UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-Q/A-1

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

For the Quarterly Period Ended September 30, 2002

Commission File Number: 0-27072

                        HEMISPHERx BIOPHARMA, INC.
------------------------------------------------------------------------------
          (Exact name of registrant as specified in its charter)

           Delaware                                    52-0845822
------------------------------                    -------------------
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                    Identification No.)

1617 JFK Boulevard, Suite 660, Philadelphia, PA 19103
------------------------------------------------------------------------------
(Address of principal executive offices)  (Zip Code)

(215) 988-0080
------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

Not Applicable
------------------------------------------------------------------------------
(Former name,former address and former fiscal year, if changed since
last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or15(d) of the Securities  Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
            /X/ Yes        / / No
32,080,270 shares of common stock issued and outstanding as of October 31, 2002.





                                          PART I - FINANCIAL INFORMATION

ITEM 1:   Financial Statements

               HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                             (in thousands)


                                                December 31,    September 30,
                                                    2001          2002
                                                 -----------   -----------
                                                               (Unaudited)
                              ASSETS
                                                               
Current assets:

  Cash and cash equivalents                          $3,107        $3,471
  Short Term investments                              5,310           837
  Accounts receivable                                     8            12
  Prepaid expenses and other current assets             381            98

                                                 -----------    ----------
    Total current assets                             8,806         4,418

  Property and equipment, net                           246           177
  Patent and trademark rights, net                    1,025         1,087
  Investments in unconsolidated affiliates            1,878         1,128
  Other assets                                           80            53
                                                 -----------    ----------
      Total assets                                  $12,035      $  6,863
                                                 ===========    ==========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Accounts payable                                $      979     $    703
  Accrued expenses                                       293          231
                                                 -----------     ----------
    Total current liabilities                          1,272          934
                                                 -----------     ----------
Commitments and contingencies:
  Minority interest in subsidiary (Note 5)                  -         946

Stockholders' equity:
  Common stock                                            33           33
  Additional paid-in capital                         106,832      107,115
  Accumulated other comprehensive income                  17           17
  Treasury stock - at cost                           (4,470)      (4,520)
  Accumulated deficit                                (91,649)     (97,662)
                                                 -----------    ----------
    Total stockholders' equity                        10,763        4,983
                                                 -----------    ----------
     Total liabilities and stockholders' equity      $12,035    $   6,863
                                                 ===========    ==========

See accompanying notes to condensed consolidated financial statements.





               HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
            (in thousands, except share and per share data)


                                              For the Three months ended
                                                      September 30,
                                                --------------------------
                                                       (Unaudited)
                                                  2001            2002
                                               ----------      ----------
                                                              
Revenues:
 Cost recovery - clinical treatment programs  $      76          $   79
                                               ----------       ----------


Costs and expenses:
  Research and development                        1,589           1,194
  General and administrative                        673             767
                                               ----------       ----------
    Total cost and expenses                       2,262           1,961

Interest and other income                            68              23
Equity in loss of  unconsolidated
affiliate                                           (27)            (32)


                                               ----------       ----------
   Net loss                                     $(2,145)         $(1,891)
                                               ==========       ==========




Basic and diluted loss per share                $  (.07)         $ (.06)
                                               ==========       ==========

Basic and diluted weighted
average common shares outstanding              30,528,322       32,093,066
                                               ===========      ==========



See accompanying notes to condensed consolidated financial statements.













                HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
            (in thousands, except share and per share data)



                                                For the Nine months ended
                                                      September 30,
                                                -------------------------
                                                        (Unaudited)
                                                  2001            2002
                                               ----------      ----------
                                                              
Revenues:
 Cost recovery - clinical treatment programs  $     304          $  263
 License fee income                                  -              563
                                               ----------       ----------
                                                    304             826

Costs and expenses:
  Research and development                        4,765           3,732
  General and administrative                      2,677           2,447
                                               ----------       ----------
    Total cost and expenses                       7,442           6,179

Interest and other income                           248              90
Loss on investment due to impairment                  -            (678)
Equity in loss of unconsolidated
affiliate                                           (78)            (72)
                                               ----------       ----------
   Net loss                                     $(6,968)        $(6,013)
                                               ==========       ==========




Basic and diluted loss per share                $  (.23)        $  (.19)
                                               ==========       ==========

Basic and diluted weighted
average common shares outstanding              30,202,583      32,083,957
                                              ===========      ==========


See accompanying notes to condensed consolidated financial statements.























               HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands)



                                                   For the Nine months ended
                                                         September 30,
                                                     ---------------------
                                                         (Unaudited)
                                                      2001          2002
                                                    --------     ---------
                                                                
Cash flows from operating activities:

 Net loss                                           $(6,968)      $(6,013)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
 Depreciation of property and equipment                  99           69
 Amortization of patents rights                         290           79
 Write-off of patent rights                              29            2
 Stock option and warrant compensation  and
    service expense                                     673          132
 Equity in loss of unconsolidated affiliates             77           72
 Loss in investment due to impairment                    -           678
Changes in assets and liabilities:
  Accounts receivable                                    47           (4)
  Prepaid expenses and other current assets            259           283
  Accounts payable                                    (278)         (190)
  Accrued expenses                                      32           (62)
  Other assets                                           3            27
                                                     --------    ----------
Net cash (used in) operating activities             (5,737)       (4,927)
                                                     --------    ----------
Cash flows from investing activities:
 Additions to patent rights                           (100)         (143)
 Maturity of short term investments                  4,613         5,310
 Purchase of short term investments                 (1,220)         (837)
 Investments in unconsolidated affiliates              (22)            _
                                                     ---------    ---------
 Net cash  provided by investing activities           3,271         4,330
                                                     ---------    ---------
Cash flows from financing activities:
 Proceeds from issuance of common stock                  73             6
 Proceeds from exercise of warrants                   2,050            59
 Proceeds from issuance of preferred stock
 of subsidiary                                           -            946
 Purchase of treasury stock                            (519)          (50)
                                                     --------     ---------
  Net cash provided by financing activities           1,604           961
                                                     ---------    ---------
Net (decrease) increase in cash and cash equivalents   (862)          364
Cash and cash equivalents at beginning of period      3,721         3,107
                                                     ---------    ---------
Cash and cash equivalents at end of period           $2,859        $3,471
                                                     =========    =========
Supplemental disclosures of cash flow information:

Issuances of common stock for accounts payable           -        $    86
                                                     =========    =========

See accompanying notes to condensed consolidated financial statements.



                   HEMISPHERx BIOPHARMA, INC. AND SUBSIDIARIES
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1: BASIS OF PRESENTATION

     The accompanying  consolidated financial statements include the accounts of
Hemispherx  BioPharma,  Inc., a Delaware  corporation and its subsidiaries.  All
significant intercompany accounts and transactions have been eliminated.

     In  the  opinion  of  management,  all  adjustments  necessary  for a  fair
presentation of such consolidated financial statements have been included.  Such
adjustments  consist  of  normal  recurring  items.   Interim  results  are  not
necessarily indicative of results for a full year.

     The  interim  consolidated  financial  statements  and  notes  thereto  are
presented as permitted by the  Securities  and Exchange  Commission,  and do not
contain certain  information  which will be included in our annual  consolidated
financial statements and notes thereto.

     These consolidated  financial statements should be read in conjunction with
our year 2001 consolidated financial statements included in our annual report on
Form 10-K for the year ended  December 31, 2001,  as filed with the SEC on April
9, 2002.

NOTE 2: STOCK COMPENSATION

     This charge consists of the fair market value of warrants issued to outside
parties  for  services  rendered  on  behalf  of  the  Company.   Stock  warrant
compensation  expense has no effect on shareholder  equity as it is offset by an
increase in additional paid in capital.

     The Company recorded $673,000 in non-cash stock compensation expense in the
first nine months of 2001. These charges were the result of actions taken by the
Board of Directors in 1) extending  the  expiration  date of certain  non-public
warrants  which  produced  stock  compensation  expense of  $262,000  and 2) the
granting  of  warrants  to  certain  financial  advisors  which  produced  stock
compensation expense of $411,000. Approximately $132,000 was booked in the first
nine months of 2002 for stock compensation expense for services provided.

     On August 14, 2002, the company 1)extended the expiration date of 1,722,000
stock warrants  previously granted to certain Officers,  Directors and Employees
that were scheduled to expire in the near term with a weighted  average exercise
price of $3.59,  2)granted  1,200,000  stock  warrants  in  connection  with the
extension of employment contracts with two officers, and 3)granted 410,000 stock
warrants to various Officers, Directors and Employees. These stock warrants have
an exercise price of $2,00 per share and expire on August 13, 2008.


     In  accordance  to FASB  Interpretation  No.  44,  Accounting  for  Certain
Transaction involving Stock Compensation,  no compensation expense is recognized
as the exercise  price at the  extension  date exceeded the fair of value of the
underlying common stock.



Note 3:  INVESTMENTS

Investments in unconsolidated affiliates:

     In 1998,  the Company  invested  $1,074,000  for a 3.3% equity  interest in
R.E.D. Laboratories ("R.E.D."). R.E.D. is a privately held biotechnology company
for the development of diagnostic markers for Chronic Fatigue Syndrome and other
chronic immune diseases. We have a research collaboration  agreement with R.E.D.
to  assist  in  this  development.  R.E.D.  is  headquartered  in  Belgium.  The
investment was recorded at cost. In June,  2002 we recorded a non-cash charge of
$678,000 to operations with respect to our investment in R.E.D.  This charge was
the result of our  determination  that R.E.D.'s  business had not yet evolved to
the point that our initial carrying value of this investment could be supported.
Our net investment as of September 30, 2002 was $396,000.

     On May  11,  1999,  the  Company  acquired  a 15%  interest  in  California
Institute of Molecular  Medicine  ("CIMM") for  $375,000.  On May 16, 2000,  the
Company acquired an additional 15% interest in CIMM. The Company currently has a
total  interest  of 30% in CIMM  for a total  of  $750,000.  CIMM is  developing
therapy for treating  Hepatitis C virus. The investment has been recorded by the
equity  method.  During  the  fourth  quarter of 2001,  the  Company  recorded a
non-cash charge of $485,000 to operations with respect to the Company investment
in CIMM. This charge was the result of the Company's  determination  that CIMM'S
operation  had not yet evolved to the point where the  Company's  full  carrying
value of this  investment  could be supported  pursuant to the guidelines of APB
opinion No. 18. The  $485,000  represents  the  unamortized  balance of goodwill
included as part of the Company's  investment.  The Company's net  investment in
CIMM was $32,234 at September 30, 2002.

     Other  investments  include an initial  equity  investment  of  $290,625 in
Chronix  Biomedical  ("Chronix").   Chronix  focuses  upon  the  development  of
diagnostics for chronic  diseases.  This initial  investment was made in May 31,
2000 by the issuance of 50,000 shares of Hemispherx Biopharma, Inc. common stock
from the treasury.  On October 12, 2000, the Company issued an additional 50,000
shares  of  Hemispherx  Biopharma,  Inc.  common  stock and on March 7, 2001 the
Company  issued 12,000 more shares of Hemispherx  Biopharma,  Inc.  common stock
from the treasury to Chronix for an aggregate equity investment of $700,000.


     Note 4:  REVENUE AND  LICENSING  FEE INCOME

     Revenue from the sale of Ampligen(R) under cost recovery clinical treatment
protocols  approved by the FDA is  recognized  when the treatment is provided to
the patient.

     Revenues  for   non-refundable   license  fees  are  recognized  under  the
performance  method. This method recognizes revenue to the extent of performance
to date under a licensing  agreement.  In computing earned revenue, it considers
only the amount of  non-refundable  cash actually  received to date. This method
considers  future  payments to be contingent and thus ignores the possibility of
future  milestone  payments  when  computing  the amount of revenue  earned in a
current period.

    On March 20, 2002 our European Subsidiary Hemispherx Biopharma Europe, S.A.
("Hemispherx,  S.A.")  entered  into a Sales  and  Distribution  agreement  with
Laboratorios  del Dr.  Esteve  S.A.  ("Esteve").  Pursuant  to the  terms of the
Agreement, Esteve was granted the exclusive right to market Ampligen(R)in Spain,
Portugal and Andorra for the treatment of Myalgic  Encephalitis/Chronic  Fatigue
Syndrome  ("ME/CFS").  Esteve paid the initial and non refundable fee of 625,000
Euros (approximately $563,000) to Hemispherx S.A. on April 24, 2002

     The terms of the  agreement  granting  the  licensee  marketing  rights for
Ampligen(R) for the treatment of myalgic/chronic  fatigue syndrome ("ME/CFS") in
Spain,  Portugal and Andorra  require the Company to provide the  licensee  with
technical,  scientific and  commercial  information.  The Company  fulfilled the
requirements  during the first quarter of 2002. The agreement  terms required no
additional performance on the part of the Company.

     The agreement  also  requires the licensee to pay of 1,000,000  Euros after
FDA approval of  Ampligen(R)  for the treatment of ME/CFS and a fee of 1,000,000
after  issuance  in  Spain  of  final  marketing   approval   authorization  for
Ampligen(R) for the treatment of ME/CFS.


Note 5: MINORITY SHAREHOLDER INTEREST

     Laboratorios  del Dr. Esteve S.A.  purchased  1,000,000 Euros of Hemispherx
Biopharma Europe S.A.'s  convertible  preferred  equity  certificates on May 23,
2002.  Currently  these  securities will pay a 7% dividend and will be converted
into 1.14% of the outstanding  common stock of Hemispherx  Biopharma Europe S.A.
upon  completion  of an initial  public  offering  ("IPO")  on a European  stock
exchange or before  September 30, 2003,  whichever comes earlier.  The terms and
conditions of these  securities are being changed so that these preferred equity
certificates  will be converted  into the common stock of Hemispherx  Biopharma,
Inc. in the event that a European IPO is not  completed  by September  30, 2003.
The conversion rate is 300 shares of Hemispherx Biopharma,  Inc.'s common shares
for each 1000 Euro convertible preferred certificate.

     The contingent  conversion price was more than the then market value of the
parent  company's  or  subsidiaries's  common  stock at each of that  respective
measurement dates. As a result and in accordance with Emerging Issues Task Force
(EITF) No.  00-27  Application  of Issue No. 98-5  (Accounting  for  Convertible
Securities-with   Beneficial  Conversion  Features  or  Contingently  Adjustable
Conversion  Ratios) to Certain  Convertible  Instruments,  the  Company  did not
ascribe any value to any contingent conversion feature.

     ITEM 2:  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.

     SPECIAL NOTE REGARDING  FORWARD LOOKING  STATEMENTS  Certain  statements in
this Report on Form 10-Q ("Form 10-Q"), constitute "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,  and the Private
Securities  Litigation  Reform Act of 1995  (collectively,  the  "Reform  Act").
Certain,  but not  necessarily  all, of such  forward-looking  statements can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects,"  "may," "will," "should," or "anticipates" or the negative thereof or
other  variations  thereon  or  comparable  terminology,  or by  discussions  of
strategy that involve risks and uncertainties.  Such forward-looking  statements
involve known and unknown risks,  uncertainties and other factors, including but
not limited to, the risk  factors  discussed  below,  which may cause the actual
results,  performance  or  achievements  of Hemispherx  Biopharma,  Inc. and its
subsidiaries  (collectively,  the  "Company",  "we  or  "us")  to be  materially
different  from any future  results,  performance or  achievements  expressed or
implied by such forward-looking  statements and other factors referenced in this
Form  10-Q.  The  Company  does not  undertake  and  specifically  declines  any
obligation to publicly release the results of any revisions which may be made to
any forward-looking  statement to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or  unanticipated
events.

     Overview Hemispherx Biopharma,  Inc. is a biopharmaceutical Company that is
focusing on the  development  of Nucleic  Acid  compounds to enhance the natural
anti-viral  defense systems of the human body. Using Nucleic Acid  technologies,
the Company is developing  therapeutic  products for treating viral diseases and
certain  cancers.  The Company's lead compound,  Ampligen(R),  is a new class of
specifically   configured   ribonucleic   acids   targeted   to  treat   Myalgic
Encephalomyelitis/Chronic   Fatigue  Syndrome  ("ME/CFS"),   HIV,  Hepatitis  B,
Hepatitis  C and  certain  cancers  such as renal cell  carcinoma  and  metastic
malignant melanoma.

     The  Company  currently  has four  clinical  trials  underway in the United
States  consisting  of 1) an open  label  study  of using  Ampligen(R)  to treat
patients with severely  debilitating  ME/CFS. This study was approved by the FDA
as a cost recovery treatment program.  Patients enrolled in this program pay for
costs  related  to  treatment.  2)  A  Phase  III  multi-center,  double  blind,
randomized, placebo-controlled study of using Ampligen(R) to treat patients with
severely  debilitating ME/CFS. A total of 230 patients will have participated in
this study when  enrollment  is  completed  in the near  future.  3) A Phase IIb
multi-center,  randomized,  controlled study of the biological  actions of using
Ampligen(R) as an adjunct in HIV patients  receiving  HAART (cocktail of various
anti-HIV drugs). 4) An open label,  prospective randomized,  controlled study of
using Ampligen(R) to treat HIV patients already controlling their HIV with HAART
as a way to improve HIV  control  while off HAART  during a Strategic  Treatment
Intervention  ("STI").  STI is designed to help prevent  serious drug toxicities
that develop in patients on HAART.

     We have three domestic subsidiaries: BioPro Corp., BioAegean Corp. and Core
BioTech  Corp.,  all  of  which  are  incorporated  in  Delaware.   Our  foreign
subsidiaries   include  Hemispherx   BioPharma  Europe,   N.V./S.A.   which  was
established in Belgium in 1998 and Hemispherx  Biopharma Europe,  S.A. which was
established  in  Luxembourg  during 2002.  Our principal  executive  offices are
located  at One Penn  Center,  1617 JFK  Boulevard,  Philadelphia,  Pennsylvania
19103, and our telephone number is (215) 988-0080.

Risk Factors

     The following  cautionary  statements identify important factors that could
cause our  actual  results to differ  materially  from  those  projected  in the
forward-looking  statements  made in this Annual  Report.  Among the key factors
that have a direct bearing on our results of operations are:

No assurance of successful product development of Ampligen(R).

     The  development  of  Ampligen(R)  and our other  products  is subject to a
number of significant  risks.  Ampligen(R)  may be found to be ineffective or to
have adverse side effects, fail to receive necessary regulatory  clearances,  be
difficult to manufacture on a commercial  scale, be uneconomical to market or be
precluded from  commercialization  by proprietary  rights of third parties.  Our
products are in various  stages of clinical and  pre-clinical  development  and,
require further clinical studies and appropriate  regulatory  approval processes
before any such  products  can be  marketed.  We do not know  when,  or if ever,
Ampligen(R)  or our other  products will be generally  available for  commercial
sale  for any  indication.  Generally,  only a  small  percentage  of  potential
therapeutic products are eventually approved by the FDA for commercial sale.


     Our drug and  related  technologies  are  investigational  and  subject  to
regulatory approval

     All of our drugs and associated  technologies are  investigational and must
receive prior  regulatory  approval by appropriate  regulatory  authorities  for
general use and are currently  legally  available only through  clinical  trials
with  specified  disorders.  Our  principal  development  efforts are  currently
focused  on  Ampligen(R),  which  has not  been  approved  for  commercial  use.
Ampligen(R) and other proposed  products are subject to extensive  regulation by
numerous  governmental  authorities in the U.S. and other countries,  including,
but not limited  to, the Food and Drug  Administration  in the U.S.,  the Health
Protection  Branch of Canada,  and the European  Medicines  Evaluation Agency in
Europe.  Obtaining  regulatory  approvals is a rigorous and lengthy  process and
requires the  expenditure  of  substantial  resources.  In order to obtain final
regulatory  approval of a new drug, we must  demonstrate to the  satisfaction of
the  regulatory  agency that the product is safe and  effective for its intended
uses and that we are  capable of  manufacturing  the  product to the  applicable
regulatory  standards.  We  require  regulatory  approval  in  order  to  market
Ampligen(R)  or any other  proposed  product  and  receive  product  revenues or
royalties. We cannot assure you that the drug will ultimately be demonstrated to
be safe or efficacious.  In addition, while Ampligen(R) is authorized for use in
clinical trials in the United States and other  countries,  we cannot assure you
that additional clinical trial approvals will be authorized in the United States
or in other  countries in a timely  fashion or at all, or that we will  complete
these clinical trials. If Ampligen(R) or one of our other proposed products does
not receive regulatory approval in the U.S. or elsewhere, our operations will be
materially adversely effected.


     We may continue to incur substantial losses and our future profitability is
uncertain

     We began  operations in 1966 and last reported net profit from 1985 through
1987. Since 1987, we have incurred  substantial  operating losses, as we pursued
our Clinical  trial  effort and expanded our efforts in Europe.  As of September
30, 2002 our accumulated deficit was approximately $97,662,000.  We have not yet
generated  significant  revenues from our products and may incur substantial and
increased  losses in the  future.  We cannot  assure  that we will ever  achieve
significant  revenues from product sales or become profitable.  We require,  and
will continue to require, the commitment of substantial resources to develop our
products.  We  cannot  assure  that  our  product  development  efforts  will be
successfully completed or that required regulatory approvals will be obtained or
that any products will be manufactured and marketed successfully, or profitably.

Additional financing requirements.

     The  development of our products will require the commitment of substantial
resources to conduct the time-consuming research,  preclinical development,  and
clinical trials that are necessary to bring  pharmaceutical  products to market.
Based on our current  operating plan, we anticipate  receipt of limited revenues
and proceeds  from the sale of  Ampligen(R)  under the Cost  Recovery  Treatment
Clinical Programs and holders of non-public  warrants  exercising  warrants from
time to time. We believe these  proceeds and the cash on hand will be sufficient
to meet our  capital  requirements  through May 2003.  The Company  will need to
raise substantial  additional funds through  additional equity or debt financing
or from other sources in order to complete the necessary clinical trials and the
regulatory approval processes and begin commercializing its products.  There can
be no assurances that our non-public  Warrants will be exercised or that we will
raise any proceeds from  possible  equity  financing,  which may have a material
effect on our ability to develop our products.

     No regulatory  agency has approved the full  commercial  sale of any of the
our products.

     We cannot assure you that  Ampligen(R)  or any of our other  products being
developed  will  ultimately be  demonstrated  to be safe or  efficacious.  While
Ampligen(R)  is authorized  for use in clinical  trials in the United States and
other countries,  we cannot assure you that additional  clinical trial approvals
will be  authorized  in the United  States,  or in other  countries  in a timely
fashion or at all or that we will complete these clinical trials. If Ampligen(R)
or one of our other products does not receive regulatory  approval in the United
States or elsewhere, our operations will be significantly affected.

     We may not be profitable  unless we can protect our patents  and/or receive
approval for additional pending patents.

     We need to acquire  enforceable patents covering the use of Ampligen(R) and
other products for a particular  disease in order to obtain exclusive rights for
the commercial sale of Ampligen(R)  for such disease.  Our success  depends,  in
large part, on our ability to obtain patent  protection  for our products and to
obtain and preserve our trade secrets and expertise. We have been issued certain
patents including those on the use of Ampligen(R) and Ampligen(R) in combination
with  certain  other  drugs for the  treatment  of HIV. We have also been issued
patents on the use of Ampligen(R)  in  combination  with certain other drugs for
the treatment of chronic  hepatitis B virus,  chronic  hepatitis C virus,  and a
patent which  affords  protection  on the use of  Ampligen(R)  in patients  with
chronic  fatigue  syndrome.  We have not been  issued any  patents in the United
States for the use of Ampligen as a sole  treatment for any of the cancers which
we have sought to target.  We cannot  assure you that any of these  applications
will be  approved  or that our  competitors  will not  seek and  obtain  patents
regarding the use of Ampligen(R) in combination with various other agents, for a
particular  target  indication  prior to us. If we cannot  protect  our  patents
covering the use of Ampligen(R) for a particular  disease,  or obtain additional
pending patents, we may not be able to successfully market Ampligen(R).


     The patent position of  biotechnology  and  pharmaceutical  firms is highly
uncertain and involves complex legal and factual questions.

     To date,  no  consistent  policy  has  emerged  regarding  the  breadth  of
protection afforded by pharmaceutical and biotechnology patents. There can be no
assurance that patent  applications  relating to our products or technology will
result in patents  being  issued or that,  if issued,  such  patents will afford
meaningful  protection  against  competitors  with  similar  technology.  It  is
generally  anticipated that there may be significant  litigation in the industry
regarding patent and intellectual property rights. Such litigation could require
substantial  resources  from us. No assurance  can be made that our patents will
provide  competitive  advantages  for our  products or will not be  successfully
challenged by  competitors.  No assurance can be given that patents do not exist
or could  not be filed  which  would  have a  materially  adverse  effect on our
ability to market our products or to obtain or maintain any competitive position
that we may achieve  with  respect to our  products.  Our  patents  also may not
prevent  others  from   developing   competitive   products  using  a  different
technology.

     There  can be no  assurance  that  we will  have  the  financial  resources
necessary to enforce patent rights we may hold.

     If we cannot enforce the patent rights we currently hold we may be required
to obtain  licenses from others to develop,  manufacture or market our products.
There can be no assurance  that we would be able to obtain any such  licenses on
commercially   reasonable  terms,  if  at  all.  We  currently  license  certain
proprietary  information  from  third  parties,  some of  which  may  have  been
developed  with  government  grants  under  circumstances  where the  government
maintained certain rights with respect to the proprietary information developed.
No assurances can be given that such third parties will  adequately  enforce any
rights they may have or that the rights, if any, retained by the government will
not  adversely  affect the value of our  license.  Certain of our  know-how  and
technology  is  not  fully  patentable,  particularly  the  procedures  for  the
manufacture of our  Ampligen(R)  drug product which are carried out according to
standard operating procedure manuals.

We may  not be  profitable  unless  we can  produce  Ampligen(R)  in  commercial
quantities at costs acceptable to us.

     We  have  never  produced  Ampligen(R)  or  any  other  products  in  large
commercial  quantities.  Ampligen(R)  is  currently  produced  only  for  use in
clinical trials.  We must manufacture our products in compliance with regulatory
requirements in commercial quantities and at acceptable costs in order for us to
be profitable.  We intend to utilize third-party manufacturers and/or facilities
if and when the need  arises  or, if we are unable to do so, to build or acquire
commercial-scale  manufacturing  facilities. We are dependent upon certain third
party supplies for key components of the proposed products and for substantially
all of the production process. If we cannot manufacture commercial quantities of
Ampligen(R) or enter into third party  agreements  for its  manufacture at costs
acceptable to us, our operations will be significantly affected.

If our distributors do not market our product successfully,  we may not generate
significant revenues or become profitable.

     We have limited marketing and sales capability.  Accordingly we may need to
enter into marketing agreements and third party distribution  agreements for our
products in order to generate significant revenues and become profitable. To the
extent that we enter into  co-marketing  or other  licensing  arrangements,  any
revenues  received by us will be dependent on the efforts of third parties,  and
there is no assurance that these efforts will be successful.  Our agreement with
Gentiva Health  Services offers the potential to provide  significant  marketing
and  distribution  capacity in the United  States while  licensing and marketing
agreements  with certain foreign firms should provide an adequate sales force in
South  America,  Africa,  United  Kingdom,  Australia  and New Zealand,  Canada,
Austria, Spain and Portugal.

     Our partners may not be able to deliver  treatment  and services to chronic
disease patients  including  infusion  services,  home nursing and other medical
services through a national network of more than 500 locations. We cannot assure
that our domestic or our foreign marketing partners will be able to successfully
distribute our products,  or that we will be able to establish  future marketing
or third party  distribution  agreements on terms  acceptable to us, or that the
cost of establishing  these  arrangements  will not exceed any product revenues.
The failure to continue these arrangements or to achieve other such arrangements
on satisfactory terms could have a materially adverse effect on us.

Ampligen(R) safety profile and scientific literature.

     We believe that  Ampligen(R)  has been  generally well tolerated with a low
incidence of clinical toxicity,  particularly given the severely debilitating or
life threatening  diseases that have been treated.  A mild flushing reaction has
been observed in  approximately  15% of patients treated in our various studies.
This reaction is occasionally accompanied by erythema, a tightness of the chest,
tachycardia,  anxiety, shortness of breath, subjective reports of "feeling hot,"
sweating  and  nausea.  The  reaction is usually  infusion-rate  related and can
generally be controlled by slowing the infusion rate. Other adverse side effects
include liver enzyme level elevations, diarrhea, itching, urticaria (swelling of
the skin), bronchospasm, transient hypotension,  photophobia, rash, bradycardia,
transient  visual  disturbances,  arrhythmias,  decreases in platelets and white
blood cell counts, anemia,  dizziness,  confusion,  elevation of kidney function
tests,  occasional temporary hair loss and various flu-like symptoms,  including
fever,  chills,  fatigue,  muscular aches,  joint pains,  headaches,  nausea and
vomiting.  These flu-like side effect  typically  subside within several months.
One or more of the potential  side effects might deter usage of  Ampligen(R)  in
certain  clinical  situations and therefore,  could adversely  effect  potential
revenues and  physician/patient  acceptability  of our product.  In general,  we
believe that the relative  safety profile to date has been well tolerated  given
the severe Chronic diseases being targeted.


     There is no assurance  that  successful  manufacture of a drug on a limited
scale basis for  investigational  use will lead to a  successful  transition  to
commercial, large-scale production.

     Small changes in methods of manufacturing may affect the chemical structure
of  Ampligen  and other such RNA drugs,  as well as their  safety and  efficacy.
Changes in methods of manufacture,  including commercial scale-up may affect the
chemical  structure  of  Ampligen  and,  can,  among other  things,  require new
clinical studies and affect orphan drug status, particularly, market exclusivity
rights,  if any,  under  the  Orphan  Drug  Act.  The  transition  from  limited
production of  pre-clinical  and clinical  research  quantities to production of
commercial  quantities  of our products  will involve  distinct  management  and
technical  challenges  and will  require  additional  management  and  technical
personnel and capital to the extent such  manufacturing  is not handled by third
parties.  There can be no assurance  that our efforts will be successful or that
any given product will be determined to be safe and effective,  capable of being
manufactured economically in commercial quantities or successfully marketed.

Rapid technological change.

     The  pharmaceutical  and biotechnology  industries are subject to rapid and
substantial technological change.  Technological competition from pharmaceutical
and  biotechnology  companies,  universities,  governmental  entities and others
diversifying  into the field is intense  and is expected  to  increase.  Most of
these entities have significantly greater research and development  capabilities
than  we  do,  as  well  as  substantial  marketing,  financial  and  managerial
resources,  and  represent  significant  competition  for  us.  There  can be no
assurance  that   developments  by  others  will  not  render  our  products  or
technologies  obsolete  or  noncompetitive  or that we will be able to keep pace
with technological developments.

Substantial competition.

     Competitors have developed or are in the process of developing technologies
that are, or in the future may be, the basis for competitive  products.  Some of
these products may have an entirely different approach or means of accomplishing
similar  therapeutic  effects to products being developed by us. These competing
products may be more  effective and less costly than our products.  In addition,
conventional drug therapy, surgery and other more familiar treatments will offer
competition  to  our  products.   Furthermore,  many  of  our  competitors  have
significantly  greater  experience  than us in  pre-clinical  testing  and human
clinical  trials of  pharmaceutical  products and in obtaining FDA, EMEA HPB and
other regulatory approvals of products. Accordingly, our competitors may succeed
in obtaining FDA EMEA and HPB product  approvals more rapidly than us. If any of
our products receive  regulatory  approvals and we commence  commercial sales of
our products, we will also be competing with respect to manufacturing efficiency
and  marketing  capabilities,   areas  in  which  we  have  no  experience.  Our
competitors  may  possess  or obtain  patent  protection  or other  intellectual
property rights that prevent, limit or otherwise adversely affect our ability to
develop or exploit our products.

Limited manufacturing experience and capacity.

     Ampligen(R) is currently produced only in limited quantities for use in our
clinical  trials and we are dependent upon certain third party suppliers for key
components  of our  products.  The failure to  continue  these  arrangements  on
satisfactory  terms  could have a material  adverse  affect on us.  Also,  to be
successful,  our products  must be  manufactured  in  commercial  quantities  in
compliance with regulatory  requirements  and at acceptable  costs.  Our current
facilities  are not adequate  for the  production  of our proposed  products for
large-scale  commercialization.  We intend to utilize third-party  facilities if
and when the need  arises  or, if we are  unable  to do so, to build or  acquire
commercial-scale   manufacturing   facilities.  We  will  need  to  comply  with
regulatory requirements for such facilities, including those of the FDA EMEA and
HPB pertaining to Good Manufacturing Practices ("GMP") regulations. There can be
no  assurance  that  such  facilities  can  be  used,   built,  or  acquired  on
commercially  acceptable  terms,  that  such  facilities,  if  used,  built,  or
acquired, will be adequate for our long-term needs.

We may be subject to product  liability  claims from the use of  Ampligen(R)  or
other of our products which could negatively affect our future operations.

     We face an inherent  business risk of exposure to product  liability claims
in the event that the use of  Ampligen(R)  or other of our  products  results in
adverse  effects.  This  liability  might  result from  claims made  directly by
patients,  hospitals, clinics or other consumers, or by pharmaceutical companies
or others  manufacturing these products on our behalf. Our future operations may
be negatively  effected from the litigation costs,  settlement expenses and lost
product  sales  inherent to these  claims.  While we will continue to attempt to
take appropriate  precautions,  we cannot assure that we will avoid  significant
product liability  exposure.  Although we currently  maintain  worldwide product
liability insurance coverage, there can be no assurance that this insurance will
provide adequate  coverage against product  liability  claims.  While no product
liability  claims are pending or  threatened  against us to date,  a  successful
product  liability  claim against us in excess of our insurance  coverage  could
have a negative effect on our business and financial condition.

Members of our Scientific Advisory Board may have conflicting  interests and may
disclose data and technical know how to our competitors.

     All  of our  Scientific  Advisory  Board  members  are  employed  by  other
entities,  which may include our  competitors.  Although we require  each of our
Scientific  Advisory Board members to sign a non-disclosure and  non-competition
agreement with respect to the data and information  that he or she receives from
us, we cannot  assure you that members  will abide by them.  If a member were to
reveal this  information  to outside  sources,  accidentally  or otherwise,  our
operations  could be negatively  effected.  Since our business  depends in large
part on our ability to keep our technical expertise confidential, any revelation
of this information to a competitor or other source could have an adverse effect
on our operations.


     There is no guarantee that our trade secrets will not be disclosed or known
by our competitors.

     To protect our rights,  we require  certain  employees and  consultants  to
enter into  confidentiality  agreements  with us. There can be no assurance that
these  agreements  will  not be  breached,  that  we  would  have  adequate  and
enforceable  remedies for any breach, or that any trade secrets of ours will not
otherwise become known or be independently developed by competitors.

The loss of Dr. Carter's services could hurt our chances for success.

     Our success is dependent on the continued  efforts of Dr. William A. Carter
because of his  position as a pioneer in the field of Nucleic  Acid  drugs,  his
being  co-inventor  of  Ampligen(R)  and his knowledge of the Company's  overall
activities,  including  patents,  clinical trials,  corporate  relationships and
relationships with various  governmental  regulatory  agencies.  The loss of Dr.
Carter's services could have a material adverse effect on our operations.  While
we have an employment agreement with Dr. William A. Carter, and have secured key
man life  insurance in the amount of $2 million on the life of Dr.  Carter,  the
loss of Dr.  Carter or other key  personnel,  such as Dr.  David  Strayer or Dr.
Carol Smith, or the failure to recruit additional personnel as needed could have
a materially adverse effect on our ability to achieve our objectives.

Uncertainty of health care reimbursement and potential legislation.

     Our ability to  successfully  commercialize  our products  will depend,  in
part,  on the extent to which  reimbursement  for the cost of such  products and
related  treatment  will be  available  from  government  health  administration
authorities,   private  health  coverage   insurers  and  other   organizations.
Significant  uncertainty exists as to the reimbursement status of newly approved
health care products,  and from time to time legislation is proposed,  which, if
adopted,   could  further   restrict  the  prices   charged  by  and/or  amounts
reimbursable to  manufacturers  of  pharmaceutical  products.  We cannot predict
what,  if any,  legislation  will  ultimately  be  adopted or the impact of such
legislation  on us.  There  can  be no  assurance  that  third  party  insurance
companies will allow us to charge and receive  payments for products  sufficient
to realize an appropriate return on our investment in product development.

Hazardous materials.

     Our  business   involves  the  controlled   use  of  hazardous   materials,
carcinogenic  chemicals and various radioactive  compounds.  Although we believe
that our safety  procedures for handling and disposing of such materials  comply
in  all  material   respects  with  the   standards   prescribed  by  applicable
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident or the failure
to comply with applicable  regulations,  we could be held liable for any damages
that result,  and any such liability could be significant.  The company does not
maintain insurance coverage against such liabilities.


     Because the risk factors  referred to above could cause  actual  results or
outcomes  to differ  materially  from  those  expressed  in any  forward-looking
statements  made  by us,  you  should  not  place  undue  reliance  on any  such
forward-looking  statements.  Further, any forward-looking statement speaks only
as of the date on which it is made and we undertake no  obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the  date on  which  such  statement  is  made  or  reflect  the  occurrence  of
unanticipated  events.  New  factors  emerge  from  time to time,  and it is not
possible for us to predict which will arise.  In addition,  we cannot assess the
impact of each  factor on our  business of the extent to which any  factors,  or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking  statements.  Our research and clinical efforts
may continue for the next several  years and we may continue to incur losses due
to clinical  costs incurred in the  development  of  Ampligen(R)  for commercial
application.  Possible  losses may fluctuate from quarter to quarter as a result
of  differences in the timing of  significant  expenses  incurred and receipt of
licensing fees and/or cost recovery treatment revenues in Europe,  Canada and in
the United States.


    Critical Accounting Policies

     Financial  Reporting  Release No. 60., which was released by the Securities
and  Exchange  Commission,  requires all  companies  to include a discussion  of
critical  accounting  policies or methods used in the  preparation  of financial
statements.  The  significant  accounting  policies  that we  believe  are  most
critical to aid in fully  understanding  our reported  financial results are the
following: Use of Estimates

     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 the financial
statements  and the reported  amounts of revenues and expenses for the reporting
period. Actual results could differ from those estimates.

Impairment of Long-Lived Assets

     Statement of Financial  Accounting  Standards ("SFAS") No. 121. "Accounting
for  Long-Lived  Assets and Long Lived Assets to be disposed  of," requires that
long-lived assets and certain identifiable  intangibles,  including goodwill, be
held and used by an  entity,  be  reviewed  for  impairment  whenever  events or
changes in  circumstances  indicated that the carrying  amount of the assets may
not be recoverable. We assess the recoverability of fixed assets and intangibles
based on  undiscounted  estimated  future  operating cash flows. If we determine
that the carrying values have been impaired,  the measurement and recognition of
the impairment will be based on estimated  future  operating cash flows.  During
the  fourth  quarter  of 2001,  we  recognized  an  impairment  of  $485,000  in
connection with goodwill related to equity investments of ours. In June, 2002 we
recognized an impairment  of $678,000 with respect to another  investment  whose
operations  had not evolved to the point where the company's full carrying value
could be supported.  As of June 30, 2002,  management believes that the carrying
value of the remaining  long-lived assets and identifiable  intangibles have not
been impaired.

Patents and Trademarks

     Patents and  trademarks are stated at cost  (primarily  legal fees) and are
amortized  using the  straight  line  method  over the life of the  assets.  The
Company  reviews its patents and  trademark  rights  periodically  to  determine
whether  they have  continuing  value.  Such review  includes an analysis of the
patent and  trademark's  ultimate  revenue  and  profitability  potential  on an
undiscounted   cash  basis  to  support  the  realizability  of  its  respective
capitalized cost. In addition, management's review addresses whether each patent
continues to fit into Company's strategic business plans.

Research and Developments Costs

     Research and development  costs are direct costs related to both future and
present  products  and are  charged  to  operations  as  incurred.  The  Company
recognized  research and  development  costs of $4,765,000 and $3,732,000 in the
nine month period ending September 30, 2001 and 2002 respectively.


New Accounting Pronouncements

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB statements
No. 4,44 and 64, Amendment of FASB statement No. 13, and Technical  Corrections"
("SFAS 145").  FASB No. 4 required that gains and losses from  extinguishment of
debt that were included in the determination of net income be aggregated and, if
material,  be classified as an  extraordinary  item,  net of related income tax.
Effective January 1, 2003,  pursuant to SFAS 145, the treatment of debt is to be
included in "Other  Income" in the Financial  Statements.  Currently the Company
believes that the adoption of SFAS 145 will not have an impact on it's financial
position and results of operations.

     On July 30, 2002,  the FASB issued FASB  Statement No. 146,  Accounting for
Costs Associated with Exit or Disposal  Activities,  which nullifies EITF Issues
No. 94-3,  "Liability  Recognition for Certain Employee Termination Benefits and
Other  Costs  to  Exit  an  Activity  (including  Certain  Costs  Incurred  in a
Restructuring)"  and No. 88-10,  Costs  Associated  with Lease  Modification  or
Termination."  Statement 146 fundamentally  changes how a company should account
for future  "restructurings." The company believes that the adoption of SFAS 146
will not have an impact on it's financial position and results of operations.

RESULTS OF OPERATIONS

Three months ended  September  30, 2002 versus Three months ended  September 30,
2001

     Our losses in the three months ended September 30, 2002 were  approximately
$1,891,000 or some $254,000 less than the $2,145,000 loss recorded for the three
months  ended   September  30,  2001.   These  losses  include   non-cash  stock
compensation  expense of $132,000 in 2002 and $78,000 in 2001.  Excluding  these
non-cash stock compensation charges, our recorded losses were $1,759,000 in 2002
and $2,067,000 in 2001.

     Research and Development  ("R&D") costs were lower by $395,000 in the three
months  ended  September  30, 2002  compared  to the same  period in 2001.  Drug
production  costs  were down  approximately  $135,000  primarily  due to smaller
purchases of raw materials  used to manufacture  Ampligen(R).  In 2001, we spend
$289,000  for raw material  compared to $154,000 in 2002.  Drug  production  was
ramped up in 2001 in order to build up sufficient  drug inventory for use in the
ongoing CFS clinical trials and the newly initiated HIV clinical trials.  Direct
costs  relating  to the ME/CFS  clinical  trials  were lower by $228,000 in 2002
compared to 2001  reflecting less activity as enrollment in the Phase III ME/CFS
trial  nears  completion.  The  expenses  relating  to the Phase IIb HIV  trials
increased some $145,000 as patient enrollment increased. Other expenses relating
to R&D  work in the  U.S.  and  Europe  were  lower in the  three  months  ended
September 30, 2002 compared to the same period in 2001.

     Exclusion   of   non-cash   stock   compensation   charges,   general   and
administration  ("G&A")  expenses  were  approximately  $634,000  in 2002 versus
$595,000  in 2001 for the three  months  ended  September  30,  2002.  Legal and
related  costs were  higher in 2002  primarily  due to a credit in the amount of
$107,000  received in 2001 from our  insurance  underwriter  to reimburse us for
certain legal fees previously paid to defend against the Asensio lawsuit. Public
Relations  expenses  were  lower  in 2002 by some  $96,000.  Increased  expenses
include  office  rents,   insurance   premiums  and  corporate  travel  totaling
approximately $23,000.


     We had stock  compensation  expense of  $132,000  in the three  month ended
September 30, 2002 reflecting the grant of stock warrants to outside parties for
services provided. In this same period in 2001, we recorded a non-cash charge of
$78,000  reflecting  the grant of warrants to purchase  common  stock to certain
individuals that serve as financial advisors to the Company.

     Interest  income was $23,000 for the three months ended  September 30, 2002
versus  interest income of $68,000 during the same period in 2001. This decrease
in interest income reflects the significant drop in rates earned on money market
securities.


     Nine months ended September 30, 2002 versus nine months ended September 30,
2001 Our losses for the nine months ended  September 30, 2002 were down $955,000
when compared the same period on 2001.  The losses  recorded for the nine months
ended  2002 were  $6,013,000  compared  to losses of  $6,968,000  in 2001.  This
reduction in losses is due to several factors as outlined below.

     Overall  revenue in 2002 were  $826,000  compared to $304,000 in 2001.  The
Company's  revenues  basically  consist of income from the ME/CFS cost  recovery
treatment  programs  and  licensing  fees.  In 2002,  licensing  fee  income was
$563,000  compared to no licensing fee income in 2001.  Cost recovery  treatment
income was $263,000 in 2002 versus  $304,000 in 2001.  Cost  recovery  treatment
revenues  have  declined  in the past two years as the  Company  has focused all
resources  toward  initiating and conducting the Phase III ME/CFS clinical trial
and the two Phase IIb HIV clinical trials.  The $563,000 licensing fee income in
2002  is the  product  of the  Laboratorios  del  Dr.  Esteve,  S.A.  ("Esteve")
agreement  executed in March,  2002.  This agreement  gives Esteve the exclusive
right, upon regulatory approval, to market and distribute  Ampligen(R) in Spain,
Portugal and Andorra for the treatment of patients afflicted with ME/CFS.

     Research  an  development  ("R&D")  costs were  $3,732,000  in 2002  versus
$4,765,000 in 2001 reflecting a reduction of $1,033,000 in the first nine months
of 2002. Drug production costs were down some $373,000 in 2002, primarily due to
a larger production of Ampligen(R) in 2001.  Ampligen(R)  inventories were built
of in 2001 in anticipation of the increased  Ampligen(R) needs in our ME/CFS and
HIV  clinical  trials.  Costs  relating to the  production  of  Ampligen(R)  are
expensed as incurred. Costs related to the ME/CFS clinical trials were down some
$588,000  in 2002  compared  to 2001  reflecting  the lower  number of  patients
enrolled in the ME/CFS cost recovery  treatment program and the Phase III ME/CFS
clinical trial.  The costs related to the ME/CFS clinical trials should continue
to decrease as the phase III ME/CFS clinical trial near completion.  The cost of
the HIV  clinical  trials  increased  $433,000  in 2002  versus  2001 as patient
enrollment  has steadily  increased in 2002.  These HIV trials were initiated in
2001.  Our cost of filing and  maintaining  our  patent  estate,  consisting  of
approximately  350 patents,  was lower by $212,000 in 2002  compared to 2001. In
2001, we abandoned certain foreign patents deemed non-essential and expensed the
cost of $29,000 for these patents.

     General and  administrative  ("G&A")  expenses were  $2,447,000 in the nine
months ended September 30, 2002 compared to $2,677,000 in 2001.  Excluding stock
compensation expenses, G&A expenses were $2,315,000 in 2002 versus $2,004,000 in
2001: reflecting an expense increase of $311,000. This increase was primarly due
to  increased  legal  expenses  relating to the January,  2002 Asensio  trial in
Philadelphia.  Increased  cost  in  insurance  premiums  and  office  rent  were
basically offset by reduced costs in salaries and temp help. Stock  compensation
expense  was  $132,000  through  September,  2002  compared to  $673,000.  Stock
compensation  expense is primarily  calculated using the Black-Scholes model for
determining the value of non-public  warrants  granted to  non-employee  parties
providing a service for the  company.  In 2001,  some  $262,000 of the  $673,000
stock compensation expense reflected was due to the Board of Directors extending
the expiration date of certain warrants.

     Interest income was $90,000 in 2002 versus $248,000 in 2001. This reduction
in interest  income reflects much lower money  marketing  rates.  and less funds
available to invest. The company invests any cash on hand in excess of immediate
need in short-term market investments.

     Included  in our 2002  losses is a  $678,000  write  off of our  $1,074,000
investment in R.E.D. Labs. In June 2002, we determined that our 3.3% interest in
R.E.D.  was impaired and  accordingly we wrote off $678,000 of this  investment.
These charges were the result of our  determination  that R.E.D.'s  business had
not yet evolved to the point that our initial  carrying value of this investment
could not be supported based on that company's financial position.

LIQUIDITY AND CAPITAL RESOURCES

     Our cash, cash equivalents and short term investments were $4,308,000 as of
September 30, 2002 compared to $8,417,000 at December 31, 2001  reflecting a net
use of cash in the amount of $4,109,000 in the first nine months of 2002.

     Operating activities utilized $4,927,000 reflecting cash outlays in support
of the Phase III ME/CFS  clinical  trial as well as the Phase IIb HIV trials now
underway.  In addition we have significantly  invested in expanding our capacity
to manufacture  liquid  Ampligen(R)  doses through outside  suppliers as well as
expended funds to increase our supplies of Ampligen(R).  These expenditures were
made to assure an  adequate  and stable  supply of  Ampligen(R)  to support  the
ongoing  clinical  trials  as  well  as  provide  the  capacity  to  manufacture
Ampligen(R) in commercial  quantities.  Some portion of these costs are expected
to be recovered under the expanded access, cost-recovery, programs authorized by
the FDA and regulatory bodies in other countries. The costs of the Phase IIb HIV
trials will increase as more patients are recruited. However, the costs of these
HIV trials  should be lower  overall  due to certain  inherent  efficiencies  of
running the two clinical trials in parallel.

     Proceeds  from  Financing  activities  in the first nine months of 2002 are
down  some  $1,112,000  compared  to the  same  period  in 2001.  This  decrease
basically  reflects a combination of fewer stock warrants being exercised in the
amount of $1,991,000,  offset by a placement of convertible  securities totaling
$946,000 with Laboratorios del Dr. Esteve,  S.A.  ("Esteve")in  2002. The Esteve
placement  was  pursuant  to the  terms of a sales  and  distribution  agreement
executed in March, 2002.

     Our  major  source  of  financing  in  2000  and  2001  was  proceeds  from
warrantholders  exercising  stock warrants.  We received  $9,985,000 in 2000 and
$8,075,000 in 2001. In the first nine months of 2002,  warrant holders exercised
12,400 warrants producing  proceeds of $59,000.  A major factor  contributing to
this downturn in warrants  being  exercised is the state of the stock market and
the biotech sector in particular.  We have some  2,716,000  non-public  outsider
warrants   outstanding,   which,  if  exercised,   would  produce   proceeds  of
$14,814,000.  The exercise  prices of these warrants range from $1.75 to $16.00.
Depending on future market  conditions  and the company's  stock price,  some of
these  warrants  may be  exercised.  However the company is not counting on such
event at this time.

     The company's cash burn rate has declined in recent months primarily due to
lower  legal  costs,  the  restructuring  of our  European  operation  and other
management  actions.   These  actions  should  allow  the  company  to  continue
operations through May, 2003 with the current cash on hand. In the meantime,  we
are pursing  additional capital by one or more of the following  programs,  1) a
private placement of equity in either Hemispherx Biopharma, Inc. or our European
subsidiary,  Hemispherx  Biopharma-Europe,  S.A.,  2) the  granting of licensing
agreements  to corporate  partner,  3) a  partnership  arrangement  with another
Biotech Company to develop and market Ampligen(R) .

     Any additional equity funding may result in significant  dilution and could
involve the issuance of  securities  with  rights,  which are senior to those of
existing  stockholders.  We  may  also  need  additional  funding  earlier  than
anticipated,  and our cash  requirements,  in general,  may vary materially from
those now planned,  for reasons  including,  but not limited to,  changes in our
research  and   development   programs,   clinical   trials,   competitive   and
technological  advances,  the regulatory  process,  and higher than  anticipated
expenses and lower than anticipated revenues from certain of our clinical trials
for which cost recovery from participants has been approved.

ITEM 3:   Quantitative and Qualitative Disclosures About Market Risk

     Excluding  obligations to pay us for various licensing related fees, we had
approximately $4,308,000 in cash, cash equivalents and short term investments at
September 30, 2002. To the extent that our cash and cash equivalents  exceed our
near term  funding  needs,  we invest the excess cash in three to six month high
quality interest bearing financial instruments.  The Company employs established
conservative  policies  and  procedures  to manage  any risks  with  respect  to
investment exposure.


Item 4: Controls and Procedures

     Our  management,  including  the  Chairman  of the  Board  (serving  as the
principal executive officer) and the Chief Financial Officer,  have conducted an
evaluation of the effectiveness of disclosure  controls and procedures  pursuant
to Exchange Act Rule 13a-14. Based on that evaluation, the Chairman of the Board
and the Chief  Financial  Officer  concluded  that the  disclosure  controls and
procedures are effective in ensuring that all material  information  required to
be filed  in this  quarterly  report  has  been  made  known to them in a timely
fashion.  There have been no  significant  changes in internal  controls,  or in
other factors that could significantly  affect internal controls,  subsequent to
the date the Chairman of the Board and Chief Financial  Officer  completed their
evaluation.


                           Part II - OTHER INFORMATION

     ITEM 1: Legal Proceedings In 1998, we filed a multi-count complaint against
Manuel P.  Asensio,  Asensio & Company,  Inc.("Asensio").  The  action  included
claims of defamation,  disparagement,  tortious  interference  with existing and
prospective  business  relations  and  conspiracy,  arising out of the Asensio's
false and  defamatory  statements.  The complaint  further  alleged that Asensio
defamed and  disparaged  us in  furtherance  of a  manipulative,  deceptive  and
unlawful  short-selling  scheme between August,  1998, and the present. In 1999,
Asensio filed an answer and counterclaim  alleging that in response to Asensio's
strong  sell  recommendation  and  other  press  releases,  we  made  defamatory
statements   about   Asensio.   We  denied  the  material   allegations  of  the
counterclaim.  In July 2000,  following  dismissal in federal  court for lack of
subject matter jurisdiction, we transferred the action to the Pennsylvania State
Court. In March 2001, the defendants  responded to the complaints as amended and
a trial  commenced on January 30, 2002 resulting in a withdrawal  with prejudice
of the counterclaim against us. A jury verdict disallowed the claims against the
defendants for defamation and disparagement.  However, on July 2, 2002 the Court
entered an order  granting us a new trial  against  Asensio for  defamation  and
disparagement. On July 10, 2002 Asensio filed a Notice of Appeal to the Superior
Court of  Pennsylvania  from order of July 2, 2002.  There has been no  material
changes in the status of this litigation as of October 31, 2002.

     In June 2002 a former ME/CFS clinical trial patient and her husband filed a
claim in the Superior Court of New Jersey,  Middlesex County, against us, one of
our clinical trial  investigators and others alleging that she was harmed in the
ME/CFS  clinical trial as a result of negligence  and breach of  warranties.  We
believe the claim is without  merit and we are  defending  the claim  against us
through our product liability insurance carrier.

     In July 2002 we filed a multimillion  dollar suit against Federal Insurance
Company  ("Federal")  seeking (1) a judicial order  declaring our rights and the
obligations  of  Federal  under  the  insurance  policy  Federal  sold to us (2)
monetary damage for breach of contract resulting from Federal's refusal to fully
defend us in  connection  with the Asensio  litigation  (3) monetary  damages to
compensate us for Federal's  breach of its fiduciary  duty faith and dealing and
(4) monetary damages,  interest,  costs, and attorneys fees to compensate us for
Federal's  violation of the Pennsylvania  Bad Faith Statute.  ITEM 2: Changes in
Securities and Use of Proceeds

     During the quarter  ended  September  30,  2002,  we issued an aggregate of
7,068  shares of common  stock to two  parties,  for an  aggregate of $15,000 in
funds.  All  of  these  shares  were  issued  pursuant  to  the  exemption  from
registration  provided  by  section  4(2)  of the  Securities  Act of  1933.  No
commissions were paid with regard to these sales.



ITEM 3:   Defaults in Senior Securities

None

ITEM 4:   Submission of Matters to a Vote of Security Holders

None

ITEM 5:   Other Information

None

ITEM 6:   Exhibits and Reports on Form 8K

(a)Exhibits
   99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002.
   99.2 Certification Pursuant to 18 U.S.C. Section 1350, as  Adopted
        Pursuant to Section 906 of thecSarbanes-Oxley Act of 2002.

(b)Reports on Form 8-K
          None







                                                     SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                      HEMISPHERx BIOPHARMA, INC.


                                     /S/ William A. Carter
                                     ---------------------------
Date: April 15, 2003                 William A. Carter, M.D.
                                     Chief Executive Officer & President



                                     /S/ Robert E. Peterson
                                     --------------------------
Date: April 15, 2003                 Robert E. Peterson
                                     Chief Financial Officer

CERTIFICATION PURSUANT OT RULE 13A-14 AND 15D-14 OF
THE SECURITIES AND EXCHANGE ACT OF 1934

I, Robert E. Peterson, certify that:

     1. I have  reviewed  this  quarterly  report on Form 10-Q/A-1 of Hemispherx
Biopharma, Inc. (the "registrant");

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

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

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

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

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

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

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

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

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

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

Date:  April 15, 2003

                                    /s/ Robert E. Peterson
                                    -----------------------
                                      Robert E. Peterson
                                      Chief Financial Officer

 CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 OF
 THE SECURITIES AND EXCHANGE ACT OF 1934

I, William A. Carter, certify that:

     5. I have  reviewed  this  quarterly  report on Form 10-Q/A-1 of Hemispherx
Biopharma, Inc. (the "registrant");

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

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

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

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

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

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

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

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

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

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

Date:  April 15, 2003

                                      /s/ William A. Carter
                                      ----------------------
                                       William A. Carter
                                       Chief Executive Officer