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

                                  FORM 10-KSB/A

                                 Amendment No. 1

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                        Commission file number 333-09349

                             AVAX TECHNOLOGIES, INC.
                 (Name of small business issuer in its charter)

                  Delaware                                13-3575874
        (State or other jurisdiction        (I.R.S. Employer Identification No.)
      of incorporation or organization)

               4520 Main Street
                  Suite 930
               Kansas City, MO                           64111
   (Address of principal executive offices)            (Zip Code)

                    Issuer's telephone number: (816) 960-1333

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.004 per share
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained herein and, to the best of the
registrant's knowledge, will not be contained in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or by any
amendment to this Form 10-KSB. |_|

The issuer's revenues for the period ended December 31, 1998 were $-0-.

As of March 3, 1999, 10,238,640 shares of the registrant's common stock, par
value $.004 per share, were outstanding. The aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the average bid and asked price of such common equity on the Nasdaq SmallCap
Market, on March 3, 1999, was $28,746,668. Shares of common stock, beneficially
owned by each executive officer and director and each person who beneficially
owns 10% or more of the outstanding shares of common stock, have been excluded,
in that such persons may be deemed to be affiliates of the Company. This
determination of affiliate status is not necessarily conclusive.

Documents incorporated by reference: The information required by Part III of
Form 10-KSB is incorporated herein by reference to the registrant's definitive
Proxy Statement relating to its 1999 Annual Meeting of Stockholders which will
be filed with the Commission within 120 days of the end of the registrant's
fiscal year.

Transitional Small Business Disclosure Format: Yes |_|   No |X|
<PAGE>

                             AVAX Technologies, Inc.

                             Index to Form 10-KSB/A

                                (Amendment No. 1)

                                     PART I                                 Page
                                                                            ----

Item  1. Description of Business...............................................1

Signatures....................................................................19
<PAGE>

            CAUTIONARY STATEMENT CONCERNING FORWARDLOOKING STATEMENTS

      In this Report, we make statements that plan for or anticipate the future.
These forward-looking statements include statements about the future of
biotechnology products and the biopharmaceutical industry, statements about our
future business plans and strategies, and most other statements that are not
historical in nature. These forward-looking statements are based on our current
expectations. You will find many of these statements in the following sections:

      o     "Description of Business--GENERAL" on page 1; and

      o     "Description of Business--RISK FACTORS" on page 12.

      Forward-looking statements may be identified by words or phrases such as
"believe," "expect," "anticipate," "should," "planned," "may," "estimated" and
"potential." The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. In order to comply with the terms
of the safe harbor, and because forward-looking statements involve future risks
and uncertainties, we have listed below a variety of factors that could cause
actual results and experience to differ materially from the anticipated results
or other expectations expressed in our forward-looking statements. These factors
might include:

      o     Uncertainty about whether our AC Vaccine(TM) technology can be
            developed to produce safe, effective and commercially viable
            products.

      o     Uncertainty about whether our products will successfully complete
            the long, complex and expensive clinical trial and regulatory
            approval process for approval of new drugs in the United States.

      o     The expenses, delays, uncertainties and complications typically
            encountered by development stage biopharmaceutical businesses, many
            of which are beyond our control.

      o     Our need to expand our limited manufacturing facilities or depend on
            third parties to manufacture and distribute our products.

      o     Our financial and development obligations and our responsibility to
            meet requisite research funding levels under our license and
            research agreements in order to protect our rights to our products
            and technologies.

      o     Our difficulty or inability to obtain or defend our patents, or
            operate without infringing upon the rights of others.

      o     Our difficulty or inability to compete with other companies,
            research institutes, hospitals and universities that are developing
            and producing products and technologies similar to ours.

      o     Our history of operating losses, our need to raise more money before
            the end of the third quarter of 2000, and the uncertainty of our
            future profitability.
<PAGE>

                             AVAX TECHNOLOGIES, INC.

                                     PART I

ITEM 1. Description of Business

GENERAL

      AVAX Technologies, Inc. ("AVAX" or the "Company"), is a development stage
biopharmaceutical company which is acquiring and developing technologies and
products for the treatment of cancer and other life-threatening diseases. The
Company is focusing its efforts primarily on the development of immunotherapies
and chemotherapies for cancer. Immunotherapy is a rapidly developing segment of
the cancer therapeutic market.

      In 1995, the Company licensed (the "TJU License") from Thomas Jefferson
University ("TJU") an issued U.S. patent and certain U.S. and foreign patent
applications covering a cancer vaccine containing a cancer patient's own
modified tumor cells, and a method for making and using that vaccine. This
technology allows the Company to produce an autologous cell vaccine (an " AC
Vaccine(TM)") that attempts to stimulate the patient's immune system to
eliminate the cancer. This technology has emerged from research conducted at TJU
and primarily involves the removal of a patient's own tumor cells, modifying
them with a small molecule known as a hapten, and reintroducing the product back
into the patient. The approach is based on the premise that a patient's immune
response to a strongly immunogenic, hapten-conjugated tumor antigen may be
followed by the development of an immune response to the unmodified tumor
antigen, somewhat analogous to the phenomenon of drug-induced autoimmune
disease. David Berd, M.D., Professor of Medicine and Clinical Oncologist at TJU
and the inventor of the AC Vaccine(TM) technology, has conducted the ongoing
clinical trials at TJU pursuant to an FDA-approved, physician-sponsored
Investigational New Drug application ("IND").

      The Company's initial AC Vaccine(TM), M-Vax(TM), is currently undergoing
physician-sponsored human clinical trials based on an experimental protocol at
TJU as an outpatient, post-surgical, adjunct therapy for the treatment of
melanoma, and is believed by the Company to be the first therapeutic cancer
vaccine to show a substantial increase in the survival rate for patients with
stage 3 melanoma. In the ongoing clinical trials at TJU, over 350 melanoma
patients have been treated post-surgically on an outpatient basis with
M-Vax(TM). In 62 patients with stage 3 melanoma in protocols in which there has
been sufficient time for long-term follow-up, the five-year survival rate is
approximately 55%. This compares with the historical and control group stage 3
survival rate of approximately 20%, and the survival rate for treatment with
high dose alpha interferon of approximately 32% in stage 3 patients who the
Company believes to be comparable to those treated with M-Vax(TM). In patients
over 50 years old treated with M-Vax(TM), the five-year survival rate was
approximately 71%. In a separate study of 16 patients with Stage 4 malignant
melanoma lung tumors, there was documented evidence of tumor shrinkage caused
solely by the vaccine. In the over 350 patients treated in studies only
relatively minor side effects, such as mild transient nausea and soreness and
swelling at the site of the application of M-Vax(TM), have been reported to
date. See "Technology Applications and Product Candidates - Clinical Trials".

      In 1998, the Company obtained from the FDA a Company-sponsored IND to
allow the Company to proceed with a multi-center clinical trial intended to
support a biologics license application. Depending upon the results of these
clinical trials, the Company intends to use the Company-sponsored clinical trial
results, along with the results of the TJU clinical trials, as the basis for
filing an application for FDA approval to market M-Vax(TM). The Company is also
pursuing strategies for commercial acceptance (including any applicable
regulatory approvals) of M-Vax and other AC Vaccine product candidates in
various foreign countries, although such strategies have not yet been finalized.

      Denial of any regulatory approvals or any significant delays in obtaining
any regulatory approvals would have a material adverse effect on the Company.
<PAGE>

      The Company also believes that the AC Vaccine(TM) technology may have
applications in the treatment of other cancers, which may include ovarian,
breast, prostate, lung, renal cell and colorectal cancers and acute myelogenous
leukemia (AML). The Company is funding the pre-clinical and initial clinical
development of this technology for certain of these indications. Accordingly, in
addition to continuing the clinical work on M-Vax(TM), the Company has also
entered into a sponsored research agreement with TJU relating to the development
of additional immunotherapies based on the AC Vaccine(TM) technology. For
example, the Company is treating post-surgical stage 3 patients in its Phase
I/II clinical trial of O-Vax(TM), its AC Vaccine(TM) for ovarian cancer. This
trial is being conducted at TJU under the direction of Dr. David Berd and has
shown a positive immune response to haptenized tumor cells in the first nine of
nine patients treated, and has also shown a positive immune response to
unhaptenized tumor cells in the first eight of nine patients treated, both as
measured by a delayed type hypersensitivity (DTH) test. Recently, the Company
has received agreement from National Cancer Institute ("NCI") for NCI to sponsor
a Phase I/II trial in ovarian cancer, which trial the Company intends to begin
later this year.

      In connection with the Company's strategy to acquire, develop and
commercialize other potential biotechnology products and technologies, the
Company has licensed from Rutgers University and the University of Medicine and
Dentistry of New Jersey (collectively, "Rutgers"), certain patent applications
relating to a series of topoisomerase inhibitor compounds for the potential
treatment of cancer and infectious diseases (the "Rutgers License"). The Company
also has licensed from The Texas A&M University System ("Texas A&M"), an issued
U.S. patent and certain patent applications relating to a series of novel
anti-estrogen compounds for the potential treatment of cancer (the "Texas A&M
License"). Pursuant to the Rutgers License and the Texas A&M License (and under
its related sponsored research agreements with each of Rutgers and Texas A&M),
the Company intends to continue to expend significant resources on the research
and development of these compounds.

      In order to contain costs, the Company may continue to use sponsored
research agreements and contract research organizations to help it develop its
technologies. At the appropriate time the Company may seek corporate partners to
provide the necessary resources and expertise for clinical development and to
manufacture, market or distribute products. In addition, the Company may seek to
explore the acquisition and subsequent development and commercialization of
additional commercially promising immunotherapy, chemotherapy and adjuvant
technologies. No assurance can be given that the Company will have the requisite
resources or that any such projects will be identified on terms favorable to the
Company, if at all.

      The Company was incorporated in the State of New York on January 12, 1990,
under the name Nehoc, Inc. On May 29, 1992, it changed its name to Appex
Technologies, Inc. On October 22, 1992, the Company merged into Walden
Laboratories, Inc., a Delaware corporation, which was incorporated on September
18, 1992. On December 27, 1995, Walden Laboratories, Inc. sold its former
leading product under development, an over-the-counter nutritional dietary,
medicinal and/or elixorative food supplement or drug and related patents and
intellectual property to a subsidiary of Interneuron Pharmaceuticals, Inc. The
Company changed its name from Walden Laboratories, Inc., to AVAX Technologies,
Inc., effective March 26, 1996.

BACKGROUND AND SCIENTIFIC RATIONALE OF THE AC VACCINE(TM) TECHNOLOGY

      Cancer is characterized by the uncontrolled growth and spread of abnormal
cells which escape the body's protective immune surveillance system, invade
healthy tissues and destroy normal tissue function and ultimately lead to a
person's death if untreated. Cancers, composed of either solid tumors or
blood-borne cancerous cells, tend to spread over time to other tissues and
organs in the body (metastasis). Cancer may be diagnosed at any stage of the
disease, from very early (best prognosis) to very late (worst prognosis). When
cancer is detected early and has not yet metastasized (spread) to other organs
and tissues, surgical removal of the tumor is often effective. Unfortunately,
many cancers are not discovered until metastatic cancer cells from the primary
tumor have already entered the blood or lymphatic system and established new
tumors at distant sites. These cells, and the tumors they form, are difficult to
diagnose and treat with current technology.


                                       2
<PAGE>

      As of 1997, the NCI estimates that approximately 7.4 million people living
in the United States were diagnosed as having cancer. The incidence of cancer
continues to increase. The NCI also estimates that the overall annual cost to
the health care system of treating these patients is approximately $104 billion.
The Company is aware of estimates that deaths from cancer will surpass
cardiovascular mortality worldwide by the end of this year.

      Although some progress has been made, few effective treatments are
available for most adult solid tumors, which often metastasize and invade other
organs before they are detected. The standard treatment for solid tumors is
surgery. While this treatment is effective in many types of cancers, in cases in
which removal of the tumor is incomplete or in which the tumor has metastasized,
the patient's prognosis is poor. Chemotherapy and radiation therapy are rather
crude treatments because they kill cells indiscriminately, destroying normal as
well as malignant cells, leading to toxic side-effects and thereby limiting the
usefulness of these therapies. A safe, effective treatment for residual and
metastatic disease is clearly needed. Such a treatment, if effective and safe,
would increase patient survival and may, therefore, be widely adopted.

      Although, many different types of drugs are used to treat a variety of
cancers, no one drug has been found to be a cure for the disease. Given the need
for new effective treatments for cancer, a drug which may effectively treat
cancer could have a large market potential. Although there can be no assurance,
the Company believes that an AC Vaccine(TM), developed to treat effectively the
recurrence of cancer after surgery, is likely to have a sizable market share.
Surgery, in many cases is the first treatment performed on cancer patients, and
if a treatment following surgery were to prove broadly applicable and safe, its
market potential could be significant, while enabling the health care system to
realize significant overall cost savings due to a reduction in the number of
cases of recurrent disease requiring hospitalization and ongoing clinical and
home care.

      Immunotherapy is an emerging cancer treatment modality that the Company
believes shows promise for utilizing a patient's own immune system to recognize
and eliminate cancer cells. There are a number of different types of
immunotherapies such as cytokines, antibodies, activated cell therapy and
vaccines currently under development by unrelated companies. See "Competition."
In all cases, immunotherapies attempt to modulate the body's immune system to
contain and eliminate cancer cells. In concept, immunotherapies should have
fewer side-effects than chemotherapies and should be relatively well-tolerated
by the patient. Thus, although there can be no assurance of success, the Company
believes immunotherapies have the potential to be effective and, by reason of
their selectivity, relatively safe anti-cancer therapeutic agents.

TECHNOLOGY APPLICATIONS AND PRODUCT CANDIDATES

      The AC Vaccine(TM) Technology

      The Company's primary proprietary technology is a patented autologous cell
vaccine that attempts to stimulate the patient's own immune system to recognize,
contain and eliminate cancer cells. The technology primarily involves the
removal of a patient's own tumor cells, conjugating them to a small molecule
known as a hapten-dinitro phenyl (DNP) and reintroducing the product back into
the patient with an adjuvant, which is an immunological agent that increases the
immune response. Haptenization is the process of modifying a larger molecule
with a smaller molecule. The small molecule known as a hapten, is recognized by
the immune system and elicits an immune response against the larger molecule.
The approach is based on the premise that a patient's immune response to a
strongly immunogenic, hapten-modified tumor antigen may be followed by the
development of an immune response to the unmodified tumor antigen, somewhat
analogous to the phenomenon of drug-induced autoimmune disease. Therefore, the
process of haptenizing a patient's tumor cells may allow the unhaptenized cancer
cells to be recognized by the body's immune system leading to an immune response
against the patient's tumor cells and their potential elimination from the body.

      In practice, the Company's initial therapy would be used as an adjunct to
surgical treatment of tumors. In one proposed model, the surgeon would remove
the patient's tumor and send the cells to the Company where


                                       3
<PAGE>

cancer cells would be processed and stored. The vaccine would then be created
and sent to the patient's doctor as each dose is required for administration of
the vaccine on an outpatient basis. The patient's response to the treatment
would then be monitored using standard protocols. The Company is initially
developing this technology for the treatment of metastatic melanoma but believes
that it possibly could have applications in the treatment of a variety of solid
tumors such as ovarian, breast, prostate, lung and colorectal cancer and may
have applications in the treatment of acute myelogenous leukemia (AML).

      M-Vax(TM)

      General. The Company's leading product, M-Vax(TM), is a post-surgical
treatment for stage 3 melanoma. Melanoma is a highly malignant tumor that can
spread so rapidly that it can be fatal within months of diagnosis. The incidence
of melanoma is increasing at a faster rate than most other cancers in the United
States, Australia, northern Europe and Canada. Although there are several
causative factors, rising exposure by the general population to UV radiation in
sunlight appears to be the most significant factor behind this increase. With
the incidence growing at a rate in excess of 6% annually, it is estimated that
there are approximately 200,000 existing cases of melanoma in the United States,
with approximately 40,300 new cases diagnosed in 1997.

      Melanoma patients may be categorized according to the following staging
system:

      o     Stage 1--lesion less than 1.5mm thickness and no apparent
            metastasis;

      o     Stage 2--lesion greater than 1.5mm thickness and local spreading
            from primary cancer site;

      o     Stage 3--metastasis to regional draining lymph nodes and regional
            spread from primary cancer site; and

      o     Stage 4--distant metastasis.

      Current treatment for Stage 3 melanoma patients includes surgical excision
of the tumor mass and any of the nearby lymph nodes into which there has been
metastasis, followed by a year long regimen of alpha interferon administration,
which is currently the only FDA-approved treatment for patients with stage 3
melanoma. I In many cases however, survival is restricted by the inability of
surgery to guarantee removal of all the tumor cells. It is highly possible for
the post-surgery patient to remain with undetected metastasis. Further, use of
alpha interferon is associated with many severe side effects, often leading to
either reduction in dosage or complete discontinuation before the full course of
treatment is completed. Due to its limited efficacy and highly toxic side
effects, chemotherapy and radiation have not been widely used in the treatment
of these patients. The five-year survival rate for these patients is believed by
the Company to be approximately 20%. In clinical studies, alpha interferon
demonstrated a five-year survival rate that the Company believes to be
approximately 32% in stage 3 patients whom the Company believes to be comparable
to those treated with M-Vax(TM). Thus, the Company believes that there is a
clear need for an effective post-surgical treatment of stage 3 melanoma
patients.

      Clinical Trials. Dr. David Berd, the inventor of the patented technology
licensed to the Company by TJU, is a clinical oncologist at TJU. Dr. Berd has
been conducting physician-sponsored clinical trials at TJU for the treatment of
melanoma using M-Vax(TM) for approximately ten years.

      In the ongoing clinical trials at TJU, over 350 melanoma patients have
been treated post-surgically on an outpatient basis with M-Vax(TM). In 62
patients with stage 3 melanoma in protocols in which there has been sufficient
time for long-term follow-up, the five-year survival rate is approximately 55%.
This compares with the historical and control group survival rates of about 20%,
and the survival rate for treatment with alpha interferon of approximately 32%
in stage 3 patients whom the Company believes to be comparable to those treated
with M-Vax(TM). In patients over 50 years old treated with M-Vax(TM), the
five-year survival rate was approximately 71%. The Company believes that the
results to date of the ongoing clinical trial represent the first substantial
increase in survival for stage 3 melanoma patients treated by immunotherapy. In
the over 350 patients treated in studies, only


                                       4
<PAGE>

relatively minor side effects, such as soreness and mild transient nausea and
swelling at the site of the application of the M-Vax(TM) vaccine, have been
reported to date.

      In 1998, the Company obtained from the FDA a Company-sponsored IND to
allow the Company to proceed with a multi-center clinical trial intended to
support a biologics license application. Depending upon the results of these
clinical trials, the Company intends to use the Company-sponsored clinical trial
results, along with the results of the TJU clinical trials, as the basis for
filing an application for FDA approval to market M-Vax(TM). The Company is also
pursuing strategies for commercial acceptance (including any applicable
regulatory approvals) of M-Vax and other AC Vaccine product candidates in
various foreign countries, although such strategies have not yet been finalized.
The Company's management estimates that it may be in the position to submit an
application in 2001 or 2002. The targeted timetable for filing a marketing
application depends upon the rate of enrollment of both clinical sites and
patients in the registration studies, the adequacy of the overall clinical
outcome data from these trials, and ultimately acceptance by the FDA of the
studies. A delay in enrollment of either clinical sites or patients would delay
completion of the trials. Moreover, equivocal clinical outcomes from these
trials would have the effect of at least delaying the timetable for submission
of a marketing application and would negatively affect regulatory acceptance of
the studies in connection with the possible approval of such marketing
application.

      Denial of any regulatory approvals or any significant delays in obtaining
any of the regulatory approvals, would have a material adverse effect on the
Company.

      The Company is treating post-surgical stage 3 patients in its Phase I/II
clinical trial of O-Vax(TM),, its AC Vaccine(TM) for ovarian cancer. This trial
is being conducted at TJU under the direction of Dr. David Berd and has shown a
positive immune response to haptenized tumor cells in the first nine of nine
patients treated, and has also shown a positive immune response to unhaptenized
tumor cells in the first eight of nine patients treated, both as measured by a
delayed type hypersensitivity (DTH) test. Recently, the Company has received
agreement from the NCI for NCI to sponsor a Phase I/II trial in ovarian cancer,
which trial the Company intends to begin this year. In addition, the Company
intends to begin enrolling in a multi-center Phase II clinical trial for
O-Vax(TM) this year.

      There can be no assurance, however, that the foregoing forward-looking
statements with respect to the Company's intended timetable for the completion
of the pivotal registration clinical trials for M-Vax(TM), the eventual filing
of a marketing application for M-Vax(TM) and the Company's intended timetable
for clinical trials for O-Vax(TM), will be met.

      In addition, the Company has recently entered into a Technical Testing
Agreement (the "Illinois Agreement") with the University of Illinois
("Illinois"), pursuant to which Illinois will conduct testing in order to
determine whether an animal model can be used to demonstrate the therapeutic
potential of DNP-vaccine, such as the Company's AC Vaccine(TM), in experimental
tumor models, and the value of adjunctive therapies. The Company has agreed to
fund approximately $160,000 for the expected two-year term of this study.

      Topoisomerase Inhibitors

      The Rutgers License relates to a series of novel anticancer compounds
being prepared and studied under the direction of Professors Edmund LaVoie and
Leroy Liu at Rutgers University (the "Rutgers Compounds"). The Rutgers Compounds
have proven effective on animal models during pre-clinical studies. The Rutgers
Compounds fall into six distinct and varied chemical classes, and have been
shown to inhibit topoisomerase I or topoisomerase II activities, depending on
the exact structure. Topoisomerases are key enzymes needed for remolding DNA, a
necessary function for malignant tumor growth. Inhibitors of these enzymes have
been proven to be clinically-useful anticancer therapies. In addition to having
topoisomerase-inhibiting characteristics, some of the Rutgers Compounds have
shown activity against fungal as well as parasitic organisms. Both United States
and non-U.S. patents have been filed for the Rutgers Compounds and their
anticancer and anti-infective uses. During 1998 a U.S. Patent was issued to the
Company granting claims to novel compounds which inhibit activity of


                                       5
<PAGE>

topoisomerase I, a natural enzyme needed to support malignant tumor growth.
Although these compounds are in an early stage of pre-clinical development for
solid tumor, antifungal and parasitic indications, the Company intends to pursue
development of one or more of these compounds. The Company's management
anticipates that the pre-clinical work may lead to identification of a lead
compound during 1999, and that an IND for that compound may be filed with the
FDA during 1999. However, there can be no assurance that any of the Rutgers
Compounds will ultimately reach a stage of clinical testing or
commercialization.

      Novel Anti-Estrogens

      The Texas A&M License relates to a series of novel anticancer compounds
(the "Texas A&M Compounds") being prepared and studied under the direction of
Professor Stephen Safe at Texas A&M University. The unique activity against
solid tumors exhibited by the Texas A&M Compounds can be classified as
anti-estrogen, although they appear to act indirectly on the estrogen receptor
through a novel pathway. Anti-estrogens have been proven to be clinically-useful
anticancer therapies. United States patents for both the Texas A&M Compounds and
their anticancer uses have been filed. Although non-U.S. patent filings have not
yet been made, the Company expects that foreign patent coverage will be pursued
as the result of ongoing laboratory research. These compounds are in an early
stage of pre-clinical development for solid tumor indications. The Company's
management anticipates that the pre-clinical work may lead to identification of
a lead compound during 1999, and that an IND for such compound may be filed with
the FDA during 1999. However, there can be no assurance that any such compounds
will ultimately reach a stage of clinical testing or commercialization.

RESEARCH AND DEVELOPMENT

      Autologous Cell Vaccines

      In connection with the TJU License entered into in November 1995, TJU, Dr.
Berd, as TJU's principal investigator, and the Company entered into a Clinical
Study and Research Agreement. Under that agreement, TJU and Dr. Berd began a
research and clinical study program for the further development of the AC
Vaccine(TM) technology for additional cancer targets and the Company agreed to
provide certain funding for the research.. . During 1998, the agreement was
amended to provide research funding for the fourth year of the agreement of
$279,690. The Company is presently obligated to spend a minimum of $500,000 per
year on the development of the AC Vaccine(TM) technology until commercialized in
the United States. If the Company files for FDA approval of a Company-sponsored
marketing application for the right to market a product arising from such
technology, the Company may elect to spend less than $500,000 per year on the
development of the AC Vaccine(TM) technology during the period of time the
marketing application is under review by the FDA. If the Company does not meet
its financial, development, or other obligations in a timely manner under the
TJU license or related sponsored research agreement, the Company could lose the
rights to this proprietary technology or the right to have TJU conduct its
research and development efforts, any of which could have a material adverse
effect on the Company. TJU has the right to terminate the agreement on 30 days'
written notice if it becomes unable for any reason to complete the study. See
"Risk Factors--Dependence on Licenses and Sponsored Research Agreements."

      Topoisomerase Inhibitors

      The Company has committed to fund research for each of the first three
years of the Rutgers License at a rate of $100,000 per year as well as the
payment of certain indirect overhead costs. The Company also is obligated to pay
Rutgers for certain overhead costs on a deferred basis. In addition, the Company
is obligated to spend an aggregate of $200,000 in the first year, $300,000 in
the second year and $500,000 each year thereafter until the first year of
commercial marketing of a product derived from the Rutgers Compounds, for the
development, research (including the $100,000 research funding commitment in
each of the first three years), manufacture, regulatory approval, marketing and
selling of a product derived from the Rutgers Compounds. If the Company fails to
make payments in accordance with the terms of the Rutgers License, Rutgers would
be entitled


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<PAGE>

to terminate the Rutgers License, which could have a material adverse effect on
the Company. See "Risk Factors--Dependence on Licenses and Sponsored Research
Agreements."

      The research effort with respect to these compounds is conducted at
Rutgers under the direction of Edmond J. LaVoie, Ph.D., the co-originator of the
technology underlying the Rutgers License. Dr. LaVoie is Professor of Medicinal
Chemistry and Chairman of the Department of Pharmaceutical Chemistry at Rutgers
and is a member of the Company's Scientific Advisory Board. See
"Management--Scientific Advisory Board."

      Novel Anti-Estrogens

      The Company has committed to fund research relating to the Texas A&M
Compounds in the amount of $108,750 for each of the first three years of the
Texas A&M license. In addition, the Company is required to achieve certain
milestones toward development of a licensed product within certain specified
time frames. If the Company fails to make such payments or achieve such
milestones in accordance with the terms of the Texas A&M License, Texas A&M
would be entitled to terminate the agreement. The termination of the Texas A&M
License could have a material adverse effect on the Company. See "Risk
Factors--Dependence on Licenses and Sponsored Research Agreements."

      It is anticipated that the research effort with respect to the potential
anti-cancer compounds licensed under the Texas A&M License will be conducted at
Texas A&M under the direction of Stephen H. Safe, Ph.D., the originator of the
technology underlying the Texas A&M License. Dr. Safe is Sid Kyle Professor of
Toxicology at Texas A&M and is a member of the Company's Scientific Advisory
Board.

PROPRIETARY RIGHTS

      The TJU License

      Pursuant to the TJU License, the Company has licensed an issued U.S.
patent and certain U.S. and foreign patent applications covering a process for
the modification of a patient's own tumor cells into a cancer vaccine. The TJU
License is a royalty-bearing license for the rights to such patented vaccine
technology, and provides for certain payments upon the occurrence of certain
milestones. As consideration for the TJU License, the Company paid $10,000 to
TJU, and issued 229,121 shares of Common Stock to each of TJU and Dr. Berd,
representing 7.5% (15% in the aggregate) of the Company's total outstanding
voting securities at the time of issuance in 1995.

      The Company is obligated to make certain milestone payments to TJU as
follows: $10,000 upon initiation of the first clinical trial that is approved by
the FDA (or comparable international agency), $10,000 upon the first filing of a
marketing application with the FDA (or comparable filing with a comparable
international agency), and $25,000 upon receipt by the Company of approval from
the FDA (or comparable international agency) to market products relating to the
AC Vaccine(TM) technology. In addition, the Company is obligated to pay
royalties on its net sales revenue and a percentage of all revenues received
from sublicenses relating to the AC Vaccine(TM) technology. Failure to comply
with the terms of the TJU License may cause its termination, which would have a
material adverse effect on the Company. See "Risk Factors--Dependence on
Licenses and Sponsored Research Agreements."

      The Rutgers License

      Pursuant to the Rutgers License, the Company has licensed certain U.S. and
foreign patent applications relating to the Rutgers Compounds. The Company paid
$15,000 as consideration for the Rutgers License, and has agreed to pay an
additional $15,000 license maintenance feeeach year. The license maintenance fee
is not payable in years where research funding is equal to or greater than
$100,000. The Company has issued to Rutgers warrants to purchase 125,000 shares
of Common Stock at a price of $8.24 per share. Such warrants are exercisable
upon the achievement of certain development-related milestones. The first 75,000
of the warrants will expire in 2006


                                       7
<PAGE>

and the final 50,000 warrants will expire in 2011. These warrants provide for
cashless exercise, piggyback registration rights and certain anti-dilution
rights.

      The Company is also obligated to make certain milestone payments as
follows: $15,000 on the earlier of October 31, 1999 or the date of first filing
of an IND application with the FDA, or comparable international agency, $25,000
on the earlier of October 31, 2001 or the date of initiation of Phase II trials
in the United States or another major market country, $45,000 on the earlier of
October 31, 2005 or the date of first filing of a marketing application with the
FDA, or comparable international agency and $150,000 on the earlier of October
31, 2008 or the date of receipt by the Company of approval from the FDA or
comparable international agency to market products. In addition, the Company is
required to pay royalties on its worldwide net sales revenue derived from the
Rutgers Compounds and a percentage of all revenues received from sublicenses of
products derived from these compounds. Failure to comply with the terms of the
Rutgers License may cause its termination, which could have a material adverse
effect on the Company. See "Risk Factors--Dependence on Licenses and Sponsored
Research Agreements."

      The Texas A&M License

      Pursuant to the Texas A&M License, the Company has licensed an issued U.S.
patent and certain U.S. and foreign patent applications relating to the Texas
A&M Compounds. Under the terms of the agreement, the Company is obligated to pay
future milestone payments, royalties on its net sales revenue derived from these
compounds and a percentage of all revenues received from sublicenses of such
compounds. The Company also has agreed to fund research in the amount of
$108,750 for each of the first three years of the Texas A&M License. Failure to
comply with the terms of the Texas A&M License may cause its termination, which
could have a material adverse effect on the Company. See "Risk
Factors--Dependence on Licenses and Sponsored Research Agreements."

      In the future, the Company may require additional licenses from other
parties to develop, manufacture and market commercially viable products
effectively. The Company's commercial success will depend in part on obtaining
and maintaining such licenses. There can be no assurance that such licenses can
be obtained or maintained on commercially reasonable terms, if at all, that the
patents underlying such licenses will be valid and enforceable or that the
proprietary nature of the technology underlying such licenses will remain
proprietary. The Company presently intends to pursue aggressively the broadest
patent coverage possible for all of its intellectual property. See "Risk
Factors--Uncertainty Regarding Patents and Proprietary Rights."

COMPETITION

      The Company is aware of estimates that more than 300 companies are
reported to have approximately 1,250 cancer drugs under development worldwide,
of which a substantial number are under development in the United States. Many
of these drugs or other substances under development involve chemotherapeutic
agents and cancer immunotherapies and, thus, are, or may be, in direct
competition with the Company's AC Vaccine(TM) or compounds resulting from
development work pursuant to the Rutgers License or the Texas A&M License.
Future competitor products and drugs may perform more effectively or safely than
the Company's product candidates.

      Many of the companies engaged in anticancer research and development and
in acquiring rights to the products of such research and development, including
biotechnology companies, have substantially greater financial, technical,
scientific, manufacturing, marketing and other resources than the Company and
have more experience in developing, marketing and manufacturing therapeutics,
including performing the pre-clinical testing and clinical trials that are
required for obtaining FDA and other regulatory approvals. Included among the
Company's competitors are: (i) large established pharmaceutical and
biotechnology companies with commitments to oncology or antiviral research,
development and marketing, including, without limitation, Schering Plough
Corporation, Chiron Corporation, Bristol-Myers Squibb and Johnson & Johnson;
(ii) smaller biotechnology


                                       8
<PAGE>

companies with similar strategies, including IDEC Pharmaceuticals, Inc. and
Biomira Diagnostics; and (iii) many development stage companies licensing or
developing oncology therapeutics.

      In addition, many research institutes, hospitals and universities are
working to develop products and processes in the same field of cancer that may
in the future be in direct competition with the Company's technologies.

      A number of companies or research institutions are developing cancer
vaccines, including, without limitation, Ribi ImmunoChem Research, Inc. and
Progenics, Inc., in melanoma; AltaRex, Genentech and Biomira, in ovarian cancer;
and Intracell and Aphton Corporation, in colorectal cancer. The principal
competitive factors in the area of cancer immunotherapies are (i) the efficacy
of the product and (ii) the timing of the entry of the product into the market.
Although there is significant competition, to date, the Company believes that
none of the competing immunotherapies have demonstrated the increase in survival
over the same period of time that the Company's technology has shown in
melanoma. Although there can be no assurance, the Company also believes that its
AC Vaccine(TM) technology may be applicable to a variety of solid tumors such as
ovarian, breast, prostate, lung, renal cell and colorectal cancer and may have
applications in the treatment of acute myelogenous leukemia (AML) and therefore
may not be as limited as certain other approaches. With respect to the timing of
the entry of the product, there can be no assurance as to when, if at all, any
of the Company's potential products will be approved. See "Risk Factors".

MANUFACTURING AND MARKETING

      The Company does not currently have the resources to manufacture
commercially or directly market any products that it may develop. The Company
may seek to enter into collaborative arrangements with pharmaceutical, medical
device, health care, chemical or other companies to assist in development,
commercial manufacturing or marketing of its products if such activities are
commercially feasible, or to provide funding for these efforts. These partners
may also be responsible for commercial scale manufacturing, which will be
subject to compliance with applicable FDA regulations. The Company anticipates
that such arrangements may involve the grant of exclusive or semi-exclusive
rights to sell specific products to specified market segments or particular
geographic territories in exchange for a royalty, joint venture, future
co-marketing or other financial interests.

      To date, the Company has not entered into any collaborative commercial
manufacturing or marketing agreements for any of its potential products. There
can be no assurance that the Company will be able to enter into any such
arrangements on favorable terms, if at all. Such collaborative marketing
arrangements, whether licenses, joint ventures or otherwise, may result in lower
revenues than would otherwise be generated if the Company manufactured and
marketed its own products.

      The Company is in the process of completing construction of its GMP
manufacturing facility for the AC Vaccine(TM) (which facility will be used
initially to produce AC Vaccines sufficient to support its clinical programs).
The facility is expected to go on-line in April of this year. To support this
facility, the Company will be required to hire and train significant numbers of
employees and to comply with extensive GMP regulations applicable to the
facility. The establishment of any such facilities and eventual expansion of
operations to commercial levels, as well as the hiring of qualified employees,
could require substantial expenditures. In addition, at least some of the
Company's products produced at its facilities will probably be regulated as
biologics. In that event, the Company would be required to file a biologics
license application with the FDA in order to obtain an establishment license (or
similar license) for its facilities. Any delay in the FDA's approval of (or its
refusal to grant) such a license would delay or prevent marketing of the
relevant product.


                                       9
<PAGE>

GOVERNMENT REGULATION

      The research, pre-clinical development, clinical trials, product
manufacturing and marketing conducted by or on behalf of the Company is subject
to regulation by the FDA and similar health authorities in foreign countries.
The proposed products and technologies of the Company also may be subject to
certain other federal, state and local government regulations, including, the
Federal Food, Drug and Cosmetic Act, and their state, local and foreign
counterparts.

      Generally, the steps required before a pharmaceutical or therapeutic
biological agent may be marketed in the United States include: (i) pre-clinical
laboratory tests, in vivo pre-clinical studies in animals, toxicity studies and
formulation studies; (ii) the submission to the FDA of an IND application for
human clinical testing, that must become effective before human clinical trials
commence; (iii) adequate and well-controlled human clinical trials to establish
the safety and efficacy of the drug; (iv) the submission of a marketing
application to the FDA; and (v) FDA approval of the marketing application prior
to any commercial sale or shipment of the drug.

      Pre-clinical studies include laboratory evaluation of the product, mostly
conducted under Good Laboratory Practice (GLP) regulations, and animal studies
to assess the pharmacological activity and the potential safety and
effectiveness of the drug. The results of the pre-clinical studies are submitted
to the FDA in the IND. Unless the FDA objects to an IND, it becomes effective 30
days following submission and the clinical trial described in the IND may then
begin.

      Every clinical trial must be conducted under the review and oversight of
an institutional review board (IRB) at each institution participating in the
trial. The IRB evaluates, among other things, ethical factors, the safety of
human subjects, and the possible liability of the institution.

      Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. Phase I represents the initial introduction of
the drug to a small group of healthy subjects to test for safety, dosage
tolerance, and the essential characteristics of the drug. Phase II involves
studies in a limited number of patients to test the safety and efficacy of the
drug at different dosages. Phase III trials involve large-scale evaluation of
safety and effectiveness, usually (though not necessarily) in comparison with a
placebo or an existing treatment.

      The results of the pre-clinical and clinical trials are submitted to the
FDA as part of an application to market the drug. The marketing application also
includes information pertaining to the chemistry, formulation and manufacture of
the drug and each component of the final product. The FDA review of a marketing
application takes from one to two years on average to complete, though reviews
of treatments for cancer and other life-threatening diseases may be accelerated.
The process may take substantially longer, however, if the FDA has questions or
concerns about a product. Following review, the FDA may ultimately decide that
an application does not satisfy regulatory and statutory criteria for approval.
In some cases, the FDA may approve a product but require additional clinical
tests following approval (i.e., Phase IV).

      In addition to obtaining FDA approval for each product, each domestic drug
manufacturing establishment must be registered with, and approved by, the FDA.
Domestic manufacturing establishments are subject to inspections by the FDA and
must comply with Good Manufacturing Practices. To supply products for use in the
United States, foreign manufacturing establishments must comply with GMP and are
subject to periodic inspection by the FDA or by corresponding regulatory
agencies in such countries under reciprocal agreements with the FDA.

      If marketing approval of any Company product is granted, the Company must
continue to comply with FDA requirements not only for manufacturing, but also
for labeling, advertising, record keeping, and reporting to the FDA of adverse
experiences and other information. In addition, the Company must comply with
federal and state health care antikickback laws and other health care fraud and
abuse laws that affect the marketing of pharmaceuticals. Failure to comply with
applicable laws and regulations could subject the Company to


                                       10
<PAGE>

administrative or judicial enforcement actions, including product seizures,
injunctions, civil penalties, criminal prosecution, refusals to approve new
products or withdrawal of existing approvals, as well as increased product
liability exposure, any of which could have a material adverse effect on the
Company's business, financial condition, or results of operations.

      For clinical investigation and marketing outside the United States, the
Company also is subject to certain foreign regulatory requirements governing
human clinical trials and marketing approval for drugs. The requirements
governing the conduct of clinical trials, product licensing, pricing and
reimbursement vary widely for European countries both within and outside the
European Union ("EU"). Normally, foreign marketing authorizations are applied
for at a national level, although within the EU certain registration procedures
are available to companies wishing to market their products in more than one EU
member state. If any applicable regulatory authority is satisfied that adequate
evidence of safety, quality and efficacy has been presented, a marketing
authorization will be granted. The system for obtaining marketing authorizations
within the EU registration system is a dual one in which certain products, such
as biotechnology and high technology products and those containing new active
substances, will have access to a central regulatory system that provides
registration throughout the entire EU. Other products will be registered by
national authorities in individual EU member states, operating on a principle of
mutual recognition. Any applicable foreign regulatory approval processes
include, at least, all of the risks associated with FDA approval set forth
above. The Company could possibly have greater difficulty in obtaining foreign
approvals and also might find it more difficult to protect its intellectual
property abroad.

SOURCES AND AVAILABILITY OF RAW MATERIALS

      The Company does not expect to encounter significant difficulties in
obtaining raw materials for M-Vax(TM) or O-Vax(TM),, because they are primarily
composed of a readily available chemical reagent, DNP, and the patient's own
tumor cells. In addition the vaccine is administered with a chemical adjuvant,
BCG, which assists in stimulating the immune system. Should the supply of DNP or
BCG significantly decrease, the Company may encounter problems preparing
M-Vax(TM), O-Vax(TM), or any other AC Vaccine(TM) based products.

COMPLIANCE WITH ENVIRONMENTAL LAWS

      The Company's business may be subject to regulation under federal, state,
local, and foreign laws regarding environmental protection and hazardous
substance control. The Company believes that its compliance with these laws will
have no adverse impact upon its capital expenditures, earnings or competitive
position. Federal, state and foreign agencies and legislative bodies have
expressed interest in the further environmental regulation of the biotechnology
industry. The Company is unable to estimate the extent and impact of such, if
any, future federal, state, local legislation or administrative environmental
action may have on the Company.

EMPLOYEES

      The Company utilizes a product development strategy that includes
contracting out its research and development, and to a certain extent, other
functions in order to minimize the expenses and overhead associated with
full-time employees. Consistent with this strategy, as of March 3, 1999, the
Company had 13 full-time employees. Its other consultants, scientific advisors
and directors devote only a portion of their time to the business of the
Company. The Company believes that it maintains good relations with its
employees, consultants, scientific advisors, part-time officers and directors.
See "Risk Factors--Lack of Management and Employees" and "--Dependence Upon Key
Personnel and Consultants."

RESEARCH AND DEVELOPMENT EXPENSE

      In 1997 and 1998, the Company incurred research and development expense of
$2,448,976 and $4,019,143, respectively. Research and development expense for
the period from inception has been


                                       11
<PAGE>

$8,820,428. See "Financial Statements." Although there can be no assurance it
will have the capital resources to do so, the Company intends to increase its
spending on research and development in the foreseeable future.

RISK FACTORS

      Investing in our common stock involves a high degree of risk. Before you
make a decision about investing in our common stock, carefully consider the risk
factors listed below, as well as the rest of the information contained in this
annual report on Form 10-KSB and our other reports filed with the Securities and
Exchange Commission.

Our AC Vaccine(TM) technology may not produce safe, effective or commercially
viable products.

      Our AC Vaccine technology is a new approach to the treatment of cancer. It
is a patient specific immunotherapy that utilizes the patient's own tumor cells
to stimulate the patient's immune system to recognize, attack and destroy cancer
cells. Our core technology applies to all types of cancer, but treatment of each
type of cancer requires slight modifications in the selection and processing of
a patient's cells for production of the appropriate AC Vaccine. Several
companies are developing immunotherapy products, but we are not aware of any
immunotherapy products developed for the treatment of cancer that have been
approved by the FDA for commercial marketing. We have submitted a
company-sponsored Investigational New Drug Application to the FDA and begun
clinical trials for M-Vax(TM). A clinical trial for O-Vax(TM) is being conducted
under a physician-sponsored Investigational New Drug Application. We are in
various stages of research and development for several other AC Vaccine
products. We cannot be certain that any of our AC Vaccine products will be safe
and effective for patients. If our AC Vaccine technology fails to generate
products that can be successfully developed and commercialized, our business and
financial condition will be materially and adversely affected.

The U.S. clinical trial and regulatory approval process for our products will be
expensive and time consuming, and the outcome is uncertain.

      Before obtaining regulatory approval for the commercial sale of our
products in the U.S., we must demonstrate through pre-clinical testing and
clinical trials that our products are safe and effective. We will incur
substantial expense for, and devote a significant amount of time to pre-clinical
testing and clinical trials of our products. The results from pre-clinical
testing and early clinical trials are not totally predictive of results that may
be obtained in later clinical trials. Data obtained from pre-clinical testing
and clinical trials are susceptible to varying interpretations, which may delay,
limit or prevent regulatory approval. In addition, regulatory delays or
rejections may be encountered as a result of many factors, including changes in
regulatory policy during the period of product development. In addition, we must
rely on third parties for production and supply of certain materials necessary
for our clinical trials. Our business and financial condition will be materially
and adversely affected by any delays in, or termination of, our clinical trials.

The clinical success of M-Vax and O-Vax is uncertain.

      Only two of our products, M-Vax and O-Vax , are currently undergoing
clinical trials. Although to date the clinical trials for M-Vax have supported
its safety and effectiveness, the data that have been obtained are still
insufficient to support an application for regulatory approval in the United
States without further clinical trials. We recently began a pivotal registration
clinical trial for M-Vax that is planned to involve at least 400 patients at 25
different locations around the country. Although we are currently conducting
Phase 1 clinical trials for O-Vax, to date we have only obtained delayed type
hypersensitivity data on O-Vax and preliminary clinical data in patients with
ovarian cancer. Moreover, our clinical trials for both M-Vax and O-Vax are being
conducted with patients who are in advanced stages of melanoma and ovarian
cancer. During the course of treatment, these patients can die or suffer adverse
medical effects for reasons that may not be related to M-Vax or O-Vax. In
addition, as M-Vax and O-Vax advance through the several stages of clinical


                                       12
<PAGE>

trials, it may be difficult if not impossible to continue to enroll the
requisite number of patients (several hundred patient volunteers for a typical
Phase 3 clinical trial) who meet the requirements of the study and who are
willing to participate. We cannot assure you that we will be able to complete
successfully the clinical trials or gain regulatory approval for M-Vax, O-Vax or
any of our other potential AC Vaccine products.

We are a development stage biopharmaceutical company, and we may never develop
or successfully market any products.

      You must evaluate us in light of the expenses, delays, uncertainties and
complications typically encountered by development stage biopharmaceutical
businesses, many of which are beyond our control. These include unanticipated
problems relating to product development, testing, regulatory compliance,
manufacturing, marketing and competition, and additional costs and expenses that
may exceed current estimates. Our products are at various stages of research and
development and may never be successfully developed or marketed. We cannot
assure you that our products, even if successfully developed and approved, will
generate sufficient or sustainable revenues to enable us to be profitable.

We may have to depend on third parties to market and distribute any of our
products approved for commercialization.

      We currently do not have the resources to market or distribute directly
M-Vax, O-Vax or any other products we may develop in the future. Moreover, it
may be particularly difficult and expensive to distribute our AC vaccine
products, because they are custom made for each individual patient. We will need
additional financing to hire and train an internal sales force to market and
distribute our products. If we are unable to obtain the requisite funding, or if
we determine that developing our own internal sales force is not cost effective,
we do not know if we will be able to contract with third parties for those
services on terms acceptable to us. We may have less control over marketing and
distribution activities performed by third parties than if we were performing
those functions with our own facilities and employees. This lack of direct
control could adversely affect the results of these activities.

We have limited manufacturing facilities, so we may have to expand our
facilities or depend on third parties to manufacture our products.

      We recently completed construction of a manufacturing facility in
Pennsylvania. The approval of our company-sponsored Investigational New Drug
Application for M-Vax allows us to produce M-Vax at the new facility for use in
our clinical trials. The new facility was constructed for the production of our
AC Vaccine and other biological products, and was built to comply with current
Good Manufacturing Practice standards. As part of the final regulatory approval
of M-Vax for commercialization, our manufacturing facility will have to be
licensed by the FDA. We do not know if the FDA will license our new facility.
Although we expect the new Pennsylvania facility to support adequately our
planned clinical trials, we will probably have to expand our manufacturing
efforts in the future if any of our products are approved for commercialization.
We are also in the process of building or acquiring an existing manufacturing
facility in Australia, subject only to the facility's licensure by Australia's
Therapeutic Goods Administration. We will need substantial additional moneys and
qualified personnel if we are to expand our manufacturing capabilities. If we
have to contract with third parties to assist in manufacturing our products, we
cannot guarantee that a third party will be able to manufacture our products in
a timely fashion, or that our customized products, if approved for marketing,
will be available from contract manufacturers at acceptable costs. We may also
be subject to risks relating to the expense, or unavailability of materials
manufactured or sold by third parties that are required for use in our clinical
trials and studies for our products.


                                       13
<PAGE>

We could lose the rights to our products and technologies.

      We are a party to several license and research agreements that place
substantial responsibility on our licensors for research and clinical
development of our products and technologies. We have financial, development and
other obligations under those agreements. Our primary responsibility under our
license and research agreements is to meet requisite research funding levels. If
we fail or are delayed in meeting our obligations, we could lose the rights to
our products and technologies, or lose the right to have others conduct our
research and development.

We may not be able to obtain or defend our patents, or operate without
infringing upon the rights of others.

      We, as well as our current and potential future licensors, may be unable
or have difficulty obtaining and defending our patents and maintaining our trade
secrets. If so, we could be delayed or prevented from manufacturing or using or
selling our products. It is also possible that one of our products or
technologies may infringe upon an existing U.S. or foreign patent of a third
party, or that other patents could issue in the future that could interfere with
our ability to make or sell our products. If we are involved in a patent dispute
we may have to pay significant legal costs, license fees or damages, and we may
have to stop producing and selling our products and technologies.

We are dependent on our small management team.

      In addition to the specialized scientific knowledge provided us by outside
scientists, consultants and our Scientific Advisory Board, we are dependent upon
our small management team to obtain funding for the research and development of
our products, to decide which of our products to promote, to shepherd our
products through the clinical trial and regulatory approval process, and to
stimulate business development and seek out new products and technologies for
development. We cannot guarantee that we will be able to retain our existing
personnel or that we will be able to attract, retain and motivate any additional
qualified employees required for the expansion of our activities. Our failure to
do these things could disrupt or delay our development programs.

We may not be able to compete with other companies, research institutes,
hospitals and universities that are developing and producing cancer treatment
products and technologies.

      Many other companies, research institutes, hospitals and universities are
working to develop products and technologies in our specific field of cancer
research. Many of these entities have more experience than we do in developing
and producing cancer treatment products. Most of these entities also have much
greater financial, technical, manufacturing, marketing, distribution and other
resources than we do. We believe that numerous pharmaceutical companies are
engaged in research and development efforts for products that could directly
compete with our products under development. In addition, some of our
competitors have already begun testing products and technologies similar to
ours. These other entities may succeed in developing products before us or that
are better than those that we are developing. We expect competition in our
specific area of research to intensify.

Marketing our products to the public may expose us to product liability claims.

      Marketing our products to the public may expose us to product liability
claims. If a product liability dispute is decided against us, we might incur
significant money damages that could exceed our financial resources, including
the limits of our product liability insurance. Even if we experience no
significant judgments or settlements against us, the costs of defending product
liability claims could have a major adverse effect on our management's time and
our cash resources. Our primary research and license agreements require us to
indemnify the universities, their trustees, officers, employees and agents, as
well as Dr. Berd from any


                                       14
<PAGE>

claims arising out of the clinical study and research program carried out
pursuant to the license and research agreement, except that we are not liable
for any University's negligence, wrongdoing, or failure to follow the research
protocol. We will also likely be required to indemnify any future licensors or
persons with whom we establish a marketing, manufacturing or other collaborative
arrangement, against product liability claims incurred as a result of the
products we develop.

We have a history of operating losses and our future profitability is uncertain.

      We have had substantial operating losses since our business first began.
We lost approximately $5.8 million in calendar year 1998, and, as of December
31, 1998, our accumulated deficit was approximately $13.4 million. We expect to
incur significant increasing losses over the next several years as we expand our
research and development programs. We expect the increased expenses to come from
our efforts to obtain final testing and regulatory approval of M-Vax, further
clinical testing of O-Vax and pre-clinical studies and clinical testing for our
other products under development.

We will need to raise more money before the end of the third quarter of 2000.

      We will need to raise more money before the end of the third quarter of
2000 to continue research and product development, and to pursue the manufacture
and marketing of any products that we may develop. Although we completed a $10.1
million private placement of Series C preferred stock on March 1, 1999, we
anticipate those funds and other cash resources of the company only will be
sufficient to fund our expected activities through 1999 and into the year 2000.
We have no way of knowing if we will be able to complete any additional
financings in the future. Even if we are able to obtain future financings, the
terms offered to us may significantly limit our financial and operating
flexibility, or may not be acceptable to us. If we fail to raise sufficient
funds when needed and on reasonable terms, we may have to modify or cease some
or all of our product development programs. Our current cash resources
(including the net proceeds of the March, 1999 private placement) should be
sufficient to fund operations (as presently conducted and with planned
expansions of research and development in 1999) until approximately the third or
fourth quarter of 2000.

We face uncertainty over reimbursement and healthcare reform.

      In both the U.S. and other countries, sales of our products will depend in
part upon the availability of reimbursement from third-party payors, which
include government health administration authorities, managed care providers,
and private health insurers. Third-party payors are increasingly challenging the
price and examining the cost effectiveness of medical products and services. In
addition, significant uncertainty exists as to the reimbursement status of newly
approved health care products. Our products may not be considered cost
effective. Adequate third-party reimbursement may not be available to enable us
to maintain price levels sufficient to realize an appropriate return on our
investment in the research and development of our products. The U.S. and other
countries continue to propose and pass legislation designed to reduce the cost
of healthcare. Accordingly, legislation and regulations affecting the pricing of
our products may change before our products are approved for marketing to the
public. Adoption of new legislation and regulations could further limit
reimbursement for our products. If third-party payors fail to provide adequate
coverage and reimbursement rates for our products, the market acceptance of our
products may be adversely affected. In which case, our business and financial
condition will suffer.

Collectively, our directors, officers and key stockholders own enough of our
common stock to control and direct the management of our company.

      Our directors, officers and key stockholders collectively own
approximately 36% of our common stock (on a fully-diluted basis after giving
effect to the conversion of all the preferred stock into common stock). They
have the ability to exert substantial influence over the direction and policies
of our company. If they choose


                                       15
<PAGE>

to act together, they may have the voting power to elect our board of directors
and to control the outcome of issues submitted to our stockholders.

We expect the price of our common stock to be highly volatile.

      The market price of our common stock, like that of many other
development-stage pharmaceutical or biotechnology companies, may be highly
volatile. For the 12 month period beginning June 1, 1998 through May 31, 1999,
the price of our common stock has ranged from $1 to $7. We expect the price of
our common stock to remain volatile. In addition to general market fluctuations,
the following are examples of public disclosures by our company or others, that
could have a significant impact on the price of our common stock:

      o     technological innovations or new products

      o     results of pre-clinical or clinical testing of products

      o     adverse reactions to products

      o     governmental approvals, delays in expected governmental approvals or
            withdrawals of any prior governmental approvals

      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     public or regulatory agency concerns regarding the safety or
            effectiveness of our products

      o     quarterly variations in operating results

The trading volume of our common stock is low and a more active market may never
develop.

      Our common stock is listed for quotation on the Nasdaq SmallCap Market.
The average daily trading volume in our common stock varies significantly, but
is usually low. For the 12-month period beginning June 1, 1998 through May 31,
1999, the average daily trading volume in our common stock was 41,026 shares and
the average number of transactions per day was 31. This 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. We
cannot guarantee that there will be a more active trading market for our common
stock in the future. In addition, we cannot assure you that we will be able to
continue to adhere to the strict listing criteria for the SmallCap Market, that
we are required to meet. Consequently, the liquidity of our common stock could
be materially impaired, not only in the number of securities that can be bought
and sold at a given price, but also through delays in the timing of transactions
and reduction in security analysts' and media coverage of our company.

Certain provisions of our Certificate of Incorporation, have antitakeover
effects.

      Our Certificate of Incorporation, as amended, authorizes us to issue up to
5,000,000 shares of "blank check" preferred stock. Unlike common stock, the
designation, and the rights and preferences of blank check preferred stock are
not set out in a company's Certificate of Incorporation. The specific
designation, rights and preferences of blank check preferred stock are
determined by the company's board of directors at the time they decide to issue
the preferred stock. Accordingly, our board of directors is empowered, without
stockholder approval, to issue a new series of preferred stock with dividend,
liquidation, conversion, voting or other rights


                                       16
<PAGE>

that could have a negative effect on the voting power or other rights of common
stockholders. If our board of directors decides to issue blank check preferred
stock, the new series of preferred stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of our company.

      Our board of directors used the blank check preferred stock powers granted
to it when we issued our Series B preferred stock in May and June, 1996 and when
we issued the Series C preferred stock in March, 1999.

The rights of our preferred stockholders are superior to the rights of our
common stockholders.

      The holders of our Series B preferred stock and our Series C preferred
stock have certain rights that are superior to the rights of holders of our
common stock, including a liquidation preference over the common stock. In the
case of (1) a liquidation, or (2) in the event that we cease to exist by virtue
of a merger in which we are not the surviving corporation, or (3) if one person
or entity acquires more than 50% of the voting power of our company, holders of
our Series B preferred stock will receive $135 per share in cash or securities,
and holders of our Series C preferred stock will receive $100 per share in cash
or securities, before any distributions are made to the holders of our common
stock. Additionally, the holders of the Series C preferred stock are entitled to
the consideration per share of common stock that they would have received from
the transaction if they had converted all of their shares of Series C preferred
stock into common stock immediately before the transaction. These rights of the
Series C preferred stock holders could result in the holders of those shares
receiving substantially more of the consideration in a merger transaction than
they would otherwise have received if they had actually converted their shares
of Series C preferred stock into common stock before the merger transaction. The
holders of our common stock would, accordingly, receive a lesser amount in a
merger transaction of that type than they would have received if there were no
outstanding shares of the Series C preferred stock.

Certain sections of Delaware's General Corporation Law, by which we are
governed, have antitakeover effects.

      Our company was organized under the laws of the State of Delaware, and
therefore we are subject to the General Corporation Law of the State of
Delaware. Section 203 of that law, subject to certain exceptions, prohibits a
Delaware corporation like us from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder. In general, Section 203 defines an
interested stockholder as any entity or person beneficially owning 15% or more
of the outstanding voting stock of a corporation and any entity or person
affiliated with or controlling or controlled by that entity or person.
Accordingly, Section 203 could discourage third parties from making tender
offers for our shares and, as a consequence, Section 203 could prevent
fluctuations in the market price of our shares that could result from actual or
rumored takeover attempts. Section 203 could also be used by the company to
attempt to prevent changes in our management.

We have never paid a cash dividend and we do not expect to pay a cash dividend
in the near future.

      We have never paid cash dividends on our capital stock and we do not
anticipate paying any cash dividends for the foreseeable future.

We may not be Year 2000 compliant.

      Many computer systems will not recognize date sensitive information when
the year changes to 2000. Computers which refer to years in terms of their final
two digits may interpret the year 2000 to mean the year 1900. If our systems or
software licensed from third parties do not properly recognize date sensitive
information, our systems could generate erroneous data or fail. We are in the
process of inventorying our information technology infrastructure, hardware and
software, and are in the process of an ongoing assessment


                                       17
<PAGE>

of our year 2000 compliance. We have also made inquiries of our suppliers and
third parties with whom we have significant business relationships regarding
their year 2000 compliance. We have been informed by Thomas Jefferson University
that the software used to monitor clinical trial information is not Year 2000
compliant. We intend to update this database application by the end of 1999. To
the extent that the software is found to be noncompliant, we have alternative
methods in place to ensure the functions performed by the software will be
completed. To date, we are not aware of any other clinical processing site or
financial institutions with a year 2000 problem that would materially adversely
affect our operations, liquidity or capital resources. We have been advised by
our financial institutions that we will receive certifications confirming that
their computer systems are year 2000 compliant. We intend to develop contingency
plans to address any other year 2000 compliance risks that have not been
uncovered by our ongoing evaluation efforts. Although we have no means of
ensuring that our suppliers and financial institutions will be year 2000 ready,
we will, to the extent practicable, continue to monitor their compliance. We
cannot assure you, however, that year 2000 problems will not arise.


                                       18
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, we have caused this Report to be signed on our behalf by the
undersigned, thereunto duly authorized.

                                    AVAX TECHNOLOGIES, INC.

Date: October 19, 1999              By: /s/ Jeffrey M. Jonas, M.D.
                                        --------------------------

                                    Jeffrey M. Jonas, M.D.
                                    Chief Executive Officer and President

In accordance with the Securities Exchange Act of 1934, as amended, this Report
has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated.

       Signature                       Name & Title                  Date
       ---------                       ------------                  ----


/s/ Jeffrey M. Jonas, M.D.      Jeffrey M. Jonas, M.D.          October 19, 1999
---------------------------     Chief Executive Officer,
                                President and Director


/s/ David L. Tousley            David L. Tousley                October 19, 1999
---------------------------     Chief Financial Officer and
                                Secretary (Principal Financial
                                and Accounting Officer)


/s/ Edson D. de Castro          Edson D. de Castro              October 19, 1999
---------------------------     Director


/s/ John K. A. Prendergast,     John K. A. Prendergast, Ph.D.   October 19, 1999
    Ph.D.                       Director
---------------------------


/s/ Carl Spana, Ph.D.           Carl Spana, Ph.D.               October 19, 1999
---------------------------     Director


/s/ James Currie                James Currie                    October 19, 1999
---------------------------     Director


/s/ Michael S. Weiss            Michael S. Weiss                October 19, 1999
---------------------------     Director


/s/ Andrew W. Dahl, Sc.D.       Andrew W. Dahl, Sc.D.           October 19, 1999
---------------------------     Director


/s/ Gary S. Lazar, M.D.,        Gary S. Lazar, M.D., F.A.C.P.   October 19, 1999
    F.A.C.P.                    Director
--------------------------