The impact on the Company’s results of operations of recording equity based compensation for the ninethree months ended September 30, 2007March 31, 2008 and 20082009 was to increase general and administrative expenses by approximately $2,262,000$230,000 and $466,000, respectively,$18,000 respectively.  However, there was no impact on basic and reducefully diluted earnings per share by $.03 and $.01, respectively.share.

No investment securities were pledged to secure public funds at DecemberMarch 31, 2007.

The Company has been using the proceeds from this financing to fund operating expenses and infrastructure growth including manufacturing, regulatory compliance and market development.development with regards to the FDA approval process of Ampligen®.

The aggregate Incentive Rights are rights for employees to receive Company shares and had prices ranging from $0.13 to $0.25 based on the average daily closing prices of the Company shares on the NYSE Amex.  These Incentive Rights are issued monthly in a format consistent with the Employee Wages or Hours Reduction Program.  An aggregate 1,536,777 of Incentive Rights have been accumulated by employees as of March 31, 2009 with an exercise priceapproximate value of $2.20, expire in 10 years, vest immediately and recorded as General and Administrative Expenses. The Company utilized the Black-Scholes Pricing Model to fair value the stock options and recorded approximately $255,000$922,000 as equity based compensation in the nine months ended September 30, 2008. These options replaced previously issued options that expired unexercised.

Certain statements in this document 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,""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 report 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 report. 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.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®.  The commercial focus for Ampligen® includes application as a treatment for Chronic Fatigue Syndrome (“CFS”) and as a vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is an FDA approved product with an indication for refractory or recurring genital warts. AlferonAlferon® LDO (Low Dose Oral) is an application currently under early stage development targeting influenza and viral diseases both as an adjuvant as well as a single entity anti-viral.

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Chronic Fatigue Syndrome (“CFS”).CFS.  In August 2004, we completed a Phase III clinical trial (“AMP 516”) treating over 230 CFS patients with Ampligen® and are presently in the registration process for a new drug application (“NDA”) with the Food and Drug Administration (“FDA”).  Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Emergency (compassionate) Cost Recovery Sales Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (AHRQ,(“AHRQ”, Agency Health Research Quality).  Ampligen®Ampligen represents the first drug in the class of RNA (nucleic acid) molecules to apply for NDA review. For an update on the filing status of our Ampligen® New Drug Application filed on October 10, 2007, see “Research and Development Costs” contained within this section below.

On July 7, 2008, the FDA accepted for review our NDA for Ampligen®, an experimental therapeutic, to treat CFS, originally submitted in October 2007. We are seeking marketing approval for the first-ever treatment for CFS. At present, only supportive, symptom-based care is available for CFS patients. The NDA for Ampligen®, whose chemical designation is poly I : poly C12U, is also the first ever accepted for review by the FDA for systemic use of a toll-like receptor therapy to treat any condition.  On February 18, 2009, we were notified by the FDA that the originally scheduled Prescription Drug User Fee Act date of February 25, 2009 has been extended to May 25, 2009.  According to the Pharmaceutical Manufacturing Association, eight (8) completely new molecular entities (“NME”) were approved by the FDA in year 2008.

The Status of our initiative for Ampligen® as an adjuvant for preventative vaccine development includes the pre-clinical studies in seasonal and pandemic influenza for intranasal administration being conducted by Japan’s National Institute for Infectious Diseases.  A three year program targeting regulatory approval for pandemic flu and seasonal flu in Japan has been funded by the Japanese Ministry of Health.  Parties to the research grant include Hemispherx, the NIID and BIKEN (operational arm of the non-profit Foundation for Microbial Disease of Osaka University).  Our agreement with BIKEN is part of a three party agreement to develop an effective influenza vaccine for Japan and utilizes the resources of the National Institute of Infectious Disease of Japan.  Our development strategy includes reproduction of preclinical studies outside Japan and completion of the three year program. It is our intentWe intend to conduct human studies in the US and other countries andAustralia to seek approval for seasonal and pandemic indications in the US and Europe for intranasal administration.  A phase II study for intramuscular administration for seasonal flu is currently beingwas conducted in Australia through the St. Vincent’s Hospital Clinical Trials CentreCentre.  The clinical data from this trial is currently being analyzed and is now fully enrolled. This clinical study isthe results are expected to be completed in December of 2008.

Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties. Over 1,000 patients have participated in the Ampligen® clinical trials representing the administration of more than 90,000 doses of this drug.

Alferon N Injection® 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® is also in clinical development for treating West Nile Virus.

Commercial sales of Alferon N Injection® were haltedsuspended in April 2008 as the current expiration date of our finished goods inventory expired in March 2008.  The FDA has declined to respond to our requests for an extension of the expiration date, therefore we consider the request to be denied.  Since our testing of the product indicates that it is not impaired and could be safely utilized, the finished goods inventory of 2,745 Alferon N Injection® 5ml vials may be used to produce approximately 11,000,000 sachets of Low Dose Oral Alferon (LDO) for future clinical trials.

Effective March 15, 2008, we ended our 100% matching of up to 6% of the 401(k) contributions provided to the account for each eligible participant.  Our 401(k) Plan contribution cost for the ninetwelve months ended September 30,December 31, 2008 is $20,421 with no companyand it is required for payment prior to the final filing of our 2008 Federal Corporate Tax filing that is projected for September 2009.  There have not been any additional matching costs by us since March 15, 2008 and none is projected regarding the plan for the remaining of calendar year 2008.2009.

Refer to “NOTE 7: RECENT ACCOUNTING PRONOUCEMENTS” under Notes To Unaudited Condensed Consolidated Financial Statements.

None.

Revenues for the three months ended September 30, 2008March 31, 2009 were $17,000$29,000 compared to revenues of $285,000$208,000 for the same period in 2007.2008.  There were no revenues related to the sale of Alferon N Injection® for this period in 20082009 versus $251,000$173,000 in 2007.2008.  Revenues from our Ampligen® cost recovery program were down $17,000$6,000 for a total of $29,000 in 2009 for the quarter as fewer patients are participating in the program.  Commercial sales of Alferon N Injection® were halted in April 2008 as the current expiration date of our finished goods inventoryFinished Goods Inventory expired in March 2008.  As a result, we have no Alferon N Injection® product to commercially sell and all $17,000 of Revenuerevenue was generated from Ampligen® cost recovery clinical treatment programs.

Major efforts of the New Brunswick manufacturing staff were redirected throughout year 2008 and to date in 2009 to the upcoming preapprovaltask of preparing our plant for FDA inspection ofpre and post approval inspections in connection with the Ampligen® program.NDA review process.

Work on the Alferon N Injection® is expected to resume in mid-2009, under the condition that adequate funding is obtained, which means that we may not have any Alferon N Injection® product commercially available until 2010.

Overall research and development costs for the three months ended September 30, 2008March 31, 2009 were $1,594,000$1,595,000 as compared to $2,740,000$1,307,000 for the same period a year ago reflecting a decreasean increase of $1,146,000$288,000 or 42%22%.  This decrease was primarily dueThe first three months of 2009’s Research and Development costs include the book value write-off expense of 21 patents that Management deemed no longer of value or material to reduced outside consulting feesfuture operations as an abandonment expense along with non-cash labor expenses which were attributed to Research and other costs related toClinical employees participating in the preparationEmployee Wage Or Hour Reduction Program (see “Liquidity and filingCapital Resources; Employee Wage Or Hours Reduction Program” below).  As an offset, Research and development expenses during the first three months of our NDA for Ampligen®.

On September 19, 2008, we executed an agreement with Lovelace Respiratory Research Institute in Albuquerque, New Mexico to perform certain animal toxic studies in support of our Ampligen® NDA.  These studies were requested by the FDA and will be done in collaboration with the resources of the New Brunswick facility.  We expect these studies to be complete in Januarymid- 2009.

The Biken arrangement was concluded in December 2007 and basically consists of Biken purchasing Ampligen® from us for use in conducting further animal studies of intranasal prototype vaccines containing antigens from influenza sub-types H1N1, H3N2 and B progressing to human studies with all programs supported by the Japanese Health Ministry.  Under the terms of the non—exclusive licensing arrangement, we will receive royalties as well as income for all Ampligen® used in the ongoing experimental work and any subsequent marketing of Ampligen® as an immuno-enhancer for flu vaccines delivered intranasally in Japan.  To date, only two or three pharmapharmaceutical companies worldwide have achieved regulatory authorizations to sell intranasally (IN)(“IN”) administered influenza vaccines versus many companies receiving approval for intramuscular vaccine delivery routes.  Safety has been paramount in developing effective treatments.  However, animal studies to date indicate Ampligen®, an experimental drug, may be safely administered intranasally.  Clinical studies (in other disorders) have built a database of more than 90,000 injections of Ampligen® when given parenterally (intravenous, or “IV”). In June 2008, Biken notified us they were accelerating their program and requestedwere shipped additional Ampligen® supplies for various preclinical vaccine studies.studies and research projects that remain in progress.  A secondary goal of the trial is to evaluate whether antibodies stimulated by the vaccine/Ampligen® combination also provide protection against H5N1, the avian influenza virus.  Since 2003, the World Health Organization (“WHO”) has confirmed 407 cases and attributed 241254 human deaths worldwide to H5N1.  Investigators from Japan’s Institute of Infectious Disease have conducted studies in animals that suggest that Ampligen® can stimulate a sufficiently broad immune response to provide cross-protection against a range of virus strains,genetic types, including H5N1.

Collaboration studies in non-human primates conducted by ViroClinics in the Netherlands suggest a potential role for AlferonAlferon® LDO as another novel therapeutic approach to viral pandemics.  Meetings with prospective partners are underway with respect to conducting clinical trials using AlferonAlferon® LDO to treat and/or prevent seasonal influenza in the Pacific Rim countries.  AlferonAlferon® LDO is now poised for clinical trials against seasonal influenza epidemics; meetings with prospective partners are ongoing to conduct clinical trials in the Pacific Rim countries and elsewhere.  The opportunity for AlferonAlferon® LDO is reinforced by new reports of severe side effects secondary to Tamiflu,Tamiflu®, the present standard of care, by both the FDA and Japanese health authorities.  Also, TamifluTamiflu® resistant strains of flu virus are now raising serious concerns on a world-wide basis.

We had approximately $7,592,000$5,541,000 in cash and cash equivalents and short-term investments at September 30, 2008.March 31, 2009. To the extent that our cash and cash equivalents and short term investments exceed our near term funding needs, we generally invest the excess cash in three to twelve month interest bearing financial instruments. We employ established conservative policies and procedures to manage any risks with respect to investment exposure.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. We place our cash and cash equivalents with what management believes to be high credit quality institutions.  At times such investments may be in excess of the FDICFederal Deposit Insurance Corporation (“FDIC”) insurance limit.

We have not entered into, and do not expect to enter into, financial instruments for trading or hedging purposes.