss as reported was adjusted for a
non-cash dividend accretion and accrued dividend payable to determine the net
loss applicable to common stockholders for the computation of basic or diluted
earnings per share.

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

Results of Operations

The Company is in its development stage.

Contract revenues for the third quarter of 2001 consisted of $37,560 of
reimbursable patent expenses pursuant to the Companys strategic alliance with
GlaxoSmithKline (GSK) and $50,385 from research contracts. Reimbursable
patent and contract revenues for the nine months ended September 30, 2001
totaled $207,904 and consisted of $140,519 of reimbursable patent expenses from
GSK and $67,385 from research contracts.

Revenues for the third quarter of 2000 were $57,093, and included $41,093
of reimbursable patent expenses pursuant to the strategic alliance with GSK.
Revenues for the nine months ended September 30, 2000 totaled $213,964 and
included $147,966 of reimbursable patent expenses and $49,998 from research
contracts.

Research and development expenses decreased 16% to $1,160,333 for the
third quarter of 2001 as compared to $1,386,723 for the comparable period in
2000, and decreased 7% to $3,418,393 for the nine months ended September 30,
2001 as compared to $3,694,872 for 2000. Decreases in personnel expenditures
and patent expenses account for substantially all the decrease.

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General and administrative expenses in the third quarter of 2001 decreased
8% to $740,345 as compared to $808,361 for the comparable period in 2000, and
increased 19% to $2,151,153 for nine months ended September 30, 2001 as
compared to $1,813,065 for the comparable period in 2000. Increased expenses
in 2001 related to personnel, legal and insurance expenses. In the second
quarter 2001, the Companys former Vice President and Chief Financial Officer
was terminated pursuant the terms of his employment agreement, which resulted
in approximately $175,000 in severance payments. In the third quarter 2001,
the Companys President and Chief Operating Officer was terminated pursuant the
terms of his employment agreement, which resulted in approximately $110,000 in
severance payments.

Liquidity and Capital Resources

As a development stage company, the Companys activities have been limited
primarily to research and development involving its proprietary technologies
and accordingly, have generated limited revenues.

Through mid-2002, the Company will rely primarily upon the net proceeds of
the private placements completed in March 2000 and July 2001 to fund its
operations (see Note 3 to the financial statements). The Company anticipates
that its research and development expenses will be substantial for the
foreseeable future. The Company intends to pursue additional strategic
alliances, technology licenses, and grants and contracts to help fund its
research and development expenses.

To sustain its research and development programs beyond that time, as well
as to fund its future operations, the Company will continue to seek additional
capital. In seeking additional capital, the Company continues to examine a
range of possible transactions, including: additional strategic alliances;
additional equity or debt public offerings and private placements; the exercise
of currently outstanding warrants; additional grants and contracts; the sale
and leaseback of existing assets; and research and development funding from
third parties. However, there is no assurance that additional funds will be
available from these or any other sources or, if available, that the terms on
which such funds can be obtained will be acceptable to the Company.

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

12



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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.

PART II OTHER INFORMATION

ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS

On July 3, 2001, the Company raised approximately $3.0 million in a
private placement of 3,000 shares of its Series B Convertible Preferred Stock
to certain qualified institutional buyers. The Company also issued to these
investors (i) Class E Warrants for the purchase of up to an aggregate of
750,000 shares of the Companys Common Stock and (ii) Class F Warrants for the
purchase of up to an aggregate of 375,000 shares of the Companys Common Stock.
The Company expects to use these net proceeds to fund working capital needs.
The terms of this private placement are more fully described in the Companys
Form 8-K filed with the Securities and Exchange Commission on August 1, 2001
and incorporated by reference into this Form 10-QSB.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

None

Reports on Form 8-K

Current Report on Form 8-K was filed with the Commission on August 1,
2001.

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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: | October 29, 2001 |  | By: | /s/Jeffrey V. Pirone                                                        
|      |                  |  |     | Jeffrey V. Pirone
  Executive Vice President and
    Chief Financial Officer

14