Edgar Filing: HEMISPHERX BIOPHARMA INC

As filed with the Securities and Exchange Commission on July 31, 2006
Registration No. 333- _______________

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------

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

Delaware 2836 52-0845822
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)

----------

1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
(215) 988-0080
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

----------

William A. Carter, M.D., Chief Executive Officer
Hemispherx Biopharma, Inc.
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
(215) 988-0080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies of all communications to:
Richard Feiner, Esq.
Silverman Sclar Shin & Byrne PLLC
381 Park Avenue South, Suite 1601
New York, New York, 10016
(212) 779-8600
Fax (212) 779-8858

Approximate date of proposed sale to the public: From time to time or at
one time after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 ("Securities Act") check the following box. |X|

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|

If this form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|

If this form is a post-effective amendment filed pursuant to 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|

================================================================================

CALCULATION OF REGISTRATION FEE

Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered(1) Per Share(2) Offering Price Registration Fee
---------------------- ------------- ---------------- ---------------- ----------------

Common Stock 12,720,381 $29,256,876 $3,130.49 $3,130.49
---------- ----------- --------- ---------
Total Registration Fee $3,130.49
=========

(1) The shares being registered consist of (i) 640,409 shares of our common
stock issued and outstanding, (ii) 12,064,972 shares issuable to Fusion
Capital Fund II, LLC, (iii) 15,000 shares issuable upon exercise of
outstanding options and warrants and (iv) such indeterminate number of
additional shares of common stock issuable for no additional consideration
by reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration, which
results in an increase in the number of outstanding shares of our common
stock. In the event of a stock split, stock dividend or similar
transaction involving our common stock, in order to prevent dilution, the
number of shares registered shall be automatically increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act
of 1933.

(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rules 457(c) of the Securities Act based on the closing
price of the shares of common stock of the Registrant reported on the
American Stock Exchange on July 27, 2006.

Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus included in this Registration Statement also relates to the remaining
unsold shares which were previously registered by the Registrant under
Registration Statement Nos. 333-117178, 333-108645, 333-111135, 333-113796 and
333-130008.

The Registrant hereby amends this registration statement on the date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on a date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

iii

The information in this prospectus is not complete and may be amended. Neither
we nor the selling stockholders may sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where an offer or sale is not
permitted.

Subject to Completion
Preliminary Prospectus Dated July 31 , 2006

HEMISPHERX BIOPHARMA, INC.

23,807,453 Shares of Common Stock

----------
The Offering:

This prospectus relates to the sale of up to 23,807,453 shares of our
common stock that may be offered and sold from time to time by selling
stockholders and the persons to whom such selling stockholders may transfer
their shares, consisting of: (1) 12,064,972 shares of our common stock issuable
to Fusion Capital Fund II, LLC ("Fusion Capital") under a common stock purchase
agreement; (2) 135% of 2,149,232 shares of common stock issuable upon the
conversion, redemption or other payments relating to our outstanding October
2003, January 2004, and July 2004 7% Senior Convertible Debentures Due June 30,
2007 ("Debentures") and as payment of interest thereon and 135% of 3,615,514
shares of common stock issuable upon the exercise of related outstanding
warrants ("Debenture Warrants"); (3) outstanding 2,302,590 shares of common
stock issuable upon exercise of other warrants; and (5) outstanding 1,657,485
shares of common stock (including 321,751 issued to Fusion Capital) to be sold
by certain of the selling stockholders. We will not receive any of the proceeds
from the sale of these shares by the selling stockholders, but we will receive
proceeds from the cash exercise of warrants, if any.

Our common stock is listed on the American Stock Exchange under the symbol
HEB. The reported last sale price on the American Stock Exchange on July 28,
2006 was $2.26.

The selling stockholders may sell their shares from time to time on the
American Stock Exchange or otherwise, in one or more transactions at fixed
prices, at prevailing market prices at the time of sale or at prices negotiated
with purchasers. The selling stockholders will be responsible for any
commissions or discounts due to brokers or dealers. We will pay substantially
all expenses of registration of the shares covered by this prospectus.

----------

Please see the risk factors beginning on page 6 to read about certain
factors you should consider before buying shares of common stock.

----------

Fusion Capital is an "underwriter" within the meaning of the Securities
Act of 1933. Other Selling Stockholders may be deemed to be an "underwriter"
within the meaning of the Securities Act of 1933.

----------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is July ___, 2006

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference rooms at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please
call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public from the Securities and
Exchange Commission's website at "http://www.sec.gov." Such filings are also
available through a link at our website at "http://www.hemispherx.net."
Information contained on our website is not considered to be a part of, nor
incorporated by reference in, this prospectus.

We have filed with the Securities and Exchange Commission a registration
statement (which contains this prospectus) on Form S-1 under the Securities Act
of 1933. The registration statement relates to the securities offered by the
selling stockholders. This prospectus does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the
registration statement. Please refer to the registration statement and its
exhibits and schedules for further information with respect to us, the common
stock being offered in this prospectus. Statements contained in this prospectus
as to the contents of any contract or other document are not necessarily
complete and, in each instance, we refer you to the copy of that contract or
document filed as an exhibit to the Registration Statement. You may read and
obtain a copy of the registration statement and its exhibits and schedules from
the SEC, as described in the preceding paragraph.

INFORMATION INCORPORATED BY REFERENCE

The Commission allows us to "incorporate by reference" the information
that we file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is an important part of the prospectus, and you should review that
information in order to understand the nature of any investment by you in our
common stock. Information contained in this prospectus automatically updates and
supersedes previously filed information. We are incorporating by reference the
following documents:

(a) Our annual report on Form 10-K/A-2 for our fiscal year ended December 31,
2005, SEC File No. 1-13441.

(b) Our annual report on Form 10-K/A for our fiscal year ended December 31,
2005, SEC File No. 1-13441.

(d) Our definitive proxy statement on schedule 14A for our annual meeting of
stockholders to be held on September 20, 2006, SEC File No. 1-13441.

(e) Our current reports on Form 8-K filed on January 3, 2006; April 3, 2006
(amended April 11, 2006); April 7, 2006; April 12, 2006; April 13, 2006
and May 12, 2006; SEC File No. 1-13441.

(f) A description of our common stock contained in our registration statement
on Form S-1, SEC File No. 33-93314.

(g) All of our filings pursuant to Sections 13(a) or 15(d) under the
Securities Exchange Act of 1934, as amended, since the date of the filing
of our Annual Report on Form 10-K/A-2 for the fiscal year ended December
31, 2005 through the date of this prospectus.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Hemispherx Biopharma, Inc., 1617 JFK
Boulevard, Philadelphia, Pennsylvania 19103, telephone number 215-988-0080. In
addition, these documents may be accessed at our website at
"http://www.hemispherx.net" via a link to the SEC's website. Information
contained on our website is not considered to be a part of, nor incorporated by
reference in, this prospectus.

You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not, and the selling
stockholders have not, authorized anyone else to provide you with different
information. The selling stockholders will not make offers to these shares in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or incorporated by reference or in any supplement
is accurate as of any date other than the date on the front of those documents.

PROSPECTUS SUMMARY

The following is a brief summary of certain information contained
elsewhere in this prospectus or incorporated in this prospectus by reference.
This summary is not intended to be a complete description of the matters covered
in this prospectus and is qualified in its entirety by reference to the more
detailed information contained or incorporated by reference in this prospectus.
You are urged to read this prospectus in its entirety, including all materials
incorporated in this prospectus by reference.

The registration statement that contains this prospectus, exhibits and
documents from which information is incorporated by reference can be read and
are available to the public over the Internet at the SEC's website at
http://www.sec.gov as described under the heading "Where You Can Find More
Information."

About Hemispherx

We are a biopharmaceutical company engaged in the clinical development,
manufacture and marketing of new drug entities based on natural immune system
enhancing technologies for the treatment of viral and immune based acute and
chronic disorders. We were founded in the early 1970s, as a contract researcher
for the National Institutes of Health. Since that time, we have established a
strong foundation of laboratory, pre-clinical, and clinical data with respect to
the development of nucleic acids to enhance the natural antiviral defense system
of the human body and to aid the development of therapeutic products for the
treatment of acute and chronic diseases. We own a U.S. Food and Drug
Administration approved GMP (good manufacturing practice) manufacturing facility
in New Jersey.

Our flagship products include Ampligen(R) and Alferon N Injection(R).
Ampligen(R) is an experimental drug currently undergoing clinical development
for the treatment of: Myalgic Encephalomyelitis/Chronic Fatigue Syndrome and
HIV, and pre-clinical testing for possible treatment of avian and seasonal
influenza viruses.

Alferon N Injection(R) is the registered trademark for our injectable
formulation of natural alpha interferon, which is approved by the FDA for the
treatment of genital warts. Alferon N Injection(R) is also in pre-clinical
development for treating Multiple Sclerosis and West Nile Virus.

Our principal executive offices are located at One Penn Center, 1617 JFK
Boulevard, Philadelphia, Pennsylvania 19103, and its telephone number is
215-988-0080. We maintain a website at "http://www.hemispherx.net." Information
contained on our website is not considered to be a part of, nor incorporated by
reference in, this prospectus.

Fusion Capital Transactions

On April 12, 2006, we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC, ("Fusion Capital"), pursuant to which, Fusion
Capital has agreed, under certain conditions, to purchase from us on each
trading day $100,000 of our common stock up to an aggregate of $50 million over
a period of approximately 25 months, subject to earlier termination at our
discretion. At our option, we may elect to sell less of our common stock to
Fusion Capital than the daily amount and we may increase the daily amount as the
market price of our stock increases. The purchase price of the shares of common
stock will be equal to a price based upon the future market price of the common
stock without any fixed discount to the market price. Fusion Capital does not
have the right or the obligation to purchase shares of our common stock in the
event that the price of our common stock is less than $1.00

Fusion Capital is offering for sale herein up to 12,386,723 shares of our
common stock. However, in the event that we decide to issue more than
12,386,723, i.e. greater than 19.99% of our outstanding shares of common stock
as of the date of the agreement, we would first seek stockholder approval in
order to be in compliance with American Stock Exchange rules. In the event we
elect to issue more than 12,386,723 shares to Fusion Capital under the common
stock purchase agreement, we also will be required to file a new registration
statement and have it declared effective by the SEC. The number of shares
ultimately offered for sale by Fusion Capital is dependent upon the number of
shares purchased by Fusion Capital under the common stock purchase agreement.

Securities Offered

Common stock to be offered
by the selling stockholders 23,807,453 Shares consisting of:

o 12,064,972 shares of our common stock issuable to Fusion Capital
pursuant to a common stock purchase agreement;

o 135% of 2,149,232 shares of common stock issuable upon the
conversion, redemption or other payments relating to our outstanding
October 2003, January 2004, and July 2004 7% Senior Convertible
Debentures Due June 30, 2007 (collectively, the "Debentures") and as
payment of interest thereon;

o 135% of 3,615,514 shares of common stock issuable upon the exercise
of related outstanding warrants ("Debenture Warrants");

o 2,302,590 shares of common stock issuable upon exercise of other
outstanding warrants; and

o 1,657,485 outstanding shares of common stock (including 1,136,868
owned by Fusion Capital and 520,617 owned by other selling
stockholders.

Common stock outstanding
prior to this offering 62,581,122 Shares

Use of Proceeds We will not receive any of the proceeds from
the sale of the shares of common stock because
they are being offered by the selling
stockholders and we are not offering any shares
for sale under this prospectus, but we may
receive proceeds from the exercise of warrants
held by certain of the selling stockholders. In
addition, we may receive up to $50 million in
proceeds from the sale of our common stock to
Fusion Capital under the common stock purchase
agreement. We will apply such proceeds, if any,
to extend our New Brunswick facility for the
production of Ampligen(R) and Alferon N
Injection(R), Research and Development and for
general corporate purposes. See "Use of Proceeds."

American Stock Exchange
symbol HEB

RISK FACTORS

Special Note Regarding Forward-Looking Statements

Certain statements in this prospectus constitute "forwarding-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange 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.
All statements other than statements of historical fact, included in this
prospectus regarding our financial position, business strategy and plans or
objectives for future operations are forward-looking statements. Without
limiting the broader description of forward-looking statements above, we
specifically note that statements regarding potential drugs, their potential
therapeutic effect, the possibility of obtaining regulatory approval, our
ability to manufacture and sell any products, market acceptance or our ability
to earn a profit from sales or licenses of any drugs or our ability to discover
new drugs in the future are all forward-looking in nature.

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 and its subsidiaries 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 prospectus. We
do not undertake and specifically decline 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.

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

Risks Associated With Our Business

No assurance of successful product development

Ampligen(R) and related products. The development of Ampligen(R) and our
other related 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 right 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, 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.

The clinical development of the experimental therapeutic, Ampligen(R) for
CFS was initiated approximately 16 years ago. To date federal health agencies
have yet to reach a consensus regarding various aspects of ME/CFS, including
parameters of "promising therapies" for ME/CFS and which aspects of ME/CFS are
anticipated to be "serious or life-threatening".

Over its developmental history, Ampligen(R) has received various
designations, including Orphan Drug Product Certification (FDA), Emergency
(compassionate) Cost Recovery Sales Authorization (FDA) and "promising" clinical
outcome recognition based on the evaluation of certain summary clinical reports
(AHRQ, Agency Health Research Quality). However to date, the FDA has determined
it has yet to receive sufficient information to support the potential of
Ampligen(R) to treat a serious or life threatening aspect of ME/CFS. The
definition of the "seriousness of a condition", according to Guidance for
Industry documents published in July 2004 is "a matter of judgment, but
generally based on its impact on such factors as survival, day-to-day
functioning, or the likelihood that the disease, if left untreated, will
progress from a less severe condition to a more serious one". The FDA has
recently requested a "complete and audited report of the Amp 516 study to
determine whether Ampligen(R) has a clinically meaningful benefit on a serious
or life threatening aspect of ME/CFS in order to evaluate whether the Amp 516
study results do or do not support a "fast track designation". The FDA has also
invited us to include a schedule for completion of all ME/CFS studies as well as
a proposed schedule for our NDA submission. Because we believe our ME/CFS
studies are complete, we requested a pre-NDA meeting to obtain advice on
preparing and submitting our NDA, which may eliminate the need for Fast Track
Designation. This meeting has been scheduled for August 2, 2006. Meanwhile, we
will continue with our existing ongoing efforts to prepare a complete and
audited report of our various studies, including the well-controlled Amp 516
study. We are using our best efforts to complete the requisite reports including
the hiring of new staff and various recognized expert medical/regulatory
consultants, but can provide no assurance as to whether the outcome of this
large data collection and filing process (approximately 750 patients, treated
more than 45,000 times) will be favorable or unfavorable, specifically with
respect to the FDA's perspective. Also, we can provide no guidance as to the
tentative date at which the compilation and filing of such data will be
complete, as significant factors are outside our control including, without
limitation, the ability and willingness of the independent clinical
investigators to complete the requisite reports at an acceptable regulatory
standard, the ability to collect overseas generated data, and the ability of
Hollister-Stier facilities to interface with our own New Brunswick
staff/facilities to meet the manufacturing regulatory standards.

Alferon N Injection(R). Although Alferon N Injection(R) is approved for
marketing in the United States for the intra-lesional treatment of refractory or
recurring external genital warts in patients 18 years of age or older; to date
it has not been approved for other indications. We face many of the risks
discussed above, with regard to developing this product for use to treat other
ailments such as multiple sclerosis and cancer.

Our drug and related technologies are investigational and subject to regulatory
approval. If we are unable to obtain regulatory approval, our operations will be
significantly affected.

All of our drugs and associated technologies, other than Alferon N
Injection(R), 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. At present,
Alferon N Injection(R) is only approved for the intra-lesional treatment of
refractory or recurring external genital warts in patients 18 years of age or
older. Use of Alferon N Injection(R) for other indications will require
regulatory approval. In this regard, ISI, the company from which we obtained our
rights to Alferon N Injection(R), conducted clinical trials related to use of
Alferon N Injection(R) for treatment of HIV and Hepatitis C. In both instances,
the FDA determined that additional studies were necessary in order to fully
evaluate the efficacy of Alferon N Injection(R) in the treatment of HIV and
Hepatitis C diseases. We have no immediate plans to conduct these additional
studies at this time.

Our products, including Ampligen(R), are subject to extensive regulation
by numerous governmental authorities in the U.S. and other countries, including,
but not limited to, the FDA in the U.S., the Health Protection Branch ("HPB") of
Canada, and the Agency for the Evaluation of Medicinal Products ("EMEA") 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 Ampligen(R) 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, 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 U.S. or elsewhere, our operations most likely will be
materially adversely affected.

Although preliminary in vitro testing indicates that Ampligen(R) enhances the
effectiveness of different drug combinations on avian influenza, preliminary
testing in the laboratory is not necessarily predictive of successful results in
clinical testing or human treatment.

Ampligen(R) is undergoing pre-clinical testing for possible treatment of
avian flu. Although preliminary in vitro testing indicates that Ampligen(R)
enhances the effectiveness of different drug combinations on avian flu,
preliminary testing in the laboratory is not necessarily predictive of
successful results in clinical testing or human treatment. No assurance can be
given that similar results will be observed in clinical trials. Use of
Ampligen(R) in the treatment of avian flu requires prior regulatory approval.
Only the FDA can determine whether a drug is safe, effective or promising for
treating a specific application. As discussed in the prior risk factor,
obtaining regulatory approvals is a rigorous and lengthy process.

In addition, Ampligen(R) is being tested on two strains of avian flu.
There are a number of strains and strains mutate. No assurance can be given that
a Ampligen(R) will be effective on any strains that might infect humans.

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 March 31,
2006 our accumulated deficit was approximately $153,572,000. 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 be
profitable.

We may require additional financing which may not be available.

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.
As of June 30, 2006, we had approximately $21,500,000 in cash and cash
equivalents and short-term investments. These funds should be sufficient to meet
our operating cash requirements, including debt service, for at least the next
12 months.

On April 12, 2006, we entered into a common stock purchase agreement with
Fusion Capital pursuant to which Fusion Capital has agreed, under certain
conditions and with certain limitations, to purchase on each trading day
$100,000 of our common stock up to an aggregate of $50.0 million over a 25 month
period (see "The Fusion Transaction" in Selling Stockholders" below).

We only have the right to receive $100,000 per trading day under the
agreement with Fusion Capital unless our stock price exceeds $1.90, in which
case the daily amount may be increased under certain conditions as the price of
our common stock increases. Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock on any trading days that
the market price of our common stock is less than $1.00. Since we initially
registered herein 12,386,723 shares purchasable by Fusion Capital pursuant to
the common stock purchase agreement (inclusive of up to 643,502 additional
Commitment Shares), the selling price of our common stock to Fusion Capital will
have to average at least about $4.26 per share for us to receive the maximum
proceeds of $50.0 million without registering additional shares of common stock.
Assuming a purchase price of $2.26 per share (the closing sale price of the
common stock on July 28, 2006) and the purchase by Fusion Capital of the full
12,386,723 shares (inclusive of up to 643,502 additional Commitment Shares)
under the common stock purchase agreement, proceeds to us would only be
$26,539,679 unless we choose to register more than 12,386,723 shares, which we
have the right, but not the obligation, to do. In the event we elect to issue
additional shares to Fusion Capital, we will be required to (i) file a new
registration statement and have it declared effective by the Securities and
Exchange Commission and (2) seek stockholder approval in order to be in
compliance with the American Stock Exchange Market rules. In addition, Fusion
Capital cannot purchase more than 27,386,723 shares, inclusive of Commitment
Shares under the common stock purchase agreement. Accordingly, depending upon
the future market price of our common stock, we may realize less than the
maximum $50,000,000 proceeds from the sale of stock under the Purchase
Agreement.

The extent to which we rely on Fusion Capital as a source of funding will
depend on a number of factors including, the prevailing market price of our
common stock and the extent to which we are able to secure working capital from
other sources.

If obtaining sufficient financing from Fusion Capital were to prove
unavailable or prohibitively dilutive and if we are unable to commercialize and
sell Ampligen(R) and/or increase sales of Alferon N Injection(R) or our other
products, we will need to secure another source of funding in order to satisfy
our working capital needs. Even if we are able to access the full $50,000,000
under the common stock purchase agreement with Fusion Capital, we may need to
raise 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 including the commercializing of Ampligen(R) products. There
can be no assurances that we will raise adequate funds which may have a material
adverse effect on our ability to develop our products. Also, we have the ability
to curtail discretionary spending, including some research and development
activities, if required to conserve cash.

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

We need to preserve and acquire enforceable patents covering the use of
Ampligen(R) for a particular disease in order to obtain exclusive rights for the
commercial sale of Ampligen(R) for such disease. We obtained all rights to
Alferon N Injection(R), and we plan to preserve and acquire enforceable patents
covering its use for existing and potentially new diseases. Our success depends,
in large part, on our ability to preserve and obtain patent protection for our
products and to obtain and preserve our trade secrets and expertise. Certain of
our know-how and technology is not patentable, particularly the procedures for
the manufacture of our drug product which are carried out according to standard
operating procedure manuals. 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 also have 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 yet been issued any patents in the United States for the use of
Ampligen(R) as a sole treatment for any of the cancers, which we have sought to
target. With regard to Alferon N Injection(R), we have acquired from ISI its
patents for natural alpha interferon produced from human peripheral blood
leukocytes and its production process and we have filed a patent application for
the use of Alferon LDO in treating viral diseases including avian influenza. We
cannot assure that our competitors will not seek and obtain patents regarding
the use of similar products in combination with various other agents, for a
particular target indication prior to our doing such. If we cannot protect our
patents covering the use of our products for a particular disease, or obtain
additional patents, we may not be able to successfully market our products.

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 new 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 and we may not have the financial resources
necessary to enforce the patent rights that we hold. 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 develop or 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
related technology.

There can be no assurance that we will be able to obtain necessary licenses if
we cannot enforce patent rights we may hold. In addition, the failure of third
parties from whom we currently license certain proprietary information or from
whom we may be required to obtain such licenses in the future, to adequately
enforce their rights to such proprietary information, could adversely affect the
value of such licenses to us.

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.

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.

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

We have limited marketing and sales capability. We are dependent upon
existing and, possibly future, marketing agreements and third party distribution
agreements for our products in order to generate significant revenues and become
profitable. As a result, 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 Accredo offers the potential to provide some
marketing and distribution capacity in the United States while agreements with
Biovail Corporation and Laboratorios Del Dr. Esteve S.A. may provide a sales
force in Canada, Spain and Portugal. We also had an agreement with Bioclones
(Proprietary), Ltd ("Bioclones") that covered South America, Africa, United
Kingdom, Australia and New Zealand. However, we deem this marketing arrangement
with Bioclones void due to the numerous and long standing failures of
performance by Bioclones. In addition, in December 2004, we initiated a lawsuit
in Federal Court identifying a conspiratorial group seeking to illegally
manipulate our stock for purposes of bringing about the hostile takeover of
Hemispherx. This conspiratorial group includes Bioclones.

We cannot assure that our domestic or 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.

There are no long-term agreements with suppliers of required materials. If we
are unable to obtain the required raw materials, we may be required to scale
back our operations or stop manufacturing Alferon N Injection(R) and/or
Ampligen(R).

A number of essential materials are used in the production of Alferon N
Injection(R), including human white blood cells. We do not have long-term
agreements for the supply of any of such materials. There can be no assurance we
can enter into long-term supply agreements covering essential materials on
commercially reasonable terms, if at all.

There are a limited number of manufacturers in the United States available
to provide the polymers for use in manufacturing Ampligen(R). At present, we do
not have any agreements with third parties for the supply of any of these
polymers. We are establishing relevant manufacturing operations within our New
Brunswick, New Jersey facility for the production of Ampligen(R) raw materials
in order to obtain polymers on a more consistent manufacturing basis. The
establishment of an Ampligen(R) raw materials production line within our own
facilities, while having obvious advantages with respect to regulatory
compliance (other parts of our 43,000 sq. ft. wholly owned FDA approved facility
are already in compliance for the manufacture of Alferon N Injection(R)), may
delay certain steps in the commercialization process, specifically a targeted
NDA filing.

If we are unable to obtain or manufacture the required raw materials, we
may be required to scale back our operations or stop manufacturing. The costs
and availability of products and materials we need for the production of
Ampligen(R) and the commercial production of Alferon N Injection(R) and other
products which we may commercially produce are subject to fluctuation depending
on a variety of factors beyond our control, including competitive factors,
changes in technology, and FDA and other governmental regulations and there can
be no assurance that we will be able to obtain such products and materials on
terms acceptable to us or at all.

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, including commercial scale-up,
may affect the chemical structure of Ampligen(R) and other RNA drugs, as well as
their safety and efficacy, 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 manufacturing 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.

We have limited manufacturing experience and capacity.

Ampligen(R) has been only produced in limited quantities for use in our
clinical trials and we are dependent upon third party suppliers for
substantially all of the production process. The failure to continue these
arrangements or to achieve other such 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. To the extent we are involved in the
production process, our current facilities are not adequate for the production
of our proposed products for large-scale commercialization, and we currently do
not have adequate personnel to conduct commercial-scale manufacturing. 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 pertaining to current Good Manufacturing Practices
("cGMP") regulations. There can be no assurance that such facilities can be
used, built, or acquired on commercially acceptable terms, or that such
facilities, if used, built, or acquired, will be adequate for our long-term
needs.

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

We have never produced Ampligen(R) or any other products in large
commercial quantities. We must manufacture our products in compliance with
regulatory requirements in large 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. 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. Also, each production lot of Alferon N Injection(R) is
subject to FDA review and approval prior to releasing the lots to be sold. This
review and approval process could take considerable time, which would delay our
having product in inventory to sell.

Rapid technological change may render our products obsolete or non-competitive.

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 us, 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.

Our products may be subject to substantial competition.

Ampligen(R). Competitors may be developing technologies that are, or in
the future may be, the basis for competitive products. Some of these potential
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 may 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, HPB and other
regulatory approvals of products. Accordingly, our competitors may succeed in
obtaining FDA, HPB or other regulatory product approvals more rapidly than us.
There are no drugs approved for commercial sale with respect to treating ME/CFS
in the United States. The dominant competitors with drugs to treat HIV diseases
include Gilead Pharmaceutical, Pfizer, Bristol-Myers, Abbott Labs, Glaxo Smith
Kline, Merck and Schering-Plough Corp. These potential competitors are among the
largest pharmaceutical companies in the world, are well known to the public and
the medical community, and have substantially greater financial resources,
product development, and manufacturing and marketing capabilities than we have.
Although we believe our principal advantage is the unique mechanism of action of
Ampligen(R) on the immune system, we cannot assure that we will be able to
compete.

ALFERON N Injection(R). Many potential competitors are among the largest
pharmaceutical companies in the world, are well known to the public and the
medical community, and have substantially greater financial resources, product
development, and manufacturing and marketing capabilities than we have. Alferon
N Injection(R) currently competes with Schering's injectable recombinant alpha
interferon product (INTRON(R) A) for the treatment of genital warts. 3M
Pharmaceuticals also received FDA approval for its immune-response modifier,
Aldara(R), a self-administered topical cream, for the treatment of external
genital and perianal warts. Alferon N Injection(R) also competes with surgical,
chemical, and other methods of treating genital warts. We cannot assess the
impact products developed by our competitors, or advances in other methods of
the treatment of genital warts, will have on the commercial viability of Alferon
N Injection(R). If and when we obtain additional approvals of uses of this
product, we expect to compete primarily on the basis of product performance. Our
potential competitors have developed or may develop products (containing either
alpha or beta interferon or other therapeutic compounds) or other treatment
modalities for those uses. In the United States, three recombinant forms of beta
interferon have been approved for the treatment of relapsing-remitting multiple
sclerosis. There can be no assurance that, if we are able to obtain regulatory
approval of Alferon N Injection(R) for the treatment of new indications, we will
be able to achieve any significant penetration into those markets. In addition,
because certain competitive products are not dependent on a source of human
blood cells, such products may be able to be produced in greater volume and at a
lower cost than Alferon N Injection(R). Currently, our wholesale price on a per
unit basis of Alferon N Injection(R) is higher than that of the competitive
recombinant alpha and beta interferon products.

General. Other companies may succeed in developing products earlier than
we do, obtaining approvals for such products from the FDA more rapidly than we
do, or developing products that are more effective than those we may develop.
While we will attempt to expand our technological capabilities in order to
remain competitive, there can be no assurance that research and development by
others or other medical advances will not render our technology or products
obsolete or non-competitive or result in treatments or cures superior to any
therapy we develop.

Possible side effects from the use of Ampligen(R) or Alferon N Injection(R)
could adversely affect potential revenues and physician/patient acceptability of
our product.

Ampligen(R). 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 a rapid heart
beat, a tightness of the chest, urticaria (swelling of the skin), 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, asthma, low blood pressure, photophobia, rash,
transient visual disturbances, slow or irregular heart rate, 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 effects 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 affect potential revenues and physician/patient acceptability of our
product.

Alferon N Injection(R). At present, Alferon N Injection(R) is only
approved for the intra-lesional (within the lesion) treatment of refractory or
recurring external genital warts in adults. In clinical trials conducted for the
treatment of genital warts with Alferon N Injection(R), patients did not
experience serious side effects; however, there can be no assurance that
unexpected or unacceptable side effects will not be found in the future for this
use or other potential uses of Alferon N Injection(R) which could threaten or
limit such product's usefulness.

We may be subject to product liability claims from the use of Ampligen(R),
Alferon N Injection(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 affected 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 product liability
insurance coverage, there can be no assurance that this insurance will provide
adequate coverage against Ampligen(R) and/or Alferon N Injection(R) product
liability claims. A successful product liability claim against us in excess of
Ampligen(R)'s $1,000,000 in insurance coverage; $3,000,000 in aggregate, or in
excess of Alferon N Injection(R)'s $5,000,000 in insurance coverage; $5,000,000
in aggregate; or for which coverage is not provided could have a negative effect
on our business and financial condition.

The loss of Dr. William A. 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 the co-inventor of Ampligen(R), and his knowledge of our overall
activities, including patents and clinical trials. The loss of Dr. Carter's
services could have a material adverse effect on our operations and chances for
success. We have secured key man life insurance in the amount of $2,000,000 on
the life of Dr. Carter and we have an employment agreement with Dr. Carter that,
as amended, runs until December 31, 2010. However, Dr. Carter has the right to
terminate his employment upon not less than 30 days prior written notice. The
loss of Dr. Carter or other personnel, 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 for our products.

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.

There are risks of liabilities associated with handling and disposing of
hazardous materials.

Our business involves the controlled use of hazardous materials,
carcinogenic chemicals, flammable solvents 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.
We do not maintain insurance coverage against such liabilities.

Risks Associated With an Investment in Our Common Stock

We reported material weaknesses in our internal control over financial reporting
that, if not remedied, could adversely affect our internal controls.

We assessed the effectiveness of our internal control over financial
reporting as of December 31, 2005. In making this assessment, our management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control--Integrated Framework (COSO). Based on
this assessment, our management identified the following material weaknesses as
of December 31, 2005. A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected.

1. Financial Statement Close and Reporting Process - We did not
maintain effective controls over the financial statement close and
reporting process because we lacked a complement of personnel able
to devote sufficient time and adequate financial reporting expertise
commensurate with quarterly and year-end financial statement close
requirements, which include the financial statement preparation and
disclosures. Additionally, we had inadequate policies and procedures
providing for a detailed comprehensive review of the underlying
information supporting the amounts including in our annual and
interim consolidation financial statements and disclosures.

2. We did not maintain effective controls over the initial recording of
our convertible debentures that contained beneficial conversion
features (including incorrect recording of investment banking fees
incurred and subsequent conversion price resets) and the accounting
for warrants and options issued to non-employees. Our interpretation
and application of EITF No. 00-27, FASB Statement 133, EITF 98-5 and
EITF 00-19 was not correct at the time the convertible debentures
were initially recorded (2003 through July 2004), and our
interpretation and application of FASB statement No. 123 was not
correct in recording certain warrant and option issuances to
non-employees. These control deficiencies resulted in the
restatement of the 2004 and 2003 annual consolidated financial
statements as well as to the unaudited consolidated interim
financial statements for each of the three years in the period ended
December 31, 2005.

The result of applying the proper accounting treatment increased our net
loss applicable to common stockholders by $0.01, from $0.42 per share to $0.43
per share, for the year ended December 31, 2003 and decreased our net loss
applicable to common stockholders by $0.07, from $0.53 per share to $0.46 per
share, for the year ended December 31, 2004.

Although the recording of the convertible debentures occurred during the
periods from March 2003 through July 2004, and we have not issued any debentures
since July 2004, we have taken and plan to take, during 2006, additional steps
to remediate these internal control weaknesses. In March 2006, we increased the
time allocated by our financial consultant with regards to remediating these
disclosed internal control weaknesses and we will spend additional time
monitoring our internal controls on an on-going basis. In addition, we have
subscribed to CCH's "Accounting Research Manager," a recognized on-line service
in order to maintain up-to-date accounting guidance to enhance internal control
over both financial reporting and disclosure requirements. In addition, we have
established policies and procedures to include a detailed comprehensive review
of the underlying information supporting the amounts included within our
consolidated financial statements and disclosures including to assist in
ensuring: 1) clerical accuracy within our financial statements and disclosures,
2) financial statement groupings within our financial statements are accurate,
3) support utilized in preparation of the consolidated statement of cash flows
is accurate, and 4) equity transactions during the reporting period are complete
and accurate. We also engaged an additional accounting consultant in April 2006
to assist in initiating the implementation of these policies and procedures on a
going forward basis. Notwithstanding the foregoing, and the measures we have
taken and any future measures we may take to remediate the reported internal
control weaknesses, we may not be able to maintain effective internal controls
over financial reporting in the future. In addition, deficiencies in our
internal controls may be discovered in the future. Any failure to remediate the
reported material weaknesses, or to implement new or improved controls, or
difficulties encountered in their implementation, could harm our operating
results, cause us to fail to meet our reporting obligations or result in
material misstatements in our financial statements. Any such failure also could
affect the ability of our management to certify in our Forms 10-K and 10-Q that
our internal controls are effective when it provides an assessment of our
internal control over financial reporting, and could affect the results of our
independent registered public accounting firm's related attestation report
regarding our management's assessment. Ineffective internal controls could also
cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our securities.

The market price of our stock may be adversely affected by market
volatility.

The market price of our common stock has been and is likely to be
volatile. In addition to general economic, political and market conditions, the
price and trading volume of our stock could fluctuate widely in response to many
factors, including:

o announcements of the results of clinical trials by us or our competitors;

o adverse reactions to products;

o governmental approvals, delays in expected governmental approvals or
withdrawals of any prior governmental approvals or public or regulatory
agency concerns regarding the safety or effectiveness of our products;

o changes in U.S. or foreign regulatory policy during the period of product
development;

o developments in patent or other proprietary rights, including any third
party challenges of our intellectual property rights;

o announcements of technological innovations by us or our competitors;

o announcements of new products or new contracts by us or our competitors;

o actual or anticipated variations in our operating results due to the level
of development expenses and other factors;

o changes in financial estimates by securities analysts and whether our
earnings meet or exceed the estimates;

o conditions and trends in the pharmaceutical and other industries; new
accounting standards; and

o the occurrence of any of the risks described in these "Risk Factors."

Our common stock is listed for quotation on the American Stock Exchange.
For the 12-month period ended June 30, 2006, the price of our common stock has
ranged from $1.45 to $3.99 per share. We expect the price of our common stock to
remain volatile. The average daily trading volume of our common stock varies
significantly. Our relatively low average volume and low average number of
transactions per day may affect the ability of our stockholders to sell their
shares in the public market at prevailing prices and a more active market may
never develop.

In the past, following periods of volatility in the market price of the
securities of companies in our industry, securities class action litigation has
often been instituted against companies in our industry. If we face securities
litigation in the future, even if without merit or unsuccessful, it would result
in substantial costs and a diversion of management attention and resources,
which would negatively impact our business.

Our stock price may be adversely affected if a significant amount of shares,
primarily those registered herein and in prior registration statements, are sold
in the public market.

We have registered 12,386,723 shares herein for sale by Fusion Capital and
333,658 shares by others, and may, in the future, register additional shares for
sale by Fusion under the common stock purchase agreement. As of July 26, 2006,
approximately 2,341,007 shares of our common stock, constituted "restricted
securities" as defined in Rule 144 under the Securities Act, 815,117 of which
have been registered in prior registration statements. Also, we have registered
10,084,996 shares issuable (i) upon conversion of approximately 135% of
Debentures that we issued in 2003 and 2004; (ii) as payment of 135% of the
interest on all of the Debentures; (iii) upon exercise of 135% of certain
Warrants; and (iv) upon exercise of certain other warrants. Registration of the
shares permits the sale of the shares in the open market or in privately
negotiated transactions without compliance with the requirements of Rule 144. To
the extent the exercise price of the warrants is less than the market price of
the common stock, the holders of the warrants are likely to exercise them and
sell the underlying shares of common stock and to the extent that the conversion
price and exercise price of these securities are adjusted pursuant to
anti-dilution protection, the securities could be exercisable or convertible for
even more shares of common stock. We also may issue shares to be used to meet
our capital requirements or use shares to compensate employees, consultants
and/or directors. We are unable to estimate the amount, timing or nature of
future sales of outstanding common stock. Sales of substantial amounts of our
common stock in the public market could cause the market price for our common
stock to decrease. Furthermore, a decline in the price of our common stock would
likely impede our ability to raise capital through the issuance of additional
shares of common stock or other equity securities.

The sale of our common stock to Fusion Capital may cause dilution and the sale
of the shares of common stock acquired by Fusion Capital and other shares
registered for selling stockholders could cause the price of our common stock to
decline.

The sale by Fusion Capital and other selling stockholders of our common
stock will increase the number of our publicly traded shares, which could
depress the market price of our common stock. Moreover, the mere prospect of
resales by Fusion Capital and other selling stockholders as contemplated in this
prospectus could depress the market price for our common stock. The issuance of
shares to Fusion Capital under the common stock purchase agreement, will dilute
the equity interest of existing stockholders and could have an adverse effect on
the market price of our common stock.

The purchase price for the common stock to be sold to Fusion Capital
pursuant to the common stock purchase agreement will fluctuate based on the
price of our common stock. All shares sold to Fusion Capital are to be freely
tradable. Fusion Capital may sell none, some or all of the shares of common
stock purchased from us at any time. We expect that the shares offered by this
prospectus will be sold over a period of in excess of 25 months. Depending upon
market liquidity at the time, a sale of shares under this offering at any given
time could cause the trading price of our common stock to decline. The sale of a
substantial number of shares of our common stock to Fusion Capital pursuant to
the purchase agreement, or anticipation of such sales, could make it more
difficult for us to sell equity or equity-related securities in the future at a
time and at a price that we might otherwise wish to effect sales.

Provisions of our Certificate of Incorporation and Delaware law could defer a
change of our management which could discourage or delay offers to acquire us.

Provisions of our Certificate of Incorporation and Delaware law may make
it more difficult for someone to acquire control of us or for our stockholders
to remove existing management, and might discourage a third party from offering
to acquire us, even if a change in control or in management would be beneficial
to our stockholders. For example, our Certificate of Incorporation allows us to
issue shares of preferred stock without any vote or further action by our
stockholders. Our Board of Directors has the authority to fix and determine the
relative rights and preferences of preferred stock. Our Board of Directors also
has the authority to issue preferred stock without further stockholder approval.
As a result, our Board of Directors could authorize the issuance of a series of
preferred stock that would grant to holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before dividends are
distributed to the holders of common stock and the right to the redemption of
the shares, together with a premium, prior to the redemption of our common
stock. In this regard, in November 2002, we adopted a stockholder rights plan
and, under the Plan, our Board of Directors declared a dividend distribution of
one Right for each outstanding share of Common Stock to stockholders of record
at the close of business on November 29, 2002. Each Right initially entitles
holders to buy one unit of preferred stock for $30.00. The Rights generally are
not transferable apart from the common stock and will not be exercisable unless
and until a person or group acquires or commences a tender or exchange offer to
acquire, beneficial ownership of 15% or more of our common stock. However, for
Dr. Carter, our chief executive officer, who already beneficially owns 9.3% of
our common stock, the Plan's threshold will be 20%, instead of 15%. The Rights
will expire on November 19, 2012, and may be redeemed prior thereto at $.01 per
Right under certain circumstances.

We have a limited number of authorized shares that are not issued or reserved
for issuance. If we do not increase our authorized shares, our ability to raise
capital may be hindered.

Our Certificate of Incorporation currently authorizes the issuance of
100,000,000 common shares and 5,000,000 Preferred Shares. As of July 28, 2006,
we had 62,581,122 common shares outstanding and 35,637,410 common shares
reserved for future issuance under our existing stock option plan and
outstanding options, warrants, convertible debentures, and the 2006 Purchase
Agreement with Fusion, leaving only 1,781,478 common shares available for future
use. In April 2006, our Board of Directors adopted a resolution proposing that
our Certificate of Incorporation be amended to increase the authorized number of
common shares to 200,000,000 subject to stockholder approval of such amendment.
If stockholders do not approve the amendment to our Certificate of Incorporation
at our next Annual Stockholders Meeting, it could harm our business by
preventing us from utilizing the daily purchase amounts available under the 2006
Purchase Agreement in full, raising capital from the issuance of our common
stock or delaying the payment of services via issuances of our common stock.

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 or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Our research in 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.

SELLING STOCKHOLDERS

We have registered all 23,807,453 shares of common stock covered by this
prospectus on behalf of the selling stockholders named in the table below. We
have registered the shares to permit the selling stockholders and their
respective transferees, assignees or other successors-in-interest that receive
their shares from a selling stockholder to resell the shares, from time to time,
when they deem appropriate.

The table below identifies the selling stockholders who will be offering
shares and other information regarding the beneficial ownership of the common
stock held by each of the selling stockholders as of July 26, 2006. For the
Debenture holders (the second and third stockholders listed below), the second
column lists the number of shares of common stock beneficially owned by each
selling stockholder, based on each selling stockholder's ownership of shares of
common stock, Debentures and Debenture Warrants, and assumes the conversion of
all the Debentures, the payment of all interest in stock and the exercise of all
Debenture Warrants. Because the conversion price of the Debentures and the
exercise price of the warrants are subject to adjustment for anti-dilution
protection, the interest on the Debentures may be paid in cash or common stock,
and the value attributed to any shares issued to the investors as interest (the
"Interest Shares") depends on the average closing price of the common stock
during the five consecutive business days ending on the third business day
immediately preceding the applicable interest payment date, the numbers listed
in the second column may change. For the other selling stockholders, the second
column lists the number of shares of common stock beneficially owned by the
selling stockholder as of the above date, based on each selling stockholder's
ownership of shares of common stock, and, except as set forth in the relevant
footnotes, does not assume the conversion of any of the Debentures, the exercise
of any warrants or the payment of any interest on the Debentures in the form of
common stock rather than cash.

The third column lists each selling stockholder's portion, based on
agreements with us, of the 23,807,453 shares of common stock being offered by
this prospectus. With regard to the Debenture holders, the number of shares
being offered by this prospectus was determined in accordance with the terms of
the registration rights agreements with them, in which we agreed to register the
resale of 135% of (w) the number of shares of common stock issuable upon
conversion of the Debentures, plus (x) the number of shares of common stock
issuable upon exercise of the Debenture Warrants, plus (y) an estimate of the
number of Interest Shares that may be issued to the selling stockholders as
interest payments on the Debentures and assuming interest is paid exclusively in
Interest Shares over the full term of the Debentures, rather than in cash. As we
stated above, the number of shares that will actually be issued may be more or
less than the 23,807,453 shares being offered by this prospectus.

Fusion Capital may not purchase shares of our common stock under the
common stock purchase agreement if Fusion Capital, together with its affiliates,
would beneficially own more than 9.9% of our common stock outstanding at the
time of the purchase by Fusion Capital. Under the terms of the Debentures and
the Debenture Warrants, no selling stockholder who owns any of these securities
may convert any of their Debentures or exercise any of the foregoing Warrants to
the extent that the conversion or exercise would cause the selling stockholder,
together with its affiliates, to beneficially own more than 4.99% of the shares
of our then outstanding common stock following such conversion or exercise. For
purposes of making this determination, shares of common stock issuable upon
conversion of those Debentures which have not been converted and upon exercise
of the Warrants which have not been exercised are excluded. The number of shares
offered in the third column does not reflect this limitation.

Unless otherwise indicated in the footnotes below, we believe that the
persons and entities named in the table have sole voting and investment power
with respect to all shares beneficially owned.

Any selling stockholder may sell all, some or none of its respective
shares in this offering. See "Plan of Distribution" below.

Common Stock Common Stock
Owned Prior No. of Shares Owned After The
Selling Stockholder To Offering Being Offered Offering
----------------------------------- --------------- ------------- ---------------

Fusion Capital Fund II, LLC 1,136,868(1)(2) 13,201,840 --
Portside Growth & Opportunity Fund 4,136,967 (3) 4,136,967 --
Leonardo L.P. 3,933,901 (4) 3,933,901 --
Mid South Capital, LLC 25,000 (5) 25,000 --
Windward Capital Advisors, LLC 212,292 (6) 212,292 --
HefCap Holdings, LLC 212,292 (7) 212,292 --
Baxter Capital Advisors, Inc. 30,000 (8) 30,000 --
CEOCast, Inc. 20,000 (9) 20,000 --
Christopher Chipman 30,000(10) 30,000 --
Fried Epstein & Rettig LLP 5,000(11) 5,000 --
Business Asia Consultants, Inc. 17,959(12) 17,959 --
JMBL, LTD 75,000(13) 75,000 --
The Investor Relations Group 84,000(14) 84,000 --
William Mason 131,066(15) 41,666 89,400
W. Barry McDonald 131,067(15) 41,667 89,400
Wayne Pambianchi 131,067(15) 41,667 89,400
Gordon Ramseier 131,066(15) 41,666 89,400
Daniel Tripodi 131,067(15) 41,667 89,400
Michael Burrows 690,000(16) 150,000 540,000
UBS O'Connor LLC 30,000(17) 30,000 --
Kingsbridge Capital Ltd. 28,846(18) 28,846 --
Fenmore Holdings 36,058(19) 36,058 --
Smithfield Fiduciary, LLC 72,115(20) 72,115 --
Spectra Investments, LLC 36,058(21) 36,058 --
Gemini Master Fund, Ltd. 7,211(22) 7,211 --
Provident Premier Master Fund, Ltd. 360,058(23) 360,058 --
Asset Managers International 188,461(24) 188,461 --
JMG Capital Partners, LP 37,116(25) 37,116 --
JMG Triton Off shore Fund, Ltd. 72,116(26) 72,116 --
Winton Capital Holdings, Ltd. 60,000(27) 60,000 --
Iroquois Capital, LP 57,692(28) 57,692 --
Jefferies & Company, Inc. 150,480(29) 150,480 --
Global Fluency 6,900(30) 6,900 --
Sage Healthcare Advisors 10,000(31) 10,000 --
Stem Cell Innovations, Inc. 250,000(32) 250,000 --
Paul Griffin 61,758 61,758 --

(1) As of the date hereof, 321,751 shares of our common stock have been
acquired by Fusion Capital under the common stock purchase agreement and
Fusion Capital owns an additional 815,117 shares that it purchased
pursuant to the prior common stock purchase agreement. Fusion Capital may
acquire up to an additional 12,064,972 shares under the common stock
purchase agreement, inclusive of additional Commitment Shares.

(2) Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion
Capital, are deemed to be beneficial owners of all of the shares of common
stock owned by Fusion Capital. Messrs. Martin and Scheinfeld have shared
voting and investment power over the Fusion Capital shares being offered
under this prospectus.

(3) Includes (i) up to 1,048,384 shares of common stock issuable upon
conversion of the Debentures, (ii) up to 107,104 shares of common stock
issuable upon exercise of the Debenture Warrants; (iii) up to 650,000
shares of common stock issuable upon exercise of Warrants that expire in
May 2009, (iv) up to 650,000 shares of common stock issuable upon exercise
of Warrants that expire in June 2009 and (v) up to 395,257 shares of
common stock issuable upon exercise of Warrants that expire in July 2009,
and (vi) up to 288,462 shares issuable upon exercise of warrants issued in
the August 5, 2004 Private Placement. Ramius Capital Group, LLC ("Ramius
Capital") is the investment adviser of Portside Growth & Opportunity Fund
("Portside") and consequently has voting control and investment discretion
over securities held by Portside. Ramius Capital disclaims beneficial
ownership of the shares held by Portside. Peter A. Cohen, Morgan B. Stark,
Thomas W. Strauss and Jeffrey M. Solomon are the sole managing members of
C4S& Co., LLC, the sole managing member of Ramius Capital. As a result,
Messrs. Cohen, Stark, Strauss and Solomon may be considered beneficial
owners of any shares deemed to be beneficially owned by Ramius Capital.
Messrs. Cohen, Stark, Strauss and Solomon disclaim beneficial ownership of
these shares.

(4) Represents (i) up to 1,100,848 shares of common stock issuable upon
conversion of the Debentures, (ii) up to 117,896 shares of common stock
issuable upon exercise of the Debenture Warrants; (iii) up to 1,300,000
shares of common stock issuable upon exercise of Warrants that expire in
May 2009, and (iv) up to 395,257 shares of common stock issuable upon
exercise of Warrants that expire in July 2009. Angelo, Gordon & Co., L.P.
("Angelo, Gordon") is the sole director of the general partner of
Leonardo, L.P. ("Leonardo") and consequently has voting control and
investment discretion over securities held by Leonardo. Angelo, Gordon
disclaims beneficial ownership of the shares held by Leonardo. Mr. John M.
Angelo, the Chief Executive Officer of Angelo, Gordon, and Mr. Michael L.
Gordon, the Chief Operating Officer of Angelo, Gordon, are the sole
general partners of AG Partners, L.P., the sole general partner of Angelo,
Gordon. As a result, Messrs. Angelo and Gordon may be considered
beneficial owners of any shares deemed to be beneficially owned by Angelo,
Gordon. Messrs. Angelo and Gordon disclaim beneficial ownership of these
shares.

(5) Represents up to 25,000 shares of common stock issuable upon exercise of
warrants owned by Mid South Capital which are exercisable at a price of
$3.00 per share. Mark Hill and Jack Magerson are the principals of Mid
South Capital and are therefore considered the beneficial owner of these
securities.

(6) H. David Coherd is the sole member of Windward Capital Advisors, LLC.
Accordingly, the shares beneficially owned by Windward Capital are deemed
to be beneficially owned by this selling stockholder. Shares owned and
offered include up to 212,292 shares of common stock issuable upon
exercise of warrants of which (i) 33,750 are exercisable at a price of
$2.57 per share, (ii) 91,667 are exercisable at a price of $2.50 per
share, (iii) 16,875 are exercisable at a price if $2.57 per share, and
(iv) 15,000 are exercisable at a price of $3.04 per share, and (v) 25,000
are exercisable at a price of $4.07 per share.

(7) Robert Rosenstein is the sole member of Hefcap Holdings, LLC. Accordingly,
the shares beneficially owned by Hefcap Holdings are deemed to be
beneficially owned by this selling stockholder. In addition, shares owned
and offered include up to 212,292 shares of common stock issuable upon
exercise of warrants of which (i) 33,750 are exercisable at a price of
$2.57 per share, (ii) 91,667 are exercisable at a price of $2.50 per
share, (iii) 16,875 are exercisable at a price if $2.57 per share, (iv)
30,000 are exercisable at a price of $3.04 per share, and (v) 15,000 are
exercisable at a price of $4.07 per share.

(8) Peter Baxter is the president of Baxter Capital Advisors, Inc. Shares
owned and offered include up to 30,000 shares of common stock issuable
upon exercise of warrants of which (i) 11,250 are exercisable at a price
of $2.57 per share, (ii) 8,750 are exercisable at a price if $2.42 per
share, and (iii) 10,000 are exercisable at a price of $3.04 per share.

(9) Messrs. Ken Sgro and Rachel Glicksman share voting control and investment
discretion over the shares. CEOCast provides investor relations consulting
services to us.

(10) Represents (i) 5,000 shares issuable upon exercise of warrants exercisable
at $3.91 per shares expiring on February 28, 2009, (ii) 5,000 shares
issuable upon exercise of warrants exercisable at $4.20 per shares
expiring on January 31, 2009, (iii) 5,000 shares issuable upon the
exercise of warrants at $3.51 per share expiring March 31, 2009, (iv)
5,000 shares issuable upon the exercise of warrants at $2.70 expiring
January 1, 2011, (v) 5,000 shares issuable upon the exercise of warrants
at $3.60 expiring April 1, 2011 and (vi) 5,000 shares issuable upon the
exercise of warrants at $2.54 expiring July 1, 2011. Mr. Chipman provides
us with financial and accounting consulting services.

(11) Represents shares issued to Fried Epstein & Rettig LLP, a law firm, for
legal services provided to us. The three named partners share voting
control and investment discretion over the shares.

(12) Business Asia Consultants, Inc. provides consulting services related to
obtaining distribution channels in China. It is owned by Lawrence Kronick.

(13) Jeffrey M. Busch, the principal of JMBL LLC, is deemed to be the
beneficial owner of all shares of common stock owned by JMBL LLC. Mr.
Busch has voting and investment power over the JMBL LLC shares being
offered under this prospectus.

(14) Dian Griesel is the owner of the Investor Relations Group and is deemed to
be the beneficial owner of all common stock owned by the Investors
Relations Group.

(15) Both columns include shares issuable upon the exercise of outstanding
options exercisable at $1.55 per share expiring February 14, 2015. The
first column also includes 89,400 shares owned by The Sage Group. The
principals of The Sage Group are Wayne Pambianchi, Daniel Tripodi, W.
Barry McDonald, Gordon Ramseier and R. Douglas Hulse. The foregoing
securities were issued to The Sage Group and its principals for services
provided to us. Mr. Hulse is our President.

(16) Consists of shares issuable upon exercise of 150,000 options issued in
2005 to purchase common stock at $2.00 per share expiring September 23,
2015. Mr. Burrows is a former member of the Board of Directors ad serves
as an advisor to the Company from time to time. Also includes 540,000
shares of common stock of which Mr. Burrows is the beneficial owner.

(17) Shares offered and owned includes 30,000 shares issuable upon exercise of
warrants issued in the Private Placement. The shares are beneficially
owned by O'Connor PIPES Corporate Strategies Master Ltd. UBS O'Connor LLC
is the investment manager for O'Connor PIPES Corporate Strategies Master
Ltd. UBS O'Connor LLC is a wholly owned subsidiary of UBS AG, which is
traded on the NYSE.

(18) Shares offered and owned includes 28,846 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Adam Gurney, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the selling
stockholder.

(19) Shares offered and owned includes 36,058 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Mark Nordlicht, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the selling
stockholder. Mr. Nordlicht disclaims beneficial ownership of the
securities held by Fennmore.

(20) Shares offered and owned includes 72,115 shares issuable upon exercise of
warrants issued in the Private Placement. Highbridge Capital Management,
LLC is the trading manager of Smithfield Fiduciary LLC and consequently
has voting control and investment discretion over securities held by
Smithfield. Glenn Dubin and Henry Swieca control Highbridge. Each of
Highbridge, Glenn Dubin and Henry Swieca disclaims beneficial ownership of
the securities held by Smithfield.

(21) Shares offered and owned includes 36,058 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Greg Porges, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the selling
stockholder. Mr. Porges disclaims beneficial ownership of the securities
held by Spectra.

(22) Shares offered and owned includes 7,211 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned and
offered excludes shares beneficially owned by Provident Premier Master
Fund, Ltd. The Investment Manager of Gemini Master Fund, Ltd. is Gemini
Investment Strategies, LLC. The Managing Members of Gemini Investment
Strategies, LLC are Messrs. Steven W. Winters and Mr. Richard S. Yakomin.
As such, Messrs. Winters and Yakomin may be deemed beneficial owners of
the shares. Messrs. Winters and Yakomin, however, disclaim beneficial
ownership of such shares.

(23) Shares offered and owned includes 360,058 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned and
offered excludes shares beneficially owned by Gemini Master Fund, Ltd. The
Investment Advisor to Provident Premier Master Fund, Ltd. is Gemini
Investment Strategies, LLC. The Managing Members of Gemini Investment
Strategies, LLC are Messrs. Steven W. Winters and Mr. Richard S. Yakomin.
As such, Messrs. Winters and Yakomin may be deemed beneficial owners of
the shares. Messrs. Winters and Yakomin, however, disclaim beneficial
ownership of such shares.

(24) Shares offered and owned includes 188,461 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Adam Benowitz, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the selling
stockholder. Mr. Benowitz disclaims beneficial ownership of the securities
held by Asset Managers International.

(25) Shares offered and owned includes 37,116 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned and
offered excludes shares beneficially owned by JMG Triton Offshore Fund,
Ltd. JMG Capital Partners, L.P. ("JMG Partners") is a California limited
partnership. Its general partner is JMG Capital Management, LLC (the
"Manager"), a Delaware limited liability company and an investment adviser
registered with the Securities and Exchange Commission. The Manager has
voting and dispositive power over JMG Partners' investments, including the
Registrable Securities. The equity interests of the Manager are owned by
JMG Capital Management, Inc., ("JMG Capital") a Delaware corporation, and
Asset Alliance Holding Corp., a Delaware corporation. Jonathan M. Glaser
is the Executive Officer and Director of JMG Capital and has sole
investment discretion over JMG Partners' portfolio holdings.

(26) Shares offered and owned includes 72,116 shares issuable upon exercise of
warrants issued in the Private Placement. Shares listed as owned and
offered excludes shares beneficially owned by JMG Capital Partners, L.P.
JMG Triton Offshore Fund, Ltd. (The "Fund") is an international business
company under the laws of the British Virgin Islands. The Fund's
investment manager is Pacific Assets Management LLC, a Delaware limited
liability company (the "Manager"). The Manager is an investment adviser
registered with the Securities and Exchange Commission and has voting and
dispositive power over the Fund's investments, including the Registrable
Securities. The equity interests of the Manager are owned by Pacific
Capital Management, Inc., a Delaware company ("the Pacific") and Asset
Alliance Holding Corp., a Delaware company. The equity interests of
Pacific are owned by Messrs. Roger Richter, Jonathan M. Glaser and Daniel
A. David and Messrs. Glaser and Richter have sole investment discretion
over the fund's portfolio holdings.

(27) Shares offered and owned includes 60,000 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Marc Belzberg, as a natural person with voting and investment
control over shares of our common stock beneficially owned by the selling
stockholder.

(28) Shares offered and owned includes 57,692 shares issuable upon exercise of
warrants issued in the Private Placement. The selling stockholder has
identified Joshua Silverman, as a natural person with voting and
investment control over shares of our common stock beneficially owned by
the selling stockholder. Mr. Silverman disclaims beneficial ownership of
the shares held by Iroquois Capital LP.

(29) Represents 150,480 shares issuable upon exercise of immediately
exercisable warrants. Jefferies acted as the sole placement agent in the
financing and is a registered broker-dealer. Based upon representations
made to us by Jefferies, the warrant to purchase common stock were
acquired in the ordinary course of its business for its own account for
investment purposes only and not with a view to, or for, distributing the
warrant or the shares of common stock issuable upon exercise thereof.
Jefferies does not have any agreements, plans or understandings, directly
or indirectly, with any person or entity to distribute the warrant to
purchase common stock or the shares of common stock issuable upon exercise
of the warrant.

(30) Donavan Neale-May is the owner of Global Fluency and is considered to be
the beneficial owner of all common stock owned by Global Fluency.

(31) Reflects 10,000 warrants to purchase common stock at $2.46 per share
expiring December 8, 2010.

(32) Stem Cell Innovations, Inc. was formerly known as Interferon Sciences,
Inc. James H. Kelly, the Chief Executive Officer of Stem Cell Innovations,
Inc., is a natural person with voting and investment control over shares
of our common stock beneficially owned by Stem Cell Innovations.

The Fusion Transaction

General

On April 12, 2006 we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC, pursuant to which Fusion Capital has agreed, under
certain conditions, to purchase on each trading day $100,000 of our common stock
up to an aggregate of $50.0 million over a period of approximately 25 months,
subject to earlier termination at our discretion. The purchase price of the
shares of common stock will be equal to a price based upon the future market
price of the common stock. Fusion Capital does not have the right or the
obligation to purchase shares of our common stock in the event that the price of
our common stock is less than $1.00.

The shares being offered by Fusion Capital herein include up to 12,386,723
shares of our common stock issued and issuable pursuant to the common stock
purchase agreement. In the event we elect to issue more than 12,386,723 shares,
we will be required to: (i) file a new registration statement and have it
declared effective by the SEC and (ii) seek and obtain stockholder approval in
order to be in compliance with American Stock Exchange rules. In addition,
Fusion Capital cannot purchase more than 26,743,221 shares, exclusive of
Commitment Shares under the common stock purchase agreement. The number of
shares ultimately offered for sale by Fusion Capital is dependent upon the
number of shares purchased by Fusion Capital under the common stock purchase
agreement.

Purchase Of Shares Under The Common Stock Purchase Agreement

Under the common stock purchase agreement, on each trading day Fusion
Capital is obligated to purchase a specified dollar amount of our common stock.
Subject to our right to suspend such purchases at any time, and our right to
terminate the agreement with Fusion Capital at any time, each as described
below, Fusion Capital shall purchase on each trading day during the term of the
agreement $100,000 of our common stock. This daily purchase amount may be
decreased by us at any time. We also have the right to increase the daily
purchase amount at any time, provided however, we may not increase the daily
purchase amount above $100,000 unless our stock price exceeds $1.90 per share by
at least $0.10 per share for five consecutive trading days.

The purchase price per share is equal to the lesser of:

o the lowest sale price of our common stock on the purchase
date; or

o the average of the three lowest closing sale prices of our
common stock during the twelve consecutive trading days prior
to the date of a purchase by Fusion Capital.

The purchase price will be adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction.
Fusion Capital may not purchase shares of our common stock under the common
stock purchase agreement if Fusion Capital, together with its affiliates, would
beneficially own more than 9.9% of our common stock outstanding at the time of
the purchase by Fusion Capital. Fusion Capital has the right at any time to sell
any shares purchased under the common stock purchase agreement which would allow
it to avoid the 9.9% limitation. Therefore, we do not believe that Fusion
Capital will ever reach the 9.9% limitation.

The following table sets forth the amount of proceeds we would receive
from Fusion Capital from the sale of shares of our common stock offered by this
prospectus at varying purchase prices. It is for illustrative purposes only.
Actual results will differ because it assumes that purchases will be made at a
constant price.

Percentage of
Shares Proceeds from the
Outstanding Sale of Shares to
Number of Shares After Giving Fusion Capital
to be Issued Effect to the Under the Common
Assumed Average if Full Issuance to Stock Purchase
Purchase Price Purchase(1) Fusion Capital(2) Agreement
--------------- ---------------- ----------------- -----------------
$1.00 11,743,221 16.5% $11,743,221
$2.00 11,743,221 16.5% $23,486,442
$2.26(3) 11,743,221 16.5% $26,539,679
$3.00 11,743,221 16.5% $35,229,663
$4.00 11,743,221 16.5% $46,972,884
$4.26 11,743,221 16.5% $50,000,000
$5.00 10,000,000 13.7% $50,000,000

----------
(1) Excludes Commitment Shares issued and to be issued to Fusion Capital (see
"Commitment Shares Issued to Fusion Capital" below).

(2) Based on 62,581,122 shares outstanding as of July 28, 2006 which includes
the issuance to Fusion Capital of 321,751 shares as a partial commitment
fee. Also includes the balance of Commitment Shares to be issued and the
number of shares issuable at the corresponding assumed purchase price set
forth in the adjacent column.

(3) Closing sale price of our common stock on July 28, 2006.

In connection with entering into the agreement, we authorized the sale to
Fusion Capital of up to 12,386,723 shares of our common stock and issued to
Fusion Capital 321,751 Commitment Shares. We estimate that we will issue no more
than 12,064,972 shares to Fusion Capital under the common stock purchase
agreement (inclusive of additional Commitment Shares), all of which are included
in this offering. We have the right to terminate the agreement without any
payment or liability to Fusion Capital at any time, including in the event that
all 12,064,972 shares are sold to Fusion Capital under the common stock purchase
agreement. In the event we elect to issue more than the 12,386,723 shares
offered hereby, we will be required to: (i) file a new registration statement
and have it declared effective by the SEC and (ii) seek and obtain stockholder
approval in order to be in compliance with American Stock Exchange rules. In
this regard, at our 2005 Annual Meeting of Stockholders scheduled for September
2006, we are seeking stockholder approval of the issuance of more than 12,
386,723 shares under the Purchase Agreement. Notwithstanding the foregoing,
Fusion Capital cannot purchase more than 27,386,723, inclusive of Commitment
Shares under the common stock purchase agreement.

Minimum Purchase Price

Under the common stock purchase agreement, we have set a minimum purchase
price ("floor price") of $1.00. Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock in the event that the
purchase price would be less than the floor price.

Our Right To Suspend Purchases

We have the unconditional right to suspend purchases at any time for any
reason effective upon one trading day's notice. Any suspension would remain in
effect until our revocation of the suspension.

Our Right To Increase and Decrease the Amount to be Purchased

Under the common stock purchase agreement, Fusion Capital has agreed to
purchase on each trading day during a period of approximately 25 months,
$100,000 of our common stock up to an aggregate of $50.0 million. We have the
unconditional right to decrease the daily amount to be purchased by Fusion
Capital at any time for any reason effective upon one trading day's notice.

In our discretion, we may elect to sell more of our common stock to Fusion
Capital than the minimum daily amount. First, in respect of the daily purchase
amount, we have the right to increase the daily purchase amount as the market
price of our common stock increases. Specifically, for every $0.10 increase in
Threshold Price (as defined below) above $1.90, we have the right to increase
the daily purchase amount by up to an additional $10,000. For example, if the
Threshold Price is $2.20 we would have the right to increase the daily purchase
amount by up to $30,000 to an aggregate of $130,000. The "Threshold Price" is
the lowest sale price of our common stock during the five trading days
immediately preceding our notice to Fusion Capital to increase the daily
purchase amount. If at any time during any trading day the sale price of our
common stock is below the Threshold Price, the applicable increase in the daily
purchase amount will be void.

In addition to the daily purchase amount, we may elect to require Fusion
Capital to purchase on any single trading day our shares in an amount up to
$250,000, provided that our share price is above $1.50 during the five trading
days prior thereto. The price at which such shares would be purchased will be
the lower of the lowest Sale Price of our common stock on the trading day that
Fusion Capital receives such purchase notice from us, or the lowest Purchase
Price (as defined above) during the previous ten trading days prior to the date
that such purchase notice was received by Fusion Capital. We may increase this
amount as follows:

Share Price Increased Daily Amount
----------- ----------------------
$3.00 $ 500,000
$5.00 $1,000,000
$8.00 $2,000,000

We may deliver multiple purchase notices; however at least five trading days
must have passed since the most recent non-daily purchase was completed.

Events of Default

Generally, Fusion Capital may terminate the common stock purchase
agreement without any liability or payment to us upon the occurrence of any of
the following events of default:

o the effectiveness of the registration statement of which this
prospectus is a part lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to
Fusion Capital for sale of our common stock offered hereby and
such lapse or unavailability continues for a period of ten
consecutive trading days or for more than an aggregate of 30
trading days in any 365-day period;

o suspension by our principal market of our common stock from
trading for a period of three consecutive trading days;

o the de-listing of our common stock from the American Stock
Exchange, our principal market, provided our common stock is
not immediately thereafter trading on the Nasdaq National
Market, the Nasdaq SmallCap Market or the New York Stock
Exchange or the OTC Bulleting Board;

o the transfer agent's failure for five trading days to issue to
Fusion Capital shares of our common stock which Fusion Capital
is entitled to under the common stock purchase agreement;

o any material breach of the representations or warranties or
covenants contained in the common stock purchase agreement or
any related agreements which has or which could have a
material adverse affect on us subject to a cure period of ten
trading days;

o any participation or threatened participation in insolvency or
bankruptcy proceedings by or against us;

o a material adverse change in our business, properties,
operations, financial condition or results of operations; or

o the issuance of an aggregate of 12,386,723 shares to Fusion
Capital under our agreement and, prior to Fusion Capital's
determination to terminate the agreement, we fail to obtain
the requisite stockholder approval.

Our Termination Rights

We have the unconditional right at any time for any reason to give notice
to Fusion Capital terminating the common stock purchase agreement. Such notice
shall be effective one trading day after Fusion Capital receives such notice.

Effect of Performance of the Common Stock Purchase Agreement on Our Stockholders

All shares registered in this offering will be freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to 25 months from the date of this prospectus. The sale of a significant
amount of shares registered in this offering at any given time could cause the
trading price of our common stock to decline and to be highly volatile. Fusion
Capital may ultimately purchase all of the 12,386,723 shares of common stock
registered in this offering, and it may sell some, none or all of the shares of
common stock it acquires upon purchase. Therefore, the purchases under the
common stock purchase agreement may result in substantial dilution to the
interests of other holders of our common stock. However, we have the right at
any time for any reason to: (1) reduce the daily purchase amount, (2) suspend
purchases of the common stock by Fusion Capital and (3) terminate the common
stock purchase agreement.

No Short-Selling or Hedging by Fusion Capital

Fusion Capital has agreed that neither it nor any of its affiliates shall
engage in any direct or indirect short-selling or hedging of our common stock
during any time prior to the termination of the common stock purchase agreement.

Commitment Shares Issued to Fusion Capital

Under the terms of the common stock purchase agreement Fusion Capital has
received 321,751 shares of our common stock as a partial commitment fee and is
entitled to receive up to an additional 321,751 commitment shares (collectively,
the "Commitment Shares"). These additional commitment shares will be issued in
an amount equal to the product of (x) 321,751 and (y) the Purchase Amount
Fraction. The "Purchase Amount Fraction" means a fraction, the numerator of
which is the purchase price at which the shares are being purchased by Fusion
Capital and the denominator of which is $50,000,000. Unless an event of default
occurs these shares must be held by Fusion Capital until 25 months from the date
of the common stock purchase agreement or the date the common stock purchase
agreement is terminated or in the event that we cannot commence sales of stock
to Fusion Capital prior to August 31, 2006.

No Variable Priced Financings

Until the termination of the common stock purchase agreement, we have
agreed not to issue, or enter into any agreement with respect to the issuance
of, any variable priced equity or variable priced equity-like securities unless
we have obtained Fusion Capital's prior written consent.

Repurchase of Royalty Rights from Stem Cell
Innovations, Inc. (formerly, Interferon Sciences, Inc.)

On July 26, 2006 we entered into an agreement with Stem Cell Innovations,
Inc. ("SCI") to acquire its royalty interest in the sale of products containing
natural interferon ("Interferon Products") in exchange for 250,000 shares of our
common stock. We originally acquired the rights to manufacture and market
Alferon N Injections(R) and related interferon products from SCI (then known as
Interferon Sciences, Inc.) in 2003 subject to the terms of a 6% royalty on sales
of Interferon Products. Upon execution of this agreement, we terminated this
royalty interest. Pursuant to our agreement with SCI, we have registered herein
the 250,000 shares issued to SCI for public resale.

BUSINESS

Our Annual Report on Form 10-K/A and Form 10-K/A-2 for the fiscal year
ended December 31, 2005, and our Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2006, incorporated by reference into this Prospectus,
contain information about us, including audited financial statements for our
fiscal year ended December 31, 2005 and unaudited financial statements for our
fiscal quarter ended March 31, 2006. Please refer to these reports for
additional information.

PLAN OF DISTRIBUTION

Selling Stockholders other than Fusion Capital

The following Plan of distribution relates to all selling stockholders
other than Fusion Capital.

The common stock offered by this prospectus is being offered by the
selling stockholders. The selling stockholders may sell their shares of common
stock from time to time in various ways and at various prices. The shares may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions that may involve
crosses or block transactions. Some of the methods by which the selling
stockholders may sell the shares include:

o on any national securities exchange or quotation service on which the
shares may be listed or quoted at the time of sale;

o in the over-the-counter market;

o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

o through the writing of options, whether such options are listed on an
options exchange or otherwise;

o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;

o privately negotiated transactions;

o block trades in which the broker or dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;

o purchases by a broker or dealer as principal and resale by that broker or
dealer for the selling stockholder's account under this prospectus;

o sales under Rule 144 rather than by using this prospectus;

o through the settlement of short sales;

o a combination of any of these methods of sale; or

o any other legally permitted method.

In connection with sales of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers, which may
in turn engage in short sales of the shares in the course of hedging in
positions they assume. The selling stockholders may also sell shares short and
deliver shares to close out short positions, provided that the selling
stockholders may not close out short positions entered into prior to the
effective date of the registration statement of which this prospectus is a part
with any shares included in this prospectus. The selling stockholders may also
pledge their shares as collateral for a margin loan under their customer
agreements with their brokers. If there is a default by the selling
stockholders, the brokers may offer and sell the pledged shares from time to
time under this prospectus or an amendment to this prospectus under Rule
424(b)(3) or other applicable provisions of the Securities Act amending the list
of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus.

Brokers or dealers may receive commissions or discounts from the selling
stockholders (or, if the broker-dealer acts as agent for the purchaser of the
shares, from that purchaser) in amounts to be negotiated. These commissions may
exceed those customary in the types of transactions involved.

We cannot estimate at the present time the amount of commissions or
discounts, if any, that will be paid by the selling stockholders in connection
with sales of the shares.

The selling stockholders and any broker-dealers or agents that participate
with the selling stockholders in sales of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In that event, any commissions received by the broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The selling
stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of the shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling stockholders. In
addition, each of the selling stockholders who is a registered broker-dealer or
is affiliated with a registered broker-dealer has advised us that:

o it purchased the shares in the ordinary course of business; and

o at the time of the purchase of the shares to be resold, it had no
agreements or understandings, directly or indirectly, with any person to
distribute the shares.

Under the securities laws of certain states, the shares may be sold in
those states only through registered or licensed broker-dealers. In addition,
the shares may not be sold unless they have been registered or qualified for
sale in the relevant state or unless they qualify for an exemption from
registration or qualification.

We do not know whether any selling stockholder will sell any or all of the
shares registered by the registration statement of which this prospectus forms a
part.

We have agreed to pay all fees and expenses incident to the registration
of the shares, including certain fees and disbursements of counsel to certain of
the selling stockholders. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.

Certain of the selling stockholders have also agreed to indemnify us, our
directors, officers, agents and representatives against certain liabilities,
including certain liabilities under the Securities Act.

The selling stockholders and other persons participating in the
distribution of the shares offered under this prospectus are subject to the
applicable requirements of Regulation M promulgated under the Exchange Act in
connection with sales of the shares. With certain exceptions, Regulation M
precludes the selling stockholders, any affiliated purchasers, and any
broker-dealer or other person who participates in the distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution
is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that
security. All of the foregoing may affect the marketability of the shares
offered hereby this Prospectus.

We have agreed with the selling stockholders to keep the registration
statement of which this prospectus is a part effective until all the shares
registered under the registration statement have been resold.

This offering will terminate on the date that all shares offered by this
Prospectus have been sold by the selling stockholders.

Fusion Capital

The following Plan of distribution relates to all selling stockholders
other than Fusion Capital.

The common stock offered by Fusion Capital may be sold or distributed from
time to time by Fusion Capital only for cash directly to one or more purchasers
or through brokers, dealers, or underwriters who may act solely as agents at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock may be effected in one or more of the
following methods:

o ordinary brokers' transactions;

o transactions involving cross or block trades;

o through brokers, dealers or underwriters who may act solely as agents;

o "at the market" into an existing market for the common stock;

o in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;

o in privately negotiated transactions;

o any combination of the foregoing methods of sale; and

o any other method permitted pursuant to applicable law.

In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in the state or an exemption
from the registration or qualification requirement is available and complied
with.

Brokers, dealers, underwriters, or agents participating in the
distribution of the shares as agents may receive compensation in the form of
commissions, discounts, or concessions from the selling stockholder and/or
purchasers of the common stock for whom the broker-dealers may act as agent. The
compensation paid to a particular broker-dealer may be less than or in excess of
customary commissions.

Fusion Capital is an "underwriter" within the meaning of the Securities
Act of 1933. Any broker-dealers or agents that are involved in selling the
shares for the selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933 in connection with such sales.

Neither we nor the selling stockholder can presently estimate the amount
of compensation that any agent will receive. We know of no existing arrangements
between the selling stockholder, any other stockholder, broker, dealer,
underwriter, or agent relating to the sale or distribution of the shares offered
by this Prospectus. At the time a particular offer of shares is made, a
prospectus supplement, if required, will be distributed that will set forth the
names of any agents, underwriters, or dealers and any compensation from the
selling stockholder, and any other required information.

We will pay all of the expenses incident to the registration, offering,
and sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers, or agents. We have also agreed to indemnify Fusion
Capital and related persons against specified liabilities, including liabilities
under the Securities Act of 1933.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.

Fusion Capital and its affiliates have agreed not to engage in any direct
or indirect short selling or hedging of our common stock during the term of the
common stock purchase agreement.

We have advised Fusion Capital that while it is engaged in a distribution
of the shares included in this Prospectus it is required to comply with
Regulation M promulgated under the Securities Exchange Act of 1934, as amended.
With certain exceptions, Regulation M precludes the selling stockholders, any
affiliated purchasers, and any broker-dealer or other person who participates in
the distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the shares offered hereby this
Prospectus.

This offering will terminate on the date that all shares offered by this
Prospectus have been sold by the selling stockholders.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of common stock
offered by the selling stockholders. However, we may receive up to $50.0 million
in proceeds from the sale of our common stock to Fusion Capital under the common
stock purchase agreement and we may receive additional proceeds from the
exercise of warrants. We intend to use such proceeds to extend our New Brunswick
facility for the production of Ampligen(R) and Alferon N Injection(R), Research
and Development and for general corporate purposes.

SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the company
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

LEGAL MATTERS

The validity of the common stock offered in this prospectus has been
passed upon for us by Silverman Sclar Shin & Byrne PLLC, 381 Park Avenue South,
Suite 1601, New York, New York 10016.

EXPERTS

The financial statements and schedule and management's report on the
effectiveness of internal control over financial reporting incorporated by
reference in this Prospectus and in the Registration Statement have been audited
by BDO Seidman, LLP, an independent registered public accounting firm, to the
extent and for the periods set forth in their reports incorporated herein by
reference, and are included in reliance upon such reports given upon the
authority of said firm as experts in auditing and accounting.

No dealer, salesman or any other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted. The
information contained in this Prospectus is current only as of this date.

TABLE OF CONTENTS

Page
----
Where you can find More information...................................... 2
Information Incorporated By Reference.................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Selling Stockholders..................................................... 22
Business................................................................. 35
Plan of Distribution..................................................... 35
Use of Proceeds.......................................................... 40
SEC Position On Indemnification For Securities Act Liabilities........... 40
Legal Matters............................................................ 40
Experts.................................................................. 40

================================================================================

23,807,453 SHARES OF
COMMON STOCK

HEMISPHERX BIOPHARMA, INC.

----------

PROSPECTUS

----------

July __, 2006

================================================================================

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

SEC Filing Fees....................................... $ 3,130
American Stock Exchange Listing Fee*.................. $45,000
Printing and Engraving Expenses*...................... $15,000
Accounting Fees and Expenses*......................... $15,000
Legal Fees and Expenses*.............................. $15,000
Transfer Agent and Registrar Fees*.................... $ 1,500
Miscellaneous*........................................ $ 1,370
Total Expenses*...................................... $96,000

----------
* Estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Amended and Restated Certificate of Incorporation provides that
the Registrant shall indemnify to the extent permitted by Delaware law any
person whom it may indemnify thereunder, including directors, officers,
employees and agents of the Registrant. Such indemnification (other than an
order by a court) shall be made by the Registrant only upon a determination that
indemnification is proper in the circumstances because the individual met the
applicable standard of conduct. Advances for such indemnification may be made
pending such determination. In addition, the Registrant's Amended and Restated
Certificate of Incorporation eliminates, to the extent permitted by Delaware
law, personal liability of directors to the Registrant and its stockholders for
monetary damages for breach of fiduciary duty as directors.

The Registrant's authority to indemnify its directors and officers is governed
by the provisions of Section 145 of the Delaware General Corporation Law, as
follows:

(a) A corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that the person's conduct was unlawful.

II-1

(b) A corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only
to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.

(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination shall
be made, with respect to a person who is a director or officer at the time
of such determination (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority
vote of such directors, even though less than a quorum, or (3) if there
are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by
the corporation in advance of the final disposition or such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses incurred by
former directors and officers and other employees and agents may be so
paid upon such terms and conditions, if any, as the corporation deems
appropriate.

(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office.

II-2

(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under this section.

(h) For purposes of this section, references to the "corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had the power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or
is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving corporation
as such person would have with respect to such constituent corporation if
its separate existence had continued.

(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan, and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee, or agent with
respect to any employee benefit plan, its participants or beneficiaries,
and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and
beneficiaries of any employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this section.

(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all actions for advancement of expenses or indemnification
brought under this section, or under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since January 1, 2003, we have issued and sold the following securities:

On March 12, 2003, we issued an aggregate of $5,426,000 in principal
amount of 6% Senior Convertible Debentures due March 2005 (the "March
Debentures") and an aggregate of 743,288 warrants to two investors in a private
placement for gross proceeds of $4,650,000.

On July 10, 2003, we issued an aggregate of $5,426,000 in principal amount
of 6% Senior Convertible Debentures due July 31, 2005 (the "July Debentures")
and an aggregate of 507,102 Warrants (the "July 2008 Warrants") to the above
investors in a private placement for aggregate gross proceeds of $4,650,000.

II-3

On June 25, 2003, we issued to each of the debenture holders a warrant
(the "June 2008 Warrant"). Each June 2008 Warrants is exercisable at any time
through December 25, 2008 to acquire an aggregate of 500,000 shares of common
stock at a price of $2.40 per share.

On October 29, 2003, we issued an aggregate of $4,142,357 in principal
amount of 6% Senior Convertible Debentures due October 31, 2005 (the "October
Debentures") and an aggregate of 410,134 warrants to two investors in a private
placement for aggregate gross proceeds of $3,550,000.

On January 26, 2004, we issued an aggregate of $4,000,000 in principal
amount of 6% Senior Convertible Debentures due January 31, 2006 (the "January
2004 Debentures"), additional investment rights to purchase an additional
$2,000,000 principal amount of January 2004 Debentures, 158,103 shares of common
stock and an aggregate of 790,514 warrants to two investors in a private
placement for aggregate gross proceeds of $4,000,000.

On May 14, 2004, in consideration for the Debenture holders' exercise of
all of the June 2008 Warrants, we issued to the holders warrants (the "May 2009
Warrants") to purchase an aggregate of 1,300,000 shares of our common stock. We
issued 1,000,000 shares and received gross proceeds of $2,400,000 from the
exercise of the June 2008 Warrants.

On July 13, 2004, in consideration for the Debenture holders' exercise of
all of the July 2003 warrants ("July 2008 Warrants") and October 2003 ("October
2008 Warrants") aggregating approximately $2,199,000 in gross proceeds, the
Company issued to these holders warrants (the "June 2009 Warrants") to purchase
an aggregate of 1,300,000 shares of common stock.

The issuance of the foregoing debentures and the warrants was deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act as transactions by an issuer not involving a public offering.

By agreement with Cardinal Securities, LLC, for general financial advisory
services and in conjunction with the private debenture placements in July and
October 2003 and in January, May and July 2004, we paid Cardinal Securities, LLC
an investment banking fee equal to 7% of the investments made by the two
Debenture holders and issued to Cardinal the following common stock purchase
warrants: (i) 112,500 exercisable at $2.57 per share; (ii) 87,500 exercisable at
$2.42 per share; and (iii) 100,000 exercisable at $3.04 per share. With regard
to the exercise of the June 2008 Warrants and issuance of the May 2009 Warrants,
Cardinal received an investment banking fee of 7%, half in cash and half in
shares. With regard to the exercise of the Additional Investment Rights, the
July 2008 and October 2008 Warrants and issuance of the July 2009 Warrants,
Cardinal received an investment banking fee of 7%, $146,980 in cash and 22,703
in shares, as well as, 50,000 warrants exercisable at $4.07. The issuance of the
shares and warrants was deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.

II-4

On March 11, 2003, we issued 427,028 shares of our common stock to
Interferon Sciences, Inc. ("ISI") as partial consideration for the acquisition
of certain assets of ISI. Pursuant to a second asset acquisition agreement with
ISI to purchase additional assets of ISI, on May 30, 2003, we issued an
aggregate of 581,761 shares to GP Strategies and the American National Red
Cross, two creditors of ISI. On March 17, 2004, pursuant to the second asset
acquisition agreement, we issued an additional 427,028 shares of our common
stock to ISI as partial consideration for the acquisition of certain assets of
ISI. The issuance of these shares was deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as a
transaction by an issuer not involving a public offering.

In September 2003, in recognition of this action as well as Dr. Carter's
prior and on-going efforts relating to product development securing critically
needed financing and the aqcuisition of a new product line, the Compensation
Committee determined that Dr. Carter be awarded bonus compensation in 2003
consisting of $196,636 and a grant of 1,450,000 stock warrants. The issuance of
these securities was deemed to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act as a transaction by an
issuer not involving a public offering.

In September, 2003, our Board of Directors approved a new compensation
plan. Each non-employee director is to be compensated in 50% cash and 50% stock
beginning on January 1, 2003. The stock compenstaion plan covers a ten year
period not to exceed 1,000,000 shares. As of June 30, 2006, an aggregate of
282,333 shares has been issued to five non-employee directors pursuant to this
plan.

On November 4, 2003, the board of directors granted 200,000 options to
Ransom Etheridge pursuant to the 1990 Stock Option Plan. The issuance of these
securities was deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

In the period of December, 2003 through July 25, 2006, we issued 253,593
shares for payment of fees due ten service providers. The issuance of these
securities was deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

On June 23, 2004, the shareholders approved the Company's 2004 Equity
Incentive Plan this plan authorizes the Board of Directors to grant
non-qualified and incentive stock options, stock appreciation rights,
restricited stock and other stock awards to officers, key employees, consultants
and advisors of the Company. A maximum of 8,000,000 shares of stock is reserved
for use under this plan. Unless sooner terminated, this equity plan will
continue in effect for 10 years. As of June 30, 2006 the Board of Directors had
authorized the grant of 3,091,022 options to the Officers, Directors and
Employees of the Company.

On August 5, 2004, the Company issued 3,617,306 shares pursuant to the
terms of a private placement consisting of 13 investors led by Jefferies
Capital, LLC. In addition, the Company issued 1,235,673 warrants in connection
with this placement. As of June 30, 2006, 135,000 of these warrants have been
exercised.

II-5

On July 8, 2005, the Company entered into a common stock purchase
agreement with Fusion Capital, LLC ("Fusion") to acquire up to $20,000,000 in
the Company's stock over a period of no more than 25 months. As of April 3,
2006, Fusion had purchased an aggregate of 8,791,838 shares for $20,000,000. The
Company issued 785,597 shares to Fusion as a commitment fee.

On December 8, 2005, the Company issued five year warrants to Sage
Healthcare LLC to purchase 10,000 shares exercisable at $2.46 per share.

On April 3, 2006, the Company issued five year options to a consultant to
purchase 5,000 shares exercisable at $3.60 per share.

On April 12, 2006, the Company entered into a second common stock purchase
agreement with Fusion in which Fusion agreed to purchase $50,000,000 of common
stock over a period of approximately 25 months. Pursuant to the terms of the
agreement, the Company agreed to register 12,386,723 shares including 643,502
commitment fee shares.

On July 3, 2006, the Company issued 61,758 shares of common stock to Paul
Griffin in exchange for the rights to certain patents and patents pending.

On July 26, 2006, the Company issued 250,000 shares to Stem Cell
Innovations, Inc. in exchange for the return of the rights to a 6% royalty on
sales of Interferon Products.

The above mentioned issuances of securities was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.

ITEM 16. EXHIBITS.

Exhibit No. Description
----------- -----------
2.1 First Asset Purchase Agreement dated March 11, 2003, by and
between the Company and ISI.(1)

2.2 Second Asset Purchase Agreement dated March 11, 2003, by and
between the Company and ISI.(1)

3.1 Amended and Restated Certificate of Incorporation of the Company,
as amended, along with Certificates of Designations.

3.1.1 Series E Preferred Stock.

3.2 By-laws of Registrant, as amended.

4.1 Specimen certificate representing our Common Stock.

II-6

4.2 Rights Agreement, dated as of November 19, 2002, between the Company
and Continental Stock Transfer & Trust Company. The Right Agreement
includes the Form of Certificate of Designation, Preferences and Rights
of the Series A Junior Participating Preferred Stock, the Form of Rights
Certificate and the Summary of the Right to Purchase Preferred Stock.(2)

4.3 Form of 6% Convertible Debenture of the Company issued in March 2003.(1)

4.4 Form of Warrant for Common Stock of the Company issued in March 2003.(1)

4.5 Form of Warrant for Common Stock of the Company issued in June 2003.(3)

4.6 Form of 6% Convertible Debenture of the Company issued in July 2003.(4)

4.7 Form of Warrant for Common Stock of the Company issued in July 2003.(4)

4.8 Form of 6% Convertible Debenture of the Company issued in October
2003.(5)

4.9 Form of Warrant for Common Stock of the Company issued in October
2003.(5)

4.10 Form of 6% Convertible Debenture of the Company issued in January
2004.(6)

4.11 Form of Warrant for Common Stock of the Company issued in January
2004.(6)

4.12 Form of Warrant for Common Stock of the Company. (9)

4.13 Amendment Agreement, effective October 6, 2005, by and among the Company
and debenture holders.(11)

4.14 Form of Series A amended 7% Convertible Debenture of the Company
(amending Debenture due October 31, 2005).(11)

4.15 Form of Series B amended 7% Convertible Debenture of the Company
(amending Debenture issued on January 26, 2004 and due
January 31, 2006).(11)
4.16 Form of Series C amended 7% Convertible Debenture of the Company
(amending Debenture issued on July 13, 2004 and due January
31, 2006).(11)

4.17 Form of Warrant issued effective October 6, 2005 for Common Stock of
the Company.(11)

5.1 Opinion of Silverman Sclar Shin & Byrne PLLC, legal counsel.*

10.1 1990 Stock Option Plan.

10.2 1992 Stock Option Plan.

10.3 1993 Employee Stock Purchase Plan.

10.4 Form of Confidentiality, Invention and Non-Compete Agreement.

10.5 Form of Clinical Research Agreement.

10.6 Form of Collaboration Agreement.

10.7 Amended and Restated Employment Agreement by and between the Company
and Dr. William A. Carter, dated as of July 1, 1993.(7)

10.8 Employment Agreement by and between the Registrant and Robert E.
Peterson, dated April 1, 2001.

10.9 License Agreement by and between the Company and The Johns Hopkins
University, dated December 31, 1980.

10.10 Technology Transfer, Patent License and Supply Agreement by and between
the Company, Pharmacia LKB Biotechnology Inc.,
Pharmacia P-L Biochemicals Inc.
and E.I. du Pont de Nemours and Company, dated November 24, 1987.

10.11 Pharmaceutical Use Agreement, by and between the Company and Temple
University, dated August 3, 1988.

II-7

10.12 Assignment and Research Support Agreement by and between the Company,
Hahnemann University and Dr. David Strayer, Dr. lsadore Brodsky and
Dr. David Gillespie, dated June 30, 1989.

10.13 Lease Agreement between the Company and Red Gate Limited Partnership,
dated November 1, 1989, relating to the Company's Rockville, Maryland
facility.

10.14 Agreement between the Company and Bioclones (Proprietary) Limited.

10.15 Amendment, dated August 3, 1995, to Agreement between the Company and
Bioclones (Proprietary) Limited (contained in Exhibit 10.14).

10.16 Licensing Agreement with Core BioTech Corp.

10.17 Licensing Agreement with BioPro Corp.

10.18 Licensing Agreement with BioAegean Corp.

10.22 Agreement with Esteve.

10.23 Agreement with Accredo (formerly Gentiva) Health Services.

10.24 Agreement with Biovail Corporation International.

10.22 Forbearance Agreement dated March 11, 2003, by and between ISI, the
American National Red Cross and the Company.(1)

10.23 Forbearance Agreement dated March 11, 2003, by and between ISI, GP
Strategies Corporation and the Company.(1)

10.24 Securities Purchase Agreement, dated March 12, 2003, by and among the
Company and the Buyers named therein.(1)

10.25 Registration Rights Agreement, dated March 12, 2003, by and among the
Company and the Buyers named therein.(1)

10.26 Securities Purchase Agreement, dated July 10, 2003, by and among the
Company and the Buyers named therein.(4)

10.27 Registration Rights Agreement, dated July 10, 2003, by and among the
Company and the Buyers named therein.(4)

10.28 Securities Purchase Agreement, dated October 29, 2003, by and among the
Company and the Buyers named therein.(5)

10.29 Registration Rights Agreement, dated October 29, 2003, by and among the
Company and the Buyers named therein.(5)

10.30 Securities Purchase Agreement, dated January 26, 2004, by and among the
Company and the Buyers named therein.(6)

10.31 Registration Rights Agreement, dated January 26, 2004, by and among the
Company and the Buyers named therein.(6)

10.32 Memorandum of Understanding with Fujisawa. (8)

10.33 Securities Purchase Agreement, dated July 30, 2004, by and among the
Company and the Purchasers named therein.(9)

10.34 Registration Rights Agreement, dated July 30, 2004, by and among the
Company and the Purchasers named therein. (9)

10.35 Agreement for services of R. Douglas Hulse, (12)

10.36 Amended and Restated Employment Agreement of Dr. William A. Carter. (10)

10.37 Engagement Agreement with Dr. William A. Carter. (10)

10.38 Amended and restated employment agreement of Dr. William A. Carter (12)

10.39 Amended and restated engagement agreement with Dr. William A.
Carter (12)

10.40 Amended and restated engagement agreement with Robert E. Peterson (12)

10.41 Engagement Agreement with Ransom W. Etheridge (12)

II-8

10.42 Change in control agreement with Dr. William A. Carter (12)

10.43 Change in control agreement with Dr. William A. Carter (12)

10.44 Change in control agreement with Robert E. Peterson (12)

10.45 Change in control agreement with Ransom Etheridge (12)

10.46 Supply Agreement with Hollister-Stier Laboratories LLC

10.47 Manufacturing and Safety Agreement with Hyaluron, Inc.

10.48 Common Stock Purchase Agreement, dated July 8, 2005, by and among the
Company and Fusion Capital.(13)

10.49 Registration Rights Agreement, dated July 8, 2005, by and among the
Company and Fusion Capital.(13)

10.48 Common Stock Purchase Agreement, dated April 12, 2006, by and among
the Company and Fusion Capital.(14)

10.49 April 19, 2006 Amendment to Common Stock Purchase Agreement by and
among the Company and Fusion Capital.

10.50 July 21, 2006 Letter Amendment to Common Stock Purchase Agreement by
and among the Company and Fusion Capital.

10.51 Registration Rights Agreement, dated April 12, 2006, by and among the
Company and Fusion Capital.(14)

10.52 Royalty Purchase Agreement with Stem Cell Innovations, Inc.

21 Subsidiaries of the Registrant.

23.1 Consent of BDO Seidman, LLP.

23.2 Consent of Silverman Sclar Shin & Byrne PLLC, legal counsel (included
in Exhibit 5.1).

24.1 Powers of Attorney (included in Signature Pages to this Registration
Statement on Form S-1).

----------
* To be filed by amendment.

(1) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated March 12, 2003
and is hereby incorporated by reference.

(2) Filed with the Securities and Exchange Commission on November 20, 2002 as
an exhibit to the Company's Registration Statement on Form 8-A (No.
0-27072) and is hereby incorporated by reference.

(3) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated June 27, 2003 and
is hereby incorporated by reference.

(4) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated July 14, 2003 and
is hereby incorporated by reference.

II-9

(5) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated October 30, 2003
and is hereby incorporated by reference.

(6) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated January 27, 2004
and is hereby incorporated by reference.

(7) Filed with the Securities and Exchange Commission as an exhibit to the
Company's quarterly report on Form 10-Q (No. 1-13441) for the period ended
September 30, 2001 and is hereby incorporated by reference.

(8) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Form S-1 Registration Statement (No. 333-113796) and is hereby
incorporated by reference.

(9) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated August 6, 2004
and is hereby incorporated by reference.

(10) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated September 15,
2004 and is hereby incorporated by reference.

(11) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K/A-1 (No. 1-13441) filed on October
28, 2005 and is hereby incorporated by reference.

(12) Filed with the Securities and Exchange Commission as an exhibit to the
Company's annual report on Form 10-K (No. 1-13441) for the year ended
December 31, 2004 and is hereby incorporated by reference.

(13) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated September 15,
2005 and is hereby incorporated by reference.

(14) Filed with the Securities and Exchange Commission as an exhibit to the
Company's Current Report on Form 8-K (No. 1-13441) dated April 12, 2006
and is hereby incorporated by reference.

II-10

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to any plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

4. That, for the purpose of determining liability under the Securities Act
of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.

5. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, and will be governed by the final adjudication of such issue.

II-11

SIGNATURES

Pursuant to the requirement of the Securities Act of 1933, this Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Philadelphia, Commonwealth of Pennsylvania, on the 31
day of July, 2006.

HEMISPHERX BIOPHARMA, INC.
(Registrant)

By: /s/ William A. Carter
------------------------------------
William A. Carter, M.D.,
Chief Executive Officer

II-12

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the dates indicated.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints William A. Carter acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person in his name, place and stead, in any and all capacities, in
connection with the Registrant's registration statement on Form S-1 under the
Securities Act of 1933, including, without limiting the generality of the
foregoing, to sign the registration statement in the name and on behalf of the
Registrant or on behalf of the undersigned as a director or officer of the
Registrant, and any and all amendments or supplements to the registration
statement, including any and all stickers and post-effective amendments to the
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities self-regulatory
body, granting unto said attorney-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.

Signature Title Date
-------------------------------- ---------------------------------------------- -------------

/s/ William A. Carter
------------------------------- Chairman of the Board, Chief Executive Officer July 31, 2006
William A. Carter, M.D. (Principal Executive) and Director

/s/ Richard C. Piani
------------------------------- Director July 28, 2006
Richard C. Piani

/s/ Robert E. Peterson
-------------------------------
Robert E. Peterson Chief Financial Officer and Chief Accounting July 31, 2006
Officer

/s/ Ransom W. Etheridge
------------------------------- Secretary, General Counsel And Director
Ransom W. Etheridge July 28, 2006

/s/ William M. Mitchell
------------------------------- Director July 27, 2006
William M. Mitchell, M.D., Ph.D.

/s/ Steven D. Spence
------------------------------- Director July 28, 2006
Steven D. Spence

/s/ Iraj-Eqhbal Kiani
------------------------------- Director July 29, 2006
Iraj-Eqhbal Kiani, M.D.

II-13

Hemispherx Biopharma, Inc.
Form S-1
Index to Exhibits

Exhibit No. Description
----------- ------------
21 Subsidiaries of the Registrant.

23.1 Consent of BDO Seidman, LLP, independent registered public
accounting firm.