----------------------
                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-K
(MARK ONE)
               ( ) Annual Report Pursuant to Section 13 or 15(d)
            of the Securities and Exchange Act of 1934 (Fee Required)
                    For the Fiscal Year Ended April 30, 1997

                                       Or

              ( ) Transition Report Pursuant to Section 13 or 15(d)
            of the Securities Exchange Act of 1934 (No Fee Required)
                  For the transition period from _____ to _____

                           Commission File No. 0-19122
                                   -----------

                               APHTON CORPORATION
                                 P. O. Box 1049
                           Woodland, California 95776
                                  (530)666-5226
Incorporated in                                           I.R.S. Employer
California                                                Identification
                                                           No. 95-3640931

               Securities Registered pursuant to Section 12(g) of
                                    the Act:

                           Common Stock (no par value)
                             ----------------------
                               Title of Each Class

                 Number of shares of Common Stock (no par value)
                   Outstanding as of June 30, 1997: 13,633,404

              Aggregate market value of Common Stock (no par value)
                     held by non-affiliates on June 30, 1997
           based on the last sale price on June 30, 1997: $168,600,200

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

                       Documents Incorporated by Reference

     Document                                             Part of Form 10-K
Proxy Statement for the Annual                                  Part III
    Meeting of Stockholders




<PAGE>


                                                       
                                     PART I

Item 1.  Business
                                   The Company

Aphton Corporation is a biopharmaceutical  company developing products using its
innovative  vaccine-like  technology for neutralizing,  or "blocking," hormones.
The precisely  targeted  hormones are those that  participate in diseases,  both
malignant  and  non-malignant,  in (a) the  gastrointestinal  system and (b) the
reproductive  system.  These products,  called  immunogens,  treat the following
diseases:  (a)  Gastroesophageal  Reflux  Disease (GERD,  or severe  heartburn),
ulcers and colorectal,  stomach, liver and pancreatic cancers; (b) endometriosis
and prostate, breast, endometrial and ovarian cancers.


                                Basis of Approach

Aphton's  approach  to the  treatment  of major  diseases  is to  employ  (anti)
"hormone therapy." Aphton's hormone therapy involves neutralizing,  or blocking,
hormones  which play a critical  role in  diseases of the  gastrointestinal  and
reproduction  systems.  Aphton has  selected  the  strategy  of hormone  therapy
because it has proved,  over many years,  to be  efficacious in the treatment of
major  diseases,  both  malignant  and  non-malignant;  in short,  because  this
risk-averse strategy has been proven to be effective in humans.  Well-documented
examples of such  efficacy  in humans are:  blocking  gastrin  (Proglumide)  and
histamine (Zantac, Tagamet), which in turn is stimulated by gastrin, in order to
reduce stomach acid to treat ulcerations of the esophagus and to heal or prevent
peptic  ulcers;  blocking  estrogen  (Tamoxifen)  for breast cancer  therapy and
blocking testosterone for prostate cancer therapy.


                               Results and Status

Aphton has successfully completed both the safety and dose-ranging phases of its
Phase I/II clinical  trial with its  immunotherapeutic  product  Gastrimmune(TM)
with terminal cancer patients. Aphton has demonstrated,  during the dose-ranging
phase, that Gastrimmune(TM) is very potent, inducing large antibody responses in
terminally  ill  patients  whose  colon  cancer had  metastasized  to the liver.
Aphton's Phase III trial program encompasses the above  gastrointestinal  system
cancers (all of which are stimulated by gastrin) and has selected stomach cancer
as the first indication for which regulatory  approval will be sought,  because:
(a) survival  time,  the "end point," is short;  (b) trial costs are  relatively
low; and (c) there is no current effective therapy.

In February,  1997 Aphton  signed an agreement  with Pasteur  Merieux  Connaught
("PMC")  (Rhone-Poulenc Group), a leader in medical science and research and the
world's largest vaccine manufacturer and marketer,  for a strategic alliance for
all human cancer applications of Gastrimmune(TM), including stomach, colorectal,
liver and  pancreatic  cancers.  Under the terms of the  twenty-year  agreement,
Aphton  will  be  responsible  for  product  development,  clinical  trials  and
regulatory  agency  approvals,  and  PMC  will  be  responsible  for  promotion,
advertising,  marketing, distribution and sales of Gastrimmune(TM) in the United
States, Canada, Europe (including the C.I.S. countries) and Mexico. In addition,
Aphton and PMC will  enter  into  agreements  providing  for:  (a) the supply of
Gastrimmune(TM)  from Aphton to PMC; and (b) the supply of certain components of
Gastrimmune(TM)  (as well as other Aphton products) from PMC to Aphton. PMC will
fund the costs associated with product introduction,  promotion, advertising and
marketing throughout the territory covered by the agreement.  Under the terms of
the  agreement,  in addition to upfront  consideration,  Aphton will receive the
majority  of the  profits  from sales of  Gastrimmune(TM),  with the  balance of
profits to be retained by PMC. Discussions are continuing between PMC and Aphton
for marketing rights to Gastrimmune(TM) in Japan and other Asian markets.

Aphton's  immunogen  Gonadimmune(TM),  for use in  breast  and  prostate  cancer
therapy and other reproductive system diseases,  has successfully  completed the
toxicology testing (safety) required for human use, having previously  completed
extensive and successful preclinical animal testing (safety and efficacy). These
efficacy tests,  which compared  Gonadimmune(TM)  to currently used  therapeutic
drugs,  were reported upon in the scientific  literature and met or exceeded all
of Aphton's expectations. Aphton plans to initiate Phase I/II clinical trial for
both breast cancer and prostate  cancer  patients with this product.  The timing
will  depend  upon the  results of  negotiations  now  underway  with major drug
companies for a strategic alliance for Gonadimmune(TM).

Aphton  has  exclusive  manufacturing,  distribution  and  sales  rights  for an
immunocontraceptive product which also utilizes vaccine-like technology.  Aphton
is  collaborating  with the  World  Health  Organization  (WHO) on the  clinical
development of the product. This product will be sold, when approved,  worldwide
in both the developed and the  developing  countries and will confer  protective
immunity and prevent pregnancy.

Aphton's  strengths  include  its  innovative   technology  and  products  which
specifically  neutralize,  or  block,  hormones  in a  novel  manner,  providing
significant benefits and advantages over conventional drugs (blockers),  some of
which have severe  disadvantages.  Aphton's  products,  or course,  must proceed
successfully  through the  clinical  trials and  regulatory  process in the same
manner as many newly  discovered drugs whose mode of action,  in contrast,  have
not been demonstrated  previously to be clinically effective in humans. However,
Aphton believes that employing a strategy of therapeutic  approach that has been
proven  effective  in  humans  significantly   reduces  risk  and  enhances  the
likelihood of: clinical trials success;  obtaining  regulatory  agency approval;
achieving  commercial success in the market place; and,  benefiting large number
of patients suffering from these serious diseases.

In view of the foregoing,  Aphton believes that its crucial task, in addition to
proper planning and execution during clinical trials, is to demonstrate in human
trials that each product induces the patient's  immune system to neutralize,  or
block, its targeted  hormone.  Aphton believes that therapeutic  efficacy should
then  follow and be  demonstrated  in the pivotal  Phase III  trials,  given the
history of success and efficacy for hormone therapy.


                              Technical Background

Aphton has developed an innovative  technology to create  immunogens,  which are
vaccine-like  products.  They  harness  and direct the body's  immune  system to
generate  antibodies which bind to specific peptide portions of the administered
immunogen.  These antibodies  cross-react (bind) with targeted "self" molecules,
such as  hormones,  when they  encounter  that  portion of the hormone  which is
similar to the peptide portion of the administered  immunogen.  Because diseases
involving hormones are not pathogen  (microorganism)  driven, they have not been
viewed  traditionally as being  susceptible to treatment using the body's immune
system. Instead, the traditional pharmaceutical industry approach to controlling
these diseases has been to treat them with synthetic drugs. Unfortunately, these
drugs  typically must be administered  in relatively  large  quantities and on a
daily or more frequent basis,  giving rise to patient compliance  problems,  and
often have  adverse side  effects.  In contrast,  Aphton's  immunogens  create a
strong antibody response from the patient's own immune system (which effectively
becomes a "drug factory") and have a more potent and longer-lasting  therapeutic
effect.  Aphton's  technology enables it to specifically target a small sequence
within the  hormone to be  neutralized,  in order to achieve a specific  desired
biological  and  physiological  response.  This  approach  directs  all  of  the
immunogen-induced  antibodies to the targeted hormone sequence,  and at the same
time: minimizes the possibility of undesired physiological  consequences through
cross-reactivity  of the immunogen  with any self  molecule or portion  thereof,
other  than  the   specifically-targeted   hormone  sequence;   and  avoids  the
possibility of autoimmune  disease where the antibody  production is not "turned
off." This is because the  antibody  production  can only be "turned on and kept
on" in the  presence of the  "carrier"  portion of the  immunogen  (see  below).
Indeed, without a "booster shot" of the immunogen, the antibodies wane(diminish)
and are cleared by the body, over time. Aphton's products may be administered in
much  smaller  dosages  and on a much less  frequent  basis than  pharmaceutical
drugs; typically twice a year, which virtually eliminates the problem of patient
compliance.

Aphton's Gastrimmune(TM), for example, consists of:

              (a) A  synthetic  peptide,  which is  similar  to a portion of the
                  hormone G17 which is targeted to be neutralized (i.e., blocked
                  or prevented from reaching and binding to its receptor).

              (b) A "carrier,"  Diphtheria Toxoid (DT),  foreign to the body, to
                  which a number of the synthetic peptides in (a) are chemically
                  bound (conjugated). This makes them available to be both bound
                  to and,  together with the DT,  internalized  by "B-cells." DT
                  contains the structures  (epitopes)  which,  when internalized
                  and  "presented" on B-cells and  Macrophages,  are bound to by
                  "T-cells."  By  binding  to  these  foreign  epitopes,   these
                  T-cells,  in turn,  proliferate  and signal the B-cells  which
                  bind to the peptide (a) to proliferate  and to  "mass-produce"
                  the desired antibodies (all of which bind to the peptide (a)).

              (c)  A liquid slow-release suspender which contains (a) and (b).

Gastrimmune(TM),  which is  administered  by  injection,  with booster  shots at
six-month  intervals,  thus induces  antibodies  in the patient  which bind with
peptide (a) and which also bind (cross-react) with and neutralize G17 (when they
encounter  that portion on G17 which is similar to peptide (a)). G17 is known to
drive (or fuel) colorectal,  stomach, liver and pancreatic cancer.  Neutralizing
G17 inhibits both the growth and metastasis  (spread) of these  gastrointestinal
cancers. In addition, Gastrimmune(TM) uniquely neutralizes glycine-extended G17,
which has also been  shown,  recently,  to fuel  these  gastrointestinal  system
cancers.

G17 is  also  responsible  for  the  production  of the  bulk  of  stomach  acid
(approximately  90% in humans),  the reduction of which is therapeutic  for GERD
and for both peptic ulcers and NSAID (e.g., aspirin/Ibuprofen)-induced ulcers.

Aphton's  Gonadimmune(TM)  is very  similarly  constructed.  In this  case,  the
synthetic peptide sequence in (a) represents the hormone GnRH, which is targeted
to be  neutralized.  Neutralizing  GnRH  inhibits  the  production  of estrogen,
progesterone  and  testosterone.   Inhibiting  estrogen  (and  progesterone)  is
therapeutic for women with breast cancer, endometrial cancer, ovarian cancer and
endometriosis.  Inhibiting  testosterone  is  therapeutic  for men with prostate
cancer.

Aphton's  Immunocontraceptive is also very similarly constructed.  In this case,
the so-called "C-terminal" peptide portion of the hormone hCG (which is targeted
to be  neutralized)  is  synthesized.  (Not  using a larger  portion  of the hCG
molecule avoids inducing unwanted antibodies against other hormones in the woman
(LH and FSH),  which share domains with some portions of the hCG.)  Pregnancy is
prevented by immunizing  the woman;  this induces  antibodies  which bind to and
neutralize hCG.

                               Strategic Alliances

During the past year,  discussions with potential  strategic  allies  (corporate
partners)  proceeded  beyond  exploratory  and final stages of  discussions  and
culminated  in the above  discussed  agreement  with Pasteur  Merieux  Connaught
(Rhone-Poulenc Group).

Similarly,  discussions  with one or more drug  companies for animal  healthcare
applications,  for both  Gonadimmune(TM) and  Gastrimmune(TM),  have cleared the
scientific hurdles. Commercial terms and considerations are now under discussion
for  Gastrimmune(TM)  for  treatment and  prevention  of equine  ulcers  (animal
health) and,  separately,  for  Gonadimmune(TM)  for breast and prostate cancers
(human health).

In January,  1995,  Aphton announced a major  relationship with the World Health
Organization(WHO), for the immunocontraceptive product also discussed above.



                           Manufacturing and Marketing

Absent  or  together   with  a  strategic   alliance  or  corporate   partnering
relationship  (such as that with Pasteur Merieux  Connaught) which may impact on
the following, Aphton plans to commercialize its products by executing long-term
contracts with third  parties,  including  major  pharmaceutical  companies,  to
manufacture  its products  and by  contracting  with  similar drug  companies to
market   (co-promote),   sell  and   distribute   its  products.   The  contract
manufacturing approach takes advantage of the large and available  manufacturing
resources of pharmaceutical  industry companies.  Aphton already contracted with
drug  manufacturing   sources  which  have  provided  Aphton's   immunogens  for
toxicology   studies  and  clinical   trials.   Aphton's   contract   marketing,
distribution  and sales  approach  similarly  takes  advantage  of the large and
effective sales forces of the major pharmaceutical  companies.  Aphton's capital
formation,  personnel  and  plant  and  equipment  requirements,  together  with
associated  risks,  are  clearly  greatly  reduced  by such a  commercialization
strategy, while significantly enhancing Aphton's ability to achieve rapid market
penetration and growth.

It  should  be  noted  that  contract   manufacturing  and  contract   marketing
(co-promotion)  differ  significantly from the normal "licensing" of products to
third parties.  In the former,  Aphton can retain control and not relinquish the
major share of sales and earnings.  Under licensing (with royalty payments which
are generally a small  percentage of sales),  the opposite would be the case. By
avoiding the industry norm of "corporate  partnering" with drug companies in its
earlier   development  stages,  and  by  both  undertaking  and  overcoming  the
associated  risks,  Aphton has retained its options and the ability to optimally
carry  out  its  commercialization  approach.  This  strategy  was  successfully
validated with Aphton's agreement with Pasteur Merieux Connaught.

                            Patents and Trade Secrets

Proprietary  protection  for Aphton's  products is  important  to the  Company's
business.  Aphton's  policy is to protect its technology by, among other things,
filing patent  applications in worldwide  markets of interest for products which
it considers  important and intends to market. In that regard,  Aphton has filed
patent applications and has continued to receive patents for its products,  both
domestic and foreign. Additional patent applications are in preparation or being
filed or are  pending  in the U.S.  and in other  countries.  Aphton  intends to
continue filing  additional  patent  applications  relating to its products and,
when  appropriate,  improvements  in its technology and other specific  products
that it develops.

                                   Regulation

Government regulation in the U.S. and other countries is a significant factor in
the  development  and  marketing  of all of the  Company's  products  and in the
Company's ongoing research and development activities. International regulations
governing  human  clinical  studies can vary  widely,  depending on the specific
country.  In particular,  regulatory  approvals in certain countries,  including
countries in the European Community with a combined  population larger than that
of the U.S.,  often  result in more  rapid  product  approvals  than in the U.S.
Aphton will conduct trials with some of its products commencing in the UK (where
much of the data is expected  to be readily  acceptable  in the U.S.,  given the
high  standards of medicine in the UK), in addition to conducting  trials in the
U.S.  and  elsewhere  in the  world,  if,  and  as,  required  or  advantageous.
Regulatory approval,  of course, is required for marketing a product in the U.S.
and other countries.

Clinical trials of new drugs for  non-"life-threatening"  diseases are typically
conducted in three sequential phases. Phase I studies typically test the product
for safety  tolerance.  Phase II studies involve limited trials to determine the
optimal dose and frequency of administration for defined  indications.  When the
product has been found safe and shows  promise of efficacy,  further  trials are
undertaken in Phase III to fully evaluate  clinical efficacy and to test further
for safety using a large number of patients at  geographically  diverse  medical
centers.

Based on discussions with the regulatory  authorities,  Aphton believes that its
cancer immunogens will be placed on a significantly less expensive "fast track,"
because  they  treat  "life-threatening"  diseases.  The  "fast  track"  regimen
shortens the time for a clinical trial, thus offering Aphton the potential for a
more rapid approval process for these products.
                   Directors, Executive Officers and Employees

The directors and executive officers of the Company are set forth below:
Name:                                   Position(s):
Philip C. Gevas               Chairman  of the Board of  Directors,
                              Chief  Executive  Officer  and
                              President and Chief Financial Officer

Robert S. Basso               Chairman of Compensation Committee and Director

William A. Hasler             Vice Chairman of the Board of Directors
                              Chairman of Audit Committee and Director

Nicholas John Stathis, Esq.   Director

Dov Michaeli, M.D., Ph.D.     Senior Vice President, Director of Medical Science

Paul Broome, MB., Ch.B., MFPM Vice President and Medical  Director,
                              Clinical Trials and Regulatory Affairs

Richard Ascione, Ph.D.        Vice President, Director of 
                              Laboratory of Molecular Medicine

Frederick W. Jacobs           Chief Accounting Officer and Controller

     Philip  C.  Gevas--Chairman  of the  Board  of  Directors,  has  served  as
Director,  President,  Chief Executive Officer and Chief Financial Officer since
co-founding Aphton in 1981. Previously,  Mr. Gevas had over ten years experience
in  executive  management,   including  finance,  manufacturing  and  marketing,
following  ten years  experience  as a  project  scientist/engineer.  Mr.  Gevas
conceived and directed the development of Aphton's  inventions for the treatment
of colorectal,  pancreatic and stomach cancers,  GERD and chronic peptic ulcers.
He is a co-inventor for Aphton's human  contraceptive  product (issued  patent).
Mr. Gevas has the degrees of M.E., and M.S.  Mathematics  (Stevens  Institute of
Technology) and M.S.E.E.  (Ohio State University).  

     Robert S.  Basso--Director of the Company since February,  1988, has been a
Director of the Company or of its now dissolved  subsidiary,  Aphton Development
Corporation,  since 1984. Mr. Basso has been President,  Correspondent  Services
Corporation  (CSC) since 1990.  Formerly,  Mr.  Basso was  President,  Broadcort
Capital  Corporation  and Managing  Director,  Merrill Lynch,  Pierce,  Fenner &
Smith.
     William A. Hasler--In October, 1996 Mr. Hasler was elected Vice Chairman of
the Company. Mr. Hasler has been a Director of the Company since October,  1991.
Since  1991,  Mr.  Hasler  has been the Dean of both  the  Graduate  School  and
Undergraduate School of Business at the University of California, Berkeley. Dean
Hasler  was  formerly  Vice  Chairman  of KPMG  Peat  Marwick,  responsible  for
management  consulting  worldwide.  Dean  Hasler is also a director  of The Gap,
Inc., Walker Interactive Systems, Tenera, Inc. and TCSI Corporation.

     Nicholas John Stathis, Esq.--Director  of the Company since January,  1994.
Mr.  Stathis  is  retired  from the law  firm of  White & Case,  where he was of
counsel from 1989 to 1993. Prior to that he was partner at Botein, Hays & Sklar,
from 1984 to 1989. Previously, Mr. Stathis was a partner successively at Watson,
Leavenworth,  Kelton &  Taggart  and  Hopgood,  Calimafde,  Kalil,  Blaustein  &
Judlowe.  Since 1954, Mr. Stathis has been engaged in the practice of all phases
of patent, trademark, copyright and unfair competition law, including conduct of
litigation and counseling of clients.

     Dov  Michaeli, M.D.  (University  of  California,  San  Francisco),   Ph.D.
(University of California, Berkeley)--Senior Vice President, Director of Medical
Science.  Dr.  Michaeli  joined Aphton as a senior member of the management team
and was elected Vice President in 1989. Previously, Dr. Michaeli was a Professor
for twenty years at the University of California,  San Francisco (Departments of
Biochemistry  and  Surgery).  He has served as a member of  Aphton's  Scientific
Advisory  Board since 1988.  He has thirty  years of  experience  in  scientific
research and in clinical medicine. This experience includes extensive consulting
on human clinical  trials  sponsored by drug  companies.  Dr.  Michaeli has five
patents and over fifty published articles and book chapters.

     Paul Broome,  MB.,  Ch.B.,  MFPM  (University of Sheffield  Medical School,
UK)--Vice  President  and Medical  Director for Clinical  Trials and  Regulatory
Affairs. Dr. Broome's twenty years of clinical experience includes, notably, the
responsibility at Glaxo for clinical trials which provided data for US (FDA) and
UK (MCA)  registration of the indication for ranitidine  (Zantac) as maintenance
therapy.  Dr.  Broome was most  recently  Medical  Director  for BIOS, a premier
company  in the UK which  provides  consulting  and  services  ranging  from R&D
through  clinical trials,  regulatory  affairs and the registration of drugs for
marketing approval from government regulatory agencies.


     Frederick W. Jacobs--Chief Accounting Officer and Controller of the Company
since June, 1989. Previously, Mr. Jacobs, a CPA, was Chief Financial Officer for
three years at a Health  Maintenance  Organization  (HMO) and before that served
for four years on the staff of Coopers & Lybrand,  providing  both audit and tax
services.

The  Company's  Bylaws  authorize  the Board of  Directors  to fix the number of
directors to be not less than three nor more than five.  The number is currently
set at four.

All  directors  hold office until the next annual  meeting of  shareholders  and
until their successors have been elected. Officers are elected to serve, subject
to the  discretion  of the  Board  of  Directors,  until  their  successors  are
appointed.  There  are no  family  relationships  among  executive  officers  or
directors of the Company.

Directors  do not receive any fees for service on the Board.  Board  members are
reimbursed for their expenses for each meeting attended.

The Company's Audit Committee is composed of Messrs.  Hasler and Basso. The
Compensation Committee is composed of Messrs. Basso and Hasler.

Messrs. Basso, Hasler and Stathis are non-executive Board Members.


                            Scientific Advisory Board

     The members of the Scientific  Advisory Board, which functions primarily as
a review board for research projects and for product  development  programs,  in
addition to Philip C. Gevas, Drs. Dov Michaeli, Paul Broome and Richard Ascione,
are:
     Richard L. Littenberg,  M.D. A co-founder of the Company, Dr. Littenberg is
a member of  Aphton's  Scientific  Advisory  and Program  Review  Board and is a
co-inventor of three Aphton patent filings. Dr. Littenberg is Board Certified in
both  Internal  Medicine  and Nuclear  Medicine  and a Diplomate of the National
Board of Medical  Examiners and is President and Chief Executive  Officer of The
Honolulu Medical Group (HMG). Dr.  Littenberg  received his M.D. degree from the
State University of New York. He has practiced internal and nuclear medicine for
over  seventeen  years.  He  has  participated  in  clinical  trials  for  major
pharmaceutical  companies  and has  engaged in both  cancer  and  cardiovascular
research.

     Eliezer Benjamini, Ph.D., University of California,  Berkeley. A co-founder
of the Company,  Dr. Benjamini is the Chairman of the Scientific Advisory Board.
Dr.  Benjamini is a co-inventor of two of the Company's  issued US patents.  Dr.
Benjamini  has been a professor in the  Department of Medical  Microbiology  and
Immunology at the University of California, Davis, for over twenty years. He now
holds the title of Professor Emeritus. Dr. Benjamini is widely recognized in the
field  of  immunology.  He has  received  awards  from  industry  and  academia,
including the  Distinguished  Scientists Award in Virology and Immunology (1984)
which was given for his pioneering work in the development of synthetic  peptide
vaccines. Dr. Benjamini has over one hundred publications and is co-author, with
Dr. Sidney  Leskowitz,  of  Immunology:  A Short Course,  a textbook for medical
students.

     Robert J.  Scibienski,  Ph.D.,  University of  California,  Los Angeles.  A
co-founder of the Company,  Dr. Scibienski focuses on  immunology-related  basic
technology at the Company,  currently  addressing  immune system  regulation and
antigen  presentation.  Dr.  Scibienski is a co-inventor of one of the Company's
issued US  patents  and a number  of  patent  applications.  Dr.  Scibienski  is
Associate  Professor,  Department of Medical  Microbiology  and  Immunology  and
Director of the  campus-wide  Central  Hybridoma  Facility at the  University of
California, Davis. Dr. Scibienski has over thirty publications.

     Demosthenes  Pappagianis,   M.D.  (Stanford  School  of  Medicine),   Ph.D.
(University  of  California,   Berkeley).  A  co-founder  of  the  Company,  Dr.
Pappagianis  is  its  principal  resource  on the  mechanisms  of  infection  of
pathogens  and of host  defenses.  Professor  and  Chairman  (1967-1985)  in the
Department  of  Medical   Microbiology  and  Immunology  at  the  University  of
California,  Davis,  Dr.  Pappagianis  is  widely  recognized  in the  field  of
infectious  diseases.  He is a  Diplomate  of  the  National  Board  of  Medical
Examiners  and  Diplomate  of the  American  Board of Medical  Microbiology.  In
addition,  he is a Fellow of the Infectious  Diseases  Society of America and an
Associate Member of the Armed Forces  Epidemiological Board. Dr. Pappagianis has
over one hundred publications.

     Vernon C. Stevens,  Ph.D.  Professor of  Reproductive  Biology,  Ohio State
University.  Dr.  Stevens  is  recognized  worldwide  as one of the  pre-eminent
authorities on vaccines for  contraception and synthetic peptide based immunogen
formulations.  He pioneered the development of synthetic peptide  immunogens for
human  use,   particularly  for  Aphton's   immunocontraceptive   vaccine  under
development with the World Health Organization(WHO).

Other scientists  (consultants)  participate when their expertise is needed on a
specific project.

                                Scientific Staff

In  addition  to  the  founding  scientists  (Drs.  Benjamini,   Scibienski  and
Pappagianis), the Company's full-time scientific staff includes the following:

    Dov Michaeli, M.D., Ph.D. - see "Directors and Executive Officers."

    Paul Broome, MB., Ch.B., MFPM, - see "Directors and Executive Officers."

    Richard Ascione, Ph.D. - see "Directors and Executive Officers."


     Stephen L. Karr,  Jr.,  Ph.D.,  University of California,  Davis.  Dr. Karr
serves in a number of capacities,  namely: Laboratory of Immunobiology,  General
Manager,  for daily  operations;  program planning,  budgeting and control;  and
Project  Director,  in which  capacity he is  responsible  for the  experimental
design  and  implementation  of  selected  projects.  Dr.  Karr,  who is also an
immunoparasitologist,  is an inventor of two of the Company's issued patents and
three pending patent  applications.  Dr. Karr has sixteen  publications  and had
presented twenty papers prior to joining the Company.
         
     Stephen  Grimes,  Ph.D.,  University of  California,  Davis.  Dr. Grimes is
Project Director and is responsible for immunology and the  experimental  design
and  implementation  of  immunology-based  projects.  He serves as the principal
deputy for Aphton's clinical trials projects. Dr. Grimes is a co-inventor of two
of the Company's issued U.S.  patents and additional  patents in preparation and
pending.  Dr.  Grimes came  directly to the Company in 1981 upon  finishing  his
doctoral dissertation under Dr. Scibienski.

     Both  Dr.  Karr  and  Dr.   Grimes   support   closely   Aphton's   Product
Development/Manufacturing  Team  in the UK,  which  includes  former  SmithKline
Beecham employees with many years of such experience.

The  Company's  policy  had been to  preclude  publications  and  papers  in the
scientific  and  medical  literature  until the  subject  product is in clinical
trials  and  under  sufficient  patent  protection.  Aphton,  together  with its
scientific  collaborators at leading Universities and Medical Centers in the UK,
has now published papers in peer-reviewed  scientific  journals and is preparing
or completing and submitting for publication  additional papers related to those
products, on a selected basis.

The Company  employs  approximately  twenty-five  individuals  directly  and has
numerous others under contracts with other supporting organizations.

Item 2.  Properties

The Company  has  noncancelable  facilities  leases  expiring  at various  dates
through fiscal year end 2000. The leases provide various  options to renew.  The
minimum rental commitments for the fiscal years 1998 through 2000, respectively,
are, $37,000,  $32,000 and $8,000 and none thereafter.  Rental expense for these
leases for the years  ended April 30,  1997,  1996 and 1995,  was  approximately
$108,000, $108,000 and $87,000.

Item 3.  Legal Proceedings

The Company is not involved,  and has never been  involved,  in any  litigation,
administrative or governmental  proceeding and none is believed by the Company's
management to be threatened.

Item 4.  Submission of Matters to a Vote of Security Holders.

Not applicable.
                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

The Common Stock of Aphton has been trading on Nasdaq's  National  Market System
since  June 2,  1994.  Aphton had been  traded in the  Nasdaq  Small-Cap  Issues
(formerly  over-the-counter)  market  since April 1, 1991,  the date of Aphton's
initial  public  offering.  The  following  table  sets forth high and low price
information,  provided by Nasdaq Historical Research  Department,  for each full
quarter  beginning  after April 30, 1995.  The Company's  Common Stock is traded
under the symbol "APHT."

                                       High                      Low
Fiscal Year Ended April 30, 1996:
         1st Quarter                   $13                       $  9 1/4
         2nd Quarter                    12                          9 1/4
         3rd Quarter                    11 3/4                      8 1/2
         4th Quarter                    23 3/4                      9 3/4


Fiscal Year Ended April 30, 1997:
         1st Quarter                   $29 1/4                   $ 15 1/2
         2nd Quarter                    20 1/2                     13 1/2
         3rd Quarter                    22 1/2                     16 1/2
         4th Quarter                    23 3/4                     11 3/4

     As of April 30, 1997,  Aphton had  approximately 300 shareholders of record
and approximately 4,000 beneficial holders of its Common Stock.


Item 6.  Selected Financial Data

                         SELECTED FINANCIAL INFORMATION

The  selected  financial  data set forth  below with  respect  to the  Company's
statements  of operations  and balance  sheets for each of the five years in the
period ended April 30, 1997, are derived from audited  financial  statements and
should be read together with the financial statements and related notes included
in this  Annual  Report.  All  selected  financial  data are not  covered by the
independent  accountants'  report.  The  data  presented  below  should  be read
together with the  financial  statements,  related  notes,  and other  financial
information included herein.

                          SUMMARY FINANCIAL INFORMATION
                    (In thousands except for per share data)

                              Year Ended April 30,

                              1997     1996     1995     1994     1993
                              ----     ----     ----     ----     ----
Statement of Operations Data:
Revenue                       $271     $438     $463      $62     $125
Net Loss                    (5,629)  (4,711)  (3,930)  (3,139)  (2,094)
Research & Development
Expenditures                 5,221    4,501    3,905    2,924    2,085
Net Loss per Share          $(0.44)  $(0.37)  $(0.32)  $(0.28)  $(0.20)
Weighted Average
Shares Outstanding          12,913   12,723   12,378   11,268   10,593
   
                              Year Ended April 30,

                              1997     1996     1995     1994     1993
                              ----     ----     ----     ----     ----
Balance Sheet Data:
Cash and Short-Term
   Cash Investments         $8,846   $8,169   $7,520  $11,157   $2,781
Total Assets                18,362    8,354    7,741   11,290    2,924
Total Liabilities           16,949    1,313      997      619      137
Accumulated Deficit        (25,399) (19,770) (15,059) (11,130)  (7,991)
Total Stockholders' Equity   2,511    7,041    6,744   10,671    2,787







Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations

                Fiscal Years Ended April 30, 1997, 1996 and 1995

During the fiscal year ended April 30, 1997, the Company  reported a net loss of
$5,628,966.  During this period the Company had no contract revenues. Investment
earnings on cash  decreased  to $271,170  due to lower  average  cash  balances.
Research and development expenditures increased to $5,221,197. This increase was
budgeted for and related to the on-going and planned additional (human) Clinical
Trials.

During the fiscal year ended April 30, 1996, the Company  reported a net loss of
$4,710,933.  During this period the Company had no contract revenues. Investment
earnings  on cash  decreased  $24,681  to  $438,812.  Research  and  development
expenditures  increased  $596,310 to $4,500,877.  This increase was budgeted for
and related to the on-going and planned additional (human) Clinical Trials.

During the fiscal year ended April 30, 1995, the Company  reported a net loss of
$3,929,709.  During this period the Company had no contract revenues. Investment
earnings  on cash  increased  $401,162 to $463,493  due to higher  average  cash
balances.   Research  and  development   expenditures   increased   $980,342  to
$3,904,567.  This  increase  was  budgeted  for and related to the  on-going and
planned additional (human) Clinical Trials.

The  Financial   Accounting  Standards  Board  (FASB)  has  issued  several  new
pronouncements, including Statement of Financial Accounting Standards (SFAS) No.
125,   "Accounting   for  Transfers  and  Servicing  of  Financial   assets  and
Extinguishment of Liabilities" and SFAS No. 127, "Deferral of the Effective Date
of Certain  Provisions of FASB  Statement No. 125," SFAS No. 128,  "Earnings Per
Share"; SFAS No. 129, "Disclosures of Information About Capital Structure"; SFAS
No. 130, "Reporting  Comprehensive Income"; and SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related  Information."  These  statements  will be
effective in various  periods ending after April 30, 1997. The adoption of these
standards is not expected to have a material  effect on the Company's  financial
statements.

The Company utilizes various computer  software packages as tools in running its
accounting  operations.  Management  plans to  implement  any  necessary  vendor
upgrades and modifications to ensure continued functionality with respect to the
widely discussed  software  problems  associated with the year 2000. At present,
management does not expect that material  incremental  costs will be incurred in
the aggregate or in any single future year.

Inflation and changing  prices have not had a  significant  effect on continuing
operations and are not expected to have any material  effect in the  foreseeable
future.  Dividend,  interest  and  other  income  were  primarily  derived  from
money-market accounts.

                         Liquidity and Capital Resources

The Company had financed its operations since inception  through the sale of its
equity securities and, to a lesser extent,  operating  revenues from R&D limited
partnerships  to conduct  research  and  development.  These funds  provided the
Company  with the  resources  to  acquire  staff,  construct  its  research  and
development  facility,  acquire capital equipment and to finance  technology and
product development, manufacturing and clinical trials. In February, 1997 Aphton
signed an  agreement  with  Pasteur  Merieux  Connaught  ("PMC")  (Rhone-Poulenc
Group), a leader in medical science and research and the world's largest vaccine
manufacturer  and  marketer,  for a  strategic  alliance  for all  human  cancer
applications  of  Gastrimmune(TM),  including  stomach,  colorectal,  liver  and
pancreatic cancers.  Under the terms of the twenty-year license and co-promotion
agreement,  Aphton will be responsible for product development,  clinical trials
and regulatory  agency  approvals,  and PMC will be  responsible  for promotion,
advertising,  marketing, distribution and sales of Gastrimmune(TM) in the United
States, Canada, Europe (including the C.I.S. countries) and Mexico. In addition,
Aphton  and PMC will  enter into  agreements  providing  for : (a) the supply of
Gastrimmune(TM)  from Aphton to PMC; and (b) the supply of certain components of
Gastrimmune(TM)  (as well as other Aphton products) from PMC to Aphton. PMC will
fund the costs associated with product introduction,  promotion, advertising and
marketing throughout the territory covered by the agreement.  Under the terms of
the  agreement,  in addition to upfront  consideration  aggregating  $10 million
including $1 million cash and the  unconditional  supply commitment (of material
suitable  for human use) of $9 million,  Aphton will receive the majority of the
profits  from  sales of  Gastrimmune(TM),  with the  balance  of  profits  to be
retained by PMC. The unconditional supply commitment is valued at a price agreed
upon at the  signing  of the  contract.  The price  agreed to is a  conservative
valuation  below market value.  The $10 million has been classified as a license
payment and has been  deferred and will be recognized  for  financial  statement
(accounting) purposes as revenue within the twenty-year period of the agreement,
which  began  February  14,  1997.  The  revenue  recognition  will  begin  once
regulatory  agency  approval to market the product has been received and will be
recognized  ratably  over the  remaining  period  of the  contract,  which  ends
February 13, 2017.  The Company does not  speculate on the timing of  regulatory
approvals.  However,  they are not  likely  to occur in less  than two years and
quite possibly may occur in more than two years. Under the agreement,  PMC shall
have the right to terminate  upon one hundred  eighty (180) days prior notice to
Aphton,  in the event  that it  determines,  following  completion  of Phase III
clinical trials of the Product (and receipt by PMC of the results and supporting
data obtained in such trials),  that for safety and efficacy reasons it does not
wish to co-promote,  market or sell the Product.  In addition,  either party may
terminate the agreement by (a) mutual agreement, (b) for uncured material breach
and (c) due to liquidation, insolvency , etc. Further, under the agreement, none
of the  aggregate  $10 million  consideration,  either the cash or the Company's
rights to the full $9 million in unconditional supply commitment,  is refundable
to PMC under any  conditions.  There is no provision under the agreement for the
unconditional  supply  commitment,  which is for  supplies  that are not readily
available in the open market,  to be satisfied by PMC with a cash payment.  (The
$10 million was  recognized  for tax purposes in the year ended April 30, 1997.)
Discussions  are  continuing  between  PMC and  Aphton for  marketing  rights to
Gastrimmune(TM)  in Japan and other Asian  markets.  In April 1997,  the Company
issued a $5,000,000 7% senior redeemable  convertible  debenture.  Interest-only
payments are due  quarterly  with the  principle  maturing in April,  2000.  The
interest may be paid in common stock,  a combination of common stock or cash, or
new  debentures  at the option of the  Company.  Up to 20% of the  debenture  is
convertible  into shares of common stock, at the option of the holder,  from and
after  August  22,  1997 and in  increasing  increments  such  that  100% may be
converted from and after November 10, 1997. The conversion  price shall be equal
to the lesser of $25.00  per share or 82% of the  average  closing  bid price as
reported by The Nasdaq National Market for the 5 consecutive trading days ending
on the trading day  immediately  preceding the  conversion  date. The conversion
rate increases when the Company's stock trades above $35.00 per share.  Interest
on such debt amounted to approximately $15,000 in fiscal 1997.

Subsequent to April 30, 1997, on June 17, 1997,  the Company  announced  that it
had received  proceeds of $10,000,000 from the closing of a private financing of
Common Stock with one of the largest investment banking/stock brokerage firms in
the United  States.  The Company  issued  715,000  shares of common stock with a
7-year warrant for 225,000 shares exercisable at $17.50 per share.

The Company  anticipates that its existing capital  resources which are composed
primarily of cash and short-term cash investments, including the proceeds of its
private  placements  and  interest  thereon,  would  enable it to  maintain  its
currently  planned  operations into the year 2000. The Company's working capital
and capital  requirements  will  depend upon  numerous  factors,  including  the
following:  the  progress of the  Company's  research and  development  program,
preclinical  testing  and  clinical  trials;  the timing  and cost of  obtaining
regulatory  approvals;  the  levels of  resources  that the  Company  devotes to
product  development,  manufacturing and marketing  capabilities;  technological
advances;  competition;  and collaborative  arrangements or strategic  alliances
with other drug companies, including the further development,  manufacturing and
marketing of certain of the Company's products and the ability of the Company to
obtain funds from such strategic alliances or from other sources.


Item 8.  Financial Statements and Supplementary Data.

Financial Statements are set forth in this report beginning at page F-1.


Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.

Not applicable.


                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.

The  information  required  for this item is  incorporated  by  reference to the
section  captioned  "Election of Directors" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.


Item 11.  Executive Compensation

The  information  required  for this item is  incorporated  by  reference to the
section captioned "Executive  Compensation" in the Company's Proxy Statement for
the Annual Meeting of Stockholders.


Item 12.  Security Ownership of Certain Beneficial Owners and Management.

The  information  required  for this item is  incorporated  by  reference to the
section  captioned  "Election of Directors" of the Company's Proxy Statement for
the Annual Meeting of Stockholders.


Item 13.  Certain Relationships and Related Transactions.

Not applicable.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)    Documents filed as part of this Form 10-K
       (i) Financial Statements:
           Report of Independent Accountants
           Balance sheets as of April 30, 1997 and 1996
           Statements of Operations  for the years ended April 30, 1997,  1996
                  and 1995
           Statements  of  Stockholders'  Equity for the years ended
                  April 30,  1997,  1996 and 1995
           Statements  of Cash  Flows for the years  ended  April  30,  1997,
                  1996 and 1995  
           Notes to  Financial Statements

       (ii)  Financial Statements Schedules:
             Financial  Statement  Schedules are omitted because they are either
             not required, not applicable, or the information is included in the
             Financial Statements or Notes thereto.



(b)    Exhibits
       Exhibit Number            Description
          3.1          Articles of Incorporation  (Incorporated by reference to
                       Exhibit 3.1 of the Registrant's Form S-1 Registration
                       Statement, File No. 33-38255, "Registration Statement")

          3.2          Amendment to Articles of Incorporation (Incorporated by
                       reference to Exhibit 3.2 to Registration Statement)

          3.3          By-Laws (Incorporated by reference to Exhibit 3.3 
                       to Registration Statement)

         11.1          Computation of Earnings per common share
                       (attached as an exhibit)

         23.1          Written Consent of Coopers & Lybrand L.L.P.

         27.1          Financial Data Schedules

(c)    Reports on Form 8-K

       During the three-month  period ending April 30, 1997, the Company did not
       file any reports on Form 8-K.


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Dated:  July 25, 1997                   APHTON CORPORATION

                                       /S/PHILIP C. GEVAS
                                          ---------------
                                      By: PHILIP C. GEVAS
                                          Chairman of the Board,
                                          Chief Executive Officer,
                                          President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

   Signatures             Title                                 Date

/s/PHILIP C. GEVAS
   ---------------
   PHILIP C. GEVAS        Chairman of the Board,            July 25, 1997
                          Chief Executive Officer, President
                          and Chief Financial Officer       
/s/ROBERT S. BASSO
   ---------------
   ROBERT S. BASSO        Director                          July 25, 1997

/s/WILLIAM A. HASLER
   -----------------
   WILLIAM A. HASLER      Vice Chairman of the Board        July 25, 1997
                          and Director        

/S/NICHOLAS JOHN STATHIS
   ---------------------
   NICHOLAS JOHN STATHIS  Director                          July 25, 1997

/S/FREDERICK W. JACOBS
   -------------------
   FREDERICK W. JACOBS    Controller and                    July 25, 1997 
                          Chief Accounting Officer           







                          INDEX TO FINANCIAL STATEMENTS
                              FINANCIAL STATEMENTS

Report of Independent Accountants..................................F-1

Balance Sheets - April 30, 1997 and 1996...........................F-2

Statements of Operations - for the years ended
     April 30, 1997, 1996 and 1995.................................F-3

Statements of Stockholders' Equity - for the years ended
     April 30, 1997, 1996 and 1995.................................F-4

Statements of Cash Flows - for the years ended
     April 30, 1997, 1996 and 1995.................................F-5

Notes to the Financial Statements..................................F-6







                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders
Aphton Corporation


We have audited the  accompanying  balance  sheets of Aphton  Corporation  as of
April 30, 1997 and 1996, and the related statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended April 30,
1997.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Aphton Corporation as of April
30, 1997 and 1996, and the results of its operations and its cash flows for each
of the three  years in the  period  ended  April  30,  1997 in  conformity  with
generally accepted accounting principles.


                            COOPERS & LYBRAND L.L.P.




Honolulu, Hawaii
July 18, 1997




                           



                               APHTON CORPORATION

                    Balance Sheets - April 30, 1997 and 1996


                                                 1997                   1996

                                     Assets

Current assets:
Cash and short-term 
cash investments (Note 10)                  $8,845,739             $8,169,368
Other assets (including current
  portion of the unconditional
  supply agreement)                            308,920                 52,534
                                             ---------              ---------
   Total current assets                      9,154,659              8,221,902

Equipment and improvements, at cost,
   net of accumulated depreciation 
   and amortization                            216,123                132,303
Unconditional supply commitment              8,991,000                     --
                                             ---------              ---------
Total assets                               $18,361,782             $8,354,205
                                           ===========             ==========

                      Liabilities and Stockholders' Equity

Liabilities:
Current liabilities:
Accounts payable and other                  $1,948,827             $1,312,784
                                             ---------              ---------
Total current liabilities                    1,948,827              1,312,784

Convertible debenture                        3,902,440                     --
Deferred revenue                            10,000,000                     --
                                            ----------             ----------
Total liabilities                           15,851,267              1,312,784
                                            ----------             ----------

Commitment

Stockholders' Equity (Note 10):
Common stock, no par value -
Authorized:  20,000,000 shares
Issued and outstanding:  
  12,913,149 shares at April 30, 1997 and
  12,911,149 shares at April 30, 1996       26,665,091             26,664,591
Additional paid in capital                   1,097,560                     --
Purchase warrants                              147,004                147,004
Accumulated deficit                        (25,399,140)           (19,770,174)
                                            ----------             ----------
Total stockholders' equity                   2,510,515              7,041,421
                                             ---------              ---------
Total liabilities and stockholders' equity $18,361,782             $8,354,205
                                            ==========              =========


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



                               APHTON CORPORATION
                            Statements of Operations
                for the years ended April 30, 1997, 1996 and 1995



                                   1997         1996          1995

Revenue:
Dividend, interest
  and other income              $271,170     $438,812      $463,493
                                --------     --------      --------
Total revenue                    271,170      438,812       463,493
                                --------     --------       -------

Costs and Expenses:
General and administrative       543,939      648,868       488,635
Research and development       5,221,197    4,500,877     3,904,567
                               ---------    ---------     ---------

Total costs and expenses       5,765,136    5,149,745     4,393,202
                               ---------    ---------     ---------
Loss before income tax expense(5,493,966)  (4,710,933)   (3,929,709)
Income tax expense               135,000           --            --
                               ---------    ---------    -----------
Net loss                     $(5,628,966) $(4,710,933)  $(3,929,709)
                             ============ ============  ============

Net loss per common share        $(0.44)      $(0.37)       $(0.32)
                                 =======      =======       =======
Weighted average number of
 common shares outstanding    12,912,982   12,723,082    12,377,541
                              ==========   ==========    ==========



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


                               APHTON CORPORATION
                       Statements of Stockholders' Equity
                for the years ended April 30, 1997, 1996 and 1995

                                              Additional
                 Common Stock       Purchase    Paid in   Accumulated
               Shares     Amount    Warrants    Capital     Deficit   Total
Balance,
May 1, 1994   12,367,949 $21,653,791 $147,004  $     - $(11,129,532)$10,671,263

Exercise of purchase
   warrants       11,100       2,775       -         -            -       2,775

Net loss              -           -        -         -   (3,929,709) (3,929,709)
              ----------   --------- --------  --------   ---------   ---------
            
Balance,
April 30,1995 12,379,049  21,656,566  147,004        -  (15,059,241)  6,744,329

Exercise of purchase
   warrants       32,100       8,025       -         -            -       8,025

Sale of stock,
   net           500,000   5,000,000       -         -            -   5,000,000
                                                             
Net loss              -           -        -         -    (4,710,933)(4,710,933)
              ----------  ----------  -------  ----------  ---------  ---------
Balance,
April 30,1996 12,911,149  26,664,591  147,004         -  (19,770,174) 7,041,421

Exercise of purchase
   warrants        2,000         500       -          -          -          500

Conversion
feature of
convertible debt      -           -        -   1,097,560         -    1,097,560

Net loss              -           -        -          -   (5,628,966)(5,628,966)
              ----------  ----------  -------  ---------   ---------  --------- 
Balance,
April 30,1997 12,913,149 $26,665,091 $147,004 $1,097,560$(25,399,140)$2,510,515
              ========== =========== ======== ==========  ==========  =========



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


                               APHTON CORPORATION
                            Statements of Cash Flows
                for the years ended April 30, 1997, 1996 and 1995

           Increase (decrease) in cash and short-term cash investments

                                          1997           1996         1995
Cash flows from operating activities:
Cash paid to suppliers and employees  $(4,156,450)   $(4,756,612)  $(4,011,652)
Interest and dividends received           271,170        438,812       463,493
                                        ---------      ---------     ---------
Net cash used in operating activities  (3,885,280)    (4,317,800)   (3,548,159)
                                        ---------      ---------     ---------
Cash flows from investing activities:
Capital expenditures                     (151,349)       (41,029)      (91,428)
                                        ---------      ---------     ---------
Cash used in investing activities        (151,349)       (41,029)      (91,428)
                                        ---------      ---------     ---------
Cash flows from financing activities:
Issuance of convertible debenture       5,000,000             -             -
Debenture issue costs                    (287,500)            -             - 
Sales of stock                                500      5,008,025         2,775
                                        ---------      ---------     ---------

Cash received from financing activities 4,713,000      5,008,025         2,775
                                        ---------      ---------     ---------
Net increase (decrease) in cash and
short-term cash investments               676,371        649,196    (3,636,812)
Cash and short-term cash investments:
     Beginning of year                  8,169,368      7,520,172    11,156,984
                                        ---------      ---------    ----------
     End of year                       $8,845,739     $8,169,368    $7,520,172
                                        =========      =========     =========

Reconciliation of net loss to net cash
   used in operating activities

Net loss                              $(5,628,966)   $(4,710,933)  $(3,929,709)
Adjustments to reconcile net
loss to net cash used in 
operating activities:

Depreciation and amortization              67,529         52,780        47,073

Changes in -
Other current assets                       40,114         24,098       (43,119)

Cash receipt treated
as deferred revenue                     1,000,000             -             -

Accounts payable and 
  other current liabilities               636,043        316,255       377,596
                                        ---------       --------      --------
Net cash used in operating activities:$(3,885,280)   $(4,317,800)  $(3,548,159)
                                        =========      =========     =========

Schedule of non-cash activities:
Unconditional supply commitment        (9,000,000)           -              -
Deferred revenue                        9,000,000            -              -

    The accompanying notes are an integral part of the financial statements.
 
                              APHTON CORPORATION
                        Notes to the Financial Statements
1.       Organization and Operations
Aphton Corporation is a biopharmaceutical  company developing products using its
innovative  vaccine-like  technology for neutralizing,  or "blocking," hormones.
The precisely  targeted  hormones are those that  participate in diseases,  both
malignant  and  non-malignant,  in (a) the  gastrointestinal  system and (b) the
reproductive  system.  These products,  called  immunogens,  treat the following
diseases:  (a)  Gastroesophageal  Reflux  Disease (GERD,  or severe  heartburn),
ulcers  and  colorectal,   stomach,   liver  and  pancreatic   cancers  and  (b)
endometriosis and prostate, breast, endometrial and ovarian cancers.

2.       Summary of Significant Accounting Policies

Research and Development Expenses -
    Research and development costs are expensed as incurred.

General and Administrative Expenses -
    Amounts  shown  represent  expenses  not  clearly  related to  research  and
    development  expense.  A  significant  portion of these  expenses  relate to
    intellectual property/patent legal costs and salaries.

Equipment and Improvements -
    Equipment and furniture are depreciated using  accelerated  methods over the
    estimated  economic  lives  (5-7  years)  of the  assets.  Improvements  are
    amortized  over  the  term of the  lease  using  the  straight-line  method.
    Betterments  that  substantially  extend the useful  life of  equipment  and
    furniture  are  capitalized  and  depreciated  over the  period of  expected
    benefit.

Unconditional Supply Commitment -
     Unconditional supply commitment  represents $9,000,000 in an unconditional,
     non-refundable  supply commitment of materials suitable for human use. (See
     Note 3.) In compliance with SFAS No. 121, "Accounting for the Impairment of
     Long-Lived  Assets and for Long-Lived  Assets to be Disposed of," it is the
     Company's  policy to review the current  market  prices of the  supplies to
     assure that they remain above the stated  contract  price of the  materials
     and that the right to receive the supplies remains unimpaired.  The Company
     does not  believe  there is any  current  impairment  of the  unconditional
     supply agreement.

Income Taxes -
    The Company  accounts  for income  taxes  pursuant to Statement of Financial
    Accounting  Standards No. 109  "Accounting for Income Taxes," which requires
    an asset and liability  approach in accounting for income taxes.  Under this
    method,  the amount of deferred  tax asset or  liability  is  calculated  by
    applying the provisions of enacted tax laws to the  differences in the bases
    of assets and liabilities for financial and income tax purposes.  Income tax
    expense is the tax payable  for the period and the change  during the period
    in deferred tax assets and liabilities.  Investment tax credits and research
    and experimentation credits are accounted for using the flow-through method.

Loss Per Share -
    The computation of loss per share is based on the weighted average number of
    shares  outstanding  during the year.  Fully  diluted  loss per share is not
    presented as the results would be anti-dilutive.

Cash Equivalents -
    For  purposes of the  statement  of cash flows,  the Company  considers  all
    highly  liquid debt  instruments,  including  short-term  cash  investments,
    purchased  with an  original  maturity  of three  months  or less to be cash
    equivalents.

Concentrations Of Credit Risk -
    The Company's  short-term  cash  investments  are held in several  financial
    institutions  and consist  principally of insured money market  accounts and
    cash  management  accounts  that are  collateralized  by or invested in U.S.
    Government and U.S. Government agency securities.

Use of Estimates in the Preparation of Financial Statements -
    The  preparation  of  financial  statements  in  conformity  with  generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions  that affect the reported  amounts of assets and liabilities and
    disclosures  of  contingent  assets  and  liabilities  at  the  date  of the
    financial  statements  and the  reported  amounts of revenues  and  expenses
    during  the  reporting  period.  Actual  results  could  differ  from  those
    estimates.

New Accounting Pronouncements-
    The  Financial  Accounting  Standards  Board  (FASB) has issued  several new
    pronouncements, including Statement of Financial Accounting Standards (SFAS)
    No. 125,  "Accounting  for Transfers  and Servicing of Financial  assets and
    Extinguishment  of  Liabilities,"  SFAS No. 127,  "Deferral of the Effective
    Date of  Certain  Provisions  of FASB  Statement  No.  125,"  SFAS No.  128,
    "Earnings Per Share"; SFAS No. 129,"Disclosures of Information About Capital
    Structure";  SFAS No. 130, "Reporting  Comprehensive  Income";  and SFAS No.
    131,  "Disclosures About Segments of an Enterprise and Related Information."
    These statements will be effective in various periods ending after April 30,
    1997.  The  adoption of these  standards  is not expected to have a material
    effect on the Company's financial statements.


3.       License and Co-Promotion Agreement
    In February,  1997 Aphton signed an agreement with Pasteur Merieux Connaught
    ("PMC")  (Rhone-Poulenc Group), a leader in medical science and research and
    the world's  largest  vaccine  manufacturer  and  marketer,  for a strategic
    alliance for all human cancer  applications  of  Gastrimmune(TM),  including
    stomach,  colorectal,  liver and pancreatic cancers.  Under the terms of the
    twenty-year license and co-promotion  agreement,  Aphton will be responsible
    for product  development,  clinical trials and regulatory  agency approvals,
    and  PMC  will  be  responsible  for  promotion,   advertising,   marketing,
    distribution  and sales of  Gastrimmune(TM)  in the United  States,  Canada,
    Europe (including the C.I.S. countries) and Mexico. In addition,  Aphton and
    PMC  will  enter  into  agreements   providing  for  :  (a)  the  supply  of
    Gastrimmune(TM) from Aphton to PMC; and (b) the supply of certain components
    of  Gastrimmune(TM)  (as well as other Aphton  products) from PMC to Aphton.
    PMC will fund the costs  associated  with product  introduction,  promotion,
    advertising and marketing throughout the territory covered by the agreement.
    Under the terms of the  agreement,  in  addition  to  upfront  consideration
    aggregating  $10 million  including  $1 million  cash and the  unconditional
    supply commitment (of material suitable for human use) of $9 million, Aphton
    will receive the majority of the profits from sales of Gastrimmune(TM), with
    the  balance of profits to be  retained  by PMC.  The  unconditional  supply
    commitment  is valued at a price agreed upon at the signing of the contract.
    The price agreed to is a conservative  valuation below market value. The $10
    million has been  classified as a license  payment and has been deferred and
    will be recognized for financial statement  (accounting) purposes as revenue
    within the  twenty-year  period of the  agreement,  which began February 14,
    1997. The revenue  recognition will begin once regulatory agency approval to
    market the product has been received and will be recognized ratably over the
    remaining period of the contract,  which ends February 13, 2017. The Company
    does not speculate on the timing of regulatory approvals.  However, they are
    not likely to occur in less than two years and quite  possibly  may occur in
    more than two  years.  Under  the  agreement,  PMC  shall  have the right to
    terminate upon one hundred eighty (180) days prior notice to Aphton,  in the
    event that it determines,  following completion of Phase III clinical trials
    of the  Product  (and  receipt by PMC of the  results  and  supporting  data
    obtained in such trials),  that for safety and efficacy  reasons it does not
    wish to co-promote,  market or sell the Product.  In addition,  either party
    may  terminate  the  agreement  by (a)  mutual  agreement,  (b) for  uncured
    material breach and (c) due to liquidation, insolvency , etc. Further, under
    the agreement,  none of the aggregate $10 million consideration,  either the
    cash or the Company's rights to the full $9 million in unconditional  supply
    commitment, is refundable to PMC under any conditions. There is no provision
    under the agreement for the unconditional  supply  commitment,  which is for
    supplies that are not readily  available in the open market, to be satisfied
    by PMC with a cash payment. (The $10 million was recognized for tax purposes
    in the year ended April 30, 1997.)  Discussions  are continuing  between PMC
    and Aphton for marketing rights to  Gastrimmune(TM) in Japan and other Asian
    markets.

4.       Equipment And Improvements
At April 30, 1997 and 1996, equipment and improvements
consisted of the following:
                                     April 30,             April 30,
                                        1997                  1996
Laboratory equipment                 $ 414,408             $ 342,328
Leasehold improvements                 243,456               190,333
Office and laboratory
 furniture and fixtures                192,300               166,154
                                       -------               -------
                                       850,164               698,815
Less accumulated depreciation
         and amortization             (634,041)             (566,512)
                                       -------               -------
                                     $ 216,123             $ 132,303
                                       =======               =======

5.       Accounts Payable and Other
At April  30,  1997 and  1996,  accounts  payable  and  other  was  composed  of
approximately  $934,000 and $479,000 payable on trade accounts and approximately
$1,015,000 and $834,000 accrued for employee wages and benefits, respectively.

6.       Senior Redeemable Convertible Debenture
In April 1997, the Company issued a $5,000,000 7% senior redeemable  convertible
debenture.  Interest-only payments are due quarterly with the principle maturing
in April,  2000.  The interest may be paid in common  stock,  a  combination  of
common stock or cash, or new debentures at the option of the Company.  Up to 20%
of the debenture is  convertible  into shares of common stock,  at the option of
the holder,  from and after August 22, 1997 and in  increasing  increments  such
that 100% may be converted  from and after  November 10,  1997.  The  conversion
price  shall be equal to the  lesser of $25.00  per share or 82% of the  average
closing  bid  price  as  reported  by  The  Nasdaq  National  Market  for  the 5
consecutive  trading days ending on the trading day  immediately  preceding  the
conversion  date. The conversion  rate increases when the Company's stock trades
above $35.00 per share.  For  financial  reporting  purposes,  $1,097,560 of the
proceeds  was  allocated to the  conversion  feature of the debt and recorded as
additional paid-in-capital.  The value of the conversion feature is based on the
Company's stock market price at the date of issuance, less an 18% discount. As a
result,  the  convertible  debt  instrument  of  $5,000,000  was recorded net of
discount equal to the conversion  feature which increases the effective interest
rate of the debt.  Accordingly,  beginning on the date of issuance, the discount
is being  charged to interest  expense on a pro rata basis  using the  effective
interest method as the security becomes convertible. The effective interest rate
on this  debenture  is  approximately  52%.  Interest  on such debt  amounted to
approximately  $15,000  in fiscal  1997.  Under  generally  accepted  accounting
principles  the  conversion  feature  of the  $5,000,000  debenture,  which  was
calculated  to be  $1,097,560,  is a  discount  to the  debenture  and is  being
amortized to interest expense through November 10, 1997 which is the time period
the  conversion  is  expected to occur.  The  Company  expects to pay any actual
interest  expense in shares of common stock and the discount of  $1,097,560 is a
non-cash expense.


7.       Common Stock and Purchase Warrants
Common Stock -

     During  fiscal 1997 the Company sold 2,000  shares of common stock  through
the exercise of outstanding purchase warrants.

    During fiscal 1996, in a private placement,  the Company sold 500,000 shares
    of common stock for $5,000,000 net of  insignificant  legal,  accounting and
    filing fee  expenses.  The Company  also sold 32,100  shares of common stock
    through the exercise of outstanding purchase warrants.

    The Company sold 11,100  shares of common  stock during  fiscal 1995 through
    the exercise of outstanding purchase warrants.


Purchase Warrants -
    Each warrant  described  below is exercisable  for one share of common stock
    and is subject to the restrictive holding  requirements of SEC Rule 144. All
    warrants  exercised  from  inception of the Company have been from  warrants
    issued prior to April 30, 1991.  Warrants are granted periodically and are
    not part of a formal plan.

The Financial   Accounting   Standards  Board  issued   Statement  of  Financial
    Accounting   Standards   (SFAS)  No.  123,   "Accounting   for   Stock-Based
    Compensation,"  in October,  1995. Under SFAS No. 123,  companies can either
    continue  to account  for stock  compensation  plans  pursuant  to  existing
    accounting  standards  or elect to expense the value  derived  from using an
    option pricing model such as Black-Scholes. Aphton Corporation will continue
    to apply  existing  accounting  standards.  However,  SFAS No. 123  requires
    disclosure  of pro forma net income and earnings per share as if the Company
    had adopted the expensing provisions of SFAS No. 123. Based on Black-Scholes
    values,  for the year ended April 30, 1997,  the pro forma net loss would be
    $6,011,431 and the pro forma loss per common share would be $.47. There were
    no  warrants   issued  in  the  year  ended  April  30,  1996  for  employee
    compensation.  Warrants  issued in the year ended April 30, 1996 were issued
    in conjunction with a private placement of stock.

    The following  assumptions  were used in the  Black-Scholes  option  pricing
    model for the 25,000  purchase  warrants  granted in fiscal 1997.  The stock
    price and exercise price of $18.25 was set equal to the fair market value of
    the  Company's  common  stock on the date of grant.  The  risk-free  rate of
    return used was 7.01%. The expected dividend yield used was 0%. The expected
    time to exercise used was 10 years. The expected volatility used was 75%.


The following table summarizes purchase warrant activity over the past three
years:                                        Weighted-Average
                                              Number of Shares   Exercise Price
Outstanding and exercisable at May 1, 1994        1,699,500           $12.57
                  Granted                                --               --
                  Exercised                         (11,100)            $.25
                  Canceled or expired               (20,000)          $12.00
                                                  ---------
Outstanding and exercisable at April 30, 1995     1,668,400           $12.66
                  Granted                           125,000           $12.50
                  Exercised                         (32,100)            $.25
                  Canceled or expired                    --               --
                                                  ---------               
Outstanding and exercisable at April 30, 1996     1,761,300           $12.88
                  Granted (1)                        25,000           $18.25
                  Exercised                          (2,000)            $.25
                  Canceled or expired                    --               --
                                                  ---------     
Outstanding and exercisable at April 30, 1997     1,784,300           $13.26
                                                  =========           ======


For options  outstanding  and  exercisable at April 30, 1997, the exercise price
ranges and average remaining lives were:

                       Options Outstanding and Exercisable

    Range of 
Exercise Prices   Number Outstanding   Average Period(2)  Average Price(3)
---------------   ------------------   -----------------  ----------------
  $.25 to $14.00        775,300             16.5              $ 9.87
$14.01  to  $24.00    1,009,000             18.7              $15.87
                      ---------
                      1,784,300             17.7              $13.26
                      =========

(1)  Weighted average grant date fair value is $15.30
(2)  Weighted average remaining years
(3)  Weighted average exercise price



8.       Income Taxes
The provision for income taxes consists of the following:

Current                       1997             1996            1995
   Federal                  $100,000           $  -            $  -
   State                      35,000              -               -
Deferred                           -              -               -
                             -------           ----            ----
                            $135,000           $  -            $  -
                             =======           ====            ====

The 1997 current provision reflects alternative minimum tax for which a deferred
tax asset was not recognized.

Gross  deferred tax assets result from net operating  loss and income tax credit
carryforwards. Realization of these assets is dependent on the Company's ability
to generate  sufficient  future taxable  income,  prior to the expiration of the
carryforwards,  which is dependent on the completion of research and development
activities and successful  marketing of the Company's various  products.  Due to
the uncertainties related to the above and in accordance with guidance contained
in Statement No. 109, a valuation allowance has been provided for these deferred
tax assets.  Accordingly,  these assets do not appear in the  Company's  balance
sheet at April 30, 1997 and 1996.  The  changes in the  valuation  allowance  in
1997, 1996 and 1995 were $2,886,000, $3,071,000 and $1,614,000, respectively.


Deferred tax assets at April 30, 1997 and 1996 consisted of:
                                             1997               1996
                                             ----               ----
Federal net operating loss carryforward   $4,010,000                $5,760,000
State net operating loss carryforward        446,000                   740,000
                                           ---------                 ---------
Total operating loss carryforward          4,456,000                 6,500,000
                                           ---------                 ---------

Deferred license payment revenues          4,330,000                         -
Expenses deductible in future periods        453,000                   361,000
                                           ---------                 ---------

Federal tax credits                        1,413,000                 1,031,000
State tax credits                            557,000                   451,000
                                           ---------                 ---------
Total tax credits                          1,970,000                 1,482,000
                                           ---------                 ---------
Total deferred tax assets                 11,209,000                 8,343,000
Valuation allowance                      (11,209,000)               (8,343,000)
                                          ----------                 ---------
Net deferred tax assets                  $        --                $       --
                                          ==========                ==========

At April 30,  1997,  for  Federal  income  tax  purposes,  the  Company  had net
operating loss carryforwards of approximately $11,800,000 and various income tax
credit  carryforwards,  primarily  research  and  experimentation,   aggregating
$1,413,000, which expire at various dates through 2012.

At April 30,  1997,  for  California  income tax  purposes,  the Company had net
operating  loss  carryforwards  of  approximately  $5,000,000,  which  expire at
various  dates  through  2002;  and  various  income tax  credit  carryforwards,
primarily research and experimentation,  aggregating  $557,000,  which expire at
various dates through 2012.

9.       Commitments and Contingencies

The Company utilizes various computer  software packages as tools in running its
accounting  operations.  Management  plans to  implement  any  necessary  vendor
upgrades and modifications to ensure continued functionality with respect to the
widely discussed  software  problems  associated with the year 2000. At present,
management does not expect that material  incremental  costs will be incurred in
the aggregate or in any single future year.

The Company  has  noncancelable  facilities  leases  expiring  at various  dates
through fiscal 2000. The leases provide  various  options to renew.  The minimum
rental  commitments for the fiscal years 1998 through 2000,  respectively,  are,
$37,000, $32,000 and $8,000 and none thereafter. Rental expense for these leases
for the years ended April 30, 1997, 1996 and 1995, was  approximately  $108,000,
$108,000, and $87,000.

10.      Subsequent Event

Aphton  announced  on June  17,  1997  that it had  received  cash  proceeds  of
$10,000,000 from a private placement of Common Stock. The Company issued 715,000
shares of common stock at the full market price of $14 per share,  with a 7-year
warrant for 225,000 shares exercisable at $17.50 per share, a 25% premium.

                               APHTON CORPORATION
                    Pro Forma Balance Sheets - April 30, 1997
       Giving Effect to the $10,000,000 Private Placement of Common Stock

                                                Actual   Effect of   Pro Forma
                                                 1997   Transaction     1997
                                     Assets
Current assets:
Cash and short-term cash investments        $8,845,739 $10,010,000 $18,855,739
Other assets (including current 
  portion of the unconditional
  supply agreement)                            308,920                 308,920
                                             ---------  ----------  ----------
Total current assets                         9,154,659  10,010,000  19,164,659
Equipment and improvements, at cost,
   net of accumulated depreciation 
   and amortization                            216,123                 216,123
Unconditional supply commitment              8,991,000               8,991,000
                                           -----------  ----------  ----------
Total assets                               $18,361,782 $10,010,000 $28,371,782
                                           ===========  ==========  ==========

                      Liabilities and Stockholders' Equity

Liabilities:
Current liabilities:
Accounts payable and other                  $1,948,827             $1,948,827
                                             ---------              ---------
Total current liabilities                    1,948,827              1,948,827
Convertible debenture                        3,902,440              3,902,440
Deferred revenue                            10,000,000             10,000,000
                                            ----------             ----------
Total liabilities                           15,851,267             15,851,267
                                            ----------             ----------

Commitment

Stockholders' Equity:
Common stock, no par value -
Authorized:  20,000,000 shares
Issued and outstanding:  
  12,913,149 shares at April 30, 1997
  715,000 additional pro forma shares       26,665,091 $10,010,000 36,675,091
Additional paid in capital                   1,097,560              1,097,560
Purchase warrants                              147,004                147,004
Accumulated deficit                        (25,399,140)           (25,399,140)
                                            ----------  ---------- ----------
Total stockholders' equity                   2,510,515  10,010,000 12,520,515
                                             ---------  ---------- ----------
Total liabilities and stockholders' equity $18,361,782 $10,010,000$28,371,782
                                            ==========  ========== ==========


11.      Fair Value of Financial Instruments

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  About Fair
Values of Financial  Instruments,"  requires that the company disclose estimated
fair values for its  financial  instruments.  The  carrying  amounts of cash and
short-term  cash  investments  and the  recorded  cost of the senior  redeemable
convertible debenture approximate fair value.