______________________
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ______________________
                                    FORM 10-K
                                   (MARK ONE)
                (X) Annual Report Pursuant to Section 13 or 15(d)
            of the Securities and Exchange Act of 1934 (Fee Required)
                   For the Fiscal Year Ended January 31, 1999

                                       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
                        444 Brickell Avenue, Suite 51-507
                            Miami, Florida 33131-2492
                                 (305) 374-7338
Incorporated in Delaware                     I.R.S. Employer Identification
                                                     No. 95-3640931

           Securities Registered pursuant to Section 12(g) of the Act:
                         Common Stock ($.001 par value)
                               Title of Each Class

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes (X) No ( )

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  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)

 Aggregate market value of Common Stock ($.001 par value) held by non-affiliates
 on March 31, 1999 based on the last sale price on March 31, 1999: $199,110,730

               Number of shares of Common Stock ($.001 par value)
                  Outstanding as of March 31, 1999: 14,433,384


                       Documents Incorporated by Reference

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




                                     PART I

Item 1.  Business
                                   The Company

Aphton Corporation is a biopharmaceutical  company developing products using its
innovative vaccine-like technology for neutralizing hormones that participate in
gastrointestinal  system and reproductive system cancer and non-cancer diseases;
and the  prevention of pregnancy.  Aphton has strategic  alliances  with Pasteur
Merieux Connaught  (Rhone-Poulenc  Group),  SmithKline Beecham,  Schering-Plough
Animal  Health  and the World  Health  Organization  (WHO).  Aphton's  Web page,
describing the company, its technology,  products,  strategic alliances and news
releases, can be visited at: www.aphton.com.

                                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, targeted
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:  either  blocking the hormone  gastrin
(Proglumide)  or  blocking  histamine  (Zantac,  Tagamet),  which  is a  hormone
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  the   production  of
testosterone (Lupron, Zoladex) for prostate cancer therapy.

                               Results and Status

Anti-Gastrin Immunogen
Overview
Aphton's  anti-gastrin  immunogen  programs which treat human cancers  encompass
several  gastrointestinal  system cancers since  adenocarcinomas  arising in the
gastrointestinal   system  are  stimulated  by  the  hormones   gastrin  17  and
glycine-extended  gastrin 17. Aphton's anti-gastrin immunogen induces antibodies
in the patient that neutralize both gastrin 17 and glycine-extended  gastrin 17.
The  company  knows of no other  vaccine  or drug  that  selectively  blocks  or
neutralizes both gastrin 17 and glycine-extended gastrin 17.

Safety / Dose Ranging
Aphton has successfully  completed a safety and dose-ranging Phase I/II clinical
trial  with  its  anti-gastrin   immunogen  in  terminal  cancer  patients.  The
anti-gastrin  immunogen  induced  large  antibody  responses in  terminally  ill
patients  whose colon  cancer had not only  metastasized  to the liver,  but was
considered "end-stage".

Survival
In 1998, Aphton announced  increased survival results,  which were statistically
significant,  from a comparative  analysis of its Phase I/II clinical  trials in
which  Aphton's  anti-gastrin   immunogen  was  administered  to  patients  with
end-stage  colorectal cancer ("advanced" Duke's D). The study was carried out at
the Queens Medical  Center,  University of Nottingham,  United Kingdom (UK). The
group treated with the  anti-gastrin  immunogen had 40 evaluable  patients.  The
comparative  placebo group was from a parallel study at the same medical center,
with the same principal  investigator as the Aphton study, carried out under the
auspices of the Cancer  Research  Campaign  (CRC).  The CRC is a leading  cancer
research  organization  in the UK. The  placebo  group from the CRC study had 77
evaluable patients, also with end-stage colorectal cancer.

The anti-gastrin immunogen treatment group and placebo group had similar patient
inclusion and exclusion criteria. The treatment group had a higher proportion of
patients  with  liver  and a  similar  incidence  of lung  metastases.  A larger
proportion of patients in the placebo group had received  adjuvant  chemotherapy
or chemotherapy for advanced  disease,  prior to entry into the trial.  Both the
lower  rate  of  liver  metastases  and  the  higher  proportion  of  antecedent
chemotherapy  in the placebo  group,  tended to confer on the  placebo  group an
expected,  or  theoretical,   "survival  advantage"  over  the  treatment  group
(anti-gastrin immunogen).

Results:  The patients  immunized  with  Aphton's  anti-gastrin  immunogen had a
median survival of 338 days versus 184 days for the placebo group. The increased
survival in the treatment group was statistically significant both by univariate
analysis and by multivariate analysis.

Phase III Clinical Trial Programs
Aphton's Phase III clinical trial programs  encompass  several  gastrointestinal
system cancers.  Aphton selected stomach cancer as the first indication to begin
Phase III clinical  trials in,  because:  (a) survival time, the "end point," is
short relative to colon cancer (the patients  selected in Phase I/II); (b) trial
costs are relatively  low; (c) there is no current  effective  therapy;  (d) the
number of patients,  worldwide,  is in the millions.  Subsequently,  Aphton also
initiated  Phase III clinical  trials with its  anti-gastrin  immunogen to treat
patients with pancreatic cancer and colorectal cancer.

Strategic Alliance
In 1997 Aphton signed an agreement with Pasteur  Merieux  Connaught  ("PMC") the
vaccine business of Rhone-Poulenc  Group, for a strategic alliance for all human
cancer   applications  of  its  anti-gastrin   immunogen,   including   stomach,
colorectal,  liver,  esophageal and pancreatic  cancers.  Under the terms of the
twenty-year agreement,  Aphton is responsible for product development,  clinical
trials and regulatory agency approvals, and PMC is responsible for and will fund
the  promotion,  advertising,  marketing,  distribution  and  sales of  Aphton's
anti-gastrin immunogen in North America, Mexico and Europe. In addition,  Aphton
and PMC have entered into further agreements providing for the supply of certain
components of the anti-gastrin immunogen (as well as other Aphton products) from
PMC to Aphton.

Aphton is in active discussions with potential  strategic partners for marketing
rights to the anti-gastrin  immunogen in Japan and Asia. Because of the high per
capita incidence of gastrointestinal cancers in Japan and other Asian countries,
Aphton is pursuing these discussions as a high priority subject.

GnRH pharmaccine
Overview
Aphton has  developed a second  major  anti-hormone  immunogen  for human cancer
indications,  one that targets the reproductive hormone  Gonadotropin  Releasing
Hormone (GnRH) and which is now in Phase I/II clinical  trials.  By successfully
neutralizing  (blocking)  GnRH,  it shuts down the  production  of estrogen  and
testosterone   in  the  gonadal   organs.   Estrogen  fuels  breast  cancer  and
testosterone  fuels  prostate  cancer.  It  has  been  known  for  decades  that
biological blockage,  like physical castration,  is efficacious in the treatment
of prostate and breast cancers.  Aphton's anti-GnRH immunogen induces biological
blockage.

Safety / Dose Ranging
In October 1998, a safety and  dose-ranging  trial was initiated  using Aphton's
anti-GnRH immunogen called GnRH pharmaccine,  in patients with advanced prostate
cancer.  The  purpose  of the safety and  dose-ranging  trial is to  demonstrate
safety and  determine an optimal  dose  regimen to use in the pivotal  Phase III
efficacy trial.

Biological Castration
The  objective  of  immunizing  with  GnRH  pharmaccine  is  to  reduce  gonadal
testosterone to levels achieved by surgical  castration.  In March 1999,  Aphton
announced  that GnRH  pharmaccine  reduced,  in some patients at the lowest dose
level,  gonadal  testosterone  to levels achieved by surgical  castration.  This
demonstrated  "proof of  concept"  in man.  In  addition,  the  prostate  cancer
"progression" marker Prostate  Specific  Antigen (PSA) was reduced  markedly in
these patients to very low levels.


Strategic Alliance
In June 1998,  Aphton and SmithKline  Beecham signed a Collaboration and License
Agreement for a worldwide  strategic alliance for Aphton's anti-GnRH  immunogen.
The agreement  covers the diagnosis,  treatment and  prevention of  GnRH-related
cancers and other diseases in humans. Human cancer indications for Aphton's GnRH
pharmaccine are prostate,  breast,  ovarian and endometrial  cancer.  Additional
medical indications for GnRH pharmaccine are endometriosis,  polycystic ovaries,
uterine fibroids, infertility and precocious puberty.

Under terms of the  agreement,  SmithKline  Beecham  received  exclusive  rights
worldwide to Aphton's  GnRH-related patents and proprietary  technology.  Aphton
and SmithKline Beecham are collaborating in a joint product development program.
SmithKline Beecham is responsible for funding all costs of product  development,
clinical  trials and  regulatory  approvals,  and for  worldwide  marketing  and
distribution of approved products.  The agreement uses a royalty mechanism based
on product sales, in dollars, worldwide to determine Aphton's revenues.

Immunocontraceptive
Aphton's  immunocontraceptive,  an anti-hCG immunogen which prevents  pregnancy,
has been in a Phase I/II trial,  funded by the World Health  Organization (WHO).
Aphton has developed a "next generation"  anti-hCG  immunogen which incorporates
two major advances:  (1) Aphton's  proprietary delivery vehicle which provides a
protection  profile  tailored to meet the consensus of needs as  communicated to
Aphton and WHO by Women's Healthcare Organizations;  (2) An additional target on
hCG as part of the immunogen which provides  increased  efficacy.  Women will be
immunized in a continuing but  accelerated,  Phase I/II trial in the near future
with this new  formulation.  It is expected that a final pivotal Phase III trial
will follow shortly thereafter.

Equine Anti-Gastrin Immunogen
In 1998, a preliminary  safety trial  commenced  using  Aphton's  Equine (horse)
anti-gastrin  immunogen  to  reduce  stomach  acid and heal  ulcers  in  horses.
Following  completion of this safety and a  dose-ranging  phase, a larger safety
and a pivotal efficacy trial are planned.

In  August,  1997,  Aphton  announced  that it  formed  an  exclusive  worldwide
strategic  alliance  with  Schering-Plough  Animal  Health for the  development,
clinical   testing,   manufacturing   and  marketing  of  Aphton's   proprietary
anti-gastrin  immunogen,  as a veterinary product, that reduces stomach acid and
heals peptic ulcers in animals.  Equine (horse) ulcers was selected as the first
indication to be pursued under the alliance.  Under the terms of the  agreement,
Schering-Plough  Animal  Health will work closely with Aphton's  scientists  and
management to bring the  anti-gastrin  immunogen to market.  Schering-Plough  is
responsible   for  all  capital  costs  and  financial   requirements,   product
development,  clinical  trials and marketing for each animal health  indication.
Schering-Plough Animal Health and Aphton will share in all product profits.

                              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.  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  and  have a  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.  This virtually  eliminates the
problem of patient compliance, which is associated with pharmaceutical drugs.



Aphton's anti-gastrin immunogen, for example, consists of:

     (a) A  synthetic  peptide,  which is similar  to a portion  of the  hormone
gastrin 17 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).


The  anti-gastrin  immunogen,  is administered by injection,  with booster shots
contemplated  at,  typically,   six-month   intervals.   The  immunogen  induces
antibodies  in the  patient  which  bind with  peptide  (a) and which  also bind
(cross-react)  with and neutralize  gastrin 17 (when they encounter that portion
on gastrin 17 which is similar to peptide (a)). Gastrin 17 is known to drive (or
fuel)  colorectal,  stomach,  liver and pancreatic  cancer.  It is believed that
neutralizing  gastrin 17 will prove to  inhibit  both the growth and  metastasis
(spread)  of these  gastrointestinal  cancers.  In  addition,  the  anti-gastrin
immunogen uniquely neutralizes  glycine-extended gastrin 17, which has also been
shown, recently, to fuel these gastrointestinal system cancers.

Gastrin 17 is also  responsible  for the  production of the bulk of stomach acid
(approximately  90% in  humans),  the  reduction  of  which is  therapeutic  for
gastroesophageal  reflux  disease  (GERD) and for both  peptic  ulcers and NSAID
-induced ulcers (NSAID examples include Aspirin and Ibuprofen).

Aphton's  anti-GnRH  immunogen  is  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,  which  prevents  pregnancy  in  humans,  is also
similarly constructed.  In this case, the so-called "C-terminal" peptide portion
of the  hormone  hCG (which is targeted to be  neutralized)  is  synthesized.  A
second, unique target, located on the hormone hCG, is now also incorporated into
the immunogen, which enhances efficacy. Pregnancy is prevented by immunizing the
woman; this induces antibodies which bind to and neutralize hCG.

                               Strategic Alliances

In June,  1998,  Aphton  completed a major  strategic  alliance  agreement  with
SmithKline  Beecham for all human  applications of its anti-GnRH  immunogen,  as
discussed  above.  SmithKline  Beecham is the world's largest vaccine company in
terms of annual sales.

In  August,   1997,   Aphton   completed  a  major   strategic   alliance   with
Schering-Plough  Animal  Health  covering  all  animal  health  applications  of
Aphton's  anti-gastrin  immunogen,  as discussed above.  Schering-Plough  Animal
Health,  in terms of  annual  sales,  is one of the  largest  animal  healthcare
companies in the world.

In February,  1997, Aphton completed a major strategic  alliance  agreement with
Pasteur   Merieux   Connaught   (Rhone  Poulenc  Group)  for  all  human  cancer
applications of the anti-gastrin  immunogen, as discussed above. Pasteur Merieux
Connaught  is the  largest  vaccine  company  in the  world in  terms of  annual
patients  dosed.  Subsequently,   Rhone-Poulenc  Group  and  Hoechst  A.G.  have
announced  an  agreement  to merge the two  companies  into a new  company to be
called Aventis.  The Rhone-Poulenc Group / Hoechst A.G. merger is expected to be
completed  during 1999.  Pasteur  Merieux  Connaught will be responsible for the
vaccine business of Aventis. We believe this merger strengthens our anti-gastrin
immunogen  program as Pasteur  Merieux  Connaught  now will be  responsible  for
Aventis' entire vaccine business,  worldwide. In addition,  Rhone-Poulenc Rorer,
the other "arm"  (together  with Pasteur  Merieux  Connaught)  of  Rhone-Poulenc
Pharma,  has been increasingly  participating in the Clinical Trials Program for
the  anti-gastrin  immunogen.  Rhone-Poulenc  Rorer  is a  major  factor  in the
worldwide  cancer  markets,   including  the  successful   commercialization  of
Taxotere, as well as other cancer products.

In January,  1995,  Aphton announced a major  relationship with the World Health
Organization  (WHO),  for the development and testing of an  immunocontraceptive
(which prevents  pregnancy),  as well as exclusive  rights for the  manufacture,
distribution and supply of the immunocontraceptive for the developing countries,
worldwide.  Under a  separate  agreement  executed  simultaneously,  Aphton  has
exclusive  manufacturing and distribution rights for the  immunocontraceptive in
the developed countries.
                           Manufacturing and Marketing

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,  sell and
distribute its products.

The contract  manufacturing  "outsourcing" approach takes advantage of the large
and available  manufacturing  resources of  pharmaceutical  industry  companies.
Aphton has  contracted  with drug  manufacturing  sources  which  have  provided
Aphton's  immunogens  for  toxicology  studies  and  clinical  trials.  Aphton's
contract   marketing,   distribution  and  sales  (outsourcing)   strategy,   as
exemplified  by  the  Pasteur   Merieux   Connaught,   SmithKline   Beecham  and
Schering-Plough Animal Health agreements, 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.  This significantly  enhances Aphton's ability to achieve rapid market
penetration  and growth and to exploit  the  benefits  of the patent life of its
products.

It should be noted that contract  manufacturing  and contract  marketing  differ
significantly from the normal  "licensing" of products to third parties.  In the
former,  Aphton can retain a  significantly  larger degree of control,  share of
profits and thus earnings.  Under typical 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 earned and retained its options and the ability to
optimally  carry  out  its   commercialization   approach.   This  strategy  was
successfully  validated with Aphton's agreements with Pasteur Merieux Connaught,
SmithKline Beecham and Schering-Plough Animal Health.

                            Patents and Trade Secrets

Proprietary  protection  for  Aphton's  products  is  central  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 US 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 US 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 Union with a combined  population  larger than that of
the US, often result in more rapid product approvals than in the US. 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 US, given the high standards of
medicine and clinical  trials  monitoring  in the UK), in addition to conducting
trials  in the  US  and  elsewhere  in  the  world,  if,  and  as,  required  or
advantageous.  Regulatory  approval,  of course,  is  required  for  marketing a
product in the US and other countries.

Clinical trials of new drugs 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 and an indication of efficacy for defined  indications.  When the
product has been found safe and shows  promise of  efficacy,  further  (pivotal)
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.

                   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,
                                          President and Chief Executive Officer

William A. Hasler                         Vice  Chairman of the Board of
                                          Directors  and  Co-Chief  
                                          Executive  Officer
                                            
Robert S. Basso                           Chairman of Compensation 
                                          and Audit Committees and Director

Nicholas John Stathis, Esq.               Director

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

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

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

Peter Blackburn, Ph.D.                    Vice President, Program Development

Theo de Roij, D.V.M., Ph.D.               Vice President, Business and 
                                          Product Development

Douglas A. Eayrs                          Vice President, Chief Financial
                                          Information Officer

Donald Henderson                          Regional Managing Director,
                                          Finance and Administration

Frederick W. Jacobs                       Treasurer and Chief 
                                          Accounting Officer

Philip  C.  Gevas--Chairman  of the  Board of  Directors,  President  and  Chief
Executive Officer, has served as Director, President and Chief Executive 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 of  experience as a project  scientist/engineer.
Mr. Gevas  conceived and directed the development of Aphton's  inventions  which
have  resulted in numerous  patents for  Aphton,  both US and  foreign,  for the
treatment of colorectal, pancreatic, liver, esophageal and stomach cancers, GERD
and  chronic  peptic  ulcers.  He is  also  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).

William  A.  Hasler--Vice  Chairman  of the  Board  of  Directors  and  Co-Chief
Executive  Officer.  In August,  1998,  Mr.  Hasler was  appointed  the Co-Chief
Executive Officer of the Company.  Mr. Hasler has been a Director of the Company
since  October,  1991 and was elected Vice Chairman in 1996.  From 1991 until he
joined the Company in 1998 as Co-CEO,  Mr.  Hasler was Dean of both the Graduate
School and  Undergraduate  School of Business at the  University of  California,
Berkeley.   Mr.  Hasler  was  formerly  Vice  Chairman  of  KPMG  Peat  Marwick,
responsible  for  management  consulting  worldwide.  He is also a  Director  of
Solectron   Corporation,   Walker  Interactive   Systems,   Tenera,  Inc.,  TCSI
Corporation and is a Public Governor of the Pacific Exchange.

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) and a Managing  Director of  PaineWebber  Incorporated  since
1990.  Formerly,  Mr. Basso was President,  Broadcort  Capital  Corporation  and
Managing Director, Merrill Lynch, Pierce, Fenner & Smith.

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 Fortune 500 clients.

Dov Michaeli, M.D. (University of California, San Francisco),  Ph.D. (University
of California, Berkeley)--Senior Vice President, Director of Medical Science and
Chief  Medical  Officer.  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 over 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.

Richard  Ascione,  Ph.D.  (Princeton  University),  Vice President,  is Aphton's
Director of the Laboratory of Molecular Medicine. Dr. Ascione directs R&D in the
area of  Molecular  Biology  and  works  closely  with  Aphton's  Laboratory  of
Immunobiology in research and product development.  Previously,  Dr. Ascione was
Professor in the Department of Experimental  Oncology and Associate  Director of
the Center for Molecular and  Structural  Biology at the Hollings  Cancer Center
and the Medical University of South Carolina, respectively, in Charleston, South
Carolina.  Prior to that,  Dr.  Ascione was with the National  Cancer  Institute
(NCI) of the National Institutes of Health (NIH) for approximately twenty years,
the last ten of which he served as Deputy Chief of NCI's Laboratory of Molecular
Oncology.  Dr.  Ascione has  published  over  sixty-five  peer-reviewed  papers,
several book chapters and articles  related to the molecular  biology of cancer,
human retroviruses and HIV/AIDS.

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 more than 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,  which became the world's largest selling drug.  Later,  Dr. Broome was
Medical  Director for BIOS, a leading company in the UK which provides  services
ranging from consulting and R&D through clinical trials,  regulatory affairs and
the  registration  of drugs for marketing  approval from  government  regulatory
agencies.

Peter Blackburn,  Ph.D.-Vice President, Program Development of the Company since
September, 1997. Previously Dr. Blackburn was Executive Vice President,  Applied
Microbiology,   Inc.,   where  he  was   employed   for  over  ten  years.   His
responsibilities  encompassed those of a chief operating officer, engaged in the
R&D and  manufacture of  antimicrobial  peptides and  pharmaceutical  grade bulk
drug.  Earlier,  and for ten years,  he was engaged in academic  research at the
Rockefeller University,  New York, in protein chemistry in the laboratory of two
recipients  of the Nobel  Prize  for  Chemistry.  Dr.  Blackburn  has  published
numerous papers in peer-reviewed journals and is the inventor on numerous US and
foreign patents.

Theo de Roij, D.V.M.,  Ph.D.--Vice  President,  Business and Product Development
since  September 1998.  Prior to joining the company,  Dr. de Roij served as the
Director  of  Business   Development  at  SmithKline  Beecham  Biologicals  S.A.
responsible for worldwide business development  activities.  Previously,  Dr. de
Roij was employed by the Animal Health  Division of Solvay,  S.A.  where he held
several senior positions during his 13 year tenure with the company. For several
years,  he was the Corporate  Director,  Business  Development for Solvay Animal
Health responsible for worldwide business development and strategic planning.

Douglas A. Eayrs--Vice President,  Chief Financial Information Officer. Prior to
joining Aphton Corporation, Mr. Eayrs was a Research Analyst for John G. Kinnard
& Company, a  Minneapolis-based  brokerage firm, since 1989 he focused primarily
on  companies   developing  new   pharmaceutical   drugs  and  emerging  medical
technologies.  In 1996,  Mr.  Eayrs was named an  "All-Star  Analyst" in medical
stocks in the Wall Street Journal's annual analyst survey.  Mr. Eayrs also holds
a Master's degree in Applied Economics (Marquette University).

Donald Henderson-Regional  Managing Director,  Finance and Administration of the
Company since February,  1998. Mr. Henderson has held management  positions with
Warner Lambert and Fisons,  including  postings to Australia and Japan,  and was
most  recently  Director  of  Finance  and   Administration   for  Europe/Middle
East/Africa  for the  Australian  based  pharmaceuticals  group  Fauldings.  His
experience includes  implementing six corporate  acquisitions,  and creating new
pharmaceutical  operations in four  countries.  Mr.  Henderson is qualified as a
CPA-equivalent in England.

Frederick W.  Jacobs--Treasurer  and Chief Accounting Officer, has been with the
Company since June,  1989.  Previously,  Mr. Jacobs,  a CPA, was Chief Financial
Officer at a Health Maintenance Organization (HMO) and before that served 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 from time to time by vote.

All  directors   currently   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.

Messrs. Basso 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:

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.

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.

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.

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 both issued US patents and a
number of patent  applications  of the  Company.  Dr.  Scibienski  is  Associate
Professor,  Department of Medical  Microbiology and Immunology at the University
of California, Davis. Dr. Scibienski has over thirty 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 product, which prevents
pregnancy, 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."

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

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

Stephen L. Karr, Jr., Ph.D.,  University of California,  Davis.  Dr. Karr joined
Aphton in 1983 and serves in a number of capacities,  namely:.  Divisional  Vice
President and General  Manager,  Laboratory of  Immunobiology.  Responsible for:
daily operations;  program planning, budgeting and control; and Project Manager,
in  which  capacity  he  is  responsible   for  the   experimental   design  and
implementation   of   special    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,  Divisional
Vice  President,  Immunology,  is  responsible  for research and  development in
immunology and the experimental  design and  implementation of  immunology-based
projects.  He also serves as the principal scientific deputy to Dr. Michaeli and
Dr. Broome for Aphton's clinical trials projects. Dr. Grimes is a co-inventor of
issued US patents of the Company and of additional  patents in  preparation  and
pending.  Dr.  Grimes came  directly to the Company in 1981 upon  finishing  his
doctoral  dissertation  under Dr.  Scibienski at the  University of  California,
Davis.

Both Dr. Karr and Dr. Grimes support  closely the office of Program  Development
and Aphton's  Product  Development/Manufacturing  Team in the UK, which includes
former   SmithKline   Beecham   employees  with  many  years  of  development  /
manufacturing  experience.  Aphton employs approximately thirty-five individuals
directly  and  has  numerous  others  under  contracts  with  other   supporting
organizations.

Item 2.  Properties

Aphton has  noncancelable  facilities  leases  expiring at various dates through
fiscal 2003. The leases  provide  various  options to renew.  The minimum rental
commitments for the fiscal years 2000 through 2003, respectively, are, $101,000,
$103,000, $80,000, $22,000 and none thereafter.  Rental expense for these leases
for the year ended January 31, 1999,  the nine months ended January 31, 1998 and
for the  years  ended  April  30,  1997 and 1996,  was  approximately  $115,000,
$80,000, $108,000 and $108,000, respectively.

Item 3.  Legal Proceedings

Aphton  is not  involved,  and  has  never  been  involved,  in any  litigation,
administrative  or  governmental  proceeding  and none is  believed  by Aphton'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, 1997.  Aphton's Common Stock is traded under
the symbol "APHT."

Fiscal Period Ended January 31, 1998:     High                      Low
         1st Quarter                    $15 1/2                   $ 11 1/2
         2nd Quarter                     16 1/2                     10 1/4
         3rd Quarter                     12 3/4                      9 3/8
Fiscal Period Ended January 31, 1999:
         1st Quarter                    $15                       $ 11 7/16
         2nd Quarter                     18 1/8                     11
         3rd Quarter                     13 1/4                      6 1/4
         4th Quarter                     17 1/2                    10 3/8
Quarter ended April 30, 1999:            17 3/4                    10 3/4

As of January 31, 1999,  Aphton had approximately 300 shareholders of record and
approximately  4,000  beneficial  holders  of its Common  Stock.  Aphton did not
declare dividends on its common stock during the year ended January 31, 1999 and
nine months ended January 31, 1998.

Item 6.  Selected Financial Data

                             SELECTED FINANCIAL DATA

The  selected  financial  data set forth  below with  respect  to the  Company's
statements of operations and balance sheets for the year ended January 31, 1999,
the nine months ended  January 31, 1998 and each of the four 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.

                      (In thousands except for per share data)
                     Year    Nine Months
                    Ended      Ended     ---- Year Ended April 30,----
                 January 31, January 31,
Statements of
 Operations:          1999     1998     1997      1996      1995     1994
Revenue            $   547   $  534   $  271   $   438    $   463    $  62

Research & Development
Expenditures         9,063    4,963    5,206     4,501      3,905    2,924

Net Loss            (9,757)  (6,605)  (5,629)   (4,711)    (3,930)  (3,139)

Net Loss per Share
(basic and diluted) $(0.68)  $(0.48)  $(0.44)   $(0.37)    $(0.32)  $(0.28)

Weighted Average Shares
   Outstanding      14,431   13,733   12,913    12,723     12,378   11,268

                      January 31,      ------------  April 30, -----------
                     1999     1998     1997      1996        1995     1994
Balance Sheets:
Cash and Short-Term
Cash Investments    $10,164  $14,226   $8,846   $8,169      $7,520  $11,157
Total Assets         19,499   23,580   18,362    8,354       7,741   11,290
Total Liabilities    12,948   12,273   15,851    1,313         997      619
Accumulated Deficit (41,760) (32,004) (25,399) (19,770)    (15,059) (11,130)
Total Stockholders'
    Equity            6,552   11,307    2,511    7,041       6,744   10,671

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

         Year Ended January 31, 1999, Nine Months Ended January 31, 1998
                    and the Fiscal Year Ended April 30, 1997

During the year ended  January  31,  1999,  the  Company  reported a net loss of
$9,756,815.  During this period the Company had no contract or product revenues.
Investment  earnings on cash for twelve months was approximately the same as the
$534,000  earned in the nine months ended  January 31, 1998 due to lower average
cash balances.  Research and  development  expenditures  were  $9,062,775  which
represented  an  increase  in  average   quarterly   research  and   development
expenditures  from about $1.7  million  per  quarter  in the nine  months  ended
January  31, 1998 to about $2.3  million per quarter for the year ended  January
31,  1999.  This 35%  increase  was budgeted for and related to the on-going and
planned additional (human) Clinical Trials.

During the nine months ended January 31, 1998,  the Company  reported a net loss
of $6,604,544, including non-cash interest expense of $1,566,971 relating to the
convertible  debenture  described  below.  During this period the Company had no
contract or product revenues.  Investment earnings on cash increased $262,738 to
$533,908  due  to  higher  average  cash  balances.   Research  and  development
expenditures  were $4,963,481 which represented an increase in average quarterly
research and development expenditures from about $1.3 million per quarter in the
year ended April 30, 1997 to about $1.7  million per quarter for the nine months
ended  January 31,  1998.  This  increase  was  budgeted  for and related to the
on-going and planned additional (human) Clinical Trials.

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 or product revenues.
Investment  earnings on cash  decreased  to $271,170  due to lower  average cash
balances.  Research and development  expenditures increased to $5,205,854.  This
increase was  budgeted  for and related to the  on-going and planned  additional
(human) Clinical Trials.

In fiscal  1999,  the Company  implemented  Statement  of  Financial  Accounting
Standards ("SFAS") No. 130, "Reporting  Comprehensive  Income" and SFAS No. 132,
"Employers' Disclosure About Pensions and Other Postretirement  Benefits." These
new  accounting  standards had no impact on the Company's  financial  statements
since the Company does not have elements of comprehensive  income other than net
loss,  nor does it provide  pension or other  postretirement  benefits.  In June
1998, the FASB issued SFAS No. 133,  "Accounting for Derivative  Instruments and
Hedging  Activities"  which will not have an effect on the  Company's  financial
statements  since the Company does not engage in the  transaction  of derivative
instruments and hedging activities.

Many computer programs were written to use only two digits to identify the year.
Thus, a computer  program  could read the digits "00" as the year 2000 or as the
year 1900. In addition,  microprocessors  embedded in many operating  facilities
such as communication  systems may cause equipment  malfunctions  because of the
year 2000 date change.  Failure by third  parties upon which the Company  relies
(or by the Company) to address the year 2000 issue could cause  material loss to
the Company.

Management has completed the awareness and assessment  phase of a  comprehensive
program  to  address  the  year  2000  issue.  The  Company  utilizes   standard
"off-the-shelf"  software and will implement any necessary  vendor  upgrades and
modifications to assure continued functionality. 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 also  begun to assess  the year  2000  compliance  efforts  of
external  parties  upon which the  Company  relies.  The  Company is  developing
contingency plans for addressing any material failure to deal with the year 2000
date change that will address the Company's  exposure to year 2000 noncompliance
by third parties.

Even though the Company's planned software and hardware modifications and system
upgrades should adequately  address year 2000 issues,  there can be no assurance
that  unforeseen  difficulties  will not arise.  There is no assurance  that the
failure of any  external  party to resolve its year 2000 issues would not have a
material adverse effect on the Company.

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 June 1998,  Aphton and SmithKline  Beecham signed a Collaboration and License
Agreement for a worldwide  strategic alliance for Aphton's anti-GnRH  immunogen.
The agreement  covers the diagnosis,  treatment and  prevention of  GnRH-related
cancers and other diseases in humans. Human cancer indications for Aphton's GnRH
pharmaccine are prostate,  breast,  ovarian and endometrial  cancer.  Additional
medical indications for GnRH pharmaccine are endometriosis,  polycystic ovaries,
uterine fibroids, infertility and precocious puberty.

Under terms of the  agreement,  SmithKline  Beecham  received  exclusive  rights
worldwide to Aphton's  GnRH-related patents and proprietary  technology.  Aphton
and SmithKline Beecham are collaborating in a joint product development program.
SmithKline Beecham is responsible for funding all costs of product  development,
clinical  trials and  regulatory  approvals,  and for  worldwide  marketing  and
distribution of approved products.  The agreement uses a royalty mechanism based
on product sales, in dollars, worldwide to determine Aphton's revenues.

As part of the  Agreement,  SmithKline  Beecham  made an  equity  investment  of
$5,000,000  for  shares  of newly  issued  Aphton  common  stock.  In  addition,
SmithKline Beecham has granted Aphton an irrevocable  two-year option (which can
be  exercised  by Aphton at any time during that  period) to sell to  SmithKline
Beecham  additional  shares of  newly-issued  Aphton common stock for a value of
$5,000,000 at the then current market price.  If and when Aphton  exercises that
option, SmithKline Beecham shall have the right for 90 days to purchase a number
of  additional  shares  of  newly-issued  Aphton  common  stock  for a value  of
$5,000,000 at the then current market price.

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. The Company
issued  715,000  shares of common stock with a 7-year warrant for 225,000 shares
exercisable at $17.50 per share.

In April 1997, the Company issued a $5,000,000 7% senior redeemable  convertible
debenture.  During the nine months  ended  January 31,  1998 the  debenture  and
related  interest was  converted  into 559,068  shares of the  Company's  common
stock.  Non-cash  interest on such debt amounted to approximately  $1,567,000 in
the nine months ended January 31, 1998 and $15,000 in fiscal 1997.

On February 14, 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 the Company's  anti-gastrin immunogen 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 its  anti-gastrin  immunogen  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  anti-gastrin  immunogen
from Aphton to PMC;  and (b) the supply of certain  components  of  anti-gastrin
immunogen (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 supply  commitment  (of material  suitable for
human use) of $9 million,  Aphton will  receive the majority of the profits from
sales of its  anti-gastrin  immunogen with the balance of profits to be retained
by PMC.

The supply commitment of materials suitable for human use consists of Diphtheria
Toxoid and/or Tetanus  Toxoid.  Aphton may use some or all of the  unconditional
supply  commitment in the Product under  development  with PMC or Aphton may use
some or all of the  supply  commitment  on  other  current  product  lines or on
Research and Development.

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,  and available capital sources,  would
enable it to maintain its currently  planned  operations into the year 2001. 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 January 31, 1999 and 1998
             Statements of Operations for the year ended January 31, 1999,
               the nine months ended January 31, 1998
               and for the year ended April 30, 1997
             Statements of Stockholders' Equity for the year ended 
               January 31, 1999, the nine months ended Januarym31, 1998
               and for the year ended April 30, 1997
             Statements of Cash Flows for the year ended January 31, 1999, 
               the nine months ended January 31, 1998 and for 
               the year ended April 30, 1997
             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                    Certificate of Incorporation  (Incorporated by 
                            reference to Exhibit B of the Registrant's 
                            Definitive Proxy Statement filed October 8, 1997)

     3.3                    By-Laws (Incorporated by reference to Exhibit C of
                            the Registrant's Definitive Proxy Statement
                            filed October 8, 1997)

    23.1                     Written Consent of PricewaterhouseCoopers LLP.
                            (attached as an exhibit)

    27.1                     Financial Data Schedules. (attached as an exhibit)
(c)    Reports on Form 8-K
       During the three-month period ending January 31, 1999, 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:  April 30, 1999                APHTON CORPORATION




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

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



PHILIP C. GEVAS       Chairman of the Board, Chief Executive    April 30, 1999
                      Officer and President



WILLIAM A. HASLER     Vice Chairman of the Board and Co-Chief   April 30, 1999
                      Executive Officer



ROBERT S. BASSO       Director                                  April 30, 1999



NICHOLAS JOHN STATHIS Director                                  April 30, 1999



FREDERICK W. JACOBS   Treasurer and Chief Accounting Officer    April 30, 1999














                          INDEX TO FINANCIAL STATEMENTS
                              FINANCIAL STATEMENTS

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

Balance Sheets - January 31, 1999 and 1998................................F-2

Statements of Operations - for the year ended January 31, 1999, the nine 
months ended January 31, 1998 and for the year ended April 30, 1997.......F-3

Statements of Stockholders' Equity - for the year ended January 31, 1999, the
nine months ended January 31, 1998 and for the year ended April 30, 1997..F-4

Statements of Cash Flows - for the year ended January 31, 1999, the nine 
months ended January 31, 1998 and for the year ended April 30, 1997.......F-5

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










                                                      

                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Stockholders
Aphton Corporation


In our opinion,  the accompanying  balance sheets and the related  statements of
operations,  stockholder' equity and cash flows present fairly, in all material
respects,  the financial  position of Aphton Corporation at January 31, 1999 and
1998,  and the results of its  operations  and its cash flows for the year ended
January  31,  1999,  the nine months  ended  January 31, 1998 and the year ended
April 30, 1997 in conformity  with  generally  accepted  accounting  principles.
These financial  statements are the  responsibility of the Aphton  Corporation's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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,  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.


                                   PricewaterhouseCoopers LLP




Honolulu, Hawaii
April 29, 1999















                               APHTON CORPORATION

                   Balance Sheets - January 31, 1999 and 1998


                                               1999              1998

                  Assets

Current Assets:
Cash and short-term cash investments        $10,164,069       $14,226,000
Other assets (including current portion of
     unconditional supply commitment)           469,811           205,454
                                             ----------        ----------
         Total current assets                10,633,880        14,431,454
Equipment and improvements, at cost,
     net of accumulated depreciation 
     and amortization                           215,599           197,736
Unconditional supply commitment               8,650,000         8,951,000
                                             ----------        ----------
         Total assets                       $19,499,479       $23,580,190
                                             ==========        ==========

           Liabilities and Stockholders' Equity

Liabilities:
Current liabilities:
     Accounts payable and other             $2,947,951        $2,273,072
                                             ---------         ---------
         Total current liabilities           2,947,951         2,273,072

     Deferred revenue                       10,000,000        10,000,000
                                            ----------        ----------
         Total liabilities                  12,947,951        12,273,072

Commitment

Stockholders' Equity:
     Common stock, $0.001 par value -
     Authorized:  30,000,000 shares
     Issued and outstanding:  
     14,433,384 shares at January 31,
     1999 and 14,191,217 shares  
     at January 31, 1998                       14,434            14,191
     Additional paid in capital            47,960,689        42,955,207
     Purchase warrants                        336,904           341,404
     Accumulated deficit                  (41,760,499)      (32,003,684)
                                           ----------        ----------
         Total stockholders' equity         6,551,528        11,307,118
                                           ----------        ----------
         Total liabilities and 
             stockholders' equity         $19,499,479       $23,580,190
                                           ==========        ==========


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










                               APHTON CORPORATION
                            Statements of Operations
                      for the year ended January 31, 1999,
                     the nine months ended January 31, 1998
                      and for the year ended April 30, 1997



                                     1999            1998        1997

Revenue:
Dividend, interest and other income $547,283      $ 533,908     $271,170
                                     -------        -------      -------
         Total revenue               547,283        533,908      271,170
                                                                       
Costs and Expenses:
General and administrative         1,241,323        608,000      543,939
Research and development           9,062,775      4,963,481    5,205,854
Non-cash interest expense                  -      1,566,971       15,342
                                   ---------      ---------    ---------
      Total costs and expenses    10,304,098      7,138,452    5,765,136
                                  ----------      ---------    ---------
Loss before provision 
      for income taxes            (9,756,815)    (6,604,544)  (5,493,966)
Provision for income taxes                 -              -      135,000
                                 -----------     ----------   ----------
     Net loss                    $(9,756,815)    (6,604,544) $(5,628,966)
                                 ============    =========== ===========
Per share data
  Basic and diluted loss
      per common share                $(0.68)       $(0.48)      $(0.44)
                                      =======       =======      =======
  Weighted average number of
      common shares outstanding   14,431,417     3,733,478   12,912,982
                                  ==========     =========   ==========

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
















                               APHTON CORPORATION
                       Statements of Stockholders' Equity
                      for the year ended January 31, 1999,
                     the nine months ended January 31, 1998
                      and for the year ended April 30, 1997

                                    Additional
                  Common  Stock      Paid in Purchase  Accumulated
                Shares     Amount    Capital Warrants   Deficit          Total
Balance,
 May 1,
 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   1,097,560   147,004   (25,399,140)  2,510,515

Sale of stock,
 net        715,000  10,000,000           -         -             -  10,000,000
                                                           
Issuance
of purchase 
warrants for
services          -           -           -    198,900             -    198,900 

Exercise
of 
purchase
warrants     4,000            -       5,500    (4,500)             -     1,000

Transfer between
equity accounts
resulting from a
change in the par
value of the stock  (41,857,647) 41,857,647         -              -          -

Conversion
of convertible
debt       559,068            -   5,201,247         -              -  5,201,247
                                                             
Net loss          -           -           -         -     (6,604,544)(6,604,544)
         ---------- ----------- ----------- ---------- ------------- ----------
Balance,
January 31,
1998     14,191,217      14,191  42,955,207    341,404  (32,003,684) 11,307,118
                                             
Exercise
of 
purchase
warrants      4,900           5      5,720     (4,500)          -        1,225
     
Sale of stock,
net         237,867         238  4,999,762          -             -  5,000,000
                                             
Net loss          -           -          -          -    (9,756,815)(9,756,815)
         ---------- ----------- ----------- ---------- ------------- ----------
Balance,
January 31,
 1999    14,433,384    $14,434 $47,960,689   $336,904  $(41,760,499) $6,551,528
         ==========    ======= ===========   ========  ============= ==========
        
    The accompanying notes are an integral part of the financial statements.













                               APHTON CORPORATION
                            Statements of Cash Flows
                      for the year ended January 31, 1999,
                     the nine months ended January 31, 1998
                      and for the year ended April 30, 1997

           Increase (decrease) in cash and short-term cash investments
                                            1999         1998         1997
Cash flows from operating activities:
Cash paid to suppliers and employees   $(9,510,514)  $(5,115,606) $(4,156,450)
Interest and dividends received            547,283       533,908      271,170
                                        ----------    ----------    ---------
Net cash used in operating activities   (8,963,231)   (4,581,698)  (3,885,280)
                                        ----------    ----------    ---------
Cash flows from investing activities:
Capital expenditures                       (99,925)       (39,041)    (151,349)
                                           -------        --------    ---------
Cash used in investing activities          (99,925)       (39,041)    (151,349)

Cash flows from financing activities:
Issuance of convertible debenture               -              -    5,000,000
Debenture issue costs                           -              -     (287,500)
Sales of stock                          5,001,225     10,001,000          500
                                        ---------     ----------    ---------  
Cash received from financing activities 5,001,225     10,001,000    4,713,000
                                        ---------     ----------    ---------
Net increase (decrease) in cash and
  short-term cash investments          (4,061,931)     5,380,261      676,371
Cash and short-term cash investments:
     Beginning of period               14,226,000      8,845,739    8,169,368
                                       ----------     ----------    ---------  
     End of period                    $10,164,069    $14,226,000   $8,845,739
                                       ==========     ==========    =========

    Reconciliation of net loss to net cash
         used in operating activities
Net loss                             $(9,756,815)   $(6,604,544)  $(5,628,966)

Adjustments to reconcile net loss to net cash
used in operating activities:
     Depreciation and amortization        82,062         57,428        67,529
     Warrants issued for services 
     received                                  -        198,900             - 
     Stock issued for non-cash debenture
     interest, debenture discount and
     issuance costs                            =              -     1,566,971   
                         
     Changes in -
      Other assets                      (138,357)      (124,698)      40,114
      Unconditional supply commitment    175,000              -            -
      Cash receipt treated as 
      deferred revenue                         -              -    1,000,000
      Accounts payable and other         674,879        324,245      636,043
                                      ----------     ----------   ----------
Net cash used in operating 
      activities:                    $(8,963,231)   $(4,581,698) $(3,885,280)
                                      ==========     ==========   ==========

Non-cash investing and financing activities:
 For information about non-cash investing and financing activities,
  see Notes 3 and 6.

    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 hormones that participate in
gastrointestinal  system and reproductive system cancer and non-cancer diseases;
and the  prevention of pregnancy.  Aphton has strategic  alliances  with Pasteur
Merieux   Connaught    (Rhone-Poulenc   Group)   (PMC),    SmithKline   Beecham,
Schering-Plough Animal Health and the World Health Organization (WHO).

Aphton changed its state of incorporation  from California to Delaware effective
January 29, 1998. As part of the reincorporation,  the company's fiscal year end
was changed from April 30 to January 31.

2.       Summary of Significant Accounting Policies

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,  however
management believes such differences are unlikely to be significant.
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.

Income Taxes -
     The Company  accounts for income  taxes  pursuant to Statement of Financial
Accounting  Standards  (SFAS)  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.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management,  it is more likely than not that some portion or all of the deferred
tax assets will not be realized.

Per Share Data -
     The Company has adopted SFAS No. 128, "Earnings per Share," which specifies
the  computation,  presentation  and  disclosure  requirements  for earnings per
share.  The Company's basic loss per common share was calculated by dividing net
loss by the weighted average number of common shares outstanding.  The Company's
common stock equivalents are anti-dilutive,  and accordingly,  basic and diluted
loss per share are the same. Such common stock  equivalents  consist of purchase
warrants (See Note 7) and could  potentially  dilute basic earnings per share in
the future.


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 US Government and
US Government agency securities.

Impairment of the unconditional supply commitment -
     As discussed in Note 3, the Company has the unconditional  right to receive
supplies  aggregating $9 million from PMC. The Company's policy is to review the
current market prices of available supplies,  if any, to assure that they remain
above the  stated  PMC  contract  price of the  materials  and that the right to
receive  the   supplies   remains   unimpaired.   PMC  is  one  of  the  largest
pharmaceutical  vaccine  manufacturers  in the world.  The Company  monitors the
financial  performance  of PMC to assure  that they will  continue to be able to
perform  under the  contract,  wherein  the  special  order  supplies  are to be
provided from supplies  manufactured by PMC in large quantities and sold to many
customers,  including  the US  Government,  as part  of  PMC's  basic  franchise
(business).  The contract  allows for inflation  based increases in the per unit
costs of the  supplies  which the Company and PMC  believes  are  sufficient  to
assure that there will be no future  financial  hardship  incurred by PMC in the
execution of the agreement.  The Company does not believe that any impairment of
this asset exists at January 31, 1999.

Accounting for stock based compensation-
     The Company  accounts for employee stock based  compensation  in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees",  and related  interpretations as permitted by Statement of Financial
Accounting   Standards   ("SFAS")   No.   123,   "Accounting   for  Stock  Based
Compensation."

New Accounting Pronouncements-
     In  fiscal  1999,  the  Company   implemented  SFAS  No.  130,   "Reporting
Comprehensive  Income" and SFAS No. 132,  "Employers'  Disclosure About Pensions
and Other Postretirement Benefits." These new accounting standards had no impact
on the Company's  financial  statements since the Company does not have elements
of  comprehensive  income  other than net loss,  nor does it provide  pension or
other  postretirement  benefits.  In June 1998,  the FASB  issued  SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities"  which will not
have an effect on the Company's financial  statements since the Company does not
engage in the transaction of derivative instruments and hedging activities.

3.       License and Co-Promotion Agreements

     On June 19, 1998, Aphton and SmithKline  Beecham announced the signing of a
Collaboration  and License  Agreement  for a worldwide  strategic  alliance  for
Aphton's anti-Gonadotropin Releasing Hormone (anti-GnRH) immunogen.

     Under the terms of the agreement, SmithKline Beecham will receive exclusive
rights  worldwide to Aphton's  patents and proprietary  technology  covering the
diagnosis,  treatment and prevention of GnRH-related  cancers and other diseases
in humans - including - prostate,  breast,  ovarian and endometrial cancers; and
endometriosis, polycystic ovaries, uterine fibroids, contraception,  infertility
and precocious  puberty.  SmithKline Beecham will be responsible for funding all
costs of product  development,  clinical  trials  and  approvals  for  worldwide
marketing  and  distribution.  The agreement  uses a mechanism  based on product
sales,  in dollars,  worldwide to determine  Aphton's  revenues.  As part of the
Agreement, SmithKline Beecham made an equity investment of $5,000,000 for shares
of newly issued Aphton common stock.

     In addition,  SmithKline Beecham has granted Aphton an irrevocable two-year
option to sell to SmithKline  Beecham  additional shares of newly-issued  Aphton
common stock for a value of $5,000,000 at the then current market price.  If and
when Aphton exercises that option,  SmithKline  Beecham shall have the right for
90 days to purchase a number of additional shares of newly-issued  Aphton common
stock for a value of $5,000,000 at the then current market price.

     On February  14, 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  the  Company's
ant-gastrin  immunogen  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 anti-gastrin immunogen in the
United States, Canada, Europe (including the C.I.S. countries) and Mexico. Under
the terms of the agreement, in addition to upfront consideration aggregating $10
million  including  $1  million  cash and the  supply  commitment  (of  material
suitable  for human use) of $9 million,  Aphton will receive the majority of the
profits from sales of  anti-gastrin  immunogen with the balance of profits to be
retained by PMC.

     The supply  commitment  of  materials  suitable  for human use  consists of
Diphtheria  Toxoid  and/or  Tetanus  Toxoid.  Aphton  may use some or all of the
unconditional  supply  commitment in the Product under  development  with PMC or
Aphton may use some or all of the supply  commitment  on other  current  product
lines or on Research and Development.

     The $10 million  upfront  consideration  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.
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.  There is no provision
under the agreement for the  unconditional  supply commitment to be satisfied by
PMC with a cash payment.

4.       Equipment And Improvements

At January 31, 1999 and 1998, equipment and improvements
consisted of the following:
                                        January 31,    January 31,
                                            1999           1998
Laboratory equipment                     $ 495,557      $ 430,782
Leasehold improvements                     276,955        266,123
Office and laboratory 
  furniture and fixtures                   216,618        192,300
                                           -------        -------
                                           989,130        889,205
Less accumulated depreciation
  and amortization                        (773,531)      (691,469)
                                           -------        -------
                                         $ 215,599      $ 197,736
                                           =======        =======

5.       Accounts Payable and Other

     At January 31, 1999 and 1998,  accounts  payable and other was  composed of
approximately   $1,673,000  and   $1,167,000   payable  on  trade  accounts  and
approximately $1,275,000 and $1,106,000 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.  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 was 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
was charged to interest expense on a pro rata basis using the effective interest
method as the security became  convertible.  The effective interest rate on this
debenture  was  approximately  52%.  Non-cash  interest on such debt amounted to
approximately  $15,000 in fiscal 1997. In the period ended January 31, 1998, the
debenture and related  interest was converted to 559,068 shares of common stock.
Non-cash   interest  expense  for  the  period  then  ended  was   approximately
$1,567,000.




7.       Common Stock and Purchase Warrants

Common Stock -

     As discussed  in Note 3, during  fiscal  1999,  SmithKline  Beecham made an
equity  investment of $5,000,000 for shares of newly issued Aphton common stock.
The Company also sold 4,900 shares through the exercise of outstanding  purchase
warrants.

     During fiscal 1998, in a private placement, the Company sold 715,000 shares
of common stock for  $10,000,000  net of  insignificant  legal,  accounting  and
filing fee  expenses  and 4,000  shares  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. The term
of the warrants is from 8 to 23 years. All warrants  exercised from inception of
the Company have been from warrants issued prior to April 30, 1991.

     Under SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  companies
can either  continue to account for  employee  stock  based  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  for  employee  stock
compensation plans.  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 have been  $6,011,431  and the pro
forma loss per common share would have been $.47.  There were no employee  stock
purchase warrants granted in 1999 or 1998.

     In the nine  months  ended  January  31,  1998 the  Company  issued  13,000
warrants to individuals  (non-employees)  for services.  The Company recorded an
expense of $198,900 for these warrants. The Company also issued 225,000 warrants
to an  institutional  investor in conjunction with the sale of 715,000 shares of
stock for $10,000,000.

     The following  assumptions  were used in the  Black-Scholes  option pricing
model for the 25,000 purchase  warrants granted in fiscal 1997 to a director and
for the 13,000  warrants  granted to  individuals  for services in 1998. The and
exercise  price 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 fiscal periods: 

                                                               Weighted-Average
                                              Number of Shares  Exercise Price
Outstanding and exercisable at May 1, 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
    Granted (1)                                    238,000           $17.35
    Exercised                                       (4,000)            $.25
    Canceled or expired                                  -                -
                                                 ---------          
Outstanding and exercisable at January 31,1998   2,018,300           $13.76
    Granted (1)                                          -                -
    Exercised                                       (4,900)            $.25
    Canceled or expired                                  -                -
                                                 ---------           
Outstanding and exercisable at January 31,1999   2,013,400           $13.80
                                                 =========           ======



     For options  outstanding  and exercisable at January 31, 1999, 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      766,400             14.7              $ 9.98
    $14.01  to  $24.00    1,247,000             14.8              $16.15
                          ---------
                          2,013,400             14.8              $13.80
                          =========

(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                      1999                1998           1997
      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  approval and  commercialization  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 January 31,  1999 and 1998.  The
changes  in the  valuation  allowance  in 1999  and  1998  were  $3,450,000  and
$2,578,000, respectively.

                                                     1999              1998
          Deferred tax assets consisted of:
    Federal net operating loss carryforward      $9,123,000          $5,956,000
    State net operating loss carryforward         1,213,000             972,000
                                                 ----------           ---------
    Total operating loss carryforward            10,336,000           6,928,000

    Deferred license payment revenues             4,014,000           4,330,000
    Expenses deductible in future periods           512,000             479,000

    Federal tax credits                           1,651,000           1,433,000
    State tax credits                               608,000             501,000
                                                  ---------           ---------
    Total tax credits                             2,259,000           1,934,000
                                                  ---------           ---------
    Total deferred tax assets                    17,121,000          13,671,000
    Valuation allowance                         (17,121,000)        (13,671,000)
                                                -----------         -----------
    Net deferred tax assets                    $          -        $          -
                                                ===========         ===========

     At January 31, 1999, for Federal  income tax purposes,  the Company had net
operating loss carryforwards of approximately $26,833,000 and various income tax
credit  carryforwards,  primarily  research  and  experimentation,   aggregating
$1,651,000, which expire at various dates through 2014.

     At January 31, 1999,  for California  income tax purposes,  the Company had
net operating loss carryforwards of approximately  $19,764,000,  which expire at
various  dates  through  2004;  and  various  income tax  credit  carryforwards,
primarily research and experimentation,  aggregating  $608,000,  which expire at
various dates through 2013.

9.       Commitments and Contingencies

     The Company has  noncancelable  facilities leases expiring at various dates
through fiscal 2003. The leases provide  various  options to renew.  The minimum
rental  commitments for the fiscal years 2000 through 2003,  respectively,  are,
$101,000,  $103,000,  $80,000,  $22,000 and none thereafter.  Rental expense for
these leases for the year ended January 31, 1999,  the nine months ended January
31,  1998 and for the year ended April 30,  1997,  was  approximately  $115,000,
$80,000 and $108,000, respectively.